It's an exhausting and complicated process, but Iraq is taking steps to open up its oil and revenue interactions to the world's watchdogs.
"The commitment from the government is strong," said Eddie Rich, Middle East director for the Extractive Industries Transparency Initiative, fresh from a meeting with key Iraqi government officials in Baghdad, including Minister of Oil Hussain al-Shahristani and Deputy Prime Minister Barham Salih.
"They have said they are determined to implement EITI," he said. Since declaring its intentions in February, Rich said the government of Iraq has appointed a national EITI coordinator and said it was open to civil society involvement in the process -- two necessary steps. Now Iraq needs to formalize a work plan detailing the scope and process for becoming "what we call a candidate or implementing country." It then has two years to fully implement its work plan and for the process to be externally validated.
While Iraq posts earnings and export data on its Oil Ministry Web site, the country was ranked third to last in Transparency International's latest annual Corruption Perceptions Index.
The government of Iraq is attempting to address the perception of corruption by changing the reality being non-transparent with its oil revenue.
The EITI process could help Iraq avoid the dreaded "resource curse" afflicting other oil producing countries.
Twenty-three countries around the world are in the process of implementing the EITI, which sees a reconciliation of government oil, gas and mining receipts compared to what the companies claim to have paid the government, be it royalties, taxes, signature bonuses or other payments. All of this takes place under the watch of civil society, government and companies in the particular country.
At the very basic level, such a move would ensure the people of the country see a benefit from the resources of the country. "It's about building up the trust between the government, the companies and the communities," Rich said.
In Nigeria, for example, which is an EITI candidate, an increase in poverty and environmental contamination in oil and gas producing areas has fueled the rise of violent rebellions. Kidnappings of workers and attacks on oil and gas infrastructure there have led to a cut of production. Nigerian officials are accused of keeping revenue from properly reaching even the poorest of citizens. Last week a federal court in California heard opening arguments in a lawsuit against Chevron. The U.S. oil giant is accused of working with the Nigerian military to break up protests on a Niger Delta off-shore oil platform in 1998, resulting in the killing of two protesters.
Oil sales account for 95 percent of total Iraqi revenue, and that's with the world's third largest proven reserve holder operating well below its ability. Keeping tabs on the revenue stream, therefore, is vital for Iraqis.
EITI is a new body, fully operational since 2006. Because the rules are so new, and because the road is steep, no country is yet fully compliant with EITI.
"In a case like Iraq, it's perfectly normal for it to take a while to get started," Rich said. "It's a difficult process in Iraq, of course."
Iraq is the first all nationalized oil sector country to attempt EITI. Iraq would have to turn the lights on internal operations of the state-owned oil companies as well as any interaction in the export market and with international oil firms.
Iraq is still a war zone, and the country remains in a long-term transition phase from Saddam Hussein's rule to whatever is next.
The legacy of strong-arm Saddam lingers, though: There was no need for transparency, and U.N. sanctions forced oil sales and revenue underground. The current government is attempting to create the institutional capacity for openness and accountability, but recent audits of oil funds by British firm KPMG and the U.N. appointed International Advisory and Monitoring Board for Iraq found roadblocks remained. A nationwide metering system of oil and fuel, for example, has not been installed yet, and auditors said there was lax response to questions posed to the ministries of oil and finance.
Civil society, such as non-governmental organizations or unions, are unable to fully operate and are threatened when criticizing government. "There are some possibilities," Rich said, "but it's going to be a challenge in the Iraqi environment."
Meanwhile, Iraq faces internal political disputes over which government bodies have the final say on deciding the oil strategy, let alone what role international oil companies will play in the currently nationalized oil sector. This has paused reconciliation over new oil and revenue sharing laws. The Kurdistan Regional Government in the north has signed dozens of exploration and development deals with smaller international oil firms, to the dismay of Baghdad, while the central government is starting to offer key oil and gas fields in a bidding round led by the world's largest companies, a move the KRG has panned.
Whatever direction Iraq chooses, it will need to keep it at the transparency level expected by EITI. The international community will be watching Iraq's transparency progress and status and then will be able to take public its concerns if any arise. The leadership of the EITI also has the option of kicking a country out of the program.
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