10-14-08 by dugan
How far on the hook will the American military be for the the protection of U.S. oil companies and shipping lanes? That’s a live question again, as companies including ExxonMobil, Chevron, Shell and BP negotiate with the Iraqi oil minister, Hussain al Shahristani, during semi-secret talks in London. Iraq’s cabinet is defying both its own Parliament and regional leaders in proceeding with long-term contracts without Parliamentary approval of a national law to govern oil production and contracts.
The parliament has refused to approve a proposed oil law, arguing that it would hand over too much control to foreign oil companies. Now it appears that the oil ministry will allow the oil companies to strike the kinds of deals they had demanded–allowing outright ownership of some portion of Iraq’s huge potential output. The most detailed coverage comes from an Abu Dhabi business publication, The National. It’s update from today says:
Foreign oil companies are expected to submit bids on the 20-year
contracts within six months, and Iraq’s government wants deals to be in
place by next June. Only the Iraqi cabinet would review the deals and
decide whether to approve them, Mr Shahristani said, bypassing the need
for protracted debate in Iraq’s politically fractious parliament. “We
cannot afford any more delays,” he told reporters.But the bold
move is likely to anger many Iraqis, including oilfield workers, who
are highly suspicious of foreign involvement in the country’s energy
sector, and some influential politicians and bureaucrats who have been
calling for oil assets to be nationalised.To appease such
factions, the only previous oil agreement signed by Mr Shahristani has
been a technical services contract with China National Petroleum
Corporation, which he strongly suggested would serve as a model for
future deals. The oil minister also said on al Jazeera television that
Iraq would never sign production-sharing agreements with foreign oil
companies.Although details of the proposed oil contracts were
not fully disclosed on Monday, the deals now on offer appear to be a
hybrid between politically safer technical services agreements and
industry-preferred production-sharing contracts – revenue-sharing deals
that are standard in many oil-producing jurisdictions.
Revenue-sharing means gaining ownership and control of a certain amount of the oil produced–though just how the deals will be structured, and how profitable they will be for the companies, no one knows yet.
Making Mr Shahristani’s job even tougher, Iraq’s resource nationalists
are not the only parties likely to oppose the deals. The
semi-autonomous Kurdish Regional Government (KRG) in north-eastern Iraq
wants Baghdad to pass a law allowing pure production-sharing
agreements, and it resents not being consulted on the contracts being
offered in the federal bidding round.“The federal oil
ministry on their own have no legal power or legal mandate to negotiate
and sign contracts,” Ashti Hawrami, the KRG natural resources minister,
told United Press International. He said Iraq’s new constitution
forbids the national oil ministry from signing oil deals without
parliamentary approval.
So the London meetings could inflame both nationalists who want to own and control all of Iraq’s oil, and Kurds who want to play a free-market game with oil companies.
By making deals now, Iraq also may tie the hands of the U.S. government in advance of the Nov. 4 election. And here’s the rub: In other violence-riddled countries including Nigeria, foreign oil companies hire local troops for protection (which often leads to abuses against local populations, but that’s another story). In Iraq, what local troops would Exxon hire? Whould they be free-lance Shiite militias who might use the oil money to abuse Sunnis? Or Kurdish militias whose main goal is an independent Kurdistan? Or would the U.S. military have to volunteer its services to prevent a surge in factional fighting indirectly caused by the oil contracts?
No matter what kind of promises are made now, there is no telling what will happen to Iraqi security in the months ahead. And no contract would prevent putting more U.S. troops in harm’s way to protect Iraqi oil and its foreign producers.