|
Books on Iraq
|
Update No: 047 - (28/03/07)
Draft oil law agreed
The Iraqi cabinet finally approved a draft oil law at the end of February.
The new law opens more than two thirds of existing fields and all future fields
to foreign investment and guarantees that the distribution of revenue will take
place on the basis of the population of the different regions. The Kurdish
regional authorities will be allowed to continue signing oil contracts, a point
which was the source of much controversy. While the new law elicited mostly
positive comments abroad and in particular among oil investors, it generated
rather negative feelings at home, where remains a strong commitment to
nationalist economic policies. Oil Workers Unions have already threatened to go
on strike, while in the parliament Allawi's secular bloc, the main Sunni
alliance and sections of the increasingly fragmented Shiite alliance are opposed
to the current draft, mainly on the ground of excessive concessions to foreign
companies. Among the most controversial points are the lack of any provision
forcing investors to reinvest earnings in the Iraqi economy, form partnerships
with Iraqi companies or employ Iraqis. Moreover, oil companies will not have to
start exploiting the fields immediately after signing the contracts and will be
able to wait until they judge the situation safe enough. Contracts will be
long-term ones (20-35 years) and will allow investors to exercise a large degree
of control. In sum, the Iraqi oil law is one of the most business friendly of
the world. The rationale for this is to give an incentive to investors to
explore that 90% of Iraqi which has not been explored yet, as well as to offset
any disinclination to invest in Iraqi because of the security situation and of
the uncertainties concerning the future. Critics see US pressure as having
played a key role in shaping the law and even sources close to Prime Minister
Al-Maliki admit that the US embassy has made clear that unless the final version
of the law is in place by June support for the Prime Minister will cease. Some
companies are already beginning discussions about specific projects. Royal Dutch
Shell, for example, is looking at the gas fields and is considering building a
pipeline to Europe via Turkey.
Al-Maliki between two fires
Prime Minister Al-Maliki is also under US pressure to enlarge his cabinet,
give it a more secular leaning and make it acceptable to the Saudis. In
particular, the Americans seem to be demanding the ousting of the Sadrists. The
pressure on Al-Maliki rose further as Allawi and Kurdish leader Barzani visited
Saudi Arabia, allegedly to discuss alternative alliances. The concern of the
Americans and the Saudis is of course that Iran is steadily expanding its
influence over Iraq and that Al-Maliki is doing little, or in any case not
enough, to prevent that. Saudi and US pressure seem aimed at breaking up the
Shiite alliance and hence weakening Iranian influence. They achieved some
success in this regard already, as the pro-Sadrist Al-Fadila party in March was
officially announced to be leaving the alliance. It is unlikely, however, that
the Iranians will remain quiet spectators of these efforts. Although the
greatest concern is Iran's political influence, the economic influence of Iran
is certainly growing too and according to some unofficial estimates trade
between the two countries has been growing by 30% a year since 2003. Cultural
influence is also growing, as Iranian books, heavily subsidised by Teheran,
flood the Iraqi market. Al-Maliki is also under pressure to improve the
performance of his cabinet and improve the welfare of the growingly frustrated
population. The new 2007 draft budget doubles spending on education and health,
but it will remain to be seen how effectively that money is going to be spent.
«
Top
|
