Big Oil's occupation of Iraq
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Read more about: Our campaign to save Iraq's academics. Sign the petition online | Partial list of Iraqi academics murdered under US occupation | The Endangered Iraqi journalists: Partial list of Iraqi and non-Iraqi media professionals died under US occupation | The Children of Iraq | Iraq: the largest humanitarian crisis on the planet | Iraqi refugees |
The situation of Iraqi Healthworkers | Torture and Prison Abuse in Iraq | Iraqi Women Under Occupation | The looting of Iraq's Cultural Heritage | Comments on the Lancet Survey and other mortality studies | Big Oil's Occupation of Iraq | The Salvador Option and Death Squads | Israeli Involvement in the Occupation of Iraq | Military Bases | Voices of Resistance | Remembering Falluja | The use of WMD by the US army | The Events in Samarra | The Iraqi Constitution | The Illegal trial and verdict of Saddam Hussein | Lieutenant Watada's War Against the War | Statements and articles of the BRussells Tribunal on Lebanon | 'New Middle East' Borders | Opinion Polls | The BRussells Tribunal PDF Dossiers | MAPS | Breaking reports & Articles | De zaak Bahar Kimyongur | And even more background information... | Support the Palestinian Youth & Children Relief Centre in Shatila refugee camp |
* Oil in Iraqi History: On this page there are many materials on the history of Iraq’s oil and the international struggles to control it. Of special interest is information on the control of Iraq oil in the World War I era, the role of the international companies in Iraq and the Middle East, and the disputes leading up to Iraq’s oil nationalization in 1972.
* Iraq Oil: The Vultures are Waiting - by Sarah Meyer, member of the BRussells Tribunal Advisory Committee (03 September 2007) - last updated 20 May 2008
2008
Article: Iraq Government Says Oil Contracts Bid Out for Techical Services (01 July 2008)
Article: Iraq fails to sign deals with global oil majors (01 July 2008)
Article: 35 global oil companies compete for oil fields' developing contracts – oil minister (30 June 2008)
Article: Flurry of oil deals with foreign firms continues (26 June 2008)
Article: IRAQ: Flurry of oil deals with foreign firms continues (25 June 2008)
Article: Oil denies signing agreement to upgrade world companies (24 June 2008)
Article: 35 foreign firms win deals to develop Iraq’s oil riches (24 June 2008)
Article: Tomgram: Finally, the Oil... (22 June 2008)
Article: Oil giants return to Iraq (20 June 2008)
Article: Big oil cashes in on Iraq slaughter (20 June 2008)
Article: Deals with Iraq are set to bring oil giants back (19 June 2008)
Article: A crude business (29 March 2008)
Article: Foreign Firms Seek Iraq Oil Deals (February 18, 2008)
2007
Article:
Iraqis Make
Statement Against Oil Theft
(November 26, 2007)
Article:
Long-Term Presence
Planned at Persian Gulf Terminals Viewed as Vulnerable
(November 12, 2007)
Article:
Iraq, With US
Support, Voids a Russian Oil Contract
(November 5, 2007)
Article:
Why Did We Invade
Iraq Anyway?
