Irony in the Oil Law

Despite widespread reports that the Iraqi Cabinet has "approved" a draft of the much reviled and highly contentious Oil Law, or at least parts thereof, and will be sent to the Iraqi Parliament, via Oil Change, UPI's Ben Lando reports that the Kurdistan Regional Government Natural Resources Minister Ashti Hawrami is unaware of "anything being passed by the Cabinet." As KGR's lead negotiator, Hawrami says that the draft approved in March of this year is the "only approved text."

Further confusing the story are statements made by members of the Sunni bloc, Tawaffuk, which is currently boycotting cabinet meetings. Salim Abdulla says, that if true, the Sunnis are "astonished at the government’s rush to submit the law to Parliament." Astonished, yes, but probably not surprised. US Congress has been pushing the Iraqi government to get the Oil Law passed post haste and the Democratic majority have threatened Maliki's government for a failure to move on the law, the number one benchmark of concern to both the White House and Congress.

Of interest in the NY Times story is the section of the law that seems to have been "approved."

The cabinet approved one part of the legislative package and sent it to the Iraqi Parliament. The proposed measure lays out the role of a new powerful federal oil and gas council, which will review all contracts and determine oil and gas sector policy.

The Federal Oil and Gas Council (FOGC) and its composition is one of the most contentious sections of the law, stating as it does (Chapter II, Article 5, Sec. C, Subsec. 5) and in no uncertain terms that the FOGC will comprise, among other entities, "Executive managers from important petroleum related companies." It requires no imagination at all to imagine just who such people might be. Hell, after reading that WaPo series last week, I'm betting Dick Cheney already has his spot picked out at the head of the conference table.

Of course, the establishment and especially the operations of this Council will be nearly if not entirely opaque. No one will know how contracts will be awarded and it will all happen behind closed doors. This has the Russians and the Chinese already particularly worried about future contracts or, rather, no future contracts. This is one reason why the Russians and the Chinese have been adopting a very pro-active posture with respect to other petroleum exporting countries. China has been courting, well, almost everyone and Russia has grown quite friendly with Iran, demonstrating a hearty reception to Iran's proposed OPEC-like gas cartel. This remains the biggest reason why both Russia and China have resisted stronger economic sanctions against Tehran. But that doesn't mean those countries have ignored Iraq. On the contrary, they have seen an opening and are jumping in.

Of the many ironic developments stemming from Bush's policy bungling in Iraq, the passage of the Oil Law during this current epoch of increasing instability might ultimately work against western oil interests, which have already stated that they would not invest in Iraq until the security situation stabilizes. However, officials from Russia, China and India are much more willing to "actively court Baghdad on its home turf," while westerners stay at home and shutter the windows. A strong nationalist streak in Iraqis could doom western oil interests if this trend continues and tilt favour toward the Eurasian bloc. The White House won't tolerate that, of course, but apart from an outright coup, there will be little Washington can do to change the sentiments of the Sunni and Kurd blocs should they become enamoured of Moscow, Beijing and New Dehli. And that could result in officials from Gazprom and CNOOC on Iraq's Federal Oil and Gas Council, counterbalancing any western interests that might wind up there.