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Iraq Report: November 13, 2007

Smuggling, Mismanagement Plaguing Oil Industry

By Kathleen Ridolfo

Iraq's oil industry needs investment if it will be able to reach previous levels of production

November 13, 2007 (RFE/RL) -- Even as Iraq's Kurds sign production-sharing contracts with foreign firms, oil production south of the Kurdistan region appears handicapped by a lack of government control and continued smuggling.

Iraqi Oil Minister Husayn al-Shahristani said recently that production increased in October, but it remains unclear whether the current output levels can be maintained or increased. Meanwhile, Sunni leaders have begun calling on international firms to begin prospecting for oil and gas in the once-volatile Al-Anbar Governorate.

But government infighting, corruption, and smuggling continue to hold back exploration and development, and a national oil law on distributing the revenues remains held up in a parliamentary committee.

Officials Complicit In Smuggling

According to media reports in recent months, the export of oil from the south -- apparently carried out by militias connected to political parties -- is on the rise, and costing the federal government about $40 million a month.

Abd al-Basit Turki, the head of Iraq's Supreme Audit Board, said last month that at least 15,000 barrels of crude oil are smuggled everyday from Iraq's southern fields to Iran and the Persian Gulf states. In reality, the figure may be significantly higher. U.S.-based petroleum expert Jerry Kiser told the BBC in January that up to 300,000 barrels per day are smuggled from Al-Basrah to Iran through smuggling routes established by Saddam Hussein when Iraq was under sanctions in the 1990s.

Turki told Dow Jones Newswires that smugglers siphon oil from pipelines and load it onto trucks, which carry the oil to small boats in the Persian Gulf. He said, "organized gangs who are more strong and influential than the government and political officials" in Al-Basrah are responsible for the smuggling.

The Iraqi daily "Al-Zaman" reported on October 25 that government officials in Al-Basrah were even assisting the smugglers. Customs chief Khalaf Badran told the daily that the officials issue certificates to tanker drivers who smuggle the oil. "They use these permits to pass through checkpoints and security controls on their way to unload their cargo onto special boats along the shores of the Shatt Al-Arab Waterway," Badran said. He said it is impossible to know which tankers are official and which are smuggling, because the permits are official.

Political parties and militias are also controlling filling stations throughout the country, the daily reported on November 3. The groups use the revenues to finance their operations. Former Oil Minister Ibrahim Bahr al-Ulum has confirmed the practice, and says that political parties also used their clout and presence in the government to grab lucrative export deals from the State Oil Marketing Organization. Thamir al-Ghadban, a former oil minister and currently an energy adviser to Prime Minister al-Maliki, also confirmed the practice, saying that the groups in question imposed "levies on fuel products sold to the public."

Iraqi Vice President Barham Salih told "Al-Sharq al-Awsat" in October that the government has been working to eradicate widespread smuggling operations in Al-Basrah, as well as at the Bayji refinery, north of Baghdad.

Salih said the government "liberated" the Bayji refinery earlier this year after discovering terrorist groups had siphoned off $1.5 billion worth of oil and oil derivatives between 2005 and 2006. Regarding Al-Basrah, he said: "We are working to confront this situation, but we need time because the financial and administrative corruption has reached some important decision-making centers in the Iraqi political arena."

Mismanagement, Corruption Rife

Indeed, the government faces a daunting challenge when it comes to dealing with corruption. Parliamentarian Sabah al-Sa'idi, who heads the Integrity Commission at the Council of Representatives, is someone who has taken aim at the smuggling issue, but may himself have ties to illicit activities. Al-Sa'idi, who hails from the influential Shi'ite political party Al-Fadilah, last week accused Oil Minister al-Shahristani of corruption and called for his resignation.

Al-Shahristani fired back in an interview with Al-Sharqiyah television, indicating that al-Sa'idi and his brothers may be involved in the corruption. "We prevented [al-Sa'idi and his brothers] from intervening in many affairs concerning the ministry," al-Shahristani said, noting the former director-general of the State Oil Marketing Organization was collaborating with al-Sa'idi in an illicit oil-buying scheme. Al-Sa'idi "represents a group which sees that it has lost much after being denied contracts they were [once] benefiting from," the minister said.

