February 27, 2007

Iraqi Cabinet Approves Oil Revenue Sharing

The plan recently approved by the Kurds to split the oil revenue of Iraq with the Sunnis won approval from the Iraqi cabinet. It now faces debate in the National Assembly, whose final approval will resolve one of the toughest issues in post-war Iraq and one that has helped fan the flames of the insurgencies:

The Iraqi cabinet approved a draft of a law on Monday that would set guidelines for nationwide distribution of oil revenues and foreign investment in the immense oil industry. The endorsement reflected a major agreement among the country’s ethnic and sectarian political blocs on one of Iraq’s most divisive issues.

The draft law approved by the cabinet allows the central government to distribute oil revenues to the provinces or regions based on population, which could lessen the economic concerns of the rebellious Sunni Arabs, who fear being cut out of Iraq’s vast potential oil wealth by the dominant Shiites and Kurds. Most of Iraq’s crude oil reserves lie in the Shiite south and Kurdish north.

The law also grants regional oil companies or governments the power to sign contracts with foreign companies for exploration and development of fields, opening the door for investment by foreign companies in a country whose oil reserves rank among the world’s three largest.

Passage is critical for the future of Iraq, mainly because it gives the Sunnis a reason to invest in the central government. The Kurds and Shi'ites understand this, and conceded on critical points for that reason. By giving responsibility for revenue distribution to Baghdad, it creates a situation where the Sunnis need the central government for their compensation -- which means that insurgencies aimed at crippling the democratic government will take money out of their pockets.

It also establishes some momentum for representative government as a solution to seemingly intractable problems. During the post-war period, the last thing that the formerly oppressed factions wanted to do was to stick their oil money into the wallets of the Sunnis who oppressed them. The Kurds and Shi'ites had celebrated their economic liberty, thanks to the vast oil reserves on which they sit, while the Sunnis looked at starvation and subjugation as their only future.

That certainly fed the insurgencies, even if it didn't cause all of the problems that created the terrorism. Now, however, the Kurds and Shi'ites have given the Sunnis a stake in the success of a unified Iraq, and a substantial stake at that. Having a central government to enforce this agreement becomes a critical point for the Sunnis. Even if the government has more Shi'ites than any other faction thanks to proportional representation, the Sunnis will have better representation in Baghdad than in any of the provinces with significant oil revenue.

Insurgents could get put out of business with this agreement. The al-Qaeda nutcases will continue their mission to impose ultraconservative shari'a law on the Sunnis, but those terrorist networks getting support from native Sunnis will likely starve. The Sunnis want to start living again, and if they can rely on a solid oil income, they will take it.


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