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Iraqi Minister Denies Product Sharing Agreement, Warns of Oil Smuggling Mafia

Posted on: Sunday, 4 December 2005, 12:00 CST

Text of article by Abd-al-Wahid Tu'mah in Baghdad: "Forewarning of an oil smuggling mafia threatening lives of staff; Iraqi oil minister denies product sharing agreement with US, British multinationals"; published by London-based newspaper Al-Hayat on 30 November

Iraqi Oil Minister Ibrahim Bahr-al-Ulum has denied that the incumbent Iraqi government or any of the former Iraqi governments have entered into any production sharing agreement with US multinationals. In an interview with Al-Hayat, he pointed out that negotiations with Jordan on the provision of Iraqi oil to that country are under way and that Iraq needs to develop its oil transport network, particularly the pipeline to the Saudi Red Sea coast. He cautioned that the Iraqi oil smuggling mafia is threatening the lives of his ministry's staff.

The Iraqi minister denied the point highlighted in a report produced by US and British pressure groups warning that Iraq faces the dire prospect of losing up to 200bn of its oil wealth if a US- inspired plan, adopted by the Coalition Provisional Authority, to hand over development of its oil reserves to US and British multinationals with a likely contract term of 25 to 40 years, comes into force next year.

In a statement to Al-Hayat, he emphasized that such an agreement has never been reached and that even the Iraqi transitional governments that came after the Coalition Provisional Authority did not sign any such agreements. He went on to say that beginning with the former regime, including all successive authorities and governments up to the enforcement of the current constitution, all oil agreements must go through a rigorous review process in which the interests of the Iraqi people are placed ahead of all other interests. While calling for future agreements to be fair, equitable, and transparent, he said that any agreement that came in conflict with the permanent constitution, which enshrines the concept that oil and gas are under the ownership of the people of Iraq, would be voided.

As for former Jordanian Prime Minister Mudar Badran's demand that through an oil deal, the Iraqi Government should settle the financial liabilities incurred by Iraqi Vice President Ahmad Chalabi in the context of the Petra Bank affair, Bahr-al-Ulum said that Jordan has not lodged this proposal officially and that the Petra Bank affair has nothing to do with the Iraqi Government. Should there be any litigation involved, it is a matter for certain personalities but not the government, he said.

Bahr-al-Ulum let it be known that the negotiations between Iraq and Jordan over the provision of Jordan with Iraqi oil are still under way, but that neither side have broached the subject of terms, explicitly favourable terms. He reaffirmed his denial that there were plans to reactivate the Haifa pipeline, describing it as "ancient" with more than half of its length wiped off the surface of the earth.

Iraq has many options to raise its export capacity, he argued; the Saudi pipeline can be restored and brought back to service, the Syrian pipeline can be restored and put to use, or the security of the oil transport network in the north up to the port of Jihan in Turkey - which alone amounts to 1.5bn b/d - can be maintained.

Bahr-al-Ulum added that: "Maintaining the security of the energy transport lines in the north of Iraq has proved problematic. Although 16 regiments have been deployed to protect the network, these troops have not been able to fully secure these lines. As a result, attacks are still being reported. During the two months of August and September alone, 47 attacks were reported." He demanded that the task of securing these pipelines be handed over to the Iraqi Army headquarters, directly backed by the multinational forces, which as he put it, in practice still maintains the security situation.

To fight the smuggling of crude oil and other oil products, he said, a strict monitoring system is required, which demands the cooperation of the Ministry of Oil, the Ministry of Defence and the Ministry of Interior, and he adds that an advanced security apparatus capable of controlling all external ports used for smuggling should undertake the task. He added: "Oil and fuel smuggling networks have grown into a dangerous mafia threatening the lives of those in charge of fighting corruption," indicating that his ministry "has lost more than 70 of its staff members who were assassinated while carrying out their duties, and this has provoked a backlash from their colleagues who demand that their security be guaranteed or else they will leave their jobs. In addition, there are discrepancies between the ministry's measures to curb smuggling and the slow legal measures against the accused."

The Iraqi minister believes that the delay in the formation of Al- Ja'fari's government has had a negative impact on the development of the oil sector and has brought about the reduction of the investment budget from 2.5bn to 1.5bn dollars. He pointed out that more than 200 oil wells need to be reclaimed and that this requires huge financial resources and depends on the Ministry of Oil having a certain level of autonomy in order to carry out the task. On the other hand, he called on the Iraqi Foreign Ministry and the US Administration to intervene and lift the ban on the oil sector, which is still suffering as a result of the existing international sanctions imposed on the former Iraqi regime. He said: "Iraq is facing a huge problem in its production and export infrastructure in that the wars fought by the former regime have resulted in the closure of large portions of its loading platforms in the Arabian Gulf, Basra, and Khur-al-Amyah while other docks fell into disuse after being wrecked." He explained: "According to future plans for production and export, which aim to raise production level to 6m b/ d starting in 2011, ports should have the capacity to accommodate such development, particularly large tankers."

As to the fate of the former Iraqi oil transport fleet, Bahr-al- Ulum said that most of the fleet's vessels had been sold to other countries because of debts incurred by Iraq, leaving only two tankers, both in bad states of repair.

With reference to fuel prices he said: "Following the agreement of the Paris Club countries to write off up to 80 per cent of Iraq's debt, the International Development Bank has stipulated reform packages for Iraq, including the lifting of subsidies on oil derivatives, which amount to 6bn per annum, that is 21 per cent of Iraq's budget. Iraq consumes 24 million litres of petrol daily, in addition to 2 million litres used by electric generators owing to power cuts."

He added that the government has agreed to raise prices, provided that the differential goes into the social security fund, to which more than 150m has been appropriated to protect poor families and benefit the unemployed at a rate of 30m dollars monthly.

Source: BBC Monitoring Middle East

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