Time to Move on: Iraq's Oil & Gas Impasse Explained

Transparency and Contracts

The draft laws advocated by the parliamentary committee requires Iraqi and international entities to comply with measures aimed at reducing corruption. However there is not much mention of transparency. Meanwhile the cabinet committee’s suggested law shies away from mentioning transparency.

The parliamentary committee doesn’t go into much detail about standardised oil and gas contracts and uses relatively unclear language, which could lead to further debate and different interpretations of the law later. Meanwhile the cabinet-based committee tries to limit contracts to services rather than production sharing contracts. The latter are often used by countries that lack expertise or equipment to exploit their own oil resources – they involve the oil company taking on more risk and spending more but there is also more chance of profit for the companies involved.

Most of the contracts already signed in Iraqi Kurdistan were production sharing contracts.

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The main issue in all of this is trust. Or, at least, the distinct lack of it.

The Kurdish demands are clear: they want a decentralised oil industry within a federal Iraq. And the views of the federal government, headed by al-Maliki and represented by the Deputy Prime Minister for Energy Hussain al-Shahristani, are also clear: a centralised oil sector with the central government more powerful in related decisions.  Iraq’s federal government keeps trying to centralise power but Iraqi Kurdistan, which has been semi-independent for over 20 years, will not play along.

It’s also a complex and fraught political issue. Al-Maliki’s major opposition, the Iraqiya bloc, is sitting on the fence due to its very mixed composition – it represents both Sunni and Shiite Muslim interests as well as those of secular politicians and ultra-nationalists.

Meanwhile Kurdish politicians currently support al-Maliki’s ruling coalition and are part of the ruling alliance, holding a number of important positions. However in the case of oil and gas law, they’re working with the Iraqiya bloc. And that is despite deep ideological differences. The Iraqiya bloc is also happy to work with them, as they’re pleased for any opportunity to weaken the current Iraqi Prime Minister’s position.

In conclusion then, it is obvious that a forced marriage between all partners will simply not work. And that a decentralised Iraq is much better than a dysfunctional Iraq. There are many politicians in Iraq who believed in the utopian vision of a united nation. But this seems an impossible dream.

The Prime Minister of Iraqi Kurdistan, Barham Salih, said as much during the recent oil and gas conference in Erbil. To those who are still clinging to that vision, Salih said “it is time to move on”.