(October 30, 2007)
Article: The White Man’s Burden and ‘Oil for Peace’ in Iraq (October 21, 2007)
Article: Iraq's Workers Strike to Keep Their Oil (September – October, 2007)
Article: Black Gold Turns Grey as Western Giants Prepare to Draw from the Wells of Iraq (September 30, 2007)
Article: How the Bush Administration’s Iraqi Oil Grab Went Awry (September 25, 2007)
Article: Greenspan, Kissinger: Oil Drives US in Iraq, Iran (September 17, 2007)
Article: Greenspan: Ouster of Hussein Crucial for Oil Security (September 17, 2007)
Article: The Battle for Iraq Is About Oil and Democracy, Not Religion! (September 10, 2007)
Article: Commerce Seeks Adviser for Iraq Oil Interests (September 10, 2007)
Article: Missteps and Mistrust Mark the Push for Legislation (September 5, 2007)
Article: What Is Holding Up the Delivery of the Long-Awaited Iraqi Oil Law? (August 22, 2007)
Article: Oil Giants Rush to Lay Claim to Iraq (August 19, 2007)
Article: Why Iraqis Oppose US-Backed Oil Law (August 19, 2007)
Research: Iraq Oil: The Vultures are Waiting (Sarah Meyer, 03 September 2007)
Article: Commentary: Iraq's wealth in the balance (08 August 2007)
Article: 108 Iraqi oil experts demand slow down in passage of Oil and Gas law (30 July 2007)
Article: Iraq's Workers Strike to Keep Their Oil (June 2007)
Article: Losing Fuel (May 25, 2007)
Article: Some Iraqi MPs Say Draft Oil Law Unacceptable (20 May 2007)
Article: Iraq-Iran Increasing Bilateral Ties (18 May 2007)
Article: Iraqis Resist US Pressure to Enact Oil Law (May 13, 2007 Los Angeles Times)
Article: Billions in Oil Missing in Iraq, U.S. Study Says (12 May 2007)
Article: Iraq War Is All About Controlling The Oil (11 May 2007)
Research: The Iraq Oil Crunch: Index Timeline (Sarah Meyer, 09 May 2007)
Article: The Struggle over Iraqi Oil (May 8, 2007 TomDispatch)
Article: Kurds to 'block' Iraq oil law (29 April 2007)
Article: Iraq May Have Massive Undiscovered Reserves (19 April 2007)
Article: Violence Threatens Oil (April 13, 2007 UPI)
Article: Iraq Oil Law Turns Back the Clock to 1951 (13 April 2007)
Article: Sunni MP: U.S. Helped Shape Iraq Oil Law (07 April 2007)
Article: Bush Bailout Pal Drooling For Iraqi Oil (April 2007)
Article: Kurds Near Agreement with 15 Oil Companies (23 March 2007)
Article:
Mystery of Missing
Meters: Accounting for Iraq’s Oil Revenue
(March 22, 2007
CorpWatch)
Article:
Whose Oil Is It,
Anyway?
(March
13, 2007
New York Times)
Article:
Foreign Office
Helped Set Up Iraqi Oil Deals
(March 11, 2007
Independent)
Article:
BG Spearheads Move
to Tap Iraq's Riches
(March 10, 2007
Telegraph)
Article:
Cabinet Readies
Iraqi Oil for Privatization
(February 27, 2007)
Article:
Iraq Loses 400,000
Barrels a Day To Violence
(20 Feb 2007)
Article:
Iraqi Oil Wealth
Stays Locked Up
(February 20, 2007
Wall Street Journal)
Article:
Iraq Oil Technocrats:
Time Not Suitable for Oil Law
(February 17, 2007
Dow Jones Newswires)
Article: Meters Cost Iraq Billions In Stolen Oil (08 Feb 2007)
Article: U.S.-Tailored Iraqi Oil Alarm (27 Jan 2007)
Article: Iraqi Leaders Still Wrangling Over Hydrocarbon Law (January 9, 2007 Dow Jones)
Article: Future of Iraq: The spoils of war (07 Jan 2007)
Article: Blood and oil: How the West will profit from Iraq's most precious commodity (07 Jan 2007)
2006
Article: Will Iraq’s Oil Become a Curse? (December 22, 2006 Der Spiegel)
Article: The Roving Eye (December 14, 2006 Asia Times)
Article: Iraqi Trade Union Statement on the Oil Law (December 14, 2006)
Article: US staying the course for Big Oil in Iraq (13 Dec 2006)
