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Iraqi Blocs Opposed to Draft Oil Bill    [

    Oil Exporters and US Beware: Writing Is on the Wall
    By Hossein Askari
    t r u t h o u t | Guest Contributor

    Thursday 03 May 2007

    When you take a look at the major oil-exporting countries, the reality is stark: dismal economic growth, abhorrent income distribution, all-pervasive social malaise, authoritarian and stifling governments, frequent military conflicts and a citizenry in despair. This is a recipe for unrest and turmoil.

    The common factor is oil. Up to about thirty years ago, the source of conflict in oil-exporting countries was foreign control over oil reserves. This point of contention seemed settled through negotiations and nationalizations by the mid-1970s. Then, as oil revenues went through the roof between 1974 and 1981, it was expected that oil would be a blessing for a number of countries. These optimistic predictions were short-lived, as the blessing of oil became the curse of oil. The reason for the curse is twofold: First, a growing world economy needs oil (and gas) and the world powers will try to control and influence countries that possess oil and gas in abundance. Second, oil revenues in oil-exporting countries have accrued to rulers and governments, and not to the citizenry.

    External Control of Oil and Gas Reserves

    Oil has motivated much of Western involvement in the Middle East. Britain started manipulating Iran in the early part of the twentieth century to secure Iran's oil, and in 1945 the US cemented its access to Saudi oil. In 1953, the United States and Britain toppled the constitutionally elected government of Mohammad Mossadeq of Iran to preserve Britain's oil interests and to open a door to US companies. Washington supported the Shah to ensure US access to Persian Gulf oil. The Iranian Revolution was not a simple uprising with the goal of bringing in the mullahs; it was instead a fight for independence from foreign control of Iran's oil and internal affairs. Control over natural resources is an emotional issue for citizenry the world over, and there will always be conflict where countries have been robbed of this control.

    The US invaded Iraq to take control of Iraq's vast oil reserves. Many energy insiders expect Iraq's reserves to eventually exceed Saudi Arabia's. The issue of foreign control of oil reserves has now been settled in most countries, but the invasion of Iraq is bringing the colonial era back to the Persian Gulf. Washington, the occupier, has pushed for an Iraqi oil law that would promote US interests and that undermines Iraqi sovereignty. In so doing, the US is sowing the seeds for future conflicts with every independent Iraqi government that comes to power, especially when Iraqis begin to control their own destiny. The Bush administration once again has failed to learn a single lesson from history. This administration willfully ignores the historic reason for conflicts in the Persian Gulf, namely, the wresting of control of oil reserves.

    Revenues to Rulers and Governments

    When people get something for nothing, the results always bode ill. The same happens when oil revenues accrue to rulers and governments without their having to do anything productive. Family rulers grab all they can for themselves. Whatever accrues to governments is invariably the major source of government revenues because tax receipts are minor. This easy come and painless raising of money makes it easier for governments to be unaccountable and to do whatever they wish with the people's resources. Corruption is rampant. Military expenditures are plentiful because they are needed to maintain power at home and to shore up support from abroad.

    Enabled by oil revenues, governments fail to pursue responsible economic policies. The vast government sector is used as the vehicle to buy, not earn, domestic support. The government acts as an employer of last resort and gives subsidies, all financed by the people's vanishing oil reserves, to keep the citizenry addicted to official largesse. A vibrant private sector, necessary to fuel modern economic growth and to create jobs, is largely trumped by an overbearing public sector. Unemployment exceeds 20 percent. Income distribution is heavily skewed. Upward mobility is severely limited.

    The financial stakes are so high for those in power that democratic governance is the last thing on their minds. Authoritarian rule is the only option. Freedom of expression is limited. Human rights abuses are rampant. Citizens watch their oil birthright being used to benefit a few.

    All this is a veritable witches' brew for dissent and havoc. The rulers take no responsibility for this predictable turmoil, and instead lobby the US for support in the name of stability and order.

    From Curse to Blessing - the Obvious Solution

    These adverse internal developments could be reversed by one simple policy change: give the oil money directly to the people. It is what the people want. It is the platform of populist leaders, such as Rafael Correa in Ecuador. It will increasingly become the rallying cry in most oil- exporting countries.

    There can be little dispute that oil belongs to all generations of citizens, certainly not to rulers and governments who are not subject to the will of the people. Hence, oil and gas reserves must equally benefit current and future generations, with every citizen receiving the same benefit from resource depletion. How can this be done?