Al-Shahristani also refuted reports by the Supreme Audit Board that Iraq is losing at least 15,000 barrels per day to smuggling. He said he has heard nothing from the board on this matter, and argued that such a loss could have come from pipeline explosions.

Meanwhile, exports via the northern pipeline are up to 300,000 barrels per day now that tribal leaders in north-central Iraq have decided to side with the government. Regarding the southern terminals, al-Shahristani said they are completely under his ministry's control, and the ministry has installed meters to track oil exports.

Former Oil Minister Thamir al-Ghadban told an audience at Stanford University last week that countrywide production currently stands at 2.5 million barrels per day, which is slightly less than preinvasion production levels. Exports currently stand at 1.7 million barrels per day. Al-Ghadban said the government's aim is 6 million barrels per day by 2015.

Before it can reach that goal, the government must contend with smuggling, as well as issues of terrorism and sabotage. Last week, some 200 tribesmen from villages surrounding the Majnun oil field in Al-Basrah stormed the field's facilities and rioted, demanding jobs for the local population. It appears that the majority of workers at the field were brought in from other areas. The tribesmen inflicted damage on several structures, including the facility's water tanks, which resulted in flooding. The attack was the third of its kind by tribesmen in recent months, the state-run "Al-Sabah" newspaper reported.

Many Hurdles Remain

Meanwhile, Iraq's center remains far behind. Once believed barren of oil, recent studies suggest western Iraq may be sitting atop a trillion cubic feet of natural gas, "The New York Times" reported in February. The amount of natural gas that could theoretically be extracted from Al-Anbar's Akkas field would be the energy equivalent of around 100,000 barrels of oil a day, one official speculated.

The recent studies have prompted leaders from Iraq's Sunni Arab-populated governorates to seek a ticket on the oil train. A delegation from the Al-Anbar Salvation Council visiting Washington earlier this month called for private U.S. investment to develop Al-Anbar's oil and natural-gas reserves. The council is a body established by tribesmen who aligned with the government to fight Al-Qaeda in Iraq.

Now that security has been established in Al-Anbar, previously Iraq's most volatile governorate following the U.S.-led invasion, leaders are keen on bringing in new business. The governorate has long been known for its cement and phosphate industries. With the possibility of significant oil and gas reserves, leaders say an economic revival is just around the corner. "It's just sitting there waiting for somebody to make use of it," Al-Anbar Governor Ma'mun Sami Rashid al-Alwani told reporters in Washington.

Corruption and mismanagement could have a significant impact on international investment in Iraq's oil industry, although with surging oil prices and high demand, investors would likely overlook reports of illicit activity so long as security, output, and delivery could be guaranteed.

For now, the lack of a national oil law remains the key obstruction to development. But if the security situation in the north-central region continues to remain stable, investment could be right behind it. In the south, the situation is more in flux, though the government announced this week that it has signed an agreement with Iran to build two pipelines. One will carry oil byproducts from Iran to Al-Basrah, while the other will transport Iraqi crude to Iranian ports. The oil will be sold at international market prices.

Iraqi Kurds Push Ahead With Oil Contracts

By Kathleen Ridolfo

Iraq's Kurds have been awarding contracts to for oil exploration at an increasing rate in recent weeks (file)

November 12, 2007 (RFE/RL) -- Iraq's Kurdistan regional government (KRG) continues to award contracts for oil exploration and development to foreign oil companies despite allegations by the central Oil Ministry that the contracts are not valid due to the absence of an oil law. The KRG has ignored the criticism and contends that the contracts are legal.

The KRG has awarded 12 new contracts to international firms over the past two weeks. On November 12, it said it approved five production-sharing contracts with European, U.S., and Korean companies. The contracts are for the exploration and development of fields in the region's Irbil, Al-Sulaymaniyah, and Dahuk governorates.