Article: It's Still About Oil in Iraq (December 8, 2006 Los Angeles Times)
Article: Troops Out, Oil Companies In: The Baker Agenda? (07 Dec 2006)
Article: Iraqi Kurds' Oil Law Poses Problem for Baghdad (November 9, 2006 Radio Free Europe/Radio Liberty)
Article: Bush U.S. Must Stay In Iraq To Control Oil (02 Nov 2006)
Article: The U.S. Takeover of Iraqi Oil (17 Oct 2006) part 2
Article: Bush's Petro-Cartel Almost Has Iraq's Oil (16 Oct 2006) part 1
Article: Will Iraq Repeat Russia’s Oil Mistakes? (October 2006 Carbon Web)
Article: Turning Eastward for Oil Contracts (September 27, 2006 Stratfor)
Article: Oil Majors Maneuver for Prime Position in Iraq (August 23, 2006 Reuters)
Article: George's Oil Dubya-Speak (August 21, 2006 Carbon Web)
Article: Iraq to Talk with Big Oil Companies in 2 Months (August 2, 2006 Reuters)
Article: Iraqi Unions Kept Away from Oil Legislation (August 1, 2006 Niqash)
Article: Of Oil, War and Power – Learning From History (July 10, 2006 Niqash)
Article: BHP “Wanted Rifkind to Lobby US for Iraq Oil” (July 5, 2006 Independent)
Article: Oil Privatisation by the Back Door (June 26, 2006 Niqash)
Article: For Whom, the Wells Drilled? (June 21, 2006 Niqash)
Article: The Black Gold Rush (June 15, 2006 Niqash)
PDF File: Production sharing agreements: oil privatisation by another name? (25 May 2006)
Article: Oil Prospecting In Kurdish-Administered North Intensifies (May 12, 2006 Radio Free Europe/Radio Liberty)
Article: USAID Provides Adviser to Iraq Govt on Oil Law -Spokesman (April 28, 2006 Dow Jones Newswires)
Article: Iraq's Kurds Aim for Own Oil Ministry (April 19, 2006 Los Angeles Times)
Article: Further Steps toward Long-Term Oil Contracts (April 2006 Carbon Web)
Article: Abizaid Says US May Want to Keep Bases in Iraq (March 15, 2006 Reuters)
Article:
The
corporate plunder of Iraq (11 Feb 2006)
Article:
Oil, conflict and the future of
global energy supplies
(22 Jan 2006)
Article: Speech Delivered at the International Peace Conference (January 11, 2006 General Union of Oil Employees in Basra)
Article: The Last Word: Noam Chomsky (January 9, 2006 Newsweek)
2005
Article: Iraqis Pummeled at the Pumps (December 28, 2005 Los Angeles Times)
Article: Big Oil's occupation of Iraq (13 Dec 2005)
Article: Did Big Oil participate in planning invasion of Iraq? Thomas Eley (11 Dec 2005)
Article: GPF on Great Iraq Oil Ripoff (03 Dec 2005)
Article: Kurdish Oil Deal Shocks Iraq's Political Leaders (December 1, 2005 Los Angeles Times)
PDF File: The Rip-Off of Iraq’s Oil Wealth (25 Nov 2005)
Article: Iraqis to lose $200Biilion to US/UK Oil Companies (24 Nov 2005)
Article: Iraq's oil: The spoils of war (22 Nov 2005)
Article: Document Says Oil Chiefs Met With Cheney Task Force, washingtonpost.com (16 Nov 2005)
Article: So Iraq was about the oil, Consortium News, (08 Nov 2005)
Article: Coalition Warships Safeguard Iraq's Precious Oil Terminals (October 12, 2005 Agence France Presse)
Article: What Is Happening to Iraqi Oil? (October 10, 2005 Middle East Economic Survey)
Article: Iraq Constitution Lays Ground for Oilfield Sell-Off (October 1, 2005 Carbon Web)
Article: Heritage Oil Signs Agreement for Kurdistan, Iraq Field Study (September 28, 2005 CNW Telbec)
Article: Missteps Hamper Iraqi Oil Recovery (September 26, 2005 Los Angeles Times)
Article: The Failed War for Oil, AlterNet (23 Sept 2005)
Article: More Blood, Less Oil (September 21, 2005 TomDispatch)
Article: Bush Gives New Reason for Iraq War (August 31, 2005 Associated Press)
Article: Iraqi Kurds Demand Say over Northern Oilfields (July 29, 2005 Reuters)
