BELI DINAR BARU IRAQ

BAGHDAD, 07 March 2007 (Reuters)

An influential Sunni Arab group criticised Iraq’s long awaited oil investment law on Tuesday, accusing the United States and Britain of invading the country out of greed for its vast oil wealth.

Iraq’s cabinet agreed a draft of the law last month after months of wrangling, sending it to parliament for final approval.

The law sets out how oil revenues will be divided among the population and regulates how foreign companies will be able to invest in exploration and production.

Iraqi and U.S. officials have said the law will be a crucial ingredient for Iraqi reconciliation. It states that oil revenues will be spread evenly according to population around the country rather than staying in the region where the oil is found.

Sunni Arabs have long feared that Shi’ites and ethnic Kurds, who sit on top of Iraq’s vast oil fields, will not share the country’s wealth in an even way.

The Muslim Scholars Association, a leading Sunni clerics group accused by the Iraqi government of fomenting violence, said the law as drafted was “invalid and lacks legitimacy”.

“The occupation forces have been rushing to pass such a law in a way that the rights of generations of Iraqis will sold,” the group said in a statement, adding that U.S. and British forces had “hidden their intentions for many years”.

“The Americans backed by the British occupation forces have started to reveal their greed for Iraq’s oil wealth,” it said.

The Muslim Scholars Association is influential amongst disaffected Sunni Arabs, once the dominant group in Iraq under Saddam Hussein but now marginalised since multiparty elections in 2005 swept majority Shi’ites and Kurds to power.

Sunni Arab insurgent attacks on Iraq’s oil infrastructure are already affecting exports, particularly from northern Iraq.

International
Iraq Oil Law Necessary But Not Sufficient
Oxford Analytica 03.07.07, 6:00 AM ET

Iraq’s Council of Ministers has set the end of May as the target for parliamentary approval of the draft hydrocarbons framework law. Endorsement by the cross-factional cabinet means the draft oil law is more likely to receive parliamentary approval.

The draft hydrocarbons framework law represents a compromise between the centralizing instincts of Iraq’s Arab factions and efforts by the Kurdish parties to retain near-autonomy. The draft law establishes three principles:

1. Centralized Control Of Revenues. The central government will control and distribute oil receipts.

2. Partly Decentralized Development. The draft law envisages an era of unprecedented decentralization in the development oil and gas fields. Key institutional reforms include:

–Ministry Of Oil. The ministry will become a largely administrative body focused on the promotion of hydrocarbons development, development of federal policy and negotiation of agreements with other states.

–Iraqi National Oil Company. INOC will be established as a holding vehicle that will manage and operate existing production fields.

3. Foreign Involvement In Upstream. The law grants regions and regional oil companies the right to draw up contracts with foreign companies for exploration and development of new oil fields. It does not specify what kinds of contracts are allowed, thus making room for production sharing agreements (PSAs).

As well as approving contracts and amending their length and terms, the Federal Oil and Gas Council will determine federal petroleum policies, exploration plans, field development and pipeline plans inside Iraq. The council will rule on the unitization of fields shared by different regions:

–One of its first tasks could be the consideration of the five PSAs signed by the Kurdistan Regional Government and foreign companies, as well as six outstanding PSA contracts between the Saddam regime and companies.

–In particular, the council would seek to bring the internal rate of return on these deals in line with a lower nationally set benchmark for such deals.

The council is a forum for factions to resolve differences over their interpretations of the hydrocarbons law. Throughout the three drafts, the composition of the council has been massaged to reflect this role. The body may be too large to be an efficient decision-making forum.

Furthermore, seats will be divided between key factions according to an agreed formula, suggesting that candidates may be selected along factional lines rather than technical capability.

The key stakeholders likely to be involved in Iraq’s hydrocarbons sector have welcomed cabinet approval of the draft law. Each has interests reflected in the compromise law:

–Iraqi government. For the government of Prime Minister Nuri al-Maliki, the endorsement of the law by the multi-factional Council of Ministers is a notable success.

–United Iraqi Alliance. The main Shia bloc views the draft law as a means to strengthen Baghdad’s hold over the highly autonomous Southern Oil Company and block moves by Basra’s provincial leadership to claim an estimated 60% of proven oil reserves.

–Kurdish parties. The current draft reflects alterations to meet the demands of Kurdish leaders. Future disputes may arise from the Federal Oil and Gas Council’s interpretation of the law.

–IOCs. The draft law is a key precursor to international involvement in Iraq’s hydrocarbons sector, and many aspects of the law will be attractive to international oil companies (IOCs). Yet, a national framework for contracts and regulation is not sufficient to attract IOCs in the near term.

The next step will be the creation of a revenue-sharing law and other pieces of legislation dealing with institutional reform. These will need to be approved by the cabinet and thereafter parliament. Key difficulties include:

–Census. The per capita distribution of funds will require a politically sensitive census to be undertaken.

