Analysis: Iraq oil law author now a critic

by Ben Lando, Energy Correspondent
Energy - Analysis
Published: May 2, 2007 at 4:46 PM

WASHINGTON, May 2 (UPI) -- A critic of Iraq's draft oil law with perhaps the biggest shadow -- one of its original authors -- says the version penned by oil experts has been compromised by politics and he no longer wants it approved.

"I think really the majority of the oil technocrats are against it," Tariq Shafiq, director of the oil consultant firm Petrolog & Associates and one of three authors of Iraq's draft hydrocarbons law, told United Press International in a telephone interview from his home in Amman, Jordan.

Shafiq said the drafters' goal was to create a law that managed Iraq's oil reserves -- estimated at between 115 billion and 116 billion barrels -- in a federal planning process that included regions and governorates in decision-making roles.

"It required central united plans and policies for oil development that take into consideration the whole country and not any part of it," Shafiq said. And, he says, though it took him, Farouk al-Qassem and Thamir Ghadban three months to write the law last summer, the compromises reached in the subsequent eight months of negotiations between the central government and the Kurdistan Regional Government have turned the proposal into one he can no longer sign off on.

"These political accommodations have fragmented and weakened the central objective of the first petroleum draft: that of a unified and balanced oil resource management policy run from the center by the federal authorities, not only in cooperation with ... but also, in many instances, through the participation of the regions and governorates," Shafiq wrote last week in an article published by the Middle East Economic Survey.

(Qassem also opposes the law now. Ghadban, a respected oil expert, former oil minister and current adviser to the prime minister on oil issues, represented the central government in negotiations with Ashti Hawrami, the KRG's oil minister.)

The two sides can't come to terms on which oil fields are given to the central government and which are under the regions' purview. This will need to be resolved by an official interpretation of the constitution, passed in 2005, and a possible amendment to the document. And though there is agreement that oil revenues will be kicked to the federal government to be redistributed, there's no deal on how much the KRG receives.

Iraqi President Saddam Hussein, toppled by U.S. forces in March 2003 and executed in December 2006 for a massacre, deprived the now semiautonomous and relatively peaceful northern region of investment and oil funds. Now the KRG wants an automatic mechanism for the redistribution of the wealth -- out of the hands of the Central Bank or Finance Ministry, which the Kurds fear will withhold the money for political reasons.

The hydrocarbons framework -- a portion of the legislative regime needed to govern Iraq's oil -- was approved by negotiators and Iraq's Cabinet in February. The Bush administration immediately hailed it as a major step forward; passing an oil law is one of U.S. President Bush's benchmarks for success in Iraq. Iraq's Parliament needs to approve the document for it to become law, but the remaining pieces of the legislation need to be finalized first.

Now, however, the process is falling apart. Iraqi Oil Minister Hussein al-Shahristani told reporters at a conference two weeks ago in Dubai, the United Arab Emirates, that Parliament would take it up last week. It didn't.

At the same meeting, Hawrami said the list of control over oil fields is unacceptable to the Kurds and said their parliamentarians will vote against the law.

The oil unions and Sunni and Shiite parliamentarians and politicians have come out against the law. Shafiq, whose brother was killed recently in the sectarian violence in Iraq, says now is the time to put the law on hold and deal with resolving key issues first. Shafiq and 60 other experts wrote a letter to the government urging officials to do just that.

"While all revenue is earmarked to the whole nation, this may not necessarily be the maximum revenue as long as the management of the resources is not optimal," he wrote in the MEES article, which was a call for central planning for Iraq's oil sector. "An optimal management plan can only be based on unbiased allocation after assessing the whole resource and infrastructural base of the country."

He says the regions don't have the "necessary institutions" or "required expertise" to develop and operate their oil fields without the help of the central government -- via the reconstituted Iraq National Oil Co. (Shafiq was founding executive director of INOC in 1964) -- or international oil companies. He fears, however, the regions will then be too reliant on foreign companies.

In order to satisfy concerns of both the central and regional governments, the original draft gave overall planning responsibilities to the federal government via a federal oil and gas council and the re-established INOC. However, regional representatives would still be part of the council and sit on INOC's board.

Criticism from Shafiq is a blow, said Muhammad-Ali Zainy, senior energy economist and analyst at the London-based Center for Global Energy Studies.

"He's good; he's well-respected," said Zainy, an Iraqi-born oil expert who defected in 1982. "He's well-qualified and he has plenty of experience -- over 40 years, more than that. He's one of the pioneers."

At the meeting in Dubai last month, Shafiq said critics were kept from airing complaints publicly. He did, however, have a chance to exchange views with Hawrami, the KRG's oil negotiator.

"I was pleasantly surprised, when we sat and discussed many points," Shafiq recounts, "he tells me, 'Had we sat, you and I, a long time ago, many of these problems would not have existed.'"

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