Article: Oil and Blood (July 28, 2005 New York Times)
Article: Iraq’s Untold Story (July 26, 2005 Carbon Web)
Article: Why Iraq Oil Money Hasn't Fueled Rebuilding (July 14, 2005 Christian Science Monitor)
Article: Deciding the Future of Iraq’s Oil Wealth (July 12, 2005 ISN Security Watch)
Article: Iraqi Oil Wealth: Issues of Governance and Development (July 2005 Open Society Institute)
Article: Iraq: The carve-up begins (23 June 2005)
Article: THE AMERICAN PLANS TO EXHAUST IRAQ AND TO STEAL ITS RESOURCES: FACTS AND FIGURES (22 June 2005)
Article: Iraq Oil Sales Concern Security Council (June 20, 2005 Associated Press)
Article: Iraq's Other Resistance (June 3, 2005 Guardian)
Article: Protecting the Future: Constitutional Safeguards for Iraq's Oil (May 2005 Iraq Revenue Watch)
Article: Blood for Oil? (April 21, 2005 London Review of Books)
Article: Corruption Draining Oil Industry (April 20, 2005 Institute for War & Peace Reporting)
Article: Iraq's Oilworkers Will Defend the Country's Oil (April 5, 2005 truthout)
Article: Control of Oil Ministry Divides Factions in Iraq (March 25, 2005 Wall Street Journal)
Article: Mapping the Oil Motive (March 18, 2005 TomPaine)
Article: Secret US Plans for Iraq's Oil (March 17, 2005 BBC Newsnight)
Article: Oil Companies Hopeful on Iraqi Politics (March 14, 2005 Associated Press)
Article: Derelict Plants Are Crippling Iraq's Petroleum Industry (March 3, 2005 New York Times)
Article: Seeking Iraq's Oil Prize Government May Allow Foreign Petroleum Firms to Invest ( January 26, 2005 San Francisco Chronicle)
Article: Iraqi Oil and Tony Blair’s Absurd Conspiracy Theory (January 2005 Red Pepper)
2004
Article: Oil, Power and Empire: Iraq and the U.S. Global Agenda, Scott D. O’Reilly (05 Oct 2004)
Flashbacks:
Washington
& Big Oil vs. the world 2/06/03 -
Iraqis Anxiously Await Decisions About the Oil Industry
4/28/03 -
US
Shell Executive to Oversee Iraqi Oil Industry 4/27/03 -
Q&A:
Who Will Control Iraq's Oil? 4/17/03 -
Coalition 'Focused on
Oilfields' 4/16/03 -
US Is Banking on Iraq Oil to Finance Reconstruction
4/10/03 -
Who Will Control Iraq's Oil? 4/9/03 -
Battle Over Who Can Sell
Iraq's Oil 4/7/03 -
U.S., U.K. Waged War on Iraq Because of Oil, Blair Adviser Says
01/05/2003 -
Nielson: "US wants to
appropriate Iraq's oil" 09/05/2003
-
US Document:
Pentagon's Oil Wars Policy 5/20/03 -
France Balks at US Control of Iraqi Oil Revenue 5/14/03
-
Iraq Will Control Its Oil, Iraqi Official Asserts
5/26/03 -
Oil Giants Line Up at Iraqi Pump 5/30/03 -
Future Iraq Oil Sales May Be Pawned to Banks 5/31/03 -
Northern Iraq
Pipeline Bombed to Keep Oil from Turkey 6/13/03 -
Iraqi Oil Awarded to a Variety of Nations' Companies
6/13/03 -
US Begins Exporting Iraqi Oil 6/23/03 -
ChevronTexaco Gets Contract for Iraq Oil 6/25/03 -
Iraq Oil Lobbying – Comments on the
Confidential Document (July 14, 2006)
Global Policy Forum
/
document
-
Oil Companies in
Iraq: A Century of Rivalry and War (November
2003)
-
Iraq: the Struggle
for Oil (August, 2002)
-
Oil in Iraq: the
Heart of the Crisis (December, 2002)
-
The Iraq Oil Bonanza:
Estimating Future Profits (January 28, 2004)
-
The Byzantine
Beginnings: The Quest for Oil (April 25,
2003)
-
The Byzantine
Beginnings: The Reign of a Monopoly (April
26, 2003)
-
Great Power Conflict
over Iraqi Oil: the World War I Era (October,
2002)
-
Oil in Iraqi History
Iraq's massive oil reserves, the third-largest in the world, are about to be thrown open for large-scale exploitation by Western oil companies under a controversial law which is expected to come before the Iraqi parliament within days.