"In Kurdistan, we are setting the example: this is only the first post-Saddam framework for oil investment in Iraq that follows the democratic, federal, and free-market principles mandated by the Iraqi Constitution," regional Oil Minister Ashti Hawrami said regarding the contracts.

"It is the first and only constitutionally based legal framework to attract investments to Iraq, which is designed for Iraq-wide revenue sharing, an essential element of future stability in Iraq that the constitution also rightly mandates," Hawrami added, and that the KRG hopes a similar framework will be adopted throughout Iraq.

The KRG announced on November 6 that it has approved seven new production-sharing contracts (PSC) with foreign firms. It also awarded PSCs to the Kurdistan Exploration and Production Company, which is owned by the KRG, and awarded an integrated project to the Kurdistan National Oil Company, a government-owned development company, to build a refinery for the Khurmala oil field.

At the time, the KRG said another 24 blocks in the region were the "subject of intense interest from international companies."

Baghdad Says No

There was little reaction from Baghdad to the announcement. Iraqi Oil Minister Husayn al-Shahristani has repeatedly said that previous contracts concluded between the KRG and outside investors are illegal. Al-Shahristani contends that the KRG must wait for the central government to ratify a draft oil law.

Moreover, as Oil Ministry spokesman Assam Jihad has said, the federal draft oil law stipulates that all development agreements be awarded through an open and transparent public bidding process, and not through bilateral agreements, with final approval by Baghdad.

The draft federal law was approved by Prime Minister Nuri al-Maliki's cabinet and sent to parliament for ratification months ago, but the Council of Representatives has yet to hold a vote, and the draft appears to be tied up in the parliament's Oil Committee.

The Kurdistan regional parliament passed its own gas law in August, which the Kurds say is in line with the draft federal oil law. According to the KRG's November 6 announcement, the regional government's share of oil revenues will be 17 percent, while the remaining 83 percent will be redistributed throughout the country through the central government in Baghdad.

Following the KRG's decision to award three PSCs to foreign firms in October, al-Shahristani threatened to blacklist any foreign companies working with the KRG. Al-Shahristani said he would work to prevent those firms from doing business in Iraq in the future. "The federal government's position toward these new deals is that any contract signed without its approval isn't considered a contract," al-Shahristani told Dow Jones Newswires on October 5. "We warn these companies and hold them responsible for the consequences of signing such deals."

He added that under both the Hussein-era hydrocarbon law and the current draft law, the only Iraqi body authorized to export Iraqi crude oil and gas is the State Oil Marketing Organization. Any other exports would be considered "smuggled" by the central government.

Kirkuk As Bargaining Chip

According to media reports, one of the most controversial contracts awarded by the KRG is to U.S.-based Hunt Oil, because the territory under exploration falls outside the Kurdistan region, in the historically Kurdish-populated northern Ninawah Governorate -- an area the KRG hopes will eventually join the region, along with nearby, oil-rich Kirkuk Governorate. Baghdad will likely challenge the legality of the KRG-awarded contract for exploration outside its region.

Also at stake is the Kurdish claim to Kirkuk Governorate. The government was to hold a referendum on the status of Kirkuk next month, but it remains unclear whether the vote will go ahead. Under the constitution, revenues from existing fields such as those in Kirkuk, belong to the central government. Newly developed fields would fall under Kurdish control, but as the constitution stipulates, the revenues must be shared with Baghdad.

At the moment, it appears the central government can do little to prevent the contracts from being carried out, though Kirkuk could end up being the government's leverage issue. Some observers have also speculated that Baghdad could block export routes, a threat also voiced by Turkish leaders seeking to place an economic embargo on the Kurdistan region in retaliation for the KRG's failure to expel Kurdistan Workers Party (PKK) militants from Iraqi territory.

Should that happen, the KRG could theoretically sell the oil through smuggling routes to Iran and Syria, but such a move would be unlikely to sit well with their international investors.

Regardless, there is little chance the KRG will halt or even slow its development of the oil industry. Investors have flooded the region in recent months, and the KRG intends to benefit from the boom.

