Iraq Poised To Hand Control Of Oil Fields To Foreign Firms

Baghdad Under Pressure From Britain To Pass A Law Giving Multinationals Rights To The Country's Reserves

Heather Stewart,
Economics Correspondent
Sunday February 25, 2007
Observer.Guardian

Baghdad is under pressure from Britain and the US to pass an oil law which would hand long-term control of Iraq's energy assets to foreign multinationals, according to campaigners.

Iraqi trades unions have called for the country's oil reserves - the second-largest in the world - to be kept in public hands.

But a leaked draft of the oil law, seen by The Observer, would see the government sign away the right to exploit its untapped fields in so-called exploration contracts, which could then be extended for more than 30 years.

Foreign Office minister Kim Howells has admitted that the government has discussed the wording of the Iraqi law with Britain's oil giants.

In a written answer to a parliamentary question, from Labour's Alan Simpson, Howells said:

'These exchanges have included discussion of Iraq's evolving hydrocarbons legislation where British international oil companies have valuable perspectives to offer based on their experience in other countries.' The talks had covered 'the range of contract types which Iraq is considering'.

Control of oil is an explosive political issue in Iraq.

Hasan Jumah Awwad al-Asadi, leader of the country's oil workers' union formed after the invasion in 2003, warned this month: 'History will not forgive those who play recklessly with the wealth and destiny of a people.'

With much of the country on the brink of civil war, and a fractious government in Baghdad, campaigners say Iraq is in a poor position to negotiate with foreign oil firms.

'Iraq is under occupation and its people are facing relentless insecurity and crippling poverty. Yet, with the support of our government, multinationals are poised to take control of Iraq's oil wealth,' said Ruth Tanner, senior campaigner at War On Want.

The law, which is being discussed by the Iraqi cabinet before being put to the parliament, says the untapped oil would remain state-owned but that contracts would be drawn up giving private sector firms the exclusive right to extract it.

'There is this fine line, that the wording is seeking to draw, that allows companies to claim that the oil is still Iraqi oil, whereas the extraction rights belong to the oil companies,' says Kamil Mahdi, an Iraqi economist at Exeter University.

He criticised the US and Britain, saying: 'The whole idea of the law is due to external pressure. The law is no protection against corruption, or against weakness of government. It's not a recipe for stability.'

Simpson said 'This confirms the view of those who have said all along that the war in Iraq was not about weapons of mass destruction, but the control of the levers of mass production ... This is a cartel carve-up by the occupying powers.'

Oil production in Iraq has slipped to below two million barrels a day - less than before the invasion - and Britain and the US argue that Iraq urgently needs foreign investment to boost output.

But Ewa Jasiewicz, of campaign group Platform, said all the other Gulf states had kept production in government hands. 'Iraq could borrow the money to develop its industry, and pay that off through oil revenues.'

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