WASHINGTON - The US-backed Iraqi cabinet
approved a new oil law on Monday that is set to
give foreign companies the long-term contracts and
safe legal framework they have been waiting for,
but which has rattled labor unions and
international campaigners who say oil production
should remain in the hands of Iraqis.
Independent analysts and labor groups have
also criticized the process of drafting the law
and warned that that the bill is so skewed in
favor of foreign firms that it could end up heightening
political tensions in the Arab
nation and spreading instability.
example, it specifies that up to two-thirds of
Iraq's known reserves would be developed by
multinationals, under contracts lasting for 15-20
This policy represents a U-turn for
Iraq's oil industry, which has been in the public
sector for more than three decades, and would
deviate from normal practice in the Middle East.
According to local labor leaders,
transferring ownership to the foreign companies
would give the United States a further pretext to
continue its occupation - on the grounds that
those companies will need protection.
Union leaders have complained that they,
along with other civil-society groups, were left
out of the drafting process despite US claims that
it has created a functioning democracy in Iraq.
Under the production-sharing agreements
provided for in the draft law, companies will not
come under the jurisdiction of Iraqi courts in the
event of a dispute, nor will they be accountable
to the general auditor.
The ownership of
the oil reserves under this draft law will remain
with the state in form, but not in substance,
On February 8, the labor
unions sent a letter in Arabic to Iraqi President
Jalal Talabani urging him to reconsider the
are a relic of the 1960s," said the letter. "They
will re-imprison the Iraqi economy and impinge on
Iraq's sovereignty since they only preserve the
interests of foreign companies. We warn against
falling into this trap."
Ewa Jasiewicz, a
researcher at Platform, a British human-rights and
environmental group that monitors the oil
industry, said: "First of all, it hasn't been put
together in any kind of democratic process. It's
been put through a war and an occupation, which in
itself is a grotesquely undemocratic process."
The law was prepared by a three-member
Iraqi cabinet committee, dominated by the Kurds
and the Shi'ites. It is now expected to be
ratified by Parliament because the powerful
faction leaders in the government have cleared it.
The first draft was seen only by the Iraqi
technocrats who penned it, nine international oil
companies, the British and US governments, and the
International Monetary Fund. The Iraqi Parliament
will get its first glimpse next week.
Concerns about the process are compounded
because of the ongoing disputes in Iraq over the
legitimacy of the cabinet and the Parliament,
which have been constructed by the governing
council, which itself was created in 2004 by
occupation forces along sectarian lines.
In a speech last month by Hassan Juma,
head of the Iraqi Oil Labor Union, posted on the
union's website, he called on the Iraqi government
to consult with Iraqi oil experts and "ask their
opinion before sinking Iraq into an ocean of dark
The content of the law has
also worried international campaigners and local
Iraqi groups who say that it puts Iraqi oil wealth
firmly on the path to full privatization.
"The hydrocarbon law reflects the process
of readying Iraq's oil for privatization," said
Jasiewicz, "drafted in secret, shaped by foreign
powers, untransparent, undemocratic and forced
through under military occupation."
Jasiewicz said the law can be regarded as
the economic goal of the war and occupation and
that "it will be viewed by most Iraqis as not just
illegitimate, but a war crime".
officials with the Iraqi government, who have
already sent the draft oil law to Parliament for
consideration, say it represents a step forward
for the war-torn country. Under the law, oil
revenues would be distributed to all 18 provinces
based on population size, and regional
administrations have the authority to negotiate
contracts with international oil companies.
Prime Minister Nuri al-Maliki, a close
ally of Washington, called the law "another
founding stone in state-building".
Minister Hussain al-Shahristani said: "This law
will guarantee for Iraqis, not just now but for
future generations too, complete national control
over this natural wealth."
of the law starting eight months ago saw squabbles
between the Kurdish factions who control the
northern part of Iraq and the Shi'ite-led regime
as they both vied for bigger shares of the
country's oil wealth, estimated at 115 billion
barrels. That they have finally come to a final
agreement may be a sign of long-sought stability.
Yet critics, including Iraqi oil
professionals, engineers and union technicians,
are instead calling for technical service
contracts, meaning a company would come in and
offer services such as building a refinery, laying
a pipeline, or offering consultancy services, get
its fees and then leave.
"It is a much
more equitable relationship because the control of
production, the development of oil, will stay with
the Iraqi state," said Jasiewicz.
the model that Saudi Arabia, Iran, Kuwait
generally operate. There's no other country in the
Middle East with the kind of oil reserves that
Iraq has that would consider signing a
production-sharing agreement," she said. "It's a
form of privatization, and that's why those
countries haven't signed these, because it's not
in their interests."