Analysis: Iraq oil law in limbo

By BEN LANDO Iraq's oil unions aren't shutting off the crude taps yet, awaiting a response from the prime minister on demands, which include opposition to the draft oil law, before striking.

A strike would signal the unions' power among Iraq's political leadership in Baghdad, whose coffers are filled nearly completely by oil sales, and add another voice to the disgruntled reaction to the law. And it would take 1.6 million barrels per day from the global market, tightening a supply that has already pushed the price to around $71 per barrel.

The law would govern Iraq's 115 billion barrels of proven reserves, more than every country but Saudi Arabia and Iran, dictating the rights of foreign companies in what has been a nationalized system for three decades.

Hassan Jumaa Awad, president of the Iraqi Federation of Oil Unions, an umbrella group representing more than 26,000 workers, said their complaints with the law rest primarily on the fear foreign companies will have too much access to -- and possibly ownership of -- Iraq's oil.

"First of all, we are against the production sharing agreements," Awad said. PSAs are deals whereby a company provides capital investment in the project, sells enough of the first oil produced to recoup its costs, and then splits the rest of the oil with the government. Companies can "book" their reserves, bolstering their portfolios. "These kinds of contracts ... we don't like it at all," Awad, speaking via a translator, told UPI from a mobile phone in Rome. He ' s on a speaking tour to generate support and spread information about the law. There is also debate on companion bills to the hydrocarbons framework -- a more formal common title to the oil law, which was approved by the Iraqi Cabinet in February. The law has, however, run into opposition from all sides -- including on how the revenue will be collected and redistributed throughout the country and whether the federal or regional government has control over certain fields.

The Kurds, who operate an oil-rich, semi-autonomous and relatively safe region in the north, want strong regional control and rights to sign their own oil deals (they have already started with a handful of contracts with small international companies).

They also want to ensure the revenue is sent to them, not diverted by a politically minded finance minister.

Sunnis and most Shiites in the government are pushing for strong central control of the oil and the money, though promising development and revenue sharing benefit the entire country.

The unions want oil-producing regions to receive more revenue in order to combat the environmental effects of the oil industry and ensure the Iraq National Oil Co. -- which would be the government's arm in the oil industry -- is autonomous enough from the Iraq Oil Ministry to "act like a normal company, like a commercial company, but it must be linked with the government because it has to serve the interests of all Iraqi people," Awad said. Two weeks ago the IFOU announced it would strike because its demands -- including an active role in the law's negotiations -- were not met. Workers also want improved working and living conditions.

It postponed the strike because the central government wanted time to respond to demands. Awad said the unions don't have a good relationship with Iraqi Oil Minister Hussein al-Shahristani so they met with Prime Minister Nouri al-Maliki, who promised to look into the matter.

"We are still waiting for this," Awad said. "Till now we didn't have any response from the government and we are not on any of the tables which are discussing this law. We are still out from the discussions." Negotiations on the laws continue in Baghdad. Without any changes made yet, the workers' demands have not been met.

"We will not strike until we know what will be the response of Mr. Maliki," Awad said. But if it comes to stopping work, "it will be complete, so even for exports." "I think the demands that the union is making are pretty clearly incompatible with the framework of the hydrocarbons law that is currently being debated," said Greg Priddy, global energy analyst for the business risk consulting firm Eurasia Group. Awad told UPI in March the unions aren ' t against foreigners entering the Iraq oil sector, though there is a clear line that won ' t be crossed. "The unions are very much against any form of foreign ownership. Period," Priddy said. Saad Rahim, manager in the country strategies group at analyst PFC Energy, said the threat of a strike poses "a significant risk" to both the global oil market and internal Iraq politics. "Even if the volume that were to come off weren't that significant, I think it would add to the general tension that's in the market right now and certainly have a bullish effect on prices," Rahim said. "You now have another pole, if you will, another sort of horse in the race and it does complicate things," beyond the Sunni, Shiite and Kurdish demands of the law, Rahim said. "Adding the unions in now adds a different set of requirements to a set that is already so far apart."

WASHINGTON, May 24

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