Iraq Oil Report

…if The New York Times is writing about it A1, top of the fold.

Also in today’s Iraq Oil Report, the U.S. wants to ink deals with Sadr while its top Anbar ally is assassinated.

But first, James Glantz writes the tender deal making on the law governing Iraq’s vast reserves seems to be falling apart as political leadership cannot find middle ground on the extent of federalism and foreign investment.

I’ve been explaining the rift since last year, and most recently Sept. 4 for UPI.

And, on Sept. 10 I wrote about the real dispute over the oil law is really a dispute over the new Iraq’s political and social identity and the pressure from the United States to pass the law quickly fails to take into consideration the monumental task at hand for Iraqi leaders.

Khalilzad responds

Former U.S. Ambassador to Iraq Zalmay Khalilzad, now at the U.N., writes a letter to the editor in the Washington Post, critiquing a recent article by Joshua Partlow that portrayed U.S. efforts in pushing the oil law in a negative light.

Khalilzad writes the U.S. was a mediator between Iraqi factions; a February agreement “was a major achievement”; political leaders agreed on the draft and “understood the inefficiency” of the Iraq oil nationalism of the past four decades and they, not the U.S., pushed for international investment opportunities in the oil sector.

Unfortunately, Khalilzad continues the company line, which incorrectly states that the oil law would also distribute the proceeds from sales of oil. That issue, which is a core tenant of the Bush/Congress benchmarks, will be decided in a separate revenue sharing law.

Background: Khalilzad held a press conference in February announcing the (brief) agreement on the draft oil law, which didn’t sit well with Iraqi’s. Amidst the accusations that the United States has their eye on Iraq oil, let alone went to war for it, it probably wasn’t the best idea for an American to announce to the world the deal was reached. Perhaps the government of Iraq would be a better messenger.

The KRG and Kirkuk

An analysis of the Hunt Oil/KRG deal in JURIST by Haider Ala Hamoudi, professor at University of Pittsburgh School of Law.

A major flashpoint in Iraq is the future of the oil-rich province of Kirkuk and other disputed territories. The KRG has stated repeatedly that a referendum, called for in the constitution, to decide whether the territories would join Iraqi Kurdistan’s territory is a must have by year’s end. It has roused suspicions from Baghdad to Sunni areas of western Iraq to Turkey, Iran and Syria that the Kurds want to consolidate power and then declare independence. Sumedha Senanayake of Radio Free Europe/Radio Liberty reports the referendum will be delayed.

Politics and Security

The United States is looking to reach a deal with powerful cleric Moqtada al-Sadr, leader of the Sadr Movement political party and the Mahdi Army militia, Ned Parker writes in the LA Times

A similar move proved successful in Anbar province, where the local sheiks and tribes (the real power base in the country, largely ignored by U.S. policy for four years) have been convinced and supported to turn on al-Qaida in Mesopotamia. The success of that has been simplified by the Bush administration and eaten up by much of the U.S. media, and it will surely be compromised now that Abdul Sattar Abu Risha, the person the U.S. relied on in this movement, has been killed in a bombing at his home.
More details from Alissa J. Rubin of the International Herald Tribune.

Building a wall between a largely Shiite and a largely Sunni area in Baghdad does not sit well with Iraqis.

What the Iraqi media is saying: the Iraq Press Roundup by UPI’s Hiba Dawood
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Iraq Oil Minister Hussain al-Shahristani’s comments in Dubai about Iraqi Kurdistan’s oil prerogatives, calling into question their legitimacy and legality, didn’t sit well in Irbil.
The KRG issued a statement Tuesday calling the remarks “totally unacceptable.”

Dr Shahristani was already strongly advised to stay out of issues over which he has no authority. But once again he has repeated his false mantra of “it is illegal”. Unfortunately this has been his way of dealing with the legitimate concerns of the hard working oil union members in the south, with the achievements of the KRG or with any other organization that he does not like.

The KRG also alleges Shahristani isn’t doing enough to reign in the booming fuels black market and has told other countries not to supply fuel to the KRG.
The statement accused Shahristani of blocking progress on a federal oil law and said he should either fix that or quit.

Meanwhile, Vivienne Walt of Fortune catches up with Shahristani in Vienna. He’s attending the OPEC meeting.

An interesting read following my report yesterday, Deeper than an oil law in Iraq, Joshua Holland and Raed Jarrar write The Battle for Iraq is About Oil and Democracy, Not Religion!

