Why Iraqis Cannot Agree on an Oil Law
Author: Lionel Beehner, Staff Writer
May 9, 2007
Introduction
Disagreements over oil and revenue sharing threaten to unravel hopes for a political breakthrough and national reconciliation in Iraq. A draft oil law has drawn criticisms from Iraq’s Sunnis, who prefer a stronger role for the central government, and from Kurds, who prefer a stronger role for the regional authorities. The majority Shiites have sought to mollify the Sunnis by keeping control of Iraq’s oil sector in Baghdad, not the provinces. The role of outside investors, as well as the classification of old versus new oil fields, also divides Iraqi politicians. Oil, of course, is the country’s most vital resource, accounting for 95 percent of government revenue. Yet output has fallen well short of Baghdad’s production targets, mostly due to corruption, poor security, and lack of investment.
What is contained in the draft oil bill?
The bill drafted in February gives overall planning responsibilities to the federal oil and gas council and the Iraq National Oil Company (INOC), a state-run company to be established once the bill is passed. Representatives from regional authorities can be part of the council and sit on INOC’s board. The bill also divvies up revenue from both existing and future oil fields based on regional population. However, four annexes introduced in recent weeks by the Iraqi oil minister, Hussein al-Shahristani, a Shiite, cede greater control of management of current oil fields and existing contracts to INOC.
The Kurds argue these annexes were drafted without their input and violate the constitution, which states that Baghdad, together with regional authorities, will determine the management of untapped fields. According to the annexes, 93 percent of Iraq’s proven petroleum reserves will be under the purview of INOC, leaving just 7 percent to regional authorities. “Kurdish dissatisfaction stems from its objection to a state-run, relatively unaccountable oil company that’s given almost all of Iraq’s proven reserves,” says Jonathan Morrow, legal adviser to the Kurdistan Regional Government’s natural resources minister. The draft bill is supposed to be signed into law no later than May 31, but experts doubt the Iraqi government will meet that deadline. “Unless these annexes that describe the distribution of revenue and role of ministry of oil and INOC are resolved, the hydrocarbon law in and of itself will not change anything,” says Frank Verrastro, director of the energy program at the Center for Strategic and International Studies.
Why has it been so difficult to draft an oil law?
Iraq’s Kurds and Sunni Arabs oppose the draft law for different reasons. The Kurds say it cedes too much control to Baghdad’s oil ministry and INOC. The Kurds want more regional autonomy to develop and pocket the revenues from existing and new fields on their territory, as well as those near the northern city of Kirkuk, which is under de facto Kurdish control. Moreover, they prefer greater authority to bypass Baghdad and sign contracts with foreign companies. The Sunnis, who reside mainly in regions lacking in major oil reserves, favor a hydrocarbon law that distributes revenue more evenly and according to need. Tariq Shafiq, one of the draft oil law’s principal authors, told United Press International the regions don’t have the “necessary institutions” or “required expertise” to manage their oil fields without the assistance of the central government and will become overly reliant on foreign companies.
What are the main points of contention?
Revenue sharing. The precise distribution of revenues from Iraq’s oil production remains undecided and, according to Morrow, there has been “not one single negotiation for revenue sharing in Iraq.” The constitution is vague on the subject; Article 111 states simply that “oil and gas are the ownership of all the people of Iraq,” while Article 112 calls for a distribution of revenues “in a fair manner in proportion to the population,” taking into account regions deprived by Saddam’s regime that would be first in line for payments.
The classification of new versus old oil fields. Kurds maintain that under the Iraqi constitution new production will be under the control of regional authorities. But Verrastro says the definition of “new” varies from region to region. Kurds, he says, would classify a new well in an old field as “new,” as well as any incremental exploration of existing fields.
The role of foreign companies. Iraqis disagree over whether to allow foreign companies to develop their country’s untapped oil fields. Sunnis in particular are worried it would erode Iraqi sovereignty and redistribute oil revenues away from Iraqis and into foreign hands. But many experts say outside investors are needed to stimulate development of Iraq’s dilapidated oil infrastructure. “There’s a question if the [Iraq National Oil] Company has enough heft without foreign help,” Verrastro says.
