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Iraq Report: March 2, 2007


Displacements Upset Religious, Ethnic Communities

By Valentinas Mite

Iraqi refugees in Syria (file photo)

March 1, 2007 (RFE/RL) -- Increasing sectarian violence is touching all of Iraq's ethnic and religious minorities, even the smallest. RFE/RL correspondent Valentinas Mite spoke with Dana Graber, who is the Iraq displacement specialist within the International Organization for Migration (IOM).


RFE/RL: The IOM is tracking people who are being forced to flee their homes inside Iraq. What is the current situation there?


Dana Graber: In terms of overall displacement within the country, we have seen that about 700,000 individuals have been forced to leave their homes since February 22 [2006], which was the [date of the] bombing of the shrine in Samarra. And in terms of the displaced persons' religion, the majority who are fleeing are Shi'ite Muslims. We are seeing that about 65 percent are Shi'a and they tend to be moving to more homogeneous communities in the south. About 28 percent are Sunni Muslims and they are fleeing from mixed communities mainly in the south to homogeneous Sunni communities in the center.

"Those families that have the economic ability to leave are leaving the country."

RFE/RL: Iraq’s smaller Christian and other religious minorities also seem to be on the move. The UN refugee agency (UNHCR) reports that Christian minorities such as the ChaldoAssyrians, or smaller religious groups like the Sabean Mandaeans make up some 40 percent of the refugees who have fled Iraq over the past three years, although they constitute less than 3 percent of the Iraqi population. As IOM tracks movement inside Iraq, do you also see these small minorities seeking shelter in other parts of the country?


Graber: We have about 7 percent, who are Christians, and they tend to be fleeing to [the northern] Ninevah [Province] and to [other] northern governorates (provinces). And then we have a very, very small percentage, less then 1 percent, that represent the Sabean Mandaeans, the Yazidis, and Jewish or any other religions.


RFE/RL: What about Baghdad itself? There are reports that religious communities in the capital are becoming more and more segregated.


Graber: Absolutely. We are seeing that Baghdad has the highest number of displaced populations. And these populations are leaving mixed communities and going to homogeneous communities. Sunnis tend to be settling in the western part of Baghdad, and Shi'as in the eastern part.


RFE/RL: Some people move within the country, others flee abroad. Why do some people choose one, some the other?


Graber: Those families that have the economic ability to leave are leaving the country. Those that have the economic resources and the connections, the contacts or the network, leave the country. So, those that are displaced within the country, we find are those that are most economically vulnerable. And of course if you are fleeing for your life, you will leave the community no matter what, but certainly there are those who simply would love to leave or who want to leave because they fear for their lives but they just do not have economic means to leave.


RFE/RL: How many Iraqis have left the country since the former government was removed in 2003?


Graber: There are about 1 million, who are in Syria, about 700,000 in Jordan and then you have those who are in Iran, Lebanon, Turkey, and Egypt. But we are definitely looking at around 2 million who have left the country.




Draft Oil Law Aims To Please All Sides

By Kathleen Ridolfo

Oil worker near Kirkuk (file photo)

March 2, 2007 (RFE/RL) -- Iraq's cabinet this week endorsed a draft oil and gas law for the management of oil resources and an equitable distribution of revenues. Prime Minister Nuri al-Maliki hailed the achievement, telling reporters on February 26 that with the endorsement of the draft law, the government "lays the foundation stone for building the state." The law will now be submitted to parliament for ratification before it takes effect later this year.

Seen as a compromise between Sunnis, Shi'a, and Kurds, the law calls for the distribution of oil revenues to the governorates or regions based on population numbers, and grants regional governments or oil companies the right to draw up contracts with foreign companies for the exploration and development of new oil fields.

Regions will be allowed to enter into production-sharing agreements with foreign firms, and a federal Oil And Gas Council will be established to oversee such agreements, holding veto power over the regional governments.
See here for a summary of the Iraqi draft oil law


The council will be comprised of the ministers of oil, treasury, planning, and cooperative development; the director of the Central Bank; a minister representing each region; a representative from each governorate not belonging to a region; executive managers from related petroleum companies, including the Iraqi National Oil Company and the Oil Marketing Company; and three or less experts specializing in petroleum, finance, and economics appointed to five-year terms. The council will be responsible for setting oil and gas policy.

The draft law also veers Iraq from its historical state-controlled production path. Like other regional oil producers, oil production in Iraq under Saddam Hussein was nationalized. By allowing for production-sharing agreements, Iraq will break the regional model, a move that could limit state control over resources. But production-sharing agreements will also allow Iraq to rehabilitate its oil sector more quickly -- thereby enriching the national coffers -- than were it to go the nationalization route.

