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Iraq: Hotly debated oil issue remains
unsettled
28.1.2007
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January 28, 2007
BAGHDAD, Iraq, -- Iraqi officials say a hotly
debated proposed oil law will not favor Americans
but acknowledge that foreign companies will be
allowed to take their profits out of the country --
an incentive to draw foreign investment.
The Oil Ministry has been struggling for months to
reach a compromise over draft legislation to govern
Iraq's most important industry and pave the way for
much-needed investment and know-how to revitalize
the devastated infrastructure. But the measure faces
strong objections by ethnic Kurds and concern about
American influence in the sector.
Published reports in the Middle East said the
proposal would provide for so-called product sharing
agreements that would give international oil firms
70 percent of the oil revenues to recover their
initial investments and subsequently allow them 20
percent of the profits without any tax or
restrictions on transferring funds abroad.
"Without a decisive military victory, the U.S.
occupation of Iraq seems to be about to grab its oil
prize by establishing a new sharing arrangement,"
the English-language Yemen Observer said Saturday,
echoing a frequent criticism that the U.S.-led
invasion was aimed in part at capturing Iraq's oil.
Iraqi officials denied that the proposed law would
favor Americans but stressed that it would set terms
aimed at attracting international funds and know-how
to an industry that faces a rampant insurgency and
struggled even before the war due to sweeping U.N.
sanctions imposed after Saddam Hussein's 1990
invasion of Kuwait.
Trade Minister Abed Falah al-Sudani told The
Associated Press that American companies will be
among those bidding for contracts under the proposed
law and the Iraqis will "take the best offer ... and
take into consideration the experience of the
company."
He did not specify monetary terms but said "foreign
companies will be able to win concessions for a long
time," without elaborating.
"Iraq's economy has suffered because of the security
situation and the economic laws, but we now want to
implement laws that reform the country and reform
the economy. These laws will increase the growth of
the economy," he said.
Prime Minister Nouri al-Maliki has pressed hard for
a new oil law to be passed since he came to office
on May 20. And President Bush stepped up the
pressure on the Iraqis to pass legislation to share
oil revenues among all Iraqis in announcing his new
Iraq strategy earlier this month.
Iraqi officials also have struggled to overcome
strong objections by ethnic Kurds in the oil-rich
north who are reluctant to give up regional control.
On Jan. 18, the Oil Ministry said the law was nearly
ready to be submitted to the Cabinet and expressed
hope it could be ratified by parliament within a
month.
But ministry spokesman Assem Jihad said Friday the
measure had been delayed by unspecified "differences
among some groups." He said the ministry hoped the
differences could be overcome so parliament could
approve the bill before a monthlong recess Feb. 10.
The distribution of oil revenues and central control
over contracts are believed among the key sticking
points.
Kurdish lawmaker Mahmoud Othman pointed out that the
constitution passed last year provided for a Kurdish
federation in the north that would co-manage
existing oil fields along with the central
government and have full control over new ones.
Shiites would control new oil fields in their
southern regions -- terms that have drawn objections
from the disaffected Sunni minority.
Othman said the Kurds want the final say in signing
contracts with foreign oil companies for projects in
their area, signaling opposition to plans to give
full control over contracts to a central oil
committee.
"If they don't amend the law or the current draft or
reach a mutual agreement, the Kurdish side will not
accept it," Othman said.
Jihad said a Kurdish delegation will visit Baghdad
to try to resolve some outstanding issues.
"The Kurds talk about this issue as if they are from
another country while they are part of the Iraqi
government and parliament. They want bigger share
for Kurdistan regarding the oil revenues."
Negotiators also are stuck over taxes and the terms
for agreements with international companies, as well
as concerns that American and other multinational
firms will get a disproportionate share of the
profits.
Jihad dismissed claims that the proposed law would
allow 70 percent of Iraq's oil to be sold to U.S. or
other foreign oil companies but conceded that they
would not face restrictions in taking profits
outside Iraq.
He said the proposed law would establish that
central product sharing agreements, or PSAs, would
be negotiated with the companies on an individual
basis.
"Some are trying to give a distorted idea about the
new law that aims at serving Iraq's interests. Such
reports are baseless," he said. "We should
differentiate between monopoly and investment."
"The foreign companies can take their profits
outside Iraq without any restriction because the aim
of the law is to encourage investment," he said.
He said the question of taxes was still being
negotiated, adding that the law provides a two-year
tax exemption for general investment projects but no
decision had been made on whether they should tax
oil investments.
"This law protects both the full rights of the
investors and of the Iraqi government," he said.
Iraq is believed to be producing around 2.2 million
barrels of oil a day and exports about 1.5 million,
well below prewar levels of 2.5 to 3 million barrels
a day.
Some legislators pointed out that Iraq is desperate
and needs all the help it can get.
"Foreign companies are welcome. American companies
have the experience and they have people on the
ground in Iraq. American companies have the courage
to come into the market," said Amrah al-Baldawi, a
member of the parliament's economic committee.
AP
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