How much oil does Iraq have?
Iraq's proven oil reserves are estimated to be around 115 billion barrels, making them the world’s third largest after Saudi Arabia’s and Canada’s. The bulk of Iraq’s known oil reserves lie primarily in the Kurdish-controlled north and Shiite-controlled south around Basra. But because of sanctions, neglect under Saddam, and lack of investment, Verrastro reckons less than 20 percent of the country has been fully explored. He estimates undiscovered reserves could be anywhere from 155 billion to over 230 billion barrels. “Iraq’s western desert” (PDF)—which is Sunni controlled—“is considered to be highly prolific but has yet to be explored,” writes Amy Myers Jaffe, an energy expert at Rice University’s James A. Baker III Institute for Public Policy. The bulk of Iraq’s known reserves lie around Basra in the south and Kirkuk in the north.
Why has oil production stalled?
In the run-up to the April 2003 war in Iraq, the Bush administration predicted that within five years Iraq would be producing 6 billion barrels of oil per day, more than enough to pay for its reconstruction. Verrastro says the White House failed to account for the devastated state of Iraq’s pumps and pipes, due to years of neglect, mismanagement, and financial stress caused by sanctions. He estimates that Iraqi oil production, currently around 2 million barrels per day, will not reach 4 million barrels per day until 2010. Production shortages over the past few years are mostly due to poor maintenance, corruption within the oil ministry, and a lack of security that has fueled smuggling and sabotage.
There has been virtually no development of new fields since the April 2003 invasion of Iraq, according to Jaffe. Many experts say the problem dates back to the onset of severe UN sanctions in 1991. Even during the oil-for-food program, which started in the late 1990s, Iraq’s oil infrastructure was badly neglected. The Brookings Institution’s Iraq Index estimates about four hundred insurgent attacks have targeted Iraqi oil infrastructure since 2003.
Another problem is the flight of trained technicians needed for Iraq’s oil industry. Jaffe points to “a looming gap in technical and managerial expertise,” combined with the “intimidation of key experts.” Many of the industry’s most capable technocrats under Saddam either fled Iraq or are of retirement age, says Verrastro.
What is the likelihood of the oil law passing parliament soon?
It depends on whether Iraq’s various factions are willing to make difficult political compromises. “I’m less confident now,” says Kenneth Katzman, a Middle East expert with the Congressional Research Service. “The Kurds have always had problems with the law but what I’m worried about really is the Sunni threat to pull out of the parliament entirely.” Most experts believe the Iraqis will not meet the May 31 ultimatum. “We’ve seen deadlines pass before so I don’t see what’s so magical about May 31,” says Verrastro. Morrow says it is possible for the oil bill to be passed without the annexes (which are voted on as a bloc, not individually) by summer, thus requiring more rounds of talks before parliament signs off on the revenue-sharing bill and other provisions. U.S. officials have made an oil law one of their main benchmarks to gauge political progress in Iraq.
Why Iraqis Cannot Agree on an Oil Law - Council on Foreign Relations
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09-05-2007, 10:46 PM #821
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09-05-2007, 10:46 PM #822
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09-05-2007, 10:47 PM #823
[QUOTE=Sudden Impact;198802]No problem. I have nothing written to back this up but you can search back through the forum and find people reporting that their banks have told them the dinar is "blocked" or that it's illegal to trade the dinar due to government regulations. This should not even be considered at this point. IMO, as there are many banks, including Chase, in both the US and UK buying and selling dinar.
Thanks.
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09-05-2007, 10:59 PM #824
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Must Buy!!!
If they sell Dinar they do have to buy them. According to Presidental Order: 13303 . All Americans are incouraged to invest in Iraq by buying Dinars.
The link is http://www:edinarfinacial.net this link should work. It would be aginist the law for them not to buy them back. What kind of a deal you get is up to you. % wise.
