Bush fears Hunt Oil deal will hurt Iraq

WASHINGTON – President Bush expressed concern Thursday about whether Hunt Oil Co.'s search for oil in the Kurdish region of Iraq could undermine the national government in Baghdad.

"I knew nothing about the deal. I need to know exactly how it happened," Mr. Bush said at a White House news conference. "To the extent that it does undermine the ability for the government to come up with an oil revenue-sharing plan that unifies the country, obviously I'm – if it undermines that, I'm concerned."

Prime Minister Nouri al-Maliki's oil minister has called the deal with the Dallas-based oil company illegal. Negotiations over a national oil law that would divide Iraq's oil revenue among regional and ethnic factions collapsed after the Kurds announced the Hunt exploration deal. Congress and the Bush administration see the law as a crucial benchmark for healing sectarian divisions in Iraqi politics.

Qubad Talabani, Washington representative of the Kurdish Regional Government, said the deal would benefit all Iraqis through a revenue-sharing agreement approved by the Kurdish parliament in August.

"What's undermining the government is the lack of progress on the [national] oil law," said Mr. Talabani, the son of Iraqi President Jalal Talabani. "This deal didn't undermine the oil law per se. It will give it a good kick up the backside to get the process moving forward."

Hunt chief executive Ray Hunt is a friend of the president, a major backer of the Bush presidential library at Southern Methodist University and a member of the President's Foreign Intelligence Advisory Board.

Despite those ties, a company spokeswoman said no one in the U.S. government was told of the negotiations leading to Hunt's exploration contract in the Kurdish province of Dahuk, near Iraq's northwestern border with Turkey.

"We're a privately held company. We do not make it a practice to discuss our business dealings with anyone except the involved parties, and in this case the U.S. government is not an involved party," Hunt Oil spokeswoman Jeanne Phillips said.

At his news conference, Mr. Bush said the U.S. Embassy in Baghdad, headed by Ambassador Ryan Crocker, had "expressed concern" about the Hunt deal.

Iraq has immense oil reserves but has seen little exploration since Saddam Hussein's invasion of Kuwait in 1990. Ever since, U.N. sanctions, war, corruption and sabotage have crippled oil production.

Once national elections were held in 2005, Iraqi political factions immediately started debating the division of oil revenue, the role of the provinces in petroleum exploration and production, and how much authority should be vested in an Iraqi national oil company.

The Iraqi coalition government of Kurds and Arabs from the Sunni and Shiite branches of Islam reached agreement on a national oil law in February. Kurdish negotiators said a religious review board then changed the language in ways they could not accept – pulling authority from the regions back to Baghdad – and the deal has yet to be submitted to the Iraqi parliament.

Meanwhile, oil workers in southern Iraq have objected to provisions in the draft law that would allow international oil companies to participate in exploration and production. U.S. Rep. Dennis Kucinich of Ohio, a Democratic presidential candidate, has taken up their cause by charging that the Bush administration wants to distribute the crude to its allies in the oil industry.

"As I have said for five years, this war is about oil. The Bush administration desires private control of Iraqi oil, but we have no right to force Iraqis to give up control of their oil," Mr. Kucinich said.

Mr. Talabani said the problems with the draft oil law were much deeper than concerns over foreign oil companies.

He said the Iraqi government had lost nearly two years worth of hard-fought compromises over the federal relationship between Iraq's regions and its central government.

"Time and time again, we see people reneging and trying to pull it back to the center," he said. "The constitution is clear. The center can no longer dominate Iraq."

Hunt and its Canadian partner in Iraq, Impulse Energy Corp., expect to begin preliminary exploration work this fall and start drilling next year.

Mr. Talabani said there was still "plenty of time" to pass a national oil law before any Hunt discoveries are brought into production.