Official Says Parliament Improving, But Parties Up Progress

PRAGUE, November 13, 2007 (RFE/RL) -- The deputy speaker of the Iraqi parliament, Khalid al-Attiyah, says he expects the Council of Representatives to vote on key legislation, including the draft oil law, in the near future. Speaking with RFE/RL Iraq analyst Kathleen Ridolfo at RFE/RL headquarters in Prague on November 9, al-Attiyah also commented on political fissures, saying they stand in the way of national reconciliation, and said that there has been a noticeable improvement in the security situation.

RFE/RL: There are several draft laws yet to be ratified by parliament, including the draft oil law, the law on de-Ba'athification, and the draft law on federalism. How will these issues be resolved? We've heard many times that the drafts were going to be put to a vote, but that has yet to happen.

Khalid al-Attiyah: The four laws to which you have referred are in fact important and strategic, and need to be enacted at the earliest possible opportunity. Political leaders have been discussing these laws for some time, but there are regrettably some limited points of disagreement and contention between the political leaders that are still pending and have yet to be resolved.

That is why I am calling -- I called a few days ago -- for a new political initiative that depends on [convening] meetings between the political leaders, to engage in discussions [aimed at] identifying the pending matters with regard to these laws, in addition to other political issues, in an attempt at finding an understanding. Fortunately, these points are actually few and limited, although some are very important and fundamental.

With regard to the "Accountability and Justice Law," some major political blocs that are involved in the political process -- I mean the two Kurdish parties, in addition to the Islamic Al-Da'wah Party and the Supreme Islamic Iraqi Council that are major partners in the United Iraqi Alliance, and the Iraqi Islamic Party and the [Sunni-led Iraqi] Accordance Front -- have agreed on an understanding regarding the articles of this law.

And now this law -- I think it will be presented for its first reading at the end of next week in the Iraqi parliament -- and I believe that its enactment is imminent. [It is hoped] that this law will play a part in the national-reconciliation process that we need at this time.

The oil law also involves some pending issues -- especially from the Kurdish side that is still steadfast in some of its positions on this law -- while at the opposite side there is the Accordance Front that has some negative positions with regard to this law. In fact, there are efforts under way now to seek an understanding and a solution to the points of contention. These are basically focused on the authority of the regions in signing investment contracts with foreign companies.

This law is important to Iraq because it guarantees a necessary legal basis for dealing with Iraq's oil wealth, which is a crucial and fundamental wealth that provides 95 percent of Iraq's income. The equitable distribution of this wealth between the various areas that comprise the Iraqi people provides a fundamental guarantee for the unity of Iraq. Thus the enactment of this law in its correct form will guarantee the unity of the Iraqi people and will, as a result, guarantee peace and coexistence between the various components of the people.

There is also the law pertaining to the governorates that are unattached to any region. It is also an important law that needs to be enacted, in order to delineate the authority delegated to the governorates -- to the governorate councils -- and define their responsibilities and commitments, while also defining the relationships between the seats of the governorates and the various local authorities within these governorates.

The agreement in principle in accordance with the constitution is to grant these governorates the broad authority that would enable their self-administration and to improve conditions [within them]. That would play its part in resolving the Iraqi crisis and in "clearing the air" between the various parts of Iraq and their inhabitants. There is also the need for a law that sets out the manner in which elections are to be held in the governorates. It is essential for new councils to assume responsibility in these governorates -- councils that are elected by the people of these governorates.

This law would be complementary to the law of the governorates that are unattached to any region. There is also a law relating to the distribution of incomes and oil revenues, in a manner that guarantees fairness in the distribution of financial allocations to all the areas and regions of Iraq in an equitable manner that is proportionate to the degree of deprivation in these areas.

I am very optimistic that there will be an accord with regard to these laws before the end of this legislative session, and that they will be enacted by the required time. Of course after that there will still be budget law -- the 2008 budget -- that must be approved by the Iraqi parliament before the end of this year. The budget -- as a result of the increase in oil income and the big increase in oil prices during the past months -- will be a huge one, which will include financial appropriations exceeding those of last year by about $7 billion.