Kurds Support Draft

Proponents of the law say it is a good compromise agreement that represents the interests of all Iraqis. Ashti Hawrami, the Kurdistan Region's minister for Natural Resources, noted on the regional government's website that provisions calling for pooled revenues to be redistributed according to population numbers aim to satisfy the needs of all Iraqis.

Hawrami said the regional government was pleased that it will retain the power to sign contracts for the development of oil and oil resources in the region. Such contracts will still be subject to the approval of the federal Oil and Gas Council.

Hawrami said the five contracts already signed by the Kurdistan Region government and foreign contractors will be reviewed by an independent panel of experts that will be appointed by the Oil and Gas Council following its establishment to ensure that standards set by the draft law are met.


The Kurds have pushed for greater power to sign contracts with oil companies (AFP file photo)

Asked about the status of Kirkuk, Hawrami said the draft provides for the Iraqi National Oil Company to manage current producing fields -- no further activities will take place until after the planned referendum on the status of Kirkuk.

He contended that while the regional government is afforded greater powers over oil and gas through the Iraqi Constitution, it chose nonetheless to take a pragmatic approach to accommodate all parties.

With regard to the Kurdistan Region Petroleum Act, Hawrami said the act will be amended to fall in line with the draft federal law and the revenue-sharing law before it is presented to the Kurdistan National Assembly. The Kurdish parliament is expected to vote on it around the same time the federal laws are presented to the Iraqi National Assembly, Hawrami said.

Critics Blast Draft

The draft law has no shortage of critics. The website of the General Union of Oil Employees in Al-Basrah posted a statement by Hasan Jum'ah Awwad al-Asadi, the anti-American head of the Federation of Oil Unions in Al-Basrah, dated February 9 claiming the draft law represents U.S. interests in Iraqi oil.

Al-Asadi criticized production-sharing agreements, saying such contracts threatened Iraq's sovereignty over its natural resources and would only lead to the fleecing of national wealth. He also contended that privatization of the oil industry would not be accepted by the Iraqi "street." The union has called for legislation to reinvigorate the Iraqi National Oil Company and make it responsible for shouldering the responsibility for oil policy.

A recent gathering in Amman of former oil-industry experts from Iraq called for oil and gas contracts concluded with foreign companies to be submitted to parliament for approval. As it stands under the draft law, the Oil and Gas Council has the authority to approve such contracts.

With regard to the council, detractors have said its composition will reflect the sectarian divisions of the Iraqi government, and hence will lead to regional and sectarian agendas negatively influencing national economic policy.

In addition, the ambiguity of some clauses in the draft -- for example, calling for the publishing of the details of contracts of "significant" value -- raises concerns over transparency, critics argue.

Detractors also say the law will diminish central control over the management of natural resources, which could have disastrous consequences. However, the draft law includes several provisions calling for environmental responsibility and respect for natural resources. Companies that damage natural resources will be held to account to both the government and affected citizens.

A Vote Away?

The fact that the draft law was endorsed by the cabinet, which is comprised of representatives of the leading political parties, increases the probability that it will be ratified by parliament, but it is by no means a guarantee.

Political parties -- both Sunni and Shi'ite -- could easily use the draft as a bargaining chip to gain political concessions from the government. The possibility of Sunni opposition to the draft may have been tempered, however, by recent findings that suggest there are immense oil and natural-gas reserves in Sunni-populated areas once thought barren.



Summary Of Draft Oil Law

An oil refinery in Al-Sulaymaniyah (file photo)

March 2, 2007 (RFE/RL) -- On February 27, Iraq's cabinet approved a long-awaited federal oil law, with the aim of distributing oil revenues fairly among the regions. The law must now be approved by parliament to take effect.

The National Assembly's Council of Representatives is responsible for enacting legislation on crude oil and natural gas and shall approve all international petroleum treaties that Iraq signs with other states.

The Council of Ministers (cabinet) is responsible for proposing legislation related to the development of petroleum resources to the National Assembly. It formulates federal petroleum policy and ensures that the Oil Ministry works in consultation and coordination with provincial petroleum-production authorities.

Federal Oil And Gas Council

A Federal Oil and Gas Council will be established. It will be chaired by the prime minister, or his appointee, and will include the oil, treasury, and planning and cooperative development ministers. It will also include the director of the Central Bank, a minister representing each region; a representative of each governorate not belonging to a region; executive managers from relevant petroleum companies, including the National Iraqi Oil Company and the Oil Marketing Company; and not more than three experts specializing in petroleum, finance, and economics appointed to five-year terms.

