| Hat tip Instapundit. |
The draft law approved by the cabinet allows the central government to distribute oil revenues to the provinces or regions by population, which could lessen the economic concerns of the rebellious Sunni Arabs, who fear being cut out of IraqÂ’s vast potential oil wealth by the dominant Shiites and Kurds. The law also grants regional oil companies the power to sign contracts with foreign companies for exploration and development of fields, opening the door for investment by foreign oil companies in a country whose oil reserves rank among the worldÂ’s top three in size.
| Prof. Reynolds has been championing the idea of distributing the money directly to the population: the oil trust idea. While that would certainly be workable in a Western democracy, it's not the way for Iraq to go now. Ensure that the various tribes and clans get their cut and they'll be more willing to stop killing. Maybe. Perhaps. |
Since last year, senior Bush administration officials and top American commanders here have said a new oil law is crucial to the country’s political and economic development, and they have been pressuring Iraqi leaders to make passage of the law a priority. In recent weeks, Ambassador Zalmay Khalilzad, the senior American envoy here, has been in intense talks with Kurdish leaders in the north to overcome their objections to the draft. Iraqi officials say Mr. Khalilzad’s negotiations were crucial to winning unanimous cabinet approval today. “At the end of the day, we all supported this thing because it’s workable for all the parties and is all-inclusive,” said Barham Salih, a deputy prime minister and the head of the committee.
Several members of the committee said in interviews that they were confident that Parliament would ultimately endorse the law, but perhaps only after heated arguments. “It will be tough,” Mr. Salih said. “I want to admit it and I want to recognize that. It will be an interesting roller coaster, my friends.”
The writers of the draft law tried to balance regional control of oil versus oversight by the central government, an issue directly tied to the widening violence in Iraq. The draft oil law says that all revenues from current and future oil fields will be collected by the central government and redistributed to regional or provincial governments by population, in theory ensuring an equitable distribution of oil. This could help calm Sunni Arabs hostile to Kurdish and Shiite autonomy.
The attitudes of Sunni Arabs could also soften if more oil exploration is done on their lands. Iraqi officials recently increased their estimates of the amount of oil and natural gas deposits on Sunni Arab territory after paying tens of millions to foreign oil companies to re-examine old seismic data across the country and retrain Iraqi petroleum engineers.
The drafters of the law reached agreement on the principle of revenue-sharing fairly early in the process. Much more contentious was the issue of signing oil contracts. The Kurds, who have enjoyed de facto independence in the mountainous north since the Persian Gulf war ended in 1991, argued strongly for regional governments to have full power in signing contracts with companies to develop oil fields. Sunni Arab leaders insisted on keeping this power in the hands of the Oil Ministry, and the Shiites fell somewhere in the middle.
The draft law has a compromise: regions can enter into contracts, but a powerful new central body called the Federal Oil and Gas Council would have the power to “prevent” the contracts from going forward if they do not meet certain prescribed standards, Mr. Salih said. A panel of oil experts from inside and outside Iraq would advise the federal council on the contracts.