Three articles from the Institute for War & Peace Reporting looking at security and institutional problems affecting Iraq’s oil sector:
Oil Industry Fails to Fulfill Potential
Smuggling Thrives in Basra
Tribes Sabotage Kirkuk Pipelines

McClatchy on the opening round of Petraeus/Crocker vs. Congress

Hiba Dawood’s daily report for UPI: the Iraq Press Roundup

Ali al-Fadhily of IPS reports on two trends in religious and intra-sectarian developments:

Religious clerics are beginning to play an increasingly powerful role in Iraq. Many Iraqis now fear that they are endangering human rights and religious freedom in the once largely secular country.

and

Clashes between rival Shia militas in Kerbala have spread across southern Iraq and Baghdad, adding a new dimension to sectarian violence.

A must-read backgrounder: Anatomy of a Tribal Revolt by Dave Kilcullen

There was lots of chatter about any movement of the oil law at the opening reception of the second Iraq oil conference this week here in Dubai. Nothing has changed since my story from Tuesday.

Today’s Iraq Oil Report includes updates on various aspects of Iraq’s oil and energy sector, and plenty of context to the issue. Oil and politics are not mutually exclusive topics in Iraq, where one compromise can lead to the next, and one fight may be retaliation to the last, so it’s important to keep an eye on issues that don’t necessarily have the word oil in it. How are the current and wannabe political leaders interacting? What’s the status of human rights in Iraq, quality of life for citizens and the growing refugee crisis?

So, keep reading the Iraq Oil Report, and pass it along. The Iraq Oil Report is the source for all things Iraq energy, as well as providing the background on the political and security situation to keep you informed.

Iraqi Kurds unveil translation of oil law, controversial PSA contracts

The Kurdistan Regional Government has published its regional oil law in English and Arabic (it was approved in Kurdish on Aug. 6) as well as its model of a production sharing agreement. The PSA is a controversial contract, but one the KRG feels is the best for its development. The entire law is controversial since the federal government still hasn’t moved on its law.

Iraq Wants Wide Range Of Foreign Firms To Develop Oil Sector

After the US-led invasion of Iraq in 2003, many observers assumed that American firms would automatically win most future oil development contracts. But former Iraqi oil minister and leading candidate to head the reconstituted Iraq National Oil Company Thamir Ghadhban, interviewed in the latest issue of Middle East Economic Survey (MEES), says the aim will be for diversity.

When the day comes for invitations to be sent out to foreign oil firms to compete for contracts in Iraq, the companies concerned will be required to form consortia before bidding. This, Mr Ghadhban told MEES, is because “we believe in the benefits of diversification and we want the maximum number of international oil companies to work in Iraq to help in providing technical expertise and managerial skills and financial capabilities, but also to help in enhancing the strategic balance of Iraq.”

The likelihood is that the Iraq National Oil Company (INOC), which is scheduled to be re-established soon, will also be a partner in many of the consortia of foreign firms.
Under the terms of the draft oil law, which awaits approval by the Iraqi parliament, INOC’s mandate will differ from that of most other state oil companies.

Most importantly, Mr Ghadhban says “it will not have a monopoly on the Iraqi land in terms of exploration. INOC has the right to compete and in this way we will be assured that there is competency for INOC to compete with international oil companies in exploration. It is a unique model.”

Another important change in the way Iraq’s oil sector will be managed, as envisaged in the draft law, concerns the role of the oil ministry. Under Saddam Hussain’s rule, the ministry’s authority was paramount.

But in the new Iraq, while the oil ministry will have regulatory powers and negotiate with foreign consortia, final decisions will be taken by a new body, the Federal Oil and Gas Council (FOGC). This will be chaired by the prime minister and be composed of a number of cabinet ministers, oil executives, and economists, plus three independent experts.
The introduction of all these proposed changes awaits parliament’s ratification of the draft oil law. Mr Ghadhban and other senior officials told MEES that the signs were now looking more hopeful than they had done in the past.

“What I have been hearing and [after] counting numbers, I think the law has a good chance of being passed,” Mr Ghadhban said. “But I don’t want to give forecasts – I think it is better to leave it to parliament to handle as it likes and as it deems right.”

