29 September 2006
It will be 2008, at the earliest, before Iraq’s southern provinces unite to form the giant oil-rich federal region that some Iraqi groups are calling for. That’s the deal reached this week by Shiite and Sunni lawmakers which, for now at least, averts further ethnic and religious strife over a Shiite-backed law outlining the mechanisms whereby Iraq’s provinces can form autonomous regions. But the arrangement, brokered by Kurdish lawmakers, does nothing to enlighten international oil companies confused about the way Iraq’s huge southern fields will or should be developed. They only have to watch the bouncing share price of Norway’s DNO — which has signed a production sharing agreement with Kurdish authorities in the north — to see what happens if oil deals are reached independently of Baghdad.
The Iraqi constitution, adopted by referendum last year, enshrined the principle of federalism, but did not specify how it should be put into practice. With at least one major Shiite parliamentary group urging nine of the 18 provinces south of Baghdad to unite to become one big, powerful Shiite region, Sunni lawmakers had been threatening to walk out unless they were allowed to introduce amendments to the constitution before the regional federation law was passed. They were promised this concession in return for joining the political process last year.
The new deal gives a committee of 27 lawmakers headed by a Sunni one year to propose amendments to the constitution, to be voted on by parliament before being put to a referendum. Though Sunnis cannot alter the basic principle of federalism, they hope to introduce changes that will make it harder to establish self-governing areas and limit regions’ autonomy. The committee is made up of 12 Shiites, five Kurds, five Sunnis, two lawmakers from a secular grouping and three members of minority parties. In exchange, Sunnis agreed that the proposed federalism bill will undergo first and second readings and a vote, but will not enter into effect for 18 months.
Sunnis face an uphill battle amending the constitution, since any changes require approval by two-thirds of lawmakers as well as a referendum. As a result, many believe the showdown has been delayed, not averted, and that a lot can happen between now and 2008 to push the agreements off course.
Lawmakers’ inability to reach agreement on the federal law or the constitutional amendments bodes ill for the federal hydrocarbon law, which an interministerial committee intends to submit for approval by the full assembly by the end of the year. Even if committee members agree on how Iraq’s oil and gas riches should be managed at the federal level, there are no guarantees the law would sail smoothly through parliament.
The committee has agreed on certain principles, including revenue sharing, but is divided on who has rights to sign agreements with international oil firms. Oil Minister Hussein al-Shahristani made waves this week when he said Baghdad will not recognize deals signed by the Kurdistan Regional Government (KRG). The statement came days after his Kurdish counterpart, Ashti Hawrami, had said the KRG plans to sign more agreements in October to add to its three production sharing contracts with DNO, Turkey’s Genel Enerji and Canada’s Western Oil Sands. Al-Shahristani was only repeating what he said on taking over in May, but it was enough to send the share price of DNO, the first foreign oil firm to start exploration drilling in postwar Iraq, tumbling as much as 11% on Sep. 25.
Iraq’s Deputy Prime Minister Barham Saleh, head of the committee drafting the hydrocarbon law, had earlier told Energy Compass that all contracts negotiated before the Iraqi constitution was adopted would remain valid. “There is a very clear stipulation in the constitution that says that contracts and core decisions and arrangements that were passed before the constitution will be recognized by the federal government.” Saleh, himself a Kurd, admitted there were differences of opinion between Baghdad and the Kurds. “The Kurdistan region has a definite view, saying the region should have the authority to sign, while colleagues in Baghdad have a different view that we are considering. We are looking at a number of arrangements where the interest of the various viewpoints could be adhered to,” he said.
Some Iraqi analysts say the conflicting statements should be seen in the context of the competition raging between the regions and the central government. Both al-Shahristani and Hawrami are on the committee drafting the federal oil law. Iraqi President Jalal Talabani, another Kurd, threw in his two cents’ worth this week when he said from Washington that “the regional government has the authority to reach contracts and agreements, but the final adoption must be decided by Baghdad.” According to an Iraqi analyst, “the only way to get over all those differences is to solve all the issues related to the federalism law, the constitution amendments, the hydrocarbon law and the Kurdish regional laws together as a package. No law will be adopted except as part of compromises on other laws.”
The de facto autonomous Kurdistan region is facing pressure from Baghdad on another front, this time over its draft constitution. This has drawn the ire of many groups in Baghdad, who view it as expansionist, enlarging Kurdistan to include areas of Arab provinces, including Mosul in the north, Baquba in the center and Al-Kut in the east.
By Ruba Husari, Dubai
(Published in Energy Compass Sept. 29, 2006)