    Oil revenues could be deposited into an investment fund and professionally managed to maximize returns. Every current and future citizen would receive an annuity check from the fund. The payout to each citizen could be calculated under reasonable assumptions, and would be continually updated with changing market conditions and population estimates. There would clearly be a need for a transition period to wean the government from oil revenues.

    Taking this easy oil money away from rulers and governments would reduce corruption, forcing rulers and governments to adopt sound development policies and to implement an effective and efficient tax system, which, in turn, would provide government revenues and address income inequality.

    Such an approach would replace inefficient subsidies with more efficient consumption and production patterns, eradicating poverty and protecting the interests of all generations. This, in turn, would restore hope to the average person and reduce anger and radicalism in the region. A fund of this type would raise a number of questions, including whether the will to work would be reduced. Any deleterious effect on productivity could be balanced by conditionality for receiving annuity checks (educational accomplishments and the like) and the realization that establishing a level economic playing field would likely restore incentives and promote hard work.

    Time to Act on Both Fronts

    It is time to beat the drums for change. First, the US must let countries, notably Iraq, control their own energy reserves. Second, international institutions and other credible experts must persuade rulers in oil-exporting countries to take a hands-off approach and assign oil revenues to their people. Taking oil revenues away from rulers and governments of oil-exporting countries would certainly be painful for those in power, but the time has come to undertake this effort for the sake of equity, fairness and global peace. Stability and prosperity in this part of the world will, in turn, encourage more investment in the development of oil and gas reserves, leading to more plentiful energy supplies and lower prices for all.

 

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    Iraqi Blocs Opposed to Draft Oil Bill
    By Edward Wong and Sheryl Gay Stolberg
    The New York Times

    Thursday 03 May 2007

    Erbil, Iraq - Kurdish and Sunni Arab officials expressed deep reservations on Wednesday about the draft version of a national oil law and related legislation, misgivings that could derail one of the benchmark measures of progress in Iraq laid down by President Bush.

    The draft law, which establishes a framework for the distribution of oil revenues, was approved by the Iraqi cabinet in late February after months of negotiations. The White House was hoping for quick passage to lay the groundwork for a political settlement among the country's ethnic and sectarian factions. But the new Kurdish concerns have created doubts about the bill even before Parliament is to pick it up for debate.

    The issue comes at a delicate moment for Mr. Bush, who on Wednesday began negotiations with Congressional Democrats over a new war-spending measure.

    The president vetoed a $124 billion bill on Tuesday because it included timetables for troop withdrawals, and a House vote on Wednesday fell short of the two-thirds majority needed to override the veto, with 222 voting in favor and 203 opposing the override.

    In a speech to a construction industry trade group in Washington, Mr. Bush said he was "confident that with good will on both sides, that we can move beyond political statements" and agree on a new measure.

    But he continued to criticize Congress for trying to use the bill to dictate timelines for withdrawal.

    "The question is, 'Who ought to make that decision, the Congress or the commanders?' " Mr. Bush said. "As you know, my position is clear - I'm the commander guy."

    In Iraq, the Kurds have taken issue with a new provision that was quietly packaged with the draft oil law by the Shiite-led Oil Ministry last month. The measure would essentially cede control of the management of nearly all known oil fields and related contracts to a state-run oil company to be established after passage of the law, said a spokesman for the Kurdish regional government.

    The spokesman, Khalid Salih, said the provision violated a clause in the Constitution that says the central government must work with regional governments to determine management of known fields that have not been developed. The Kurds, who have enjoyed de facto independence in the north since 1991, have been arguing for maximum regional control over oil contracts.

    The provision is part of four so-called annexes that are to be debated with the draft oil law in Parliament. Any objection to one or more of the annexes will stall passage of the law.

    "We are worried about these ideas put into the annexes," Mr. Salih said in an interview in Erbil, the capital of Iraqi Kurdistan. "It worries us a lot." If the law and the annexes go to a vote before Parliament, a rejection by the Kurdish bloc alone, which holds 58 of 275 seats, would not doom the law. But Parliament operates by consensus, and members say it is almost certain that no law regarding oil will pass without the approval of the Kurds.

    A senior Shiite Arab legislator, Sheik Jalaladin al-Saghir, said the concerns raised by the Kurds amounted to a bargaining tactic. "I think it's a maneuver," he said, adding that he believed the Kurds "will move forward to pass the law since everybody needs it."

