Iraq's central government is expected to approve shortly a draft law on the distribution of oil revenues after it had reached agreement with officials from the Kurdistan Regional Government last week, a senior government official said Monday,
"Prime Minister Nouri al-Maliki will soon announce that the draft financial resources law is reviewed by the cabinet and submitted to parliament for final approval", the official told Dow Jones Newswires.
However, the proposed law solves only one of the sticking points facing Iraq's controversial and long-awaited hydrocarbon law, that would open up Iraq's vast oil fields.
Iraq has proven reserves of up to 115 billion barrels of crude oil. Oil revenue accounted for around 90% of the federal budget last year. Iraq currently sells about 1.6 million barrels of oil a day.
The draft financial resources law, which is crucial to regulating how wealth from Iraq's huge reserves will be shared by Iraq's sectarian and ethnic groups, needs to be approved by the Iraqi parliament.
Under the proposed law, two accounts would be set up, into which external and internal revenues would be deposited. The external account would include items such as oil export earnings and foreign donor money, while the internal fund would consist largely of customs and taxes. The federal government in Baghdad would take what it needed, and the rest would be automatically distributed to the Kurdistan regional government and to Iraq's governorates.
Revenues would be distributed monthly, the law stated.
"Financial resources shall be distributed according to the following - funding the quota of the region of Kurdistan which amounts to 17% of the remaining revenues after subtracting expenditures " the draft law states. The amount distributed to governorates would be calculated "according to their entitlement."
The draft law also states the finance ministry in Baghdad must ensure the flow of funding to the KRG and to governorates. The Kurds have complained remittances to their region have been being held back by up to six months in Baghdad.
Under the proposed law, an independent commission to monitor revenues deposited in these accounts should be set up, headed "by an employee with the grade of a minister.
"The commission shall monitor all funds deposited into and withdrawn from the financial resources fund to ensure the proper use and justice in allocating and directing these funds," the draft states.
The draft also calls for appointing an international accounting firm to audit the external and internal activities of the Fund and to file reports about these activities.
Kurds still oppose some provisions of the draft law.
Central government and Kurdish officials are still at loggerheads on issues such as who should control untapped oil fields and the powers that should be given to yet-to-be-established national oil company.
Also, the annexes haven't yet been discussed. The Kurds say these are unconstitutional because they wrest oilfields from regional governments and place them under a new state oil company. They also cover control over discovered and undiscovered oilfields and who would have the power to negotiate contracts with international oil companies.
The U.S. administration has been pressing Iraq's leaders to speed up passage of the oil law and other measures it views as crucial to spurring national reconciliation and ending sectarian violence between Shiites and Sunni Arabs.
A senior Iraqi government official said last week that Baghdad and Kurdish negotiators need up to four weeks to resolve their disputes on the law.
Iraq sits on the world's third-largest oil reserves and officials have been struggling since last year to finalize the draft hydrocarbon law, which is vital for Iraq to attract investment from foreign firms to boost its oil output and rebuild its economy.