Oil looming large in battle over Iraqs future

About the only reports out of Iraq in U.S. major media these days are about suicide bombings and other attacks. Meanwhile, though, Iraq is working to re-emerge as a major global oil producer.

How this will be achieved, what it means for Iraq’s future and who in Iraq will benefit are questions hotly debated there. Will Iraq hand over too much control over its oil wealth to foreign transnationals? Will it dismantle its publicly owned oil companies? Will it become just another “petro-state” serving global elites rather than the Iraqi people?

These issues will play an important role in the July 25 elections in Iraqi Kurdistan, and in national elections scheduled for next January. Differing views on oil matters, says Iraqi Communist Party spokesperson Salam Ali, “are highly influenced by the ongoing fierce political struggle over power, influence and wealth.”

“Oil is at the heart of this fierce battle that will decide the form and content of the future Iraqi state,” he says.

Earlier this month, Iraq’s cabinet gave preliminary approval to a deal with the China National Petroleum Corporation and BP (British Petroleum) to develop Iraq’s largest oil field, the Rumaila field in northern Iraq. It highlights China’s growing interest and role in developing Iraq’s oil industry. With violence continuing to ebb, many experts expect to see more of this type of foreign investment in Iraqi oil, with partnerships between Russian, Chinese and other companies and the big Western transnationals.

The CNPC-BP consortium was among 32 foreign bidders for eight oil development contracts at an auction held by Iraq’s Oil Ministry June 30. Bidders included transnational oil giants like Exxon Mobil, Chevron, ConocoPhillips, Shell, Lukoil, Japex, Total and the Korea Gas Corporation. The Chinese-British bid was the only one that accepted the Oil Ministry's terms. The auction was Iraq’s first oil and gas field offering to international companies in nearly three decades.

Iraq’s Communist Party reacted to the oil auction in a July 5 editorial in the party’s newspaper Tareeq al-Shaab. It made the following points:

* Oil is an especially strategic commodity, especially for Iraq, with oil revenues being the main source for funding the state’s budget and providing for the enormous needs for reconstruction and reviving Iraq’s economy. As a result, the Communist Party said, it is essential that any formula for using this national resource must ensure Iraq’s national interests and its control over oil and its revenues.

* The government should give priority to its own direct national investment, re-establishing the country’s National Oil Company, and utilizing Iraqi expertise. The Communist Party, whose leader Hameed Majid Mousa is himself trained as an oil economist, emphasizes that Iraq has a large pool of knowledgeable and trained oil experts who can play a big role in if their efforts are well organized and if they are provided with suitable working conditions.

* Iraq’s oil sector is in desperate need of developed technologies to rehabilitate its infrastructure and oil wells, to raise production in line with Iraq’s increasing needs as well as to develop its unexploited huge oil reserves with technical and economic efficiency. Considering these circumstances, Iraq may seek the help of international companies and institutions in order to make use of their experience and capabilities, but but this should be done based on conditions and controls that ensure Iraqi national interests and preserve the people’s right to own the oil wealth and control its destiny.

* Iraq can use limited-term technical support and service contracts with foreign firms, but the party warns against long-term “partnership sharing agreements” (known as PSAs) that mortgage Iraq’s oil and its revenues to foreign interests.

This is a hot topic in Iraq. Oil Minister Hussein al-Shahristani was questioned in Iraq’s Parliament last month about his ministry’s policy, shortly before the June 30 bidding. It was extensively covered on TV and other media. Shahristani has so far rejected PSAs for developing oil fields, favoring instead the service and technical support contracts.

* The details of the new Chinese-British contract must be made public and studied before any final decision is made on it, the Communist Party said. An economic feasibility study should be done, the party editorialized, “so as to ensure our national interests and abide by conditions that don’t harm proper exploitation of our oil wealth in the interest of our people and for our country’s prosperity.”

Some in Iraq who have challenged the oil auction are motivated by their own political agendas, Iraqi commentators note. Some seek to undermine Prime Minister Nouri al-Maliki as they maneuver to try to make gains in the national elections next January.

Positions that are outwardly militant, with very critical rhetoric on oil and other big issues, should be also viewed in this context, Iraqi analysts say. This includes groups that were part of the Shi’ite United Alliance (currently in the process of being restructured, but with little success so far), for example, the Fadhila (Virtue) party (which failed to capture the post of oil minister) and the Sadrists. The position of the Kurdistan Alliance is dictated by its own conflict with the central government over contentious issues (including oil, Kirkuk, and other contested areas).

The positions of some factions that are active within oil unions in the south of Iraq have been influenced by this struggle. While the stance of many activists is motivated by genuine national sentiments, analysts say, some political groups (such as those mentioned above) want to use their influence inside unions for narrow political ends, to put pressure on and extract concessions from opponents.

In addition, Ali, of the Iraqi Communist Party, points out, “One must not forget the regional factor and interference (including the interests of major oil producers in the Middle East and the Gulf that have no desire to see Iraq regaining its prominent position in international oil production). This factor is often overlooked or underestimated by foreign observers and analysts. But there is evidence that such conflicting interests have contributed to destabilizing the situation in Iraq and perpetuating internal strife.”

The Communist Party, in its July 5 editorial, said the ongoing debates in Iraq about oil, its future, and forms of investment in this sector, stress anew the need for enacting a balanced national law for oil and gas to regulate the oil industry and clarify authority and tasks, in order to help put an end to the internal power struggles over oil, and to provide favorable conditions for activating the National Oil Company, developing the oil sector and expanding its industries, ensuring a fair distribution of its revenues to benefit the people, and stimulating the development and modernization of all branches of the national economy.

suewebb @ pww.org