The council determines federal petroleum policies, exploration plans, field development, and pipeline plans inside Iraq and has the authority to approve any major changes to those plans and policies. The council is also responsible for reviewing and changing exploration and production contracts. The council will rely on an "independent consultants bureau" made up of oil-and-gas experts from Iraq and abroad who are experienced in exploration and production operations and in petroleum contracts. The experts will be hired through one-year, renewable contracts.

The council is also responsible for ensuring that petroleum resources are explored, developed, and produced in an optimal manner and in the best interests of the Iraqi people.

Oil Ministry

The law issues guidelines for the restructuring of the Oil Ministry, including the following:

The Oil Ministry must establish a new department to oversee planning, developing, and following up the process of obtaining rights. It will comprise individuals trained and specializing in operating tenders and auctions and individuals capable of carrying out professional negotiations with oil companies to sign contracts related to exploration and production rights. "This department must include in each and every negotiation representatives from the related producing governorates."

The ministry must establish mechanisms for restructuring the relationship between the ministry and related companies and for regulating entities in a way that guarantees the full separation of production companies and oil services from the regulatory, monitoring, and supervisory departments of the ministry. Moreover, production departments must be separated from -- yet integrated with -- service departments in a way that guarantees increased productivity and maximum profits.

The ministry is authorized to sign service contracts and administrative contracts with oil or service companies.

The ministry should strive for the speedy and efficient development of fields that have been discovered but are undeveloped or partially developed, and may do so in collaboration with reputable oil companies.

The Oil Ministry is responsible for proposing federal policy, laws, and plans. It is also responsible for creating legislation and issuing regulations and guidelines to implement federal plans. It will undertake monitoring, supervisory, and regulatory steps to ensure unified implementation of legislation.

The ministry shall coordinate with governorates and regional administrations to draw up federal policies and plans related to short- and long-term exploration, development, and production.

The ministry is empowered to negotiate multilateral and bilateral agreements related to oil and gas with other countries and organizations subject to approval in accordance with the constitution. It is responsible for monitoring petroleum operations to ensure adherence with the laws, regulations, and contracting terms. It is also responsible for verifying costs and expenditures incurred by the holders of rights to ensure the correct and justified cost recoveries in order to determine revenues owing to the government.

The ministry must coordinate with regional governments and producing governorates to create specialized entities that carry out the ministry's responsibilities.

Contracts will be entered into by the ministry (or regional entity) and an Iraqi or foreign entity that has demonstrated the technical competence and financial capability to complete the contract, and according to transparent and accountable tendering, according to international petroleum-industry standards.

Contracts should stipulate, among other things, national control, ownership of resources, optimum economic rent to the country, an appropriate return on investment to the investor, training and development of Iraqi personnel, and technology transfers.

Iraqi National Oil Company (INOC)

The INOC's scope of operations includes managing and operating existing production fields, including the operations of the North Oil Company and South Oil Company. It will also participate in the development and production of discovered but undeveloped fields and carrying out exploration and production operations in new areas by applying for exploration and production rights based on competition. It shall own, operate, and manage the oil and gas pipeline networks, as well as export terminals. However, after two years, the federal Oil and Gas Council will decide the entity responsible for operating the pipeline network and terminal operations based on a proposal submitted by the Oil Ministry in consultation with the INOC. Such a proposal will need the approval of the Council of Ministers.

The INOC may take part in exploration and production operations inside Iraq on behalf of the federal government. It is obligated to sell its share of crude oil to the Oil Marketing Company based on a delivery price that covers the cost of production in addition to a reasonable profit that will facilitate the company's development in the areas of exploration and production.

The INOC has the right to participate commercially in international projects related to the transportation, marketing, and sale of oil and gas. It may also participate in exploration and production ventures outside Iraq if approved by the Council of Ministers.

The INOC may establish associations with other relevant companies or acquire shares in existing companies inside Iraq and abroad if such actions are approved by the Council of Ministers.

The INOC may establish wholly owned subsidiaries to perform common services in participation with partners from regions and governorates.

The board of the INOC -- comprising federal, regional, and governorate officials -- will oversee the INOC and its subsidiaries.

Governorates


Governorate authorities are required to propose to the federal authorities activities and plans for the governorate to be included in the federal plan for petroleum operations.

Governorate authorities will also participate in the licensing process for activities related to the exploration and production of discovered but undeveloped fields in accordance with the provisions set in this law and in accordance with regulations issued by the federal Oil and Gas Council.