Former oil minister and government advisor Ibrahim Bahr al-’Ulum said he was “optimistic, but don’t ask me about the timing. The majority of MPs are ready to approve it, but there will probably be some slight changes.”

Even as the law awaits approval, Iraqi oil officials have been carrying out preparatory work on identifying oil fields and gathering data ahead of a licensing round that will be announced once the legislation is in place.

Asked how long it would take to launch a licensing round and make awards to successful consortia, Mr Ghadhban replied: “Let us say within a year. If you take other countries’ experiences of bid rounds, they usually take some time.”

As for security concerns among foreign oil firms contemplating entry into Iraq, Mr Ghadhban said “there are areas that are relatively secure. Kurdistan is safe, and areas like Basra, Amara and Nasseriya are fairly safe now.”

An oil boom in Iraq, so confidently predicted by many experts before and immediately after the 2003 invasion, may still be far off. But senior Iraqi oil officials are now striking a more positive tone than at any time since the breakdown of law and order in the country.

TTPCO, a joint venture of Canada’s Appex Petroleum and Turkey’s Genel Enerji (!!) has has success, again, in the fourth of six wells drilled in the Iraqi Kurdistan’s Taq Taq field.

While Baghdad has yet to set a national oil policy, the Kurdistan Regional Government sees continued progress in the handful of contracts, albeit controversial, it has signed with private oil firms.

Two very broad looks this week at the oil and oil law situation in Iraq in Time Magazine and Washington Post.

The BBC reports on a shorfall in the Iraq Development Fund, pinning the blame on corruption and a non-transparent oil regime.

The Kuwait News Agency, KUNA, reports President Talabani, a Kurd, is against the execution of Iraq’s former defense as well as “Chemical Ali,” who was found guilty of using organizing the gassing of Iraqi Kurds in 1988. The two are in U.S. custody and, despite Saudi reports they will be hanged Friday, in order to kill the two before the Holy Ramadan begins next week, the U.S. says they have not been moved yet. Talabani, as president, must sign death sentence orders. He didn’t sign Saddam Hussein’s, but the execution was carried out anyway, to much fanfare and criticism. Talabani represents the Patriotic Union of Kurdistan party, which in its economic policies is hoping Iraq moves toward the free market. But Talabani is a socialist at heart, and attended the Socialist International conference held in June in Geneva. Yet the biggest proponents of moving Iraq’s oil sector into the free market is the Kurdistan Regional Government (see my stories for UPI: Iraqi Kurd leader urges oil to free market and Iraq Kurd leader on oil law) Iraq’s oil sector has been nationalized since the 1970s and many Iraqis, especially the powerful oil union, point to that move as the only good thing Saddam Hussein did as leader. So, does Pres. Talabani side with the socialists or capitalists on the oil law?

For an interesting look at arguably the most powerful person in Iraq, check out Jon Lee Anderson’s Profile in the New Yorker.

Iraqi president oppose execution of ex-defense minister.

Iraqi women face harsher life during war, now gov’t makes it harder to organize

Iraq Oil Report is republishing a letter from the President of the Organization of Women’s Freedom in Iraq

Dear Friends and Supporters,

OWFI has spoken in a recent report over the CNN about the masses of Iraqi women who are part of human trafficking currently inside and outside Iraq. The report shows OWFI executives challenging the officials who choose to look the other way.

OWFI has also challenged the rapists of 7 Iraqi female prisoners who are still free and work in the Iraqi Ministry of Interior.

OWFI has initiated a secular youth movement based on Poetry, Music and Art under the name of “Freedom Space”. Hundreds of youth from the so called “Sadre City” are enthusiastic members and some are leaders of this rapidly growing movement.

OWFI is still sheltering women who are threatened by honor killing or retaliation from militia members / after these militias kill the males of the family.

As a result, the Iraqi government decided on September 4th to freeze the funds of OWFI in the Iraqi banks so as to paralyze our movement and make our work impossible.

Dear Friends and supporters do not let the intimidation of the Iraqi officials stop you from supporting one of the few freedom initiatives inside Iraq.

We are writing you this letter so that you do not send us any funds or donations into our official bank account in Iraq as the government has put its hand on it.

As for our activities, do not worry. We will still voice the pains of Iraqi women and keep on creating bigger “freedom spaces”, especially that we run mostly on volunteer will-power.

The farce of “Democracy” in Iraq will not sway our determination to a free, secular and egalitarian life for all in Iraq.

