Socialist Worker

Mortgaging Iraq’s oil

by Anne Alexander
Issue No. 2050

Iraqi Prime minister Nouri al-Maliki has called it “a gift to all the Iraqi people”. But it is profit-hungry oil multinationals who will be the real winners from the new oil law being debated by the Iraqi parliament.

According to the US-backed Iraqi government, the law will reduce sectarian conflict by allocating oil revenues fairly to each of Iraq’s 18 provinces.

The reality is it will accelerate fragmentation of the country and fuel conflict.

Kamil Mahdi is an Iraqi economist based at the University of Exeter and an expert on the oil industry.

He told Socialist Worker, “The law is designed to make regions compete with each other to give favours to the companies.

“It is also designed to accelerate exploitation of Iraq’s oil resources based on the interests of foreign companies, rather than on planning for the long-term needs of the Iraqi people.”

The wording of the draft law seems at first glance reassuring. Article 1 states that “oil and gas are owned by all the people of Iraq in all the regions and governorates”.

The devil lies in the detail. The law will bring in a type of contract known as a “production sharing agreement”. This protects oil company profits while costing Iraq hundreds of billions of pounds in revenue.

The agreements will mean a loss of democratic control over the industry. Any disputes over the contracts will be resolved in international tax courts rather than under Iraqi law.

The law allows the government to appoint representatives of the multinational oil companies to the body charged with overseeing the industry.

The law devolves the management of the oil industry from central government, allowing regional authorities to sign exploration and production contracts with foreign companies.

This clause will increase the chance of conflict over oil – including border disputes between oil-rich and oil-poor regions that can spill over into ethnic and sectarian conflict.

The Kurdistan government has already taken this path, publishing its own law.

This not only claims exclusive rights over the rich oil reserves of the Kurdish regions, but also Kurdish control of large areas of neighbouring Arab-majority provinces.

Regional authorities making deals with multinationals will be in a weaker negotiating position than central government.

Lacking the resources and legal status of a national government, they will agree worse contracts. Contracts already signed between Kurdish authorities and the oil companies demonstrate the problem.

Even though the companies are minor players, the Kurdish authorities have conceded terms giving them profit rate of between 60 and 99 percent, compared to the standard 15 percent in other oil producing countries.

The government’s determination to mortgage the country’s natural resources has generated anger. The Federation of Oil Unions in Basra has pledged to resist the new law.

Hassan Jumaa Awad, the head of the federation, warned, “History will not forgive those who play recklessly with the wealth and destiny of a people. The curse of heaven and the fury of Iraqis will not leave them.”

Hands Off Iraqi Oil. Protest at Shell’s annual general meeting, Tuesday 15 May, 8.30am-12 noon, Novotel London-West Hotel and Convention Centre, 1 Shortlands, Hammersmith, London W6. (Nearest tube Hammersmith)

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Tue 8 May 2007, 18:20 BST
Issue No. 2050
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