ISTANBUL, Turkey, July 3 (UPI) -- Critics of Iraq's draft oil law claim it either cedes too much to regional control or creates too strong a central government. Neither is necessarily wrong, depending on each side's definition of the constitution and their respective beliefs in how best to optimize the third largest oil reserves in the world.
But a longtime Iraqi oil technocrat and Prime Minister Nouri al-Maliki's top energy adviser says opponents of any stripe should know the law must reflect not what Iraq was, but what it is now.
"This is a new era in Iraq," said Thamir Ghadhban, a former oil minister. "There have been changes and now Iraq is a federal state with sharing of powers between the federal government and the people and therefore we have to have legislation to set things right."
Iraq as a whole, and the lucrative oil sector specifically, was governed in a top-down structure by Saddam Hussein, from the center that he controlled and in a nationalized system he directed.
"Iraq is no more a centralized government. Everybody has to know that," Ghadhban told United Press International last week in Istanbul, on the sidelines of Cambridge Energy Research Associates' "East Meets West: New Frontiers of Energy Security" conference.
Iraq's oil law hung in the conference as a major undertone: Demand for oil is increasing while prices hover in the high $60 per barrel range. International oil companies -- which control less than 22 percent of the world's reserves -- as well as state-owned firms await the law that will set the rules for governance of, and foreign access to, 115 billion barrels of proven reserves.
"Iraq is the least explored country among the big oil producers," Ghadhban said, "and has probable oil reserves of 214 billion barrels."
Iraq only produced about 2 million barrels per day in 2006, down from 2.6 before the 2003 invasion; it remains besieged in a war zone and by the lingering effects of Saddam Hussein's mismanagement of the oil sector and U.N. sanctions that hamstrung its development.
The vast reserves could push production far beyond what is pumping now. To do that, investment is needed to maximize the current infrastructure and bring more reserves to production.
Various entities within Iraq differ on how that should be done, whether the vague constitution retains all or most of the oil for the federal policy or should be in the hands of the regions and governorates.
"I was a member of the constitutional committee in the national assembly which prepared the constitution and I know there are conflicting interests within the country," Ghadhban said, adding the goal of both the constitution and the oil law is to preserve Iraq as an entire country with a federal government system, while sharing the power with the regions and governorates.
He recommends the constitution be amended to clarify a key article dealing with oil that uses terms not recognized by the oil sector and isn't specific enough with regards to the federal government's role.
The Kurdistan Regional Government wants to move forward on developing its semi-autonomous, relatively violence-free and oil rich area in the north. (Kurdistan is currently the only official region.) The Kurds, as well as a minority of Shiites, are pushing for more control over oil to be distributed to the regions and oil-producing governorates. They've already signed five deals with small, foreign oil companies -- raising ire in Baghdad for moving forward unilaterally. Ashti Hawrami, the KRG's natural resources minister, told UPI they'll wait, for now, until a federal oil law is passed to continue development.
Sunnis, a minority population controlling very little oil reserves, fear a weak central government. Most Shiites, the majority in Iraq, also want strong Baghdad control.
Hawrami and Ghadhban have led their respective sides in negotiations over the law since last summer. Prior to that Ghadhban, along with two other Iraqi oil experts -- Tariq Shafiq, now based in Amman and London, and Farouk Al-Kasim, working in Norway -- spent three months crafting the law. The two have since come out against the law, for changes made that have decentralized control and strategy-making by the federal government.
"What my two colleagues said, it is correct, and I told them from the very beginning, that this draft that was prepared by the three of us and ... that this draft will be subject to serious negotiations," Ghadhban said, "and I expect that there will be changes.
"I believe that we managed to make the structure of the powers of the various entities in such a way they share power but the final say rests with the federal government," Ghadhban said of the current draft of the oil law. It allows regional/governorate involvement in setting oil policy, though no final decision-making authority.
And most important, he said, the federal government will control oil revenues, the actual selling of oil, the pipeline infrastructure and will approve all contracts with oil companies.
The security situation in Iraq is also major factor moving forward, every minute of every day for its citizens as well as for the oil sector. Dangerous conditions on the ground could limit investment and increase the costs of deals with oil companies.
In Baghdad, where sectarian violence is the worst, parliamentarians are set to wrangle with the oil law once it is approved by negotiators and the council of ministers. Ghadhban said that could happen within two months. Hawrami said movement could be days away. Neither would give guarantees of a timeline. Earlier Wednesday media reports surfaced that a deal was reached, though Hawrami denies it and sources couldn't confirm it.
When the law moves to parliament -- "the most powerful entity in Iraq," Ghadhban said -- each political party and, in turn, each religious and sectarian interest, as well as the more secular members, will further shape it.
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