This will certainly provide Iraq with an opportunity to carry out reconstruction and launch the investment process. The Iraqi parliament has [already] enacted an investment law that regulates investment in Iraq and encourages foreign companies to take part in investments in Iraq, while guaranteeing their interests and rights.

I believe that these are the most important laws that are awaiting [action in] the Iraqi parliament during this month and next month, in addition to some important decisions that need to be taken by the Iraqi parliament, especially with regard to the completion of the government's formation and filling the empty ministerial posts. These portfolios and ministries have for months been vacant and blocked, and they are related to providing essential services to the Iraqi public. Bringing in competent, independent, and honest technocrats who are anxious to do their duty is very important for the improvement of these ministries' performance toward the Iraqi people.

That is the overall picture of what awaits us now in the Iraqi parliament, with regard to the decisions and legislation of the coming phase.

RFE/RL: Do you think the parliament is as effective as it could be? We see many sessions where there is a lack of a quorum, which obstructs the parliament's ability to function. As a leader in the parliament, is there any plan to sanction parliamentarians who don't attend sessions?

Al-Attiyah: The fact is that I admit that a significant number of parliamentarians are not performing their duties and responsibilities in the required proper way. Despite that, and as a result of enforcing some disciplinary measures on the members, and also as a result of the awareness campaign that was conducted by the Council [of Representatives] leadership with the representatives of the various political blocs to emphasize the need for attendance and the avoidance of absenteeism except in extreme cases, there has been a resulting improvement in the level of attendance. Thus, from the beginning of this parliamentary session, there has not been a cancellation of any meeting due to the lack of a quorum; there has always been at least the minimum number of attendees to realize a quorum.

In spite of that, I believe that the level of parliamentary performance by the members is below what is required, and there are many who do not participate in the committees and who make no effort alongside their colleagues and brothers in the various committees to study the laws, observe the government's performance, or other duties required of council members.

This phenomenon can be justified in part by the security complications being faced by Iraq, and the circumstances that force parliamentarians to travel outside Iraq to meet with their families. Another aspect of the situation is that there are training and development programs for parliamentarians that are conducted by some international agencies and the UN, in addition to the invitations received by some council members from various world parliaments to acquaint them with their parliamentary experiences. As a result, some of those members are absent from some council sessions, since they are abroad in response to such invitations or to participate in the training and development courses.

Overall, however, I believe that this phenomenon is no longer having a negative effect at this time, given that the parliamentary sessions are ongoing. The real problem that obstructs the council's work is not from within the council, but is a result of the political differences between the blocs' leaderships over positions, decisions, and the legislation that must be enacted by the council. If we are to be fair, while looking at the overall view of the situation, we need to take note of all these elements together.

RFE/RL: Can I ask you about the Dead Sea national-reconciliation meeting that ended on November 8?

Al-Attiyah: The truth is that I did not attend that conference. When I came to the Czech Republic, the conference was still under way in Jordan, so I cannot talk about this conference or what was discussed there.

RFE/RL: There was a statement that came out of that meeting that said it is not suitable to talk about reconciliation until the U.S. military withdraws from Iraq. Is this a reasonable demand or is it an excuse used by some parties to the talks? Why is national reconciliation dependant upon the setting of a date for U.S. forces to withdraw from Iraq?

Al-Attiyah: Assuming that such a statement was issued by some of the parties attending the conference, I believe that this does not represent the fact of the matter. It is rather, as you described it, an excuse for these parties to obstruct the national-reconciliation process. Of course, no Iraqi wants the presence of foreign troops on Iraqi soil.

Everybody considers the occupation to be over, and that Iraq regained its national sovereignty some time ago, and the remaining forces are there with the concurrence of the Iraqi government, and based on the wishes of the Iraqi government, because security has not yet been achieved and it is still unstable in Iraq. Hence we need the international community to cooperate with us to rectify matters and to train and supply the security and armed forces so that they can take hold of the security file in a capable and efficient manner.