Contracting Mechanisms

Exploration and production contracts must include the following clause: "This contract is valid unless it is rejected by the federal Oil and Gas Council."

All contracts must be submitted to the council within 30 days of the day of the initial signing or they will be considered cancelled.

The Oil and Gas Council may call on the Independent Consultants Bureau to analyze contracts and assess their adherence to the council's regulations pertaining to exploration and production rights. Should discrepancies be found, the council will rule on the contract based on the recommendations of the Independent Consultants Bureau, with a decision requiring a two-thirds majority of the members in attendance.

The council must inform the Oil Ministry, the INOC, or the regional entity of the rejection of a contract within 60 days of receipt of the contract. The contract will be considered approved should no decision be given within the specified period. Should the council be unable to convene for extraordinary reasons, it will have another 60 days to rule on the contract or else it will be considered approved.

Petroleum Revenues


According to the constitution, the Council of Ministers must submit to parliament a draft federal law regulating matters pertaining to the distribution of oil and gas revenues.

Oil revenues include all government revenues from oil and gas, royalties, signing awards, and production awards from petroleum contracts with foreign or local companies.

Revenues must be deposited into an Iraqi Central Bank account labeled "Oil Revenue Treasury" and managed by the Council of Ministers and the Treasury Ministry.

The Oil Revenue Treasury must be administered by an independent entity headed by a person holding the rank of minister. This entity must include representatives of the federal government, regional governments, and governorates, as well as a number of independent consultants. The entity must be associated with the Council of Ministers and must be formed immediately.

The government's revenues, including oil revenues, must be distributed in a fair and just way in adherence to the constitution.

Another treasury must be created, called the "Future Treasury," to hold a percentage of oil revenue.

Exploration-And-Production Contracts

The holder of an exploration-and-production contract will have the exclusive right to conduct petroleum exploration and production in the contract area, as well as the right of transportation.

The holder will have exclusive exploration-and-production rights for a maximum of four years; but may be granted an additional two years to complete the work. A third period of exploration may be granted for a period of two years, provided the extension is justified by "the quality and substance of the work program."

Should a discovery be made, the exclusive exploration-and-production right may be retained by the holder for the purposes of completing the operations initiated within a specified area to assess or determine the commercial value of the discovery for an additional two-year period or, in the case of a nonassociated natural-gas discovery, for an additional period not to exceed four years.

The INOC and other holders of an exploration-and-production contract may retain the exclusive right to develop and produce petroleum within the limits of a development and production area for a period to be determined by the Oil and Gas Council, but not exceeding 20 years from the date of the approval of the field-development plan. In cases where technical and economic considerations justify a longer production period, the Council of Ministers may grant an extension not to exceed five years.

Contract Areas

A discovery that spans two or more contract areas shall be developed and operated jointly pursuant to a unitization agreement approved by the Oil and Gas Council. Should the contract holders fail to agree on the terms of unitization, the council will make a decision within six months of notifying the parties.

A discovery that extends from areas authorized for production into unauthorized areas shall be developed only after consultation with the Oil and Gas Council, taking into account the interests of the Iraqi state.

The Council of Ministers shall adopt the necessary measures to protect the state's interests in petroleum discoveries extending beyond the borders of the state. In such cases, efforts shall be made to seek joint solutions with neighboring states.

Pipelines

The main pipelines are the property of the federal government

The INOC is obligated to transport, without discrimination and according to reasonable commercial terms, the petroleum of third parties, provided it has the available capacity and there are no insurmountable technical problems to prevent utilization of the pipeline.

Disputes arising over the transport of petroleum through a main pipeline or a field pipeline for oil or natural gas will be sent to the Oil Ministry for resolution.

Production Levels

In the event that there is a need to set limitations on petroleum production, such limitations will be set in a fair and equitable manner and on a pro-rata basis for each contract area on the basis of approved field-development plans.

Main Pipelines

The INOC, or a specialized company created by the Oil Ministry, shall own all the main pipelines.

The ministry in coordination with the INOC and in consultation with operators shall ensure that the main pipeline network is optimally designed, operated, and maintained so as to serve the overall requirements for petroleum transportation in the state of Iraq.

The INOC and other holders of exploration-and-production rights shall deliver oil and natural gas to the main pipeline at appropriate transfer points. The transportation of crude oil or natural gas beyond the transfer point shall be carried out by the specialized company designated by the Council of Ministers on the basis of a contract.

