New Oil Law to Go Before Iraqi Cabinet Forgoes PSAs

Photo: Flickr Creative Commons - Gregg Carlstrom

For more than four years, the Bush administration and its oil company cohorts have worked toward the passage of a new oil law for Iraq that would turn its nationalized oil system over to private foreign corporate control. On Thursday, January 18, this dream came one step closer to reality when an Iraqi negotiating committee of “national and regional leaders” approved a new hydrocarbon law. The committee chair, Deputy Prime Minister Barham Salih, told Reuters that the draft will go to the Iraqi cabinet next week and, if approved, to the parliament immediately thereafter.

The good news is that the Production Sharing Agreements (PSAs) so hotly desired by the Bush administration and the world’s oil companies that appeared in earlier drafts of the law have apparently been removed. The PSAs gave private companies (including foreign ones) control of Iraq’s oil production and 70 percent of the profits, specified that up to two thirds of Iraq’s known oil reserves would be developed by private companies and locked the government into 30-year contracts.

Unfortunately, the bad news still outweighs the good.

First, the committee has debated the new law in near total secrecy: almost no one—both outside of and within the Iraqi government, including the parliament—has seen it.

It is clear, however, based on press reports that the law allows foreign investment in Iraq’s oil industry. It also grants foreign oil companies “national treatment,” which means that the Iraqi government cannot give preference to Iraqi oil companies (whether public or privately owned) over foreign-owned companies when it chooses contractors. This provision alone will severely cripple the government’s ability to ensure that Iraqis gain as much economic benefit as possible from their oil.

The questions left are: Under what terms and to what extent will Iraq’s currently nationalized oil industry be turned over to foreign multinationals? How much of the revenue will stay in Iraq? And how much control will Iraqis themselves truly exercise over these decisions?

According to Reuters, the new law does not specifically include PSAs, but instead is vague as to what form of contract foreign oil companies will be able to sign in Iraq. In order to determine “the best model for its future contracts with international oil companies” the Iraqi government has arranged for fact-finding teams from the Iraqi Oil Ministry to visit the U.S., Britain and Norway.

“Why,” you may ask, “are the Iraqis turning North for answers rather than, say, next door?” Next door they would find that Kuwait, Iran and Saudi Arabia all maintain nationalized oil systems and have outlawed foreign control over oil development. None use PSAs, but rather hire foreign oil companies as contractors to provide specific services, as needed, for a limited duration, without giving the foreign company any direct interest in the oil produced.

Instead, the fact-finding tour is skipping its neighbors and heading straight to those nations whose governments and corporations are putting the most pressure on Iraq to adopt PSAs. As Chevron Vice Chairman Peter Robertson said in 2003, “Although the final decision for inviting foreign investment ultimately rests with a representative Iraqi government, I believe in due course the invitation will come.”

Most Iraqis remain in the dark about the new oil law. Iraq’s oil workers had to travel to Jordan to learn details of the law from the London-based research organization Platform. As a result, in September, the nation’s five trade union federations—between them representing hundreds of thousands of workers—released a public statement rejecting “the handing of control over oil to foreign companies, whose aim is to make big profits at the expense of the Iraqi people, and to rob the national wealth, according to long-term, unfair contracts, that undermine the sovereignty of the state and the dignity of the Iraqi people.” They demanded a delay in consideration of any law until all Iraqis could be included in the discussion.

At the same time, the Bush administration and U.S. oil companies have been increasing public pressure on Iraqis to pass the law. The Iraq Study Group Report specifically (and publicly) called on the Bush administration to “assist Iraqi leaders to reorganize the national oil industry as a commercial enterprise” and to “encourage investment in Iraq’s oil sector by the international community and by international energy companies.” (See “It’s Still About Oil in Iraq.”) While the rest of the report was ignored, the administration ran with the oil recommendations. President Bush made his first public demand of the Iraqi government to pass the oil law in December—followed by the same demand from U.S. ambassador to Iraq Zalmay Khalilzad and General George W. Casey Jr., the senior American commander in Iraq. The call for a troop surge came next.

The Bush administration and U.S. oil companies (among others) are quite simply (and obscenely) taking advantage of an occupied, war-ravaged and internally divided nation to get control over as much oil as possible, and on the best possible terms. They are holding our troops—and the Iraqi people—hostage in order to get it. But, the removal of the PSAs makes clear that the extensive (although unreported) popular opposition and organizing in Iraq, the U.S., Britain and elsewhere against PSAs has succeeded, at least for now.

We have (at least) three opportunities in the next seven days to do more.

On January 20 and 21, people from around the country will are coming to Tacoma, Washington for the Citizens’ Tribunal on the Legality of U.S. Action in Iraq. They are rallying in support of Lt. Ehren Watada, the first commissioned officer to refuse to fight in the war.

On January 23, the Senate Committee on Foreign Relations will hold a hearing to investigate “oil and reconstruction strategy in Iraq.” This offers a critical opportunity to demand a cessation of all U.S. government and corporate influence over Iraqis as to the future of their oil.

Then, on January 27, we can join others from across the country taking to the streets of Washington, D.C. (and elsewhere) to demand the end to both the military and corporate occupations of Iraq.