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STEVE INSKEEP, host:

Okay, here's one reason that Iraq's violence may be so intense. Whoever controls the country may control its enormous oil reserves. That's why U.S. officials have been struggling to help Iraqis approve an oil law that would fairly distribute the revenues. Now Iraq's Cabinet has approved a draft of an oil law, and it's seen as a major step in dealing with one of Iraq's most divisive issues.

Joost Hiltermann is with the International Crisis Group, and he monitors this situation from Amman, Jordan.

Mr. Hiltermann, good morning once again.

Mr. JOOST HILTERMANN (Middle East Project Director, International Crisis Group): Good morning.

INSKEEP: Or I should say good day, good afternoon where you are. How does this draft law work.

Mr. HILTERMANN: Well, it is a law that regulates the entire oil industry in Iraq, and it is yet incomplete because it's supposed to be joined by a second law that discusses the revenue sharing mechanism. That's a lot of words going to explain how exactly the revenue from the oil that is going to be produced in Iraq will be shared between the federal government, the Kurdistan region, and the other regions as they emerge.

INSKEEP: Oh, which this is the critical issue, is it not, how much Kurds get, how much Sunnis get, how much Shiites get?

Mr. HILTERMANN: That's right. And so while we now have a draft oil law - and this is certainly an historic step for Iraq - we do not yet have either the revenue sharing law, which is yet to be drafted, or several critical annexes to the oil law. So much work is still ahead. And of course there's also still this debate that will take place in the Iraqi parliament, as well as in the Kurdistan regional parliament. So there are still many difficulties up ahead, but we have made progress.

INSKEEP: Could this law make Iraq a more peaceful place?

Mr. HILTERMANN: Well, it's not the only factor, but it's for sure that if all the Iraqi communities have the certainty that they will benefit equitably from the income from the Iraq's major resource, oil, then there is more reason to believe that they can reconcile on all the other issues that divide them. And of course much will then still have to be done to reduce the level of violence that exists.

INSKEEP: Can you give us an idea of how much money is at stake here?

Mr. HILTERMANN: Well, it's of course billions of dollars. We're talking about 70 to 80 percent of Iraq's annual budget. Much oil is already in production, but much is also being siphoned off through smuggling. But even greater resources are suspected to exist, especially in the Kurdish region, and so we're talking really about the future of the country.

INSKEEP: Do you sense, based on your contacts in Iraq, that Iraqis are ready to compromise on the key issues that, as you point out, they still have not quite agreed on?

Mr. HILTERMANN: They have made this first step and other issues still remain. I think the Bush administration is pushing very hard to get all of this done within the next couple of months, and that would then coincide with the military effort that's underway in Baghdad. I still think that it will be extremely difficult to reach common ground on all the issues that divide Iraqis, including, for example, the nature of the federal system, the de-Baathification issue, and a number of other issues - also the identity of the country, whether it's Arab, or Kurd, or a mix. But this is a step forward.

INSKEEP: Okay. Joost Hiltermann, thanks very much.

Mr. HILTERMANN: Thank you.

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