Iraq Called On to Divide Oil Wealth

Iraq's oil should be a huge source of revenue for the war-torn country. But after months of negotiations, Iraqi officials haven't decided how oil revenues should be shared among the Kurd, Shiite and Sunni populations. Iraq is among the world's top producers of oil.

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And of course Iraq's wealth is in its oil. Oil is also one of the most divisive issues facing the country. After months of negotiations behind closed doors, the Council of Ministers agreed oil revenues must benefit all Iraqis. The Kurds went along but now are crying foul, and the proposed oil law, which President Bush hoped would be a sign of success, is stalled.

NPR's Anne Garrels reports.

ANNE GARRELS: The big issue still facing Iraq is what kind of country it will be, how much power the regions will have. The constitution pushed through in part by the United States is contradictory. The oil law suffers from this unresolved issue.

The draft oil law gives a lot of central authority with input from regions at every step. But the Kurds, who took part in the negotiations, are now barling. Mahmoud Othman is a Kurdish MP.

Mr. MAHMOUD OTHMAN (Kurdish MP): It is not going with the constitution because in the constitution there's an article which says that oil and gas, which are underground, are belonging to the regional authorities.

GARRELS: The Kurds take issue with an annex, which they say was slipped in without their knowledge. It states that 93 percent of Iraq's proven petroleum reserves will be under the purview of a state oil company, leaving just seven percent to regional authorities. The Kurdish prime minister has come to Baghdad demanding much greater control over resources in his region.

While the Kurds want a stronger role for the regional authorities, Iraq's Sunnis prefer a stronger role for the central government, because they live in areas where there are not yet proven oil resources. The majority Shiites have sided with the Sunnis by keeping control of Iraq's oil sector in Baghdad.

Shiite MP Abbas al-Bayati says this law is key.

Mr. ABBAS al-BAYATI (Shiite MP): (Through translator) The Iraqi people do not feel they are sharing in this national oil resource. There will be social problems and instability which will endanger the unity of Iraq.

GARRELS: Another problem is that many Iraqis believe the law gives multinational companies free access to Iraq's oil. Far from encouraging foreign investment, oil expert Kamal al-Mahaidi(ph) says the law actually makes it incredibly difficult. He argues without foreign investment, oil production cannot increase.

Mr. KAMAL al-MAHAIDI (Oil Expert): If foreign investment is not allowed in 90 percent of reserves, then I don't think we can go to the levels we are thinking of at all.

GARRELS: This first oil law just deals with organizing production. The Kurds say a law laying out revenue sharing must be decided now too. And that law is far from ready. There's a lot of talk about clocks these days, the American quack versus the Baghdad clock. U.S. officials argue approval of an oil law by summer is key to show Iraq's government can get something done.

Kurdish MP Mahmoud Othman warns the Americans about pushing too hard, too fast.

Mr. OTHMAN: They go according to their clock. They hurry up things, and then later on they find out that this thing couldn't work because they are not complete.

GARRELS: Iraq's proven oil reserves are the world's third largest. And oil, Iraq's most vital resource, accounts for 95 percent of government revenues. In the run-up to the U.S. invasion, the Bush administration predicted within five years Iraq would be producing six million barrels of oil per day. But oil production has since actually decreased, and is currently around two million barrels per day.

Shortages are due to outdated equipment, poor maintenance, corruption and sabotage. And Kamal al-Mahaidi says there's yet another problem.

Mr. al-MAHAIDI: The problem, that is qualified people to run the industry.

GARRELS: Trained technicians fled the country under Saddam and more have fled since because of threats and killings. Others have simply quit or quietly retired. That, says, al-Mahaidi, is an issue no oil law can fix.

Anne Garrels, NPR News, Baghdad.

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