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Analysis: Kurds the winner in Iraq oil law
28.2.2007 |
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February
28, 2007
WASHINGTON, February 27, -- After nearly a
year of negotiations, deadlocked on crucial issues
of revenue sharing and control of oil fields, the
Kurds seemed to have gotten what they wanted from
Iraq's central government in the hydrocarbon law
approved by the Iraqi Cabinet Monday.
The passage appears to have ended, at least for now,
the most difficult phase of creating and passing
legislation aimed at governing all of Iraq's vast
oil and natural gas reserves.
The Iraqi Parliament still needs to approve the
hydrocarbon law, backed by the majority Shiites,
which is likely now that the Kurdistan Regional
Government has endorsed it.
Oil production is struggling in Iraq. Daily
production last month averaged nearly a million
barrels below the pre-war levels of 2.6 million
barrels per day. Passage of the law is seen as the
first step to the more than $20 billion of
investment the sector needs.
According to the draft, revenue from oil sales will
be pooled into a central government coffer and
redistributed throughout the country by population,
allaying concerns from the minority Sunnis they
would be left with nothing.
The regions will have authority to negotiate and
sign contracts, though within the contract
guidelines set out in the law.
The KRG in the north, governing a region
semi-autonomous since the end of the first Gulf War,
has continued development of its oil sector during
the current war that has stifled the rest of the
country.
Claiming authority given it in the 2005
constitution, the KRG signed five exploration and
development contracts with private international
companies, deals made controversial when the Iraq
Oil Ministry threatened not to honor them. The new
law may have resolved the conflict.
The KRG also developed its own hydrocarbon law, and
proposed federal legislation largely incorporated
into the new law.
"If we go strictly by the Iraq Constitution, the KRG
is entitled to assume much greater powers over oil
and gas," KRG Natural Resources Minister Ashti
Hawrami said in a statement issued Monday by the KRG.
"However, to make it work for all concerned, we had
to be accommodating and pragmatic in our approach. I
am pleased to say that almost all our ideas are now
featured highly in the draft Federal Oil Law."
The draft law is less of an end-all deal, more like
a framework for and the first in a regime of laws
needed to govern Iraq's 115 billion barrels of
proven oil reserves -- the third-most in the world
-- and 111 trillion cubic feet of gas.
The "annexes" to the draft law, as Hawrami calls
them, include detailing authority to territories and
oil fields to the regions, the Iraq Oil Ministry and
the Iraq National Oil Co.; the model and guidelines
for contracts; and a law setting the terms of
collecting revenues and mechanisms for
redistributing them.
These issues have yet to be decided and, Hawrami
said, "will also be agreed upon before submitting
the whole package to the Council of
Representatives," the Parliament said.
But those agreements, collectively inferred as
afterthoughts in negotiations now that the first
compromise has been reached, are the thorn keeping
the central government and the KRG from shaking
hands in the past.
The Kurds fear a strong central government could
deprive them of development like under the Saddam
Hussein regime. So they've demanded an automatic
redistribution of revenue, away from sectarian
whims, and at a percentage that appeared to have
outweighed its proportion of the population (though
a census will need to be conducted before real
numbers can be confirmed).
And, citing historical wrongs and the 2005
constitution, the KRG demanded control over all new
oil development.
"Kurdistan will be guaranteed a share of pooled
revenue proportionate to its population," Hawrami
said. "The Kurdistan Regional Government will, of
course, retain the power to sign contracts for
petroleum exploration and development in the
Kurdistan Region."
A federal oil and gas council, which the KRG pushed
for, will serve as a non-binding arbiter of
disagreements.
Hawrami said a "panel of experts" named by the
council will be allowed to review KRG contracts,
though the contracts will not be stopped. The KRG
will not sign any new deals until the law is passed.
As for Kirkuk, the city of 11 billion barrels of oil
reserves which Kurds claim to be historically theirs
but outside the official KRG border, "the Iraq
National Oil Company...will continue to manage the
current producing fields," Hawrami said. A
controversial referendum to be held by year's end
will be conducted prior to "further activities."
Despite what appears to be an agreement, Hawrami set
a window of two months for action.
"If in two months time the law is still under debate
by the Council of Representatives, then we will be
reasonable about it and maintain support for the
process being completed. However, if the oil law is
still facing difficulties and the annexes and the
Revenue Sharing Law have not been agreed," Hawrami
said, "then that would be unfortunate as we will be
facing a new situation and we will have to review
our options again."
An official in the KRG's Washington office told
United Press International Tuesday negotiations are
ongoing.
UPI
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