Iraq's Draft Hydrocarbons Law Faces Growing Opposition

Jun 14, 2007 (Dow Jones Newswires)

Iraq's hydrocarbon law, which is yet to be submitted to parliament for final approval, is facing growing opposition not only from Kurds in northern Iraq but from the country's strong oil unions in the south and its main political blocs.

The controversial law, meant to bring in international oil companies to invest in Iraq's potentially lucrative oil industry, has missed several deadlines since it was passed by Prime Minister Nouri al-Maliki's government in February. Most recently it missed a May 31 deadline set by the government, and seems set to miss a further deadline being pushed by the U.S. administration.

Top U.S. military commander for the Middle East, Adm. William J.Fallon, told al-Maliki in Baghdad last Sunday the Iraqi government should aim to complete the law by next month. This was echoed by U.S. Deputy Secretary of State John Negroponte during his visit to Baghdad earlier this week.

But that date seems too soon to address sticking points that still need to be resolved between the federal government in Baghdad and the regional government in Kurdistan, let alone growing opposition by southern oil workers and various political blocs.

"The law has been delayed many times now - and with each delay, opposition to it has grown," said Greg Muttitt, an expert with U.K.-based non-governmental organization Platform.

Negotiators haven't yet reached agreement on the distribution of revenues.

The Kurds want their share to be given directly to them, by-passing the central government's finance ministry. The draft law states revenues should first reach central government in Baghdad, from where the ministry will distribute them to regions and governorates in accordance with the percentage of population.

"We are still negotiating with the Kurds some provisions of the law," a senior Iraqi federal government official said Thursday. "We haven't yet reached an agreement on the distribution of surplus of oil revenues after meeting needs of the national budget, although we have laid down the mechanism for that."

Even if the draft law is submitted to parliament now, it would take months before the parliament could vote on it, an Iraqi oil analyst said. He noted parliament is currently deadlocked after lawmakers voted to oust speaker Mahmoud al-Mashhadani, who is from the Iraqi Accordance Front, a Sunni bloc.

Al-Mashhadani has said he wouldn't quit and the Sunni front has refused to replace al-Mashhadani, saying they would do so only when al-Maliki and President Jalal Talabani quit.

"This problem is expected to last few weeks," the analyst added.

Oil workers, some Shiite, Sunni blocs oppose oil law

The law has also been facing growing opposition from the powerful Iraqi Federation of Oil Unions, which has staged several strikes in southern Iraq, demanding, among other things, the government change the draft law.

"We don't agree with the law's provision on production sharing agreements," Hassan Jumaa, head of the Federation, told Dow Jones Newswires. "We want the law to enact provision on service contract or any other model contract that fit the interests of the Iraqi people."

The unions think the draft law would allow foreign companies to control the country's oil reserve, the world second largest.

Vice-president Tareq al-Hashimi, the number one Sunni official in the current Iraqi leadership, said last month that he and his parliamentary bloc, the Accordance Front, opposed the draft law on the grounds that production sharing agreements, or PSAs, were giving foreign companies too-large "privileges."

Al-Hashimi linked part of his criticism to the decentralized constitution, which raised Kurdish hopes of attaining control over oil and gas production in their region in the first place.

The Al-Fadhila party, which had recently withdrawn from the parliament-majority United Iraqi Alliance, a Shiite bloc, also opposes the law. Lawmakers from the Sadr movement of radical Shiite clergyman Muqtada al-Sadr voiced opposition to the draft law.

"There is significant parliamentary opposition to the law," Muttitt said. "Even if an agreement is reached with the Kurdish parties, it is difficult to see how the law could pass - without using illegitimate measures to pressure members of parliament."

He didn't rule out "certain forces" would put pressure on lawmakers to pass the law.

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