Presidential Order 13303: Allows US Citizens to buy and invest in the New Iraq . Under this Order and the Coalition Provisional Government Order 39, a US citizen has the same rights to investments as an Iraqi citizen. Hope this helps
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09-05-2007, 11:10 PM #825
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wessgs
Iraqi Dinar News | Buy Iraqi Dinars
your link had a :Habakkuk 2:2-3 Then the LORD answered me and said: “ Write the vision And make it plain on tablets,
That he may run who reads it. 3 For the vision is yet for an appointed time; But at the end it will speak, and it will not lie. Though it tarries, wait for it; Because it will surely come, It will not tarry.
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09-05-2007, 11:28 PM #826
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09-05-2007, 11:45 PM #827
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Last edited by MOM2TWO; 09-05-2007 at 11:46 PM. Reason: I still can't spell
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09-05-2007, 11:53 PM #828
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economic expert stresses : the difficulty of determining prices in the light of the competitive capabilities
حسن الربيعي
Hassan Al-Rubaie
Dr. Salim Mohammed Aboud expert on the affairs of the market price policy in the Iraqi market depends on a variety of factors linked to the standard of living for individuals and the state's ability to produce and the protection of national production and regulate the relationship between the consumer and producer.
He said in an interview with the (Economic morning) that the price consists of production facilities and banking institutions and financial aspects in the implementation of functions including pricing policy in the market.
Therefore Valtozan between economic organizations and pricing policy between development programs and ways to achieve prosperity for the individual and society and between Touzan psychological situation for consumers and achieve degrees of stability is needed.
There is a direct relationship between pricing policy and the desire of consumers to buy goods and needs, taking into account the relationship between price and volume entry.
For all that the responsibility of the price list and moving to achieve production targets or even exceed the resources in the distribution of the total output as well as adapt and modify the economic system and handle any change in the request goods or services because of the evolution and change in tastes.
Despite previous attempts in the fixed fee pricing policy and control relative price levels but they failed, because of the absence of parameters fixed in supply and demand and the level of incomes that have not stabilized over the past decades and the absence of strong economic system and the people there in the economic arena does not exceed distorted structures and institutions scattered The processes and procedures regarding spending priorities unbalanced and did not arrange programs according sound development in the absence of a real evolution of production and qualitative and quantitative decline in services and the emergence of sterile techniques in the mass production of the most competitive capabilities of the country.
In general. Thus did not show the identity of the market did not establish sound economic system unable to perform his functions within the development plan and the activation of the roles economic institutions.
Dr. Abboud goes in his response to treatments, and the steps required to control the pricing policy, saying :
The weakened state capacity and production factors and resources lost most important and therefore could identify any pricing policy of a system of prices at the current stage at least we As I lost Infrastructure and revealed efforts and weakened the qualifications and capabilities available with what is looming on the horizon of quick calls invitations to move to a market economy privatization, without careful calculation or studies of the importance of a favorable climate and conditions and awareness of the potential changes.
It could not achieve stability and situations fee pricing policy to protect consumers and regulate the relationship continues to ABC at the State and society unachieved.
But this does not close the door completely under enjoyment Iraq has great economic potential and the qualifications and resources that allow them to pursue steadily towards the changes that serve society and social balance and prosperity.
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09-05-2007, 11:55 PM #829
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Trade tries to activate economic cooperation with Kuwait
بغداد - الصباحBaghdad-Sabah.
The Ministry of Trade proposal to the Kuwaiti side on the possibility of an agreement on trade and economic cooperation and cultural and artistic between the two sides in order to cancel the 1964 agreement signed between the two countries and the creation of a new convention consistent with the new reality.
The source at the Ministry of Commerce, said that the proposals submitted by the ministry were referred to the Ministry of Foreign Affairs for the purpose of the adjournment of the Kuwaiti side and studied to be agreed later on the new date for holding the meetings of the Iraqi-Kuwaiti joint search mechanisms in the development of bilateral relations in the economic, trade, cultural and artistic fields.
He pointed out that the ministry is now working as mechanisms designed to develop relations and activating bilateral agreements and work for the establishment of specialized exhibitions in all fields are also examining previous conventions and finding new proposals in coordination with the competent ministries on the subject of such agreements
Translated version of http://www.alsabaah.com/
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09-05-2007, 11:57 PM #830
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