About That Oil
Stratfor on the Iraqi cabinet’s draft oil revenue-sharing legislation says its the US a “new claim to success in its nation-building efforts for Iraq.”
Some potential problems, however:
The division of oil revenues between Iraq’s Kurdish and Shiite factions is critical to the formation of a comprehensive political resolution in the country. Though the legislation is certainly a step in the right direction, a closer look at the details reveals it is more of a time bomb than a functional agreement.
The legislation was approved nearly two months after a self-imposed deadline by the Iraqi government to enact an oil law … It comes as little surprise that the United States played a large part in rushing the negotiations over the oil legislation in an attempt to force a compromise among Iraq’s rival factions; it is hoping the legislation will help improve security in the country.
… In a nutshell, the new oil law would empower the central government to allocate oil revenues to Iraq’s 18 provinces on the basis of population (a concession for the Sunnis) while leaving the responsibility for negotiating existing and future oil deals with the regional governments (a concession for the Kurds). This is an incremental step in the effort to adopt an oil law, but it is hardly the end of the story.
Under the existing draft the regional governments are pledged to pay their oil revenues into a central depository, and an independent panel of experts will review any contracts negotiated by the KRG. However, the central government has not yet pledged to pay them out in any organized way.
So far there is no mechanism to decide on which oil fields will be managed by the national, regional or private oil firms. This allocation of specific territories and oil fields is referred to as the annexes — a rather thorny issue that was left out of the existing oil draft in the rush of the negotiations.
The draft leaves open the issue of the disputed oil-rich territory of Kirkuk until a referendum is held on whether Kirkuk should join the Kurdistan Regional Confederacy (the united administration of Arbil, Dohuk and Sulaymaniyah provinces).
The draft is contingent upon all three factions supporting it when the Iraqi parliament meets (likely in March or April). Before that happens, the factions will have to agree on the remaining annexes and revenue-sharing law.
In other words, there is an oil law, but the issues of who controls the oil and the money remain unclear. Put another way, the agreement is a done deal — so long as the stickiest issues that have held up Iraqi development for the past four years get resolved in the following two months. The survival of this oil deal will heavily revolve around what the Kurds get in return for allowing the legislation to move forward.
…. The Kurds have more or less stayed out of the fray as Iraq’s Shiite and Sunni factions have engaged in all-out war. But as the oil negotiations proceed, the Kirkuk referendum issue heats up and more of Iraq’s Kurdish forces are sent to Baghdad as part of the new security plan, Iraqi Kurds will soon find themselves playing a bigger part in Iraq’s bloody power struggle. The new oil draft legislation looks good on paper, but it is only delaying the inevitable battle.
Posted by Jules Crittenden at 11:19 am on Tuesday, February 27, 2007
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