The US government has been involved in drawing up the law, a draft of which has been seen by The Independent on Sunday. It would give big oil companies such as BP, Shell and Exxon 30-year contracts to extract Iraqi crude and allow the first large-scale operation of foreign oil interests in the country since the industry was nationalised in 1972.
The huge potential prizes for Western firms will give ammunition to critics who say the Iraq war was fought for oil. They point to statements such as one from Vice-President Dick Cheney, who said in 1999, while he was still chief executive of the oil services company Halliburton, that the world would need an additional 50 million barrels of oil a day by 2010. "So where is the oil going to come from?... The Middle East, with two-thirds of the world's oil and the lowest cost, is still where the prize ultimately lies," he said.
Oil industry executives and analysts say the law, which would permit Western companies to pocket up to three-quarters of profits in the early years, is the only way to get Iraq's oil industry back on its feet after years of sanctions, war and loss of expertise. But it will operate through "production-sharing agreements" (or PSAs) which are highly unusual in the Middle East, where the oil industry in Saudi Arabia and Iran, the world's two largest producers, is state controlled.
Opponents say Iraq, where oil accounts for 95 per cent of the economy, is being forced to surrender an unacceptable degree of sovereignty.
Proposing the parliamentary motion for war in 2003, Tony Blair denied the "false claim" that "we want to seize" Iraq's oil revenues. He said the money should be put into a trust fund, run by the UN, for the Iraqis, but the idea came to nothing. The same year Colin Powell, then Secretary of State, said: "It cost a great deal of money to prosecute this war. But the oil of the Iraqi people belongs to the Iraqi people; it is their wealth, it will be used for their benefit. So we did not do it for oil."
Supporters say the provision allowing oil companies to take up to 75 per cent of the profits will last until they have recouped initial drilling costs. After that, they would collect about 20 per cent of all profits, according to industry sources in Iraq. But that is twice the industry average for such deals.
Greg Muttitt, a researcher for Platform, a human rights and environmental group which monitors the oil industry, said Iraq was being asked to pay an enormous price over the next 30 years for its present instability. "They would lose out massively," he said, "because they don't have the capacity at the moment to strike a good deal."
Iraq's Deputy Prime Minister, Barham Salih, who chairs the country's oil committee, is expected to unveil the legislation as early as today. "It is a redrawing of the whole Iraqi oil industry [to] a modern standard," said Khaled Salih, spokesman for the Kurdish Regional Government, a party to the negotiations. The Iraqi government hopes to have the law on the books by March.
Several major oil companies are said to have sent teams into the country in recent months to lobby for deals ahead of the law, though the big names are considered unlikely to invest until the violence in Iraq abates.
James Paul, executive director at the Global Policy Forum, the international government watchdog, said: "It is not an exaggeration to say that the overwhelming majority of the population would be opposed to this. To do it anyway, with minimal discussion within the [Iraqi] parliament is really just pouring more oil on the fire."
Vince Cable, the Liberal Democrat Treasury spokesman and a former chief economist at Shell, said it was crucial that any deal would guarantee funds for rebuilding Iraq. "It is absolutely vital that the revenue from the oil industry goes into Iraqi development and is seen to do so," he said. "Although it does make sense to collaborate with foreign investors, it is very important the terms are seen to be fair."
http://news.independent.co.uk/world/middle_east/article2132569.ece
So was this what the Iraq war was fought for, after all? As the number of US soldiers killed since the invasion rises past the 3,000 mark, and President George Bush gambles on sending in up to 30,000 more troops, The Independent on Sunday has learnt that the Iraqi government is about to push through a law giving Western oil companies the right to exploit the country's massive oil reserves.
And Iraq's oil reserves, the third largest in the world, with an estimated 115 billion barrels waiting to be extracted, are a prize worth having. As Vice-President Dick Cheney noted in 1999, when he was still running Halliburton, an oil services company, the Middle East is the key to preventing the world running out of oil.
Now, unnoticed by most amid the furore over civil war in Iraq and the hanging of Saddam Hussein, the new oil law has quietly been going through several drafts, and is now on the point of being presented to the cabinet and then the parliament in Baghdad. Its provisions are a radical departure from the norm for developing countries: under a system known as "production-sharing agreements", or PSAs, oil majors such as BP and Shell in Britain, and Exxon and Chevron in the US, would be able to sign deals of up to 30 years to extract Iraq's oil.
