Walter Pincus
Washington Post Staff Writer
Monday, July 2, 2007; A17
Among the political benchmarks the Bush administration has embraced to chart progress in Iraq, approval by the Iraqi parliament of a hydrocarbon law looms large. Oil provides 95 percent of Iraq's national income, making the recovery of the country's oil sector critical to reducing the United States' military and economic burden.
But two recent U.S. government reports show that the much-awaited approval of that law -- which is designed to manage distribution of future oil revenue in Iraq and govern the granting of exploration rights to foreign companies -- would be just the beginning of addressing the nation's oil problems.
An April 30 report to Congress by the special inspector general for Iraq reconstruction shows that Iraq oil production and exports remain below even prewar levels and that U.S. spending on security to protect pipelines and upgrade facilities has had mixed results. And a recent Government Accountability Office report, titled "Integrated Strategic Plan Needed to Help Restore Iraq's Oil and Electricity Sectors," explains that passage of the hydrocarbon law would provide only a broad framework for handling Iraq's oil industry, leaving many devilish details to be worked out.
"The draft law was expected to clearly assign roles, decentralize the development of oil and gas fields, centralize control of revenues, and grant regions and regional oil companies the right to draw up contracts with foreign companies for exploration and development of new oil fields," the GAO reported.
Establishing Iraqi "regions" to control oil fields, a critical element of this structure, remains elusive. The borders of Iraq's Kurdish region are established, but a constitutionally mandated referendum on the status of Kirkuk, an oil-rich and majority-Kurd city, still awaits. Meanwhile, the Iraqi parliament still has to deal with Shiites' demands for their own region in the south, where most of Iraq's oil fields are found.
Another part of the law, the distribution of revenue based on regional population levels, "will require a politically sensitive census to be undertaken," according to the GAO -- a difficult task for a nation at war.
Complicating the oil problems is the Iraqi government's inability to work out its internal differences, with government ministries often controlled by competing parties. "Although the oil and electricity sectors are mutually dependent," the GAO notes, "the Iraqi government lacks integrated planning for these sectors."
The United States recently established an Energy Fusion Cell made up of personnel from the U.S. Embassy, the Multi-National Force-Iraq, and Iraq's oil and electricity ministries. The cell is tasked with crafting an energy strategy for Iraq, which should include "identifying rebuilding priorities, resource needs, stakeholder roles and responsibilities, and performance measures and milestones," the GAO said.
But corruption and sabotage of facilities have dogged Iraq's oil industry. According to the inspector general's report, the general director of the Oil Products Distribution Co. was arrested for alleged corruption and the minister of oil was called to answer questions by the Central Criminal Court of Iraq. The GAO reported that the Iraq-Turkey oil pipeline has been a repeated target of insurgents, "shutting down oil exports and resulting in lost revenues."
National security and intelligence reporter Walter Pincus pores over the speeches, reports, transcripts and other documents that flood Washington, and every week uncovers the fine print that rarely makes headlines -- but should. If you have any items that fit the bill, please send them to.