Prominent Kurdish Politician Discusses Iraq-Kurdistan Oil Dispute
Text of article by editor-in-chief Nawshirwan Mustafa entitled: “The issue of oil between the Kurdistan Region Government and the central government”; published by Sbay website of Wusha company on 1 December
After the downfall of the Ba’th regime, all the decisive issues affecting the future of Iraq have emerged again and have become subject of discussion and debate. These issues previously found expression in the Transitional Administrative Law [TAL] and then in the permanent constitution of Iraq. One of these decisive future issues is the issue of oil.
If, at some time in history, Iraq was a country with multiple diverse resources, at the time of Saddam Husayn, especially during his war years, it was transformed into a single resource economy, which is oil.
After the fall of the Ba’th regime, at the time of the governing council and then in the period of the governments of Dr Iyad Allawi and Dr Ibrahim al-Ja’fari and Dr Nuri al-Maliki, a sort of clarity about the budget of Iraq has appeared and this shows that oil has become the main source of the republic of Iraq’s income. From the first budget in 2003 to the budget of 2008, the extent of oil income has sometimes reached 96 per cent of the revenue.
The income for the 2008 budget is estimated as 50 trillion; 777bn and 81m [Iraqi] dinars. From this, 45 trillion and 180bn come from the sale of oil. That is why oil at present has become an important factor in determining the future of Iraq. That is why, during its invasion of Iraq, the only institutions that the USA protected were the Ministry of Oil and Oil Installations. And the only economic sector that the USA paid attention to, after its occupation of Iraq, was the oil sector.
In 1972, the Iraqi Revolutionary Council under the leadership of Saddam Husayn nationalized Iraqi oil with all its capital and installations. They made all the stages of exploration, production and sale of oil a state monopoly and property. Since America invaded Iraq, the issue of oil – like many other destiny-making issues – has become a big issue of the present say. Iraq is managed by its oil income.
In dealing with the issue of oil there have been two issues that have not yet been sorted out:
First approach: To leave the resource of oil in all its stages – exploration, production, refining, sale and distribution – in the hands of the central government in Baghdad.
Baker and Hamilton allocated a special part of their report to the issue of oil, and they addressed this issue several times. In the two recommendations that they made, they have clearly expressed their views. Recommendation No 23 asks, that by the end of year 2006 and the start of the year 2007, the Oil Act in Iraq should be issued.
Recommendation No 28 says on the distribution of oil income – that oil revenue should go to the central government and from there it should be distributed to the population. The control of any new oilfields that are discovered in future, or of present oilfields, must not be given to the regions unless this is part of a process of national reconciliation.
This approach represents the position of the Americans from the time of the civil administrator of Iraq, Paul Bremer, until the period of Ambassador Zalmay Khalilzad and his successor ambassador, Ryan Crocker. They have tried to impose this view in a legal form. Their justification for this is that oil is the factor that keeps Iraq’s land and people undivided.
The Sunni Arabs support this approach. Most Sunni Arabs also support the re-creation of a strong centralized Iraq that again keeps all political, economic and military power in the hands of a strong central government. They are afraid that if the production and sale of oil is given to the regions they will be deprived of oil revenue, because there are still no discovered oilfields and oil production installations in their region.
In addition to Sunni Arabs, some Shi’i Arabs also support this approach. They claim that Kurdistan’s oil, in comparison with Iraqi oil, is little [in quantity]. So, instead of trying to benefit from just this limited resource, it is better for the Kurds to have access to the abundant oil revenue of all Iraq. This is just an excuse that does not depend on scientific research and analysis. It is only intended to show some agreement with the Americans’ approach.
Second approach: to leave all the current oilfields and all their installations in the hands of the central government in Baghdad, on condition that all the oil revenue is distributed equally according to the size of the populations in the regions and the priority needs of the areas that have received the greatest damage and destruction at the time of the Ba’th regime and that need reconstruction and development. Along with this central power, the regions will have power to explore and sell new oilfields.
This approach is particularly advocated by the Kurds because the experience of the Kurds with the central governments in Baghdad in the area of oil is bitter and bloody. All the Kurdish areas with oil deposits were subjected to the campaigns of deportation, displacement and Arabization. All the Iraqi oil institutions are cleared from the Kurds.
Oil has been produced in Kurdistan since 1927. Not only has the central government of Baghdad not allocated any part of the oil revenue for the reconstruction of Kurdistan and building its economic infrastructure, but it has also used the oil revenue to build up a gigantic war machine which is used to destroy Kurdistan and its people.
In the days of the writing up of the permanent constitution of Iraq, the issue of oil created a difficult dispute between the Kurdish side and the Arab and American sides. Eventually some clauses were included under the pressure of the Kurdish side about the issue of oil and gas in Iraq.
Clause 111: Oil and gas in all regions and governorates are the property of all Iraqi people.
Clause 112: First: The federal government will undertake the management of the oil and gas that is produced from the existing oilfields together with the regional government and governorates, provided that all revenue from oil is justly distributed in line with the distribution of the population in all areas of the country with the allocation of a part of the revenue for a specified period for the regions that suffered most destruction and damage from the previous regime. In that way the revenue will be distributed in a balanced way to the various regions of the country and this matter will be regulated by law.
