Crude Politics in Iraq

Posted by Cutler on July 18, 2007
Iraq

Right Arabist Republican Senators like Richard Lugar have their own reasons for opposing the Shiite-led Maliki government in Iraq.

But inside the Bush administration, frustration centers on one crude benchmark: the inability of the Maliki government to win parliamentary passage of the hydrocarbons framework law.

Here is Bush on Maliki at the president’s recent press conference:

QUESTION: Mr. President, in Jordan in November you stood by Prime Minister Maliki and said, “He’s the right guy for Iraq”… [C] an you tell the American people that you still believe he’s the right guy for Iraq?

BUSH: I believe that he understands that… they need to get law passed, I firmly believe that… And, yes, I’ve got confidence in them. But I also understand how difficult it is. I’m not making any excuses, but it is hard. It’s hard work for them to get law passed.

Kind of funny language–“get law passed.”  Why not “get laws passed”?  Maybe only one law matters.  Bush could say “get the hydrocarbons framework law passed,” but I guess that would be too obvious.

After all, this isn’t a war for oil…

Anyway, it might be worthwhile to take a closer look at what, precisely, is holding up the hydrocarbons framework law.

The key to the dispute involves Kurdish demands for control over new oil field development contracts.  Kurdish demands for regional autonomy face opposition from an array of nationalist forces–Shiite and Sunni Arab–who favor centralized control of new field development.

In late December 2006, the Kurdish Globe reported on a deal that would allow a mix of regional autonomy and central control:

Oil has been a major issue dividing Kurdish and Iraqi authorities in post-war Iraq. KRG says it is constitutionally allowed to drill for oil in areas under its control, but Iraqi oil officials have threatened that KRG’s oil deals will not be “valid.”

“Most of the oil wells are in southern Iraq, and the oil law allows KRG to talk with companies and make deals for oil production,” [Kurdistan Regional Government Prime Minister Nechirvan] Barzani said…

According to preliminary agreements between the KRG and federal authorities, a representative from the Baghdad government will attend talks between the KRG and oil firms. Once the KRG reaches a deal with a company to drill for oil in Kurdistan, the contract will be sent to Baghdad for assessment and approval by an Iraqi government committee. The contract will then be returned to the KRG and it will have 60 days to sign it

“There needs to be some criteria according to which the (oil) contracts are investigated so as to know if there is any corruption in the deals or to what extent the company will implement its obligations,” Barzani said.

On the basis of this agreement, the Iraqi Cabinet backed the hydrocarbons framework law in February 2007.

Kurds grumbled about the terms, but agreed to the plan and the prospects of parliamentary passage looked promising.

In late June 2007, however, the “Shura” Consultative Council intervened, proposing some changes to the bill that would have centralized control over new field development.

Dow Jones reported:

The highest Iraqi government jurisdiction body has rejected some clauses of the controversial draft oil and gas law and urged the Cabinet to amend these provisions, according to a recent letter sent by the body, the State Shuraa Council, to the Cabinet and seen by Dow Jones Newswires Thursday.

“The Council sees that the powers of signing oil and gas contracts (with international companies) should be confined to the federal government because regions and governorates haven’t enough experience to do so,” the letter said…

The council, which consists of top Iraqi judges… also said that the rate of government royalty set by the draft law which is 12.5% regardless of the quantity, quality and type of the produced hydrocarbon is less than the normal rate set by the Organization of Petroleum Exporting Countries which is 16%….

The law is stuck in negotiations, mostly over a vaguely worded constitution that each side interprets differently. Kurds, in the north, want strong regional say in how the oil is developed. Sunnis and most Shiites want strong central control over the oil.

Maliki’s energy adviser, Thamir Ghadban, then offered the Shura-amended draft to the Kurds for consideration.

The Kurds promptly rejected the changes.

“Some of the proposed amendments made to the draft oil and gas law by the State Shura (Advisory) Council are substantial and we think they reduce powers assigned to the Kurdistan Regional Government by the Iraqi (federal) constitution,” the oil minister in the Kurdistan Regional Government, Ashti Hawrami, told Iraqi lawmakers and officials meeting in the northern city of Erbil…

Others were even more strident:

The Kurdistan Regional Government’s prime minister, Nechirvan Barzani, said in remarks published Monday that a draft oil and gas law agreed on with the central government in Baghdad had been amended by an advisory committee, the Shura Council.

“We are concerned that the agreed drafts have been bogged down in an obscure committee in Baghdad – called the Shura (Advisory) Council – which has made unauthorized material changes to the agreed drafts, apparently in consultation with unnamed oil ministry officials in Baghdad,” Barzani said.

“This is not acceptable. It is a delaying tactic that must be swept aside. The agreed drafts must be reinstated and put to the Parliament,” Barzani added.

Can the Kurds block parliamentary passage of the bill?

Perhaps.

But it might also be worth keeping an eye on the parliamentary forces of Moqtada al-Sadr.

Thus far, Sadrists have rejected the bill, ostensibly because it would open the door to controversial “production sharing agreements.”

“The most serious problem with the law is the production-sharing agreements, which we categorically reject,” Nassar al-Rubaie, the spokesman for Sadr’s parliamentary bloc, said….

Speaking for the 32-member bloc that is currently boycotting parliament, Rubaie insisted the movement would only approve the law with an amendment to ban oil contracts with “companies whose governments are occupying Iraq”.

This kind of talk will surely be taken as a sign that the Sadrists are willing to resist an oil grab by US and British oil majors.

But the Sadrists are also fierce opponents of Kurdish regional autonomy.

An article by Samuel Ciszuk from Global Insight Daily Analysis (“Sadrists Join Chorus Against Iraqi Oil Law,” July 6, 2007) suggests that Maliki will have to flip either the Sadrists or the Kurds in order to win passage of the bill.

The government will need to get one of those two groups back on its side to pass the law and, given their diametrically differing interests—the Kurds want private investments and a curtailed Iraqi National Oil Company (INOC), while the Sadrists want a strong nationalised oil industry—one of them may be in a position to extricate far-reaching concessions.

Place your bets.

But before you lay your money down, know that the Sadrist political bloc has now ended its parliamentary boycott.

Perhaps they will learn to love the Shura-amended draft of the hydrocarbons law, if only because it curbs Kurdish power in Kirkuk.

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