–Politicization. The Federal Oil and Gas Council could be disrupted by broader factional disputes.

–Brain Drain. The Ministry of Oil and INOC will struggle to recruit skilled hydrocarbons sector technocrats.

Cabinet endorsement of the draft hydrocarbons law represents a success for central governance in Iraq. The legislation is necessary, but not sufficient, to attract the near-term involvement of international oil companies, and many hurdles remain in the effort to develop Iraq’s hydrocarbons industry.

To read an extended version of this article, log on to Oxford Analytica’s Web site.

Oxford Analytica is an independent strategic-consulting firm drawing on a network of more than 1,000 scholar experts at Oxford and other leading universities and research institutions around the world. For more information, please visit www.oxan.com. To find out how to subscribe to the firm’s Daily Brief Service, click here.

Greg Howell, official in charge of developing the private sector in the American Agency for International Development in Baghdad, said on Saturday that the Iraqi government has completed the procedures to request membership in the World Trade Organization.

Howell added in a press conference held in Baghdad that the Iraqi government is preparing to hold the first dialogue with the Organization next April in Geneva, Switzerland. He pointed out that Iraq had submitted a request for membership in the Organization in 2004 and formed a working group to examine the demand and coordinate with the Iraqi government on reforming the trade policy and the requirements needed to join the World Trade Organization.

He pointed out that the Iraqi government has completed all procedural conditions in order to convene a meeting for the Group in charge of joining the Organization, pointing out that the gains of joining WTO are ensuring access of Iraqi goods and services without discrimination to foreign markets, as well as gaining more stable trade relations.

Source: Iraqdirectory.com

03 March 2007
U.S. Envoy to Iraq Applauds Passage of National Hydrocarbon Law

http://usinfo.state.gov/xarchives/display.html?p=washfile-english&y=2007&m=March&x=20070303173414lnkais0.3565332

Defense Department official Monday discussed the ongoing work to improve Iraq’s business and economic stability during at press conference at the Combined Press Information Center here.

Paul Brinkley, Deputy Undersecretary of Defense for Business Transformation and director of the Task Force to Improve Business and Stability Operations in Iraq, spoke about the progress that has been made and what is in store for the future.

“We’ve been coming to Iraq now for several months, and for the past few months, bringing sizable groups of business executives from outside of Iraq into Iraq working with one objective, and that is to restore economic opportunity and create a sense of potential economic growth for the Iraqi people,” Brinkley said.

Representatives from several dozen American and international businesses will be engaging both business communities and Iraqi officials in an effort to get an understanding of the situation here to prepare for the work ahead.

“In an effort to connect the Iraqi economy to the global economy to drive demand and opportunity to Iraqi business and to create a sense of economic hope and prosperity,” Brinkley said.

The U.S. Department of Agriculture will also try to revitalize the agricultural industry which has a huge role in Iraq’s economy.

“We have a stellar group of agricultural and agribusiness representatives from major American universities and from international businesses who are here and are going to be working to ensure that we synchronize our industry revitalization efforts with the agriculture sector, which is obviously a major part of the overall Iraqi economy,” Brinkley said.

Brinkley states that the economic efforts will help the Fardh Al-Qanoon plan and not work against it.

“We’re working in collaboration with our commands as the Fardh Al-Qanoon unfolds to ensure that we are working to revitalize industry in areas as security is restored,” Brinkley said.

Problems plague some factories due to many issues but a majority of them can be easily identified and dealt with.

“In most case, it requires a small amount of investment,” Brinkley said. “We’re working with the government of Iraq to get those investments made to deal with, in some cases, maintenance and spare parts.”

Others, such as the cement and phosphate industries in Al Anbar require a larger and more complicated approach.

“They require huge amounts of steady, continual electrical power,” Brinkley said. “We’re working closely with the minister of electricity and our own reconstruction organizations to identify the most rapid path to power restoration which will enable the re-employment of people in the Al Anbar region.”

The amount of jobs that the reconstruction would generate for the Iraqi population would be astronomical.

The official statistics go as high as 500,000 jobs, Brinkley said.

Brinkley has a positive outlook on how this will affect the economy as a whole.

“The optimism we have is that as we restore these industrial operations, this will create immediate uplift to other parts of the economy,” Brinkley said.

If there were any concern as to how much money the Iraqi government is willing to spend to fix their fledgling economy, Brinkley is quick to reassure.

“I know 10 billion dollars has been set aside by the Iraqi government,” he said.

The road ahead is difficult, but Brinkley and his team are working together to bring about a better tomorrow.

“The next several months are key to our ability to demonstrate to the Iraqi people a sense of optimism and to give them hope in a brighter future,” Brinkley said. “I think this year that’s going to be a huge amount of our energy dedicated to this.”

Source: New Blaze