Revenue Watch Analysis of Iraq Hydrocarbons Legal Framework

An analysis of Iraq's Federal Oil and Gas Law, Federal Financial Resources Law, relevant constitutional articles and proposed amendments by the Constitutional Review Committee and the Kurdistan Region Oil and Gas Law and Model Contract

Submitted July 17, 2007 to the U.S. House of Representatives Subcommittees on the Middle East and South Asia and International Organizations, Human Rights and Oversight, by Yahia Said, RWI Director for Middle East and North Africa

EXECUTIVE SUMMARY

Born out of difficult and protracted negotiations in the context of a raging conflict and very low trust, the emerging Iraqi hydrocarbon legal framework is not perfect, but it does represent progress.

The framework, particularly the proposed amendments to the Constitution, reflects a sense of realism and preparedness for compromise which has eluded Iraq's political elites over the past four years.

The framework is based on a set of principles agreed by negotiators for the federal government and Kurdistan in the summer of 2006. The principles include undivided public ownership of oil wealth, co-management of the oil sector by the federal centre and the regions and a fair and transparent distribution of revenues among all regions and provinces on the basis of population.

These principles open the way for the establishment of coherent sector management laws and institutions aimed at maximising the benefits from oil for all Iraqis and a separate revenue sharing mechanism which would assure all parties their fair share of the wealth.

The compromises struck in the course of negotiations over the past year are fragile and there are signs of backtracking. They need to be formalised before they totally unravel.

More work is necessary on almost all elements of the framework to remove ambiguities and contradictions and achieve consensus. A transparent public debate drawing on the expertise of Iraq's petroleum, legal and finance professionals, among others, could greatly contribute to this process.

Iraq is in dire need of the resources that a viable hydrocarbon legal framework could unlock. If properly developed, the framework could also reduce apprehension, both in Iraq and outside it, about the shape of the nascent union and may help reduce some of the tensions feeding into the cycle of violence.

Conversely, pushing the framework through according to a US timetable and before consensus is achieved is likely to produce further polarisation and a framework that will lack viability and may be destructive both economically and politically.

Download the full document and attachments below ...

DOCUMENTS SUBMITTED TO THE U.S. HOUSE OF REPRESENTATIVES

• Analysis: Iraq Hydrocarbons Legal Framework, Yahia Said (pdf)
• Iraq Oil Policy -- Constitutional Issues Regarding Federal and Regional Authority, Joseph C. Bell, Hogan & Hartson and Professor Cheryl Saunders, University of Melbourne (pdf)
• Analysis of the Revenue Sharing Law, Joseph C. Bell (pdf)

For older RWI information on Iraq, please see www.iraqrevenuewatch.org.