Therefore I don't believe that it is right for anybody to upstage the government or the existing blocs in the political process through such false nationalistic slogans. I also don't believe that the government and the leaders of the important political blocs are less caring than these parties with regard to the sovereignty of Iraq, and with regard to their wish that their country should be independent, enjoying calm and stability.

It is strange that these others -- instead of cooperating with the government and with the other political blocs in the national-reconciliation process, and helping the armed groups to join the political process, to renounce terror, and to renounce violence -- are fueling these groups and providing them with excuses to continue terrorizing the Iraqi people, in spilling the blood of the Iraqi people. I therefore believe that such statements do not serve Iraqi national interests nor do they enhance the reconciliation process. Rather, they fuel the conflict and keep it going, and I believe that what was said at that conference -- assuming that this was the case -- can be described at upstaging.

RFE/RL: How would you compare the level of sectarian violence in Iraq today to that of six months ago?

Al-Attiyah: I would say that there is no basis for comparison at all. There has been a tangible improvement. I don't feel that the conflict that went on -- especially during last year -- was really a sectarian conflict, or a religious conflict. It was, rather a political conflict in its entirety.

Despite that, the intensity of the conflict -- regardless of its description -- has decreased in intensity to a large extent, as witnessed by the fact that forced displacements have decreased immensely; on the contrary, many of the families displaced from some areas have returned. Kidnappings, assassinations, killings, explosions, have also in fact declined in their intensity, and the security situation has improved overall.

By the way, I must stress that component parts of the Iraqi people are brotherly and blend well among each other; the ties and relationships between the people of Iraq are very strong. That is why the people have lived for long centuries without the appearance of such phenomena; other political regimes have been replaced without resulting in what has taken place since the last [regime] change.

This most recent change has shaken Iraq and has overturned the political system by its roots, and the previous equations and balances have all changed, which is why the reaction has actually been a result of the political change, and the transformation of Iraq from dictatorship, from terror, from the suppression of freedoms, to democracy, freedom, respect for the principles of human rights, stressing the rights of minorities, and that every component of the Iraqi people has the right to participate in government.

This system is not liked by many of the political blocs, or by some of the regional parties: they would like to sabotage the political process, and it is they who have given rise to these sensitivities and sectarian conflicts, by providing them with fuel and encouragement. But, thank God, the Iraqi people have demonstrated that they are aware of the need for their national unity, and has listened to the voices of the authorities and the wise, who have called for the avoidance of being drawn into sectarian turbulence.

The truth is that it was possible for the acts committed by the terrorists -- especially the bombing of the twin shrine at Samarra -- to escalate into a most violent sectarian war in Iraq, had it not been for the intervention of our religious sources and scholars. The holding on of the Iraqi people to the principles of brotherhood, mutual love, and their readiness to reason to coexist indicates, in my view, that many of these phenomena did not originate with the Iraqi people, but rather with the political agencies -- whether from within, from without, or regional and international -- who have been behind the stoking of this phenomenon.

(Translated by Ayad al-Gailani)

Threat Of Turkish Invasion Diminished, For Now

By Sumedha Senanayake

A Turkish soldier on patrol along the Iraqi border (file photo)

November 8, 2007 (RFE/RL) -- As representatives from Iraq's neighbors and other international organizations gathered in Istanbul on November 3 to discuss ways to improve the security situation in Iraq, Turkey's threats to send troops into Iraq to attack militants of the Kurdistan Workers Party (PKK) dominated the two-day conference.

While Iraqi officials had hoped to use the Istanbul conference as a stage to highlight the sharp decline in violence in Iraq, the meeting was dominated by a flurry of diplomatic maneuverings between U.S., Iraqi, and Turkish officials to avoid a military confrontation in northern Iraq.

Even in the final communique, the issue reared its head, as conference participants called for combating terrorism, "including all efforts to prevent Iraqi territory from being used as a base for terrorists against neighboring countries."

This represents a stark contrast to what has been reiterated constantly by U.S. and Iraqi officials, who have urged Iraq's neighbors to prevent foreign fighters from infiltrating Iraq to carry out terrorist activities that have led to the spiraling instability. Now the reverse exists; Iraqi territory is perceived as being a base for terrorist groups that threaten its neighbors.

