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December 9, 2006
Progress On Oil Revenue

The thorny issue of Iraqi oil revenues appears closer to resolution, although it may still take more negotiations to finalize. The Kurds may find themselves on the short end of this debate as a result:

Iraqi officials are near agreement on a national oil law that would give the central government the power to distribute current and future oil revenues to the provinces or regions, based on their population, Iraqi and American officials say.

If enacted, the measure, drafted by a committee of politicians and ministers, could help resolve a highly divisive issue that has consistently blocked efforts to reconcile the country’s feuding ethnic and sectarian factions. Sunni Arabs, who lead the insurgency, have opposed the idea of regional autonomy for fear that they would be deprived of a fair share of the country’s oil wealth, which is concentrated in the Shiite south and Kurdish north. ...

Officials cautioned that this was only a draft agreement, and that it could still be undermined by the ethnic and sectarian squabbling that has jeopardized other political talks. The Iraqi Constitution, for example, was stalled for weeks over small wording conflicts, and its measures are often meaningless in the chaos and violence in Iraq today.

But a deal on the oil law could be reached within days, according to officials involved in the drafting. It would then go to the cabinet and Parliament for approval.

The major remaining stumbling block, officials said, concerns the issuing of contracts for developing future oil fields. The Kurds are insisting that the regions reserve final approval over such contracts, fearing that if that power were given to a Shiite-dominated central government, it could ignore proposed contracts in the Kurdish north while permitting them in the Shiite south, American and Iraqi officials said.

This is one issue that the ISG managed to get right in its report. Oil revenues and exploration are the most critical internal conflict in Iraq today. The sectarian fighting involves the radicals, but the only industry capable of putting food on the table of every Iraqi within a few months is energy production, and unless the various sects can agree on its management, real civil war will erupt.

This agreement may help avoid that. If the Kurds can win some guarantees that they will be able to develop their oil resources, then the new regulations can help everyone benefit from oil production and exploration. That will give the Sunnis a stake in stability that doesn't exist at the moment, and allow the Shi'ites to maintain Iraq as an integrated nation. The Kurds have accepted the principle of revenue sharing, as long as they can have influence on the development of their own resources. That part of federalism they like, and they do not want to give up what they fought so hard to have included in the constitution.

Obstacles still exist. Revenue sharing will rely on an accurate census, a topic that has been avoided since the end of Saddam Hussein's rule. The very attempt to conduct a census could destabilize the nation, especially if the counts differ significantly from the commonly-accepted ratios of the various ethnic/sectarian demographics. Security problems will also make it difficult to accurately count everyone, and the vast wealth that will be at stake will no doubt inspire plenty of cheating. The commission proposes to use the numbers from Saddam's rationing programs, but no doubt those favored the Sunnis.

Nonetheless, this is an important step to stabilization for the Iraqis. They need to iron out the rest of the related issues quickly and pass the law. If the government can successfully implement this and start delivering revenue to all Iraqis, they can quickly build confidence in their ability to properly govern the entire nation.

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Posted by Ed Morrissey at December 9, 2006 10:32 AM

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» Iraqis Reach Tenative Oil Deal from The American Mind
An draft Iraqi oil deal has been hammered out between Sunnis, Shia, and Kurds: The national oil law lies at the heart of debates about the future of Iraq, particularly the issue of a strong central government versus robust regional governments. The oil... [Read More]

Tracked on December 9, 2006 2:07 PM


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