Iraqis Near Draft Law on Dividing Oil Revenue

A group of Iraqi politicians and ministers is close to finishing a draft of a national oil law that, if enacted, would be the most significant legislation passed by the government so far and help narrow some of the country's major political schisms, Iraqi and American officials say.

The officials said the authors have reached agreement on one of the most divisive issues in Iraq: How revenues from the oil industry should be distributed. The working draft calls for the central government in Baghdad to collect oil revenues and distribute them to provinces or regions based on population, the officials say. The measure could calm some Sunni Arabs who oppose regional autonomy because of fears that Sunnis would be excluded from a fair share of oil wealth, which is concentrated in Shiite and Kurdish regions.

The law could also encourage foreign investment in the oil industry, although security would remain a major concern for companies operating outside the relatively safe region of Iraqi Kurdistan.

The national oil law lies at the heart of debates about the future of Iraq, particularly the issue of having a strong central government or robust regional governments. The question of oil hasE also exacerbated sectarian tensions, because of the worries of Sunni Arabs, who are leading the insurgency, over the potentially lopsided distribution of oil wealth.

General George W. Casey Jr., the senior American commander here, and Zalmay Khalilzad, the U.S. ambassador, have urged Iraqi politicians to put the oil law at the top of their agendas, saying it must be passed before the year's end.

The report released this week by the Iraq Study Group said an equitable oil law was a necessary cornerstone to the process of national reconciliation, and thus to ending the war.

A final sticking point over approval of oil contracts remains, so there is a chance that parts of the working draft could be scrapped. But a deal could be reached within days, according to officials involved in the writing. The law would then go to the cabinet and Parliament for approval.

The Kurds, who already have an autonomous region in the north, had put up a fight to have regional governments collect and redistribute oil revenues, particularly ones from oil fields yet to be exploited. They had also proposed that revenues be shared among the regions based on both population and crimes committed against people under Saddam Hussein's rule. That would give the Kurds and Shiites a share of the oil wealth larger than the proportions of their populations.

But the Kurds on the drafting committee have shelved those demands, said Barham Salih, a deputy prime minister who is a Kurd and chairman of the committee.

"Revenue sharing is an accepted principle by all the constituent elements of the Iraqi government, including the Kurds, and that is the unifying element that we're all hoping for in the oil law," Salih said in an interview.

An American official here who has tracked the negotiations said the Kurds were willing to make concessions because a national oil law could attract more foreign oil companies to exploration and development in Kurdistan. A large foreign oil company would have more confidence in signing a contract with the Kurds if the company were to operate under the law of a sovereign country rather than just the law of an autonomous region, the official said on the condition of anonymity.

Furthermore, the official said, some Kurdish leaders believe that the concessions are a worthwhile price to pay for having a stake in the much larger revenue pool of the entire country's oil industry. The southern fields of Basra accounted for 85 percent of total Iraqi crude production last year, partly because northern production was hampered by insurgent sabotage. The south has an estimated 65 percent of the country's 115 billion barrels of proven reserves.

But the Kurds are still holding out on the issue of oil contracts. They insist that the central government should not have final approval over contracts signed by the regions to develop future oil fields, American and Iraqi officials said. The Kurds, who have recently discovered two new fields in the north after signing exploration contracts with a Turkish company and a Norwegian company, argue that the Constitution guarantees the regions absolute rights over such contracts.

"There are those among us who say we cannot go back to the former days of centralization, which were not conducive to good business practice and to the idea of federalism that is enshrined in the Constitution," Salih said.

Officials met Thursday night to try to resolve the issue, but could not reach an agreement. The committee includes politicians and ministers representing the major Shiite, Sunni Arab and Kurdish blocs in government.

A possible compromise floated by the Kurds is to allow a proposed body called the Federal Petroleum Council, whose mission would be to set oil policy, to reject a regional contract only if it can muster a two-thirds vote, and only if the contract does not meet very specific criteria.

"The Kurds are afraid that if they left the contracting up to the central government rather than themselves, the center might defer contracts," said the American who is tracking the law. "For example, the government might find it easier to contract for production in the south or develop only the fields there."

As for revenue distribution by population, the American official said a national census expected to be taken next year should determine the share of revenue that goes to each province or region. But the proposed census and any talk of demographics are volatile issues here - Sunni Arabs often claim they are at least 60 percent of the population, not the 20 percent that is often cited, and so have the right to rule over the Shiites and Kurds. The Shiites are generally estimated to be 60 percent of the population, and the Kurds 20 percent.

If doing a census next year is too politically fraught, or if security conditions prevent it, then revenue percentage could beU determined by the household counts recorded in rolls used by Saddam Hussein's government to distribute rations in the 1990s.

(C) 2006 International Herald Tribune. via ProQuest Information and Learning Company; All Rights Reserved.


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