6 May 2003
With the weekend announcement of the first two names for an advisory board, US plans for oversight of Iraq’s oil industry appear to be taking shape.
But questions are being asked as to why the rest of the board is taking so long to firm up, and what this might mean for Washington’s ability — or desire — to shape Iraqi oil policy.
Some observers say that the late and limited announcement on the advisory board — it has only two names so far, Philip Carroll as chairman and Fadhil Othman as vice chairman — indicates the difficulties the US administration faces in recruiting exiled Iraqi advisors to oversee technocrats who remained inside the country.
US and UK officials insist that such criticism is unjustified. Noting that the war in Iraq has effectively been over for only a matter of weeks, they say the importance of the oil sector means plans should not be rushed.
But at the same time, US officials have also expressed concern about the need to get plans in place quickly, to fill a power vacuum that emerged during the war.
While announcing the appointment of long-serving Iraqi technocrat Thamer al-Ghadban as chief executive officer of the oil sector in Baghdad on Saturday, Tim Cross, British deputy to the head of the Office of Reconstruction and Humanitarian Assistance (ORHA), and ORHA’s senior oil advisor Gary Vogler said the advisory board will offer “professional advice and guidance” to al-Ghadban and “bring an important element of transparency, openness, and accountability to oil sector operations.”
Cross dismissed suggestions that the board’s formation is proving to be a protracted and still-incomplete process, while noting that it would be expanded in the near future to include additional Iraqi and international experts.
“If we had done what has been alluded to, you would think a board would be parachuted in and would take over on day one but that’s not the way it has been done,” Cross said in Baghdad. “We have met with the Iraqi people running the oil ministry, we have talked with them, and we are now going to develop the advisory board to suit the conditions that we have found,” he said adding that those conditions are much better than most people expected.
“Carroll should be in the country in a week but I’m not sure about he rest of the board,” Vogler said. As to the functioning of the board, Cross told reporters: “It is still too early to say.”
“The campaign only started relatively recently and the war has only been over for a very short period of time,” Cross said. “What we wanted to do is to come up into Iraq, meet with the ministry, talk with them, find out their needs, and make sure we have the appropriate structures to enable the ministry to stand back up and begin to deliver.”
In fact, reports that the US Defense Department was trying to form an advisory board have been around for at least a couple of months, with news that it would be led by former Shell Oil boss Carroll first emerging in late March.
And serious contacts by the US State Department with Iraqi exiles on postwar planning for Iraq’s oil sector started last year.
There is still no word as to who the board’s members will be, whether it will have permanent office in the ministry, and when it will hold its first meeting.
So far, only four members of the board are known, out of a potential dozen or so members.
As well as Carroll and Othman, they are Muhammad-Ali Zainy, a former oil ministry official who fled Iraq in 1982 en route to an Opec meeting and has since worked as an oil consultant in London and the US, and Hashim al-Khersan, who headed up Iraq’s northern upstream operations and supervised exploration activities for more than a dozen years before leaving the country in 1991. Al-Khersan is currently running the Tunisian office of US Pioneer Natural Resources, having previously served as head of Middle East new ventures for the Dallas-based independent.
As the US explored its options, sources say al-Khersan was among those asked to run the Iraqi management team. But he is understood to have said it was important to appoint an Iraqi who had remained in the country.
Sources also suggested that a number of well-qualified Iraqis could cooperate now that al-Ghadban, former head of planning at the oil ministry, has been selected. “He is the best choice under the circumstances — an Iraqi who remained in Iraq, a hard-working fellow who is not a political figure,” one Iraqi oil expert said.
Several Iraqis in exile approached by the US to sit on the advisory board turned down the job. Those invited included Ramzi Salman, former Somo chief and deputy secretary-general of Opec, who is understood to have said he was happy with his current job of adviser to the Qatari energy ministry.
Details of how the advisory committee will operate remain thin. Sources have suggested it will meet once a month and provide only advice, not taking an executive role. “At this stage, it is unclear whether the team will meet once a week, once a month, in Baghdad or elsewhere,” said another source familiar with the board’s planning. “It is being worked out as we go along.”
Zainy is already in Baghdad and Carroll is expected to travel there in a week or so. It is not clear how long they will stay.
The US Defense Department and National Security Council have taken the lead in forming the advisory committee, with the State Department excluded from the process despite meetings it held over the past several months with Iraqi exiles to discuss the oil industry post-Saddam Hussein.
President George W. Bush’s appointment last week of a former State Department official, Paul Bremer, to lead the postwar transition team that includes retired general Jay Garner and special White House envoy Zalmay Khalilzad was seen by some as a victory in the State-versus-Pentagon tussle for control.
But US government sources said the Pentagon itself suggested Bremer when Garner drew heavy criticism in his initial days in charge. “Bremer is being briefed by the DOD [Department of Defense] and reports to the Pentagon, which shows who is calling the shots,” one government source said.
The official US line is that because of the critical sensitivity of the oil industry within the Iraqi economy, the advisory committee is expected to be one of the last to materialize fully and it will focus on reconstruction and recovery, not the broader questions of industry structure and foreign investment. Given the critical importance of oil, US officials prefer to gain practical experience with other sectors first.
But in an indication that the timeframe is more urgent than this might suggest, some US officials have expressed concern about the power vacuum over the last month, which prompted Iraqis to start taking matters into their own hands.
Some US officials also expressed a lack of comprehension as to why Iraqis have proven reluctant so far to sit on the board.
Other US officials noted that Iraqis have expressed concerns about reporting to Carroll, an American with no experience of Iraq’s oil sector.
It is becoming clear that any major changes to the structure of Iraq’s oil industry must await the formation of a new Iraqi government and will not be dealt with by an interim authority. Despite talk among neoconservatives in Washington of radical measures such as privatization, legal obstacles and political realities, US government officials say that these decisions must be made by Iraqis in their new government.
Still, at the core of the US effort to create a democracy that will serve as an example to the region is a desire to liberalize ownership of the petroleum sector
The coalition announcement of appointments of Iraqi oil managers stated that they were made “on the advice of the executive committee of the oil advisory board”. Iraqi officials speculated that Zainy played a role in the appointments, especially where deputy ministers and directors general of Iraqi oil companies are concerned.
After listening to ORHA’s explanation of the role of the advisory board, some Iraqi oil officials were skeptical, while others said they were willing to wait and see how things panned out.
“Why should we have an advisory board made up of people who have not been in Iraq for tens of years,” said the director general of one upstream company. “It’s more likely that we are the ones who are going to advise them on Iraq’s oil.”
Another departmental director commented: “They said the advisors will be there for the interim period only. We’ll have to see once they are there how much power they have and the areas where they can advise.”
By Ruba Husari, Baghdad
(Published in International Oil Daily May 6, 2003)