Turkey Appeased...

The high-level meeting in Istanbul bringing together the foreign ministers of Iraq's neighbors, and representatives of the permanent members of the UN Security Council, the Group of Eight (G8) leading industrialized states, and the Organization of the Islamic Conference was seen as an opportunity to focus on the issues plaguing Iraq as it tries to rebuild, and to build upon initiatives discussed and adopted by the previous conference in the Egyptian resort of Sharm El-Sheikh in early May.

Among the resolutions adopted by the participants in the final communique was support for Iraq's "sovereignty, national unity, territorial integrity, Arab and Islamic identity," and for the Iraqi government's efforts to achieve national reconciliation and greater efforts "to protect and assist displaced Iraqis by addressing their immediate and foreseeable needs and safeguarding their safety."

While the focus of the gathering was meant to be on Iraq, the Turkey-PKK affair overshadowed everything. Moreover, Ankara’s threats to carry out a major military operation inside northern Iraq initiated a diplomatic push by the United States and Iraq that led to several breakthroughs that seemed to soothe Turkish anger.

First, Iraq promised to take additional steps to curb PKK activities in northern Iraq. Iraqi Prime Minister Nuri al-Maliki insisted on November 4 that no terrorist group would use Iraqi territory to stage attacks against one of its neighbors and the Kurdistan regional government followed up those statements by shutting down the offices of the Kurdistan Democratic Solution Party's (PCDK) in Irbil. The PCDK are believed to have links to the PKK and Ankara has repeatedly called for the closure of all PKK offices in Iraq.

Also on November 4, the PKK released and handed over eight abducted Turkish soldiers to the Turkish government after mediation by both the United States and Iraq. The abduction of the soldiers on October 21 infuriated the Turkish public, which in turn urged the military to take decisive action against the PKK. Turkey's military amassed some 100,000 troops along the Iraqi border after it was given approval by the Turkish parliament for it to conduct operations inside Iraq if need be.

Finally, on November 5, Turkish Prime Minister Recep Tayyip Erdogan met with U.S. President George W. Bush at the White House. The two sides underscored their determination to work together against the PKK -- which Bush described as an "enemy of Turkey, a free Iraq, and the United States" -- by improving the intelligence-sharing capabilities between the two NATO allies' militaries.

In addition, Bush's pledge to offer Turkey "real-time" intelligence was seen as tacit approval for the Turkish military to carry out "surgical" strikes on PKK positions in northern Iraq -- a compromise allowing limited military action but staving off a major Turkish invasion, which would undoubtedly destabilize the most secure region in Iraq. More importantly, the enhanced intelligence sharing between the United States and Turkey against the PKK may soften Ankara's complaints that the Americans were not doing enough about the PKK.

...But For How Long?

It remains to be seen whether Bush's assurances to Erdogan that the United States will do everything it can to help Ankara curb PKK activities will defuse the crisis along the Iraqi border or only temporarily soothe Turkish anger. Given previously unfulfilled pledges by both Iraq and the United States to crack down on the PKK, it seems unlikely that Turkey will ease the pressure for immediate action completely.

This inability or unwillingness to act was the subject of recent comments by retired Air Force General Joseph Ralston, who until last month was the U.S. special envoy for the PKK issue in northern Iraq. Ralston allegedly resigned in frustration, citing the ongoing failure by Iraq and the United States to take any concerted steps against the PKK. In a November 2 interview with McClatchy Newspapers, Ralston stressed that ongoing inaction on the PKK situation may give Turkey no choice but to take unilateral military action against the group in northern Iraq.

"They're [Turkey] going to have to [intervene], in the absence of the U.S. doing anything," Ralston said. "The U.S. government should have made good on the commitments they have made to the Turks."

However, the mere threat of a military incursion has been a major bargaining chip for Turkey. It was the threat of such an action that led to pressure being placed on the PKK to release the eight Turkish soldiers, as well as the new pledges by Bush and action by the Iraqis. Therefore, it is doubtful that Ankara would take the military option off the table, unless the PKK in northern Iraq was eliminated completely.