Second: The federal government and the government of the region and the governorates will cooperate to plan strategic needs for the development of oil and gas wealth in a way that creates the utmost benefits for the Iraqi people, especially through the use of new technology, the principles of a free market and encouraging investment.
In additions to these two clauses, another clause is included in the constitution, which is partly related to the issue of oil which was produced before the downfall of the Ba’th regime and some contracts that were signed with foreign companies for the exploration and production of oil. This clause should have protected these contracts from cancellation.
Clause 141: The laws that have been passed by Kurdistan Region since 1991 will remain valid and all the decisions made by the Kurdistan Regional Government – including court decisions and contracts – will be valid and operational unless they are amended or annulled according to the laws of Kurdistan Region.
In the period of Al-Maliki’s government, the dispute over the oil issue became clear. Minister of Oil Dr Husayn Shahristani, who belongs to the Shi’i coalition, has clearly opposed the previous contracts between Kurdistan Region and foreign companies and called for the review of all the contracts. When some new contracts were signed in Arbil and Sulaymaniyah, Shahristani described all these contracts as illegal and threatened to punish those companies that have signed contracts with Kurdistan Region.
This problem has various dimensions:
Political dimension:
In all the negotiations that took place between the Kurds and the previous Ba’th government, the Ba’th leaders frankly said that they would not allow the return of Kirkuk to the “Kurdistan autonomous region” because this would become the economic basis for the separation of Kurdistan from Iraq. The mentality of Shahristani is the same chauvinistic mentality of the racist Arabs in the periods of the monarchy and the republican system in Iraq.
Constitutional dimension: Return to the [imposition of a] central government means the abolishing of Clauses 111,112 and 141 of the Iraqi constitution, which provide a sort of constitutional guarantees for the implementation of federalist principles and the distribution of wealth and revenue and land between the centre and the regions. Although the problem now is given a legal framework, it is in essence a political one.
Economic dimension: [The central government] wants to keep the economic infrastructure of Kurdistan weak and unable to depend on itself in order to remain in need of begging from the central government and never entertain thoughts of separation.
In the period of [US Ambassador] Zalmay Khlailzad, a legal project [draft] for oil and gas in Iraq was prepared and this was accepted by the Iraqi cabinet and sent to the House of Representatives for its approval. Khalilzad did not want to turn this law into a political triumph for himself before leaving Iraq by supporting its approval by the Iraqi parliament as soon as possible. Then the law was attacked by various Arab sides for different reasons. As a result, the draft law was frozen before it reached the Iraqi National Assembly. If this draft law were accepted by parliament, then all the clauses in Iraqi constitution that relate to the issue of oil – which were supported by the majority of the Iraqi people in a referendum – would have been annulled and all the powers would have returned to the central government.
To take the initiative and hinder the passing of this draft law, the Kurdistan Regional Government hurried to draft a law of its own for gas and oil in Kurdistan and sent it to the Kurdistan parliament for approval. This was done in a big hurry without giving enough time to the members of parliament and people to debate it in a satisfactory way. The draft law was accepted and put into action.
Before the drafting of this law in Kurdistan, before the downfall of Ba’th regime and after its downfall, a number of contracts in Kurdistan were signed. The approval of this law attracted several new foreign companies and several new contracts were signed.
The signed contracts and the passing of the law on oil and gas in Kurdistan – in spite of all the criticism and arguments they provoked – are considered important steps in the direction of exploiting the natural resources in Kurdistan and building the infrastructure for meeting the vital needs of the people of Kurdistan, especially in the area of fuel and electricity.
Kurds must not give up their rights [to exploit their own natural resources] under whatever internal and external pressure.
The right to claim the ownership of the natural resources of Kurdistan, including oil, gas and water.
The right to exploit and use natural resources for the benefit of the people of Kurdistan.
This is a historical responsibility that Kurdish leadership has.
But the greatest danger to the contracts is the way they are carried out: in a dark closed room, without the knowledge of the people of Kurdistan, even without the knowledge of specialists and experts in the field of oil and contracts.
Who are the sides that are involved in negotiations about the oil contracts?
Who are the representatives of the Kurdish side? Is it the Kurdistan Regional Government, the dominant parties, private companies belonging to the private sector in Kurdistan?
Who are the foreign companies? What is their capital portfolio? What are their previous experiences and work in the area of oil exploration and production?
What are the negotiations about?
Who will fund investment in the exploration, digging of wells, production, refining and exporting of oil? How will the expenditure be recovered?
How will the profit be distributed? What is the share ratio of each side? Share of the companies? Share of the population of the region? Share of the Kurdistan Regional Government and of central government?
If the Kurdistan Regional Government is to be successful in this conflict, it must have broad support from the people, and in order to ensure this, its own steps, before anything else, must be transparent and clear to people.
Originally published by Sbay media website, in Sorani Kurdish 1 Dec 07.
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