The Oil Ministry is responsible for the coordination of tasks related to the transport of crude oil through new pipelines outside Iraqi territory.

Exploration and production contracts shall provide a nonexclusive right to access main pipelines on reasonable commercial terms. It shall also confer the right to construct and operate field pipelines to deliver oil or natural gas from the contract area to the transfer point for further transportation through the main pipeline to the delivery point.

The INOC and holders of exploration and production rights shall implement the field-development plan and construct field pipelines connected to the main pipeline following approval by the Oil Ministry.

The INOC and holders of exploration and production rights shall present a decommissioning plan to the Oil Ministry no later than two years before the planned termination of production.

Natural-Gas Utilization

The INOC and other holders of exploration-and-production rights shall diligently pursue all alternatives for optimal commercial utilization of surplus produced gases. Should they fail to do so, surplus natural gas shall be offered after treatment to the government at no cost at the field's outlet. The cost incurred by the holder of exploration-and-production rights shall be recoverable under the respective contract. Similar terms apply to the production of associated natural gas.

The development and production of natural gas or liquid components thereof from a nonassociated natural-gas discovery shall be subject to the approval of the ministry of a field-development plan supported by a signed agreement for the sale of natural gas from the discovery and approved by the Council of Ministers.

Land Usage

The duration of the right of use and benefit of land shall be the same as the duration of the contract.

The INOC and other holders of contracts who cause damage to crops, soils, or property are obligated to compensate the holders of title to the assets and relocate the persons affected.

Subject to the payment of the compensation due, the holder of the right to conduct petroleum operations may require the right of way in accordance with legislation in force in order to access locations where petroleum operations are carried out.

In cases where lands and rights of way are owned by an Iraqi citizen, the land shall either be rented or purchased by the relevant state-owned company according to applicable laws.

Royalties

The INOC and other holders of exploration and production rights shall pay a royalty on petroleum produced from the development and production area at the rate of 12.5 percent of gross production measured at the entry flange to the main pipeline.

The collection of royalties shall be in kind or in cash at the option of the Oil Ministry.

If the royalties are paid in cash, they shall be calculated according to the prevailing market price.

Transparency

In the interests of transparency, the following information shall be made public: all revenues, payments, and receipts delivered to any governmental unit or entity run by the government from activities related to oil or gas; all revenues of oil and gas usage and distribution, including distributions among government entities; all financially significant contracts related to exploration, development, processing, and marketing of oil and gas resources; all financially significant contracts related to importing and exporting services and goods for the oil-and-gas industry or by any governmental unit or entity controlled by the government; and the annual report of the Oil and Gas Council, as well as the annual and quarterly reports of the INOC and its subsidiaries.

Anticorruption Laws


Any rights contract shall be voided if found to violate any laws of the state of Iraq, and in particular anticorruption laws.

Violations may lead to the cancellation of the contract in whole or part.

Competitive Public Bidding

All oil companies working in Iraq shall submit public bids on a competitive basis in order to offer any goods or services in accordance to the general bidding laws.

All public bidding must be published within a reasonable time frame and the reasons for selecting the chosen bid declared. Competitors must be given the chance to raise objections to the outcome.

Existing Contracts

The Oil Ministry and the regions must review all existing exploration-and-production contracts signed with any entity before this law was in place to ensure harmony with the goals and the general regulations of this law. This review must be submitted to the Oil and Gas Council to ensure the maximum benefit for the Iraqi people, in a period not exceeding three months from the time the Oil and Gas Council issues model contracts and related regulations.

Changes In Administrative Borders

In the case of changes in borders of regions or producing governorates, or in the case of establishing new governorates, the newly affected places shall be dealt with in accordance with this law regarding the granting rights and petroleum operations.

Disputes

Any disputes arising from the interpretation and application of this law should be attempted to be resolved first by the parties involved. If a resolution cannot be reached, the case will be referred to the oil minister, and in the last case, to the competent judicial authorities.

In the case of a dispute related to technical, engineering, operational, or accounting matters relative to petroleum operations, the parties may refer the dispute to an independent technical expert. If a party does not accept the expert's recommendation for the resolution of the dispute, the case may be referred to the courts.

Arbitration between the state of Iraq and foreign investors shall be conducted in accordance with the Rules of Procedure for Arbitration Proceedings of Paris or Geneva Chamber of Commerce for the Settlement of Disputes between States and Nationals of other States or pursuant to the Convention on the Settlement of Disputes between States and Nationals of other States and based on Iraqi law.

(compiled by Kathleen Ridolfo on the basis of material from http://www.al-ghad.org/)



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