But Turkish frustration may not be that easy to mollify. Following Erdogan's meeting with Bush, in a speech at the National Press Club in Washington, he reiterated Turkey's impatience and called for concrete steps to be taken to rein in or eliminate the PKK in Iraq. Alluding to military action in northern Iraq, Erdogan insisted that Turkey has the legitimate right to defend itself against terrorist threats.

With winter approaching, the PKK fighters in based in the rugged terrain along the Turkey-Iraq are likely to be much less active. This could give a temporary respite to the tensions until a long-term solution to the PKK issue can be negotiated. However, if the PKK carry out another bold maneuver similar to the October 21 ambush that led to the death of 12 Turkish soldiers and the abduction of eight others, then Ankara may be left with no other choice but to bow to public anger and launch a full-scale incursion.

Iraqi Governor Calls Federalism Best Solution

As'ad Sultan Abu Kulal

PRAGUE, November 6, 2007 (RFE/RL) -- The governor of the Iraqi province of Al-Najaf says that federalism offers the best solution for Iraq's regions to reconstruct and succeed economically.

As'ad Sultan Abu Kulal said on a visit to RFE/RL in Prague today that his region is using the decentralization of power in Baghdad to make many of its own decisions. He says the result it that Al-Najaf has achieved economic self-sufficiency, both in food and fuel.

The Al-Najaf governor acknowledged that his province has many starting advantages -- including a historically thriving tourism industry based on religious pilgrims flocking to the Shi'ite holy city of Al-Najaf.

The religious tourism has boomed since the overthrow in 2003 of Saddam Hussein's regime, which greatly discouraged it. Recent years have seen investors build more than 450 hotels to lodge the pilgrims, many of whom are from neighboring Iran. The trade also supports restaurants and specialty shops, generating enough revenue for the city to enjoy considerable economic security relative to much of the rest of the country.

Benefits Of Devolution

But Abu Kulal says Al-Najaf has prospered in recent years mostly because the decentralized government in Baghdad allows local authorities to make many key decisions on their own. He says the city's goal is to use this freedom to create self-sufficiency in fuel and food -- two key economic staples.

"Our theory as a provincial council and civil administration is to build complementary, self-sufficient institutions for this purpose," he said. "For example, we are building the health sector, to have hospitals, and have medicine depots. For energy, we are building power stations, in order not to need power transferred from other provinces. We are building oil refineries, so as not to be obliged to bring fuel from outside the province."

Al-Najaf has been relatively free of unrest since major fighting between U.S.-backed Iraqi forces and members of the Imam Al-Mahdi Army in 2004. The Al-Mahdi Army is loyal to radical Shi'ite cleric Muqtada al-Sadr, who opposes the U.S. presence in Iraq.

Control of the city today is shared between supporters of al-Sadr and supporters of other Shi'ite religious parties, particularly the Supreme Islamic Iraqi Council. A major moderating influence over the sometimes violent rivalries between factions is the presence of Grand Ayatollah Ali al-Sistani, the preeminent Shi'ite religious authority in Iraq.

The Al-Najaf governor told RFE/RL's Radio Free Iraq that federalism offers opportunities for other parts of the country, too, despite resistance to the idea in some quarters.

"We have tried during the last few years to practice a tiny part of decentralization, and you could see the huge change that happened when the state gave [us] a little bit of authority, and a little bit of funds," Abu Kulal said. "Despite the lack of local resources and human resources -- there was development. But the problem that we face is that a part of the Iraqi people lack a knowledge of federalism."

Federalism remains a divisive issue in Iraq, where the Sunni community says it could lead to unequal sharing of the country's oil wealth or even break up of the country. Most oil wells are in the Shi'ite-majority south of the country or in the Kurdish north.

Iraq's Kurds currently enjoy substantial autonomy under Iraq's federal system. Many Shi'ite parties are actively pressing for similar rights for southern areas.