Freedom and equality for all

Yanar Mohammed, President

Politics and Security

Be sure to check out Hiba Dawood’s daily report for UPI of what the Iraq media is saying, the Iraq Press Roundup. Today’s is somewhat slimmer than usual, but still a necessary read.

Juan Cole writes on the Bush vs. Bremer battle over who said he could/should fire the Iraq Army; Diyala Province moving from U.S. to Iraqi security control; and more.

Basra security chief dodges bombing.

The Independent Commission on the Security Forces of Iraq’s Report published by the Center for Strategic and International Studies.

The International Organization for Migration says internally displaced Iraqis — and estimated 2.2 million – are being restricted from moving to most of Iraqs provinces.

Meanwhile Syria denies the charge that it is restricting Iraqis from finding refuge there. Syria has the largest of growing 2+ million externally displaced Iraqis.

Security in Iraq is a major holdup to investment there, sometimes second only to the lack of a law governing Iraq’s vast oil and gas reserves.Various security plans, by Iraqi and U.S. forces, are intended to break the cycle of violence, but little of the ambitions for Iraq’s future will take hold until its citizens face fewer day-to-day threats to their lives.
What is the main issue to me, as long as security problem is there, it is very difficult to get service companies to Iraq,” said the general manager of Turkish oil firm Genel Enerji. “Of course, the cost … is higher than normal countries, because of the security,” Duran said, estimating Iraq’s deals to be two to three times higher than if it were more stable.
“In the long term Iraq will be the next land for investment,” Industry Minister Fawzi Hariri said. “There will not be another part of this planet that provides so much promise and so many opportunities … with quick, great return as Iraq will.”

Parliament’s back, forgot the oil law

Reuters confirms, as I reported yesterday, Parliament reconvenes but doesn’t take up the oil law.
www.reuters.com

The LA Times’ Raheem Salman and Tina Susman report only 56 percent of parliamentarians showed.
www.latimes.com

If the oil law does get passed, Iraq will seek immediate deals to develop up to 15 oilfields and explore 5 new blocks, reports Kate Dourian of Platts.
www.platts.com

The U.S. Institute for Peace has issued a summary of the Iraq Parliaments attempt to reform the Constitution. Proposed reforms are not light, and include many oil-related and those that will affect the future shape of the country, like federalism and the status of Kirkuk.
www.usip.org

There’s no proof Basra’s governor has allowed the Fadhila Party to infiltrate the force tasked with protecting oil from both sabotage and smugglers, a top Iraqi security official says.
www.upi.com

Iraq moves from cheap fuel, possibly dedicating billions saved to needed quality of life improvements.
www.upi.com

Iraq’s oil and electricity sector needs an $80B cash pipeline.
www.upi.com

Iraq has fixed, protected and turned back on the pipeline from Kirkuk to Ceyhan, a port city in Turkey. The pipeline is the second most important for Iraq’s exports, and has been targeted by Sunni insurgents so much it has been rendred mostly useless since 2003.
www.alertnet.org

Lionel Laurent on Forbes.com reports Norwegian firm DNO, which made a bold move to start oil business in Iraqi Kurdistan, was found to have NOT invented a story that an oil major offered to buy the Iraq assets.
www.forbes.com

From Basra to Baghdad to Washington

Juan Cole reports on a number of crucial background issues, necessary to understand why what happens next happened: Sadr wants detained leaders released; CPA’s Bremer on WH approval of Iraq Army disband; arming of Sunni militias; and the GAO’s new and critical report on Iraqi forces/other key issues.
www.juancole.com

Dominic Moran for ISN Security Watch on the internal battle in Basra now that the British have left.
www.isn.ethz.ch

Neighbor Iran may play a bigger role, explains Kaveh L Afrasiabi in the Asia Times online.
www.atimes.com

Reidar Visser, research fellow at the Norwegian Institute for International Affairs, has written a very important look forward into Basra’s future.

Perhaps the most important aspect of the recent British withdrawal from the urban centre of Basra to a base near the city’s airport is the reaction from local political forces. So far, the loudest response has come from the Sadrists, who publicly claim that their armed campaign led to the British withdrawal … the British ceased exercising effective control of Basra a long time ago … The main difference between the US and the British approach does not relate to militia power as such, but rather to the extent to which there has been an attempt to manipulate the political games in which the militias take part.