Eighteen months since its first deadline and a year since cabinet approval, Iraq’s controversial oil law is still not on the statute book. The last four months have seen a consolidation of protests worldwide over the Bush administration’s top benchmark. Opponents of the oil law and the economic occupation it represents, including oil unions and civil society, appear to be winning the public argument. So what happens next?
The oil law’s advocates have not given up, even if they’re having to regroup. Both Shell and BP sponsored the recent Chatham House ‘Middle East Energy’ event, attended by Iraqi Oil Minister Hussein al-Shahristani, US Ambassador Charles Reis and UK Energy Minister Malcolm Wicks. Shell sent 14 delegates, BP six – seven if former UK Ambassador to Iraq and current advisor Sir Jeremy Greenstock can be counted. 17 delegates attended from across UK government departments – the highest representation being from the Foreign Office (6) and the Department for Business, Enterprise and Regulatory Reform (5). The presence of such high numbers of British oil company and government representatives is indicative of the importance of Iraqi oil within UK foreign policy and economic agendas.
TSAs – A foot in the door
With Iraq lacking a legal, regulatory and fiscal framework for investment, IOCs (International Oil Companies) are understandably cautious. Perhaps most unsettling for them is that Production Sharing Agreements, their favoured form of investment contracts, are off the table for now at least. Instead, Technical Service Agreements are the name of the game, which do not allow companies to book or claim ownership over reserves – bad news for the world’s top five IOCs, which have seen their reserves-toproduction ratio halve in the past 6 years.
The short-term contracts currently on offer are aimed at boosting production by 500,000 bpd by the end of the year in five key brownfields in the south. 115 companies, including Russian, Japanese, South Korean and Canadian firms have registered their interest.
BP is believed to be in line for Rumaila, Iraq’s largest producing field, and Shell for Kirkuk, the second largest. They are hoping these contracts will give them a foot in the door for the more lucrative PSAs in the future.
PSAs – not appropriate for Iraq
But are they coming? Shahristani has started to publicly question whether PSAs would be appropriate – or acceptable – for Iraq. He has also stepped back somewhat from his attack on trade unions, telling reporters at Middle East Energy that Iraqi unions would be part of any consultation over the law and oil deals – the Iraqi Federation of Oil Unions, the dominant oil sector trade union in Iraq is resolutely opposed to the oil law and PSAs. Furthermore, criticism of the Kurdistan Regional Government for signing PSAs has started to focus on the generous terms of the contracts themselves.
The KRG has signed 20 PSAs since last July – and Baghdad has declared them all illegal. Despite the KRG commissioning an opinion from UK lawyers Clifford Chance finding the deals constitutional, Shahristani has remained intransigent. He told reporters at Middle East Energy, ‘The contracts of last year will never be accepted. They have not been won through competitive bidding, and the law prohibits that.
These contracts violated the spirit and letter of the law. Even the President of the country, a Kurd himself, has not seen the contracts.’ And he has the backing of Iraq’s unions, oil experts and senior figures in Parliament.
KRG vs Baghdad
The KRG Energy Minister Ashti Hawrami shrugged off the accusations. He told reporters, ‘We are doing our contracts according to the law and it is the Regional Law Committee which has the ultimate last word on the contract.’ The Committee is made up just five representatives: the Prime Minister, Deputy Prime Minister, and Ministers of Planning, Finance and Oil.
For Hawrami, the conflict as actually a proxy dispute about the constitution of Iraq, which is set to be revised. ‘The problem is not the oil law but the constitution itself and we have always said, this is not the place to have the argument, and to change the spirit and fundamentals of the constitution’. However, he later conceded that, ‘Within one year, two, five years, there will be constitutional changes, no doubt about it’.
So how are IOCs hedging their bets in such a politically and legally, not to mention physically, insecure environment? The building of new political and diplomatic relationships with the relevant Iraqi departments is one, depending on existing political and diplomatic relationships with the relevant British governmental departments is another.
Attendees at Middle East Energy admitted that many former diplomats now work for Private Military Security Companies, contributing their knowledge of war zones to the intelligence and risk analysis portfolios of PMSCs in Iraq. Despite the FCO stating, ‘We have not offered strategic support to PMSCs’ it appears PMSCs have it through former diplomats working in their ranks. For example, Rob Sherwin, who worked as a Middle East Business Development advisor for Shell, before moving on to work as a Middle East Economic Advisor for the FCO, now works for Control Risks Group.
The UK’s Treasury, Department for International Development, Foreign Office, UK Trade and Investment, Ministry of Defence, and the Department for Business Enterprise and Regulatory Reform all have staff working on Iraqi energy sector-related security and commercial issues.
It appears that other countries’ economies are still very much the province of the political and economic agendas of this government. A militarised free market fundamentalism hides behind the seemingly benign mantras of ‘economic and regulatory reform’, backed up by tanks, F16s and civil servants.
‘Middle East Economic / Energy Advisors’ have frequently been drawn from almost identical posts in companies such as Shell, with Rob Sherwin’s replacement James Husemeyer being no exception. Prior to joining the FCO, he worked as an advisor within Shell’s Global Security Team. The revolving door between the FCO, British Oil Companies and now Private Military Security Companies looks set to be in full swing, fuelled by the back-draft of the Iraq war.
But there is resistance, in the Iraqi civil society backlash against UK-US led plans to privatise Iraqi oil. This is being taken up and spread around the world by human rights activists.
The Hands Off Iraqi Oil campaign held its first international day of action on February 23rd Protests against Shell and BP took place in US, Netherlands and UK. 25 towns and cities took part in the UK. Petrol stations were occupied, shut down, climbed-upon and picketed. As the efforts of the British government and oil companies to control Iraqi oil plough on, so does the grassroots resistance to them. The fact that such a hard-lobbied for oil law cannot be passed, is testament to the growing movement against it.