Green Zone Cabinet OKs Oil Law

The cabinet of the Green Zone Government in Iraq-Nam yesterday approved a draft oil law. Although the parliament will still have to vote on it, that is likely to be a mere formality. The new law will bring an end to the nationalized oil industry in Iraq-Nam, which has existed for three decades. It will also undermine the central authority, meaning the Kurds are the big winners here.

Iraq-Nam has about 115 billion barrels of oil reserves, which makes it fourth in the world after Saudi Arabia, Canada (oil sands!) and Iran. However, the oil is very near the surface, and estimates are that production costs will run from $1 to $1.50 a barrel, including exploration costs. North Sea oil, by comparison, costs $5-6 a barrel to bring up. At $60 a barrel, that difference doesn’t mean a great deal, but four bucks on 115 billion adds up.

One of the big political issues is the sharing of the revenue this oil wealth will bring into the country. The law calls for it to be disbursed to each province based on population. This is a genuine concession to the Sunnis, whose heartland in the west of the country has very little petroleum under it. The Kurds, who have oil fields as well as stability and engineering know-how, are giving up substantial sums – but gain far more.

An independent Kurdistan is the objective of 90% of voters in the region, and both main parties are coy about autonomy versus independence. Independence isn’t worth much if the Turkish army comes in the next day. However, the law permits regional governments to negotiate with oil producers, meaning the Kurdish Regional Government will decide who gets what contract, will apportion jobs and determine the conditions of the deal. This will then be reviewed by something call the Federal Council of Oil and Gas.

The FCOG has 60 days, under the law, to object to any deal the Kurds make, and it will take a 2/3 majority to make that objection stick. And of course, the Kurds will have council seats. Any disputes will go to a group of independent advisors, who “might include foreign oil and gas experts, Iraqi or foreign,” according to the draft law. Foreign experts from BP, Shell and Exxon are unlikely to find against the Kurdish Regional Government that handed them the nice deal. Who controls the purse, controls the nation. The Kurds have found a way to the catbird seat.

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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