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Books on Iraq
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Update No: 049 - (29/05/07)
Oil law: not quite there yet
The initial optimism about the near readiness of the new Iraqi oil law had
largely evaporated by May. In its stead an increasingly acrimonious debate about
the gaps in the law and the alleged bias towards US oil multinationals was
threatening to prevent its approval from the parliament or at least several
months of delay. Even in the US Congress there are growing doubts about the law,
which many fears would not guarantee a fair distribution of oil revenue and
consequently add new fuel to the ongoing civil war. There is also a sense that a
law increasingly perceived as drafted to favour foreign interests will not help
the task of pacifying the country. Despite earlier claims that the law had been
sent to parliament, the government now says that it will not send the law until
all parties will be satisfied with it. The Kurds still claim that the law will
have to allow them to sign oil contracts in their autonomous region and threaten
to reject the law in the absence of such a provision. In the current draft 93%
of oil revenue would be controlled by the centre and just 7% by regional
governments. Some, even among the drafters of the law, believe that for existing
oil fields Iran's model should be adopted, that is short-term service contracts
for foreign multinationals. We may see the US Oil industry supporters of Bush
and particularly Cheney, kick up against this unattractive formula which is
greatly unpopular with multinationals in Iran, where it was devised. This is not
why they lent their support for this adventure in Iraq, and they can be expected
to rattle their cages. Only for new fields longer-term contracts more favourable
to the oil industry should be adopted.
Maliki weaker and weaker
After the withdrawal from government of the Sadrists last month and the
secession of the Al-Fadhila party from the Shiite alliance, in May it was the
turn of the Kurds (see above) and of the main Sunni political bloc to issue
their own ultimatums. The Iraqi Accordance Front wants the Constitution to be
amended to incorporate features that would guarantee the Sunni Arabs from the
risk of a federalisation of Iraq without revenue redistribution through the
central government. If Maliki fails to deliver, they threaten to quit the ruling
coalition and even withdraw from parliament. For the moment Maliki survives, not
least because the Sadrists, who have about 30 MPs, are still part of the Shiite
alliance and support the government, but his position is increasingly
precarious. His rival Allawi continues his efforts to put together a new
coalition which is supposed to take the name of Iraqi National Front and bring
together Kurds, Sunnis and Shiites. He is even being reported to be negotiating
with erstwhile arch-enemy As-Sadr over the entrance of the Sadrists in the
Front. Until an alternative coalition is in place, Maliki is likely to carry on.
The security situation in Baghdad, which is the object of a major military
operation to root out insurgents and militias, is seen by many as the litmus
test of Maliki's fate as Prime Minister. After an initial improvement, violence
is now worsening again.
Fresh oil (a few drops)
In June the first oil well dug by a foreign company in many years is
scheduled to start pumping for the international market. The company is
Norwegian DNO and it operates in the Kurdish autonomous region, although the
amount will be mostly of symbolic value (15,000 bpd or less than 1% of total
Iraqi production). In fact, the new development might contribute to increases in
the tension surrounding the new oil law. Typically Baghdad refused to grant
access to the export pipeline, so that the output will have to be carried by
truck.
On the debt front too the initial optimism concerning a quick and easy
cancellation of most of it appears increasingly ill founded. One of the main
creditors, Saudi Arabia, is now hinting that its attitude towards cancellation
will depend on the Iraqi government's willingness to take Sunni Arab interests
in greater consideration. Other Arab creditors too are said to be pushing for
Iraq to drop the de-Baathification law, disband Shiite militias and a
distribution of oil revenue which satisfies the Sunni Arabs too.
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