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Update No: 053 - (24/09/07)

Squaring the circle
The final draft of the still unapproved oil law differed sufficiently from what had earlier been agreed among parties, and now upsets the Kurds, who are particularly keen on securing a wide room of manoeuvre in exploiting local resources. They proceeded to send strong signals to Baghdad that they would not accept the changes. During the summer the Kurdish regional government signed a deal to develop gas reserves with Dana Gas of the Emirates, causing the Sunni blocs in the parliament, whose region has no proven oil reserves, to drop their support for the draft oil law. Then at the beginning of September the Kurdish regional government went even farther and signed an oil exploration contract with an American oil company, Hunt. The deal caused a major rift between Hussain al-Shahristani, the Iraqi oil minister, and the provincial government of Kurdistan. The Bush administration sided with Shahristani, despite the closeness between Hunt and President Bush. The issue is complicated by the fact that a law meant to be accompanying the oil law to specify how oil revenue should be shared out is not ready yet. It can safely be assumed that every one of the Iraqi power elite will be clustered around that particular negotiating table. 

Moreover, the draft law does not include any dispute resolution mechanism between centre and regions. Gaining both the Kurds' and the Sunni Arabs' support is going therefore to be problematic. The government is trying to square the circle by paying experts to review potential resources, in the hope that even the Sunni-dominated region might get its own fields. 

Smaller and braver
Even international oil experts are increasingly raising doubts about the draft oil law, which in their view does not provide sufficient guarantees to investors and is vague on a number of key issues. Big multinationals are unlikely to be willing to take the risks, although smaller oil companies and the Russians seem more interested. One such company is Petrel, an Anglo-Irish oil exploration company which has been in southern Iraq since 1999, hoping to make long-term profits. The company is actually losing money in Iraq, but like other smaller players its best hope of winning lucrative contracts is to be there finding niches, where the giants will not go. The other three companies already active in Iraq (DNO, Addax and Dana Gas) operate all in Kurdistan. Production in northern Iraq in the meanwhile continues to be prevented by sabotage. In September after long repairs the pipeline to Turkey was reactivated, only to be blown up again almost immediately.

The ever-shrinking cabinet
Maliki has been working in September on expanding his government beyond Kurds and Shiites, with mixed results. Some progress was achieved with the Sunni Arabs, on the basis of a deal which includes freeing detainees held without charge, easing the ban on former Baathist supporters in government posts, holding provincial elections and approving the oil law. However, they have not resumed their cabinet posts yet, as they distrust Maliki and want to see the deal implemented first. At the same time three cabinet members belonging to the secular block led by Allawi resigned at the end of August. Moreover, the Sadrists have definitely dropped out of the Shiite alliance, complaining about not being consulted. Even is As-Sadr's six ministers had already quit in April, the latest development weakens Maliki's parliamentary position, with support down to about half the votes. Rumours concerning Maliki's impending departure continue to be rife, but there is no obvious replacement. American agencies predict that he might cling on to power, but grow even weaker over the next 12 months. The situation in Basra is now expected to worsen, after the British have withdrawn their forces to the airport and the various militias gear up for dividing the spoils. The impact of the assassination of Abd al-Sattar Abu Risha, the courageous leader of the pro-government Anbar Salvation Council, is obviously a reverse for the anti- al Qaeda in Iraq, campaign there. In other ways although still difficult to assess, it seems unlikely to contribute to the stabilisation of Anbar.

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