[wvns] Who Will Control Iraq's Oil?
Who Will Control Iraq's Oil?
Antonia Juhasz and Raed Jarrar
http://www.tompaine.com/articles/2007/02/27/who_will_control_iraqs_oil.php
While debate rages in the United States about the military in Iraq, an
equally important decision is being made inside of Iraq—the future of
Iraq's oil. A new Iraqi law proposes to open the country's currently
nationalized oil system to foreign corporate control. But emblematic
of the flawed promotion of "democracy" by the Bush administration,
this new law is news to most Iraqi politicians.
A leaked copy of the proposed hydrocarbon law appeared on the Internet
last week at the same time that it was introduced to the Iraqi Council
of Ministers. The law is expected to go to the Iraqi Council of
Representatives within weeks. Yet the Internet version was the first
look that most members of Iraq's parliament had of the new law.
Many Iraqi oil experts, like Fouad al-Ameer who was responsible for
the leak, think that this law is not an urgent item on the country's
agenda. Other observers and analysis share al-Ameer's views and
believe the Bush administration, foreign oil companies, and the
International Monetary Fund are rushing the Iraqi government to pass
the law.
Not every aspect of the law is harmful to Iraq. However, the current
language favors the interests of foreign oil corporations over the
economic security and development of Iraq. The law's key negative
components harm Iraq's national sovereignty, financial security,
territorial integrity, and democracy.
National Sovereignty and Financial Security
The new oil law gives foreign corporations access to almost every
sector of Iraq's oil and natural gas industry. This includes service
contracts on existing fields that are already being developed and that
are managed and operated by the Iraqi National Oil Company (INOC). For
fields that have already been discovered, but not yet developed, the
proposed law stipulates that INOC will have to be a partner on these
contracts. But for as-yet-undiscovered fields, neither INOC nor
private Iraqi companies receive preference in new exploration and
development. Foreign companies have full access to these contracts.
The exploration and production contracts give firms exclusive control
of fields for up to 35 years including contracts that guarantee
profits for 25-years. A foreign company, if hired, is not required to
partner with an Iraqi company or reinvest any of its money in the
Iraqi economy. It's not obligated to hire Iraqi workers train Iraqi
workers, or transfer technology.
The current law remains silent on the type of contracts that the Iraqi
government can use. The law establishes a new Iraqi Federal Oil and
Gas Council with ultimate decision-making authority over the types of
contracts that will be employed. This Council will include, among
others, "executive managers of from important related petroleum
companies." Thus, it is possible that foreign oil company executives
could sit on the Council. It would be unprecedented for a sovereign
country to have, for instance, an executive of ExxonMobil on the board
of its key oil and gas decision-making body.
The law also does not appear to restrict foreign corporate executives
from making decisions on their own contracts. Nor does there appear to
be a "quorum" requirement. Thus, if only five members of the Federal
Oil and Gas Council met—one from ExxonMobil, Shell, ChevronTexaco, and
two Iraqis—the foreign company representatives would apparently be
permitted to approve contacts for themselves.
Under the proposed law, the Council has the ultimate power and
authority to approve and re-write any contract using whichever model
it prefers if a "2/3 majority of the members in attendance" agree.
Early drafts of the bill, and the proposed model by the U.S. advocate
very unfair, and unconventional for Iraq, models such as Production
Sharing Agreements (PSAs) which would set long term contracts with
unfair conditions that may lead to the loss of hundreds of billions of
dollars of the Iraqi oil money as profits to foreign companies.
The Council will also decide the fate of the existing exploration and
production contracts already signed with the French, Chinese, and
Russians, among others.
The law does not clarify who ultimately controls production levels.
The contractee—the INOC, foreign, or domestic firms—appears to have
the right to determine levels of production. However, a clause reads,
"In the event that, for national policy considerations, there is a
need to introduce limitations on the national level of Petroleum
Production, such limitations shall be applied in a fair and equitable
manner and on a pro-rata basis for each Contract Area on the basis of
approved Field Development Plans." The clause does not indicate who
makes this decision, what a "fair and equitable manner" means, or how
it is enforced. If foreign companies, rather than the Iraqi
government, ultimately have control over production levels, then
Iraq's relationship to OPEC and other similar organizations would be
deeply threatened.
Democracy and Territorial Integrity
Many Iraqi oil experts are already referring to the draft law as the
"Split Iraq Fund," arguing that it facilitates plans for splitting
Iraq into three ethnic/religious regions. The experts believe the law
undermines the central government and shifts important decision-making
and responsibilities to the regional entities. This shift could serve
as the foundation for establishing three new independent states, which
is the goal of a number of separatist leaders.
The law opens the possibility of the regions taking control of Iraq's
oil, but it also maintains the possibility of the central government
retaining control. In fact, the law was written in a vague manner to
help ensure passage, a ploy reminiscent of the passage of the Iraqi
constitution. There is a significant conflict between the Bush
administration and others in Iraq who would like ultimate authority
for Iraq's oil to rest with the central government and those who would
like to see the nation split in three. Both groups are powerful in
Iraq. Both groups have been mollified, for now, to ensure the law's
passage.
But two very different outcomes are possible. If the central
government remains the ultimate decision-making authority in Iraq,
then the Iraq Federal Oil and Gas Council will exercise power over the
regions. And if the regions emerge as the strongest power in Iraq,
then the Council could simply become a silent rubber stamp, enforcing
the will of the regions. The same lack of clarity exists in Iraq's
constitution.
The daily lives of most people in Iraq are overwhelmed with meeting
basic needs. They are unaware of the details and full nature of the
oil law shortly to be considered in parliament. Their
parliamentarians, in turn, have not been included in the debate over
the law and were unable to even read the draft until it was leaked on
the Internet. Those Iraqis able to make their voices heard on the oil
law want more time. They urge postponing a decision until Iraqis have
their own sovereign state without a foreign occupation.
Passing this oil law while the political future of Iraq is unclear can
only further the existing schisms in the Iraqi government. Forcing its
passage will achieve nothing more than an increase in the levels of
violence, anger, and instability in Iraq and a prolongation of the
U.S. occupation.
This piece was written February 22 for Foreign Policy in Focus. While
it does not take into account unfolding events in Baghdad, the
underlying analysis remains pertinent.
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