    Contributing a further layer of complication, a Sunni Arab legislator said Wednesday evening that the main Sunni Arab bloc, which has 44 legislative seats, objected to any discussion of the law in Parliament at this time. "Acceleration in presenting it is inappropriate since the security condition is not encouraging," said the legislator, Saleem Abdullah. He said Sunni Arabs were also worried that the law would give foreign companies too large a role in the country's oil industry. Sunni Arab political leaders supported cabinet approval of the draft law, but appear ambivalent now.

    White House officials have said passage of the oil law is one of four major benchmarks they would like the Iraqi government to meet before fall.

    During a visit to Baghdad last month, Defense Secretary Robert M. Gates told the Iraqi prime minister, Nuri Kamal al-Maliki, that Mr. Bush would weigh Iraq's commitment to meeting the goals when he decided at the end of the summer whether to extend the recent troop increase.

    Differences on benchmarks for the Iraqi government are a central issue in the spending-bill talks between Mr. Bush and Democrats. Democrats, conceding they are unable to use the bill to force the withdrawal of troops, hope to write new benchmarks into the legislation, with consequences if the goals are not met.

    Speaking to reporters after Wednesday's meeting, Senator Harry Reid, the Democratic leader, said Democrats were determined that the bill would include "language in it that has the Iraqis take care of their own country." But the White House is likely to resist any attempt to punish the Iraqis for failure to reach certain goals, and Republicans say the president would consider benchmarks only if they are nonbinding.

    "I think Republicans and the president are amenable to some benchmarks," said Senator Trent Lott of Mississippi, the No. 2 Republican, "provided that they don't slop over into trying to dictate to the commander in chief or the commanders on the ground."

    The draft oil law provides for the distribution of revenues from all current and future oil fields to regions or provinces based on population. That agreement was meant to assuage the fears of the Sunnis, who suspect that the Shiites and Kurds are conspiring to hoard oil wealth, which is concentrated in the areas they dominate.

    The minority Sunni Arabs are at the heart of the insurgency against the Shiite-led government, and hold swaths of land in western and northern Iraq that produce little oil, though geologists believe there are substantial untapped reserves there.

    The Sunnis have been pushing for centralized control of the oil industry to assure equitable distribution of the revenues, while the Kurds have favored strong regional control. The Shiites have fallen somewhere in between.

    The Kurds held up cabinet approval of the draft law for months, seeking to ensure that it guaranteed maximum regional autonomy to sign oil contracts. They fear that the central government might steer exploration and development contracts toward the Shiite-dominated south, at the expense of other regions.

    The Kurds recently discovered two fields in northern Iraq, after signing contracts with a Norwegian and a Turkish company. But on Wednesday the Iraqi oil minister, Hussain al-Shahristani, a Shiite, said at a conference in Saudi Arabia that any contracts signed by the Kurds before passage of the oil law were considered invalid and illegal, news agencies reported.

    In Erbil, Mr. Salih, the Kurdish spokesman, said the Kurdish contracts were legal and "had been prepared according to international standards and norms."

    The draft law approved by the Iraqi cabinet says regions may enter into contracts, but a powerful new central body called the Federal Oil and Gas Council would have the power to "prevent" the contracts from going forward if they did not meet certain standards. A panel of oil experts from inside and outside Iraq would advise the federal council on the contracts.

    Oil industry analysts estimate the country's proven oil reserves at 115 billion barrels. Iraqi oil production peaked at 3.7 million barrels a day in 1979, according to the United States Department of Energy. Production stood at 2.6 million barrels a day before the 2003 invasion, but has dropped since. Passage of the draft law is seen as critical for encouraging the foreign investment needed to lift production levels.

    The draft oil law would allow regions to enter into production-sharing agreements with foreign companies, which some Iraqis and critics of the Bush administration say could lead to foreigners reaping too much of the country's oil wealth.

    Iraqi officials say all contracts will be subjected to a fair bidding process, but there are fears that American companies could be favored.

    In March, Mr. Shahristani said at an industry conference in Austria that 27 fields currently producing oil would be managed by the Iraq National Oil Company, which was shut down by Saddam Hussein in 1987 but would be re-established once the draft oil law was passed. Another 65 known fields would be offered for exploration and development contracts through rounds of bidding.

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    Edward Wong reported from Erbil, and Sheryl Gay Stolberg from Washington. Khalid al-Ansary contributed reporting from Baghdad, and Jeff Zeleny from Washington.