PSAs allow a country to retain legal ownership of its oil, but gives a share of profits to the international companies that invest in infrastructure and operation of the wells, pipelines and refineries. Their introduction would be a first for a major Middle Eastern oil producer. Saudi Arabia and Iran, the world's number one and two oil exporters, both tightly control their industries through state-owned companies with no appreciable foreign collaboration, as do most members of the Organisation of Petroleum Exporting Countries, Opec.
Critics fear that given Iraq's weak bargaining position, it could get locked in now to deals on bad terms for decades to come. "Iraq would end up with the worst possible outcome," said Greg Muttitt of Platform, a human rights and environmental group that monitors the oil industry. He said the new legislation was drafted with the assistance of BearingPoint, an American consultancy firm hired by the US government, which had a representative working in the American embassy in Baghdad for several months.
"Three outside groups have had far more opportunity to scrutinise this legislation than most Iraqis," said Mr Muttitt. "The draft went to the US government and major oil companies in July, and to the International Monetary Fund in September. Last month I met a group of 20 Iraqi MPs in Jordan, and I asked them how many had seen the legislation. Only one had."
Britain and the US have always hotly denied that the war was fought for oil. On 18 March 2003, with the invasion imminent, Tony Blair proposed the House of Commons motion to back the war. "The oil revenues, which people falsely claim that we want to seize, should be put in a trust fund for the Iraqi people administered through the UN," he said.
"The United Kingdom should seek a new Security Council Resolution that would affirm... the use of all oil revenues for the benefit of the Iraqi people."
That suggestion came to nothing. In May 2003, just after President Bush declared major combat operations at an end, under a banner boasting "Mission Accomplished", Britain co-sponsored a resolution in the Security Council which gave the US and UK control over Iraq's oil revenues. Far from "all oil revenues" being used for the Iraqi people, Resolution 1483 continued to make deductions from Iraq's oil earnings to pay compensation for the invasion of Kuwait in 1990.
That exception aside, however, the often-stated aim of the US and Britain was that Iraq's oil money would be used to pay for reconstruction. In July 2003, for example, Colin Powell, then Secretary of State, insisted: "We have not taken one drop of Iraqi oil for US purposes, or for coalition purposes. Quite the contrary... It cost a great deal of money to prosecute this war. But the oil of the Iraqi people belongs to the Iraqi people; it is their wealth, it will be used for their benefit. So we did not do it for oil."
Paul Wolfowitz, Deputy Defense Secretary at the time of the war and now head of the World Bank, told Congress: "We're dealing with a country that can really finance its own reconstruction, and relatively soon."
But this optimism has proved unjustified. Since the invasion, Iraqi oil production has dropped off dramatically. The country is now producing about two million barrels per day. That is down from a pre-war peak of 3.5 million barrels. Not only is Iraq's whole oil infrastructure creaking under the effects of years of sanctions, insurgents have constantly attacked pipelines, so that the only steady flow of exports is through the Shia-dominated south of the country.
Worsening sectarian violence and gangsterism have driven most of the educated élite out of the country for safety, depriving the oil industry of the Iraqi experts and administrators it desperately needs.
And even the present stunted operation is rife with corruption and smuggling. The Oil Ministry's inspector-general recently reported that a tanker driver who paid $500 in bribes to police patrols to take oil over the western or northern border would still make a profit on the shipment of $8,400.
"In the present state, it would be crazy to pump in more money, just to be stolen," said Greg Muttitt. "It's another reason not to bring in $20bn of foreign money now."
Before the war, Mr Bush endorsed claims that Iraq's oil would pay for reconstruction. But the shortage of revenues afterwards has silenced him on this point. More recently he has argued that oil should be used as a means to unify the country, "so the people have faith in central government", as he put it last summer.
But in a country more dependent than almost any other on oil - it accounts for 70 per cent of the economy - control of the assets has proved a recipe for endless wrangling. Most of the oil reserves are in areas controlled by the Kurds and Shias, heightening the fears of the Sunnis that their loss of power with the fall of Saddam is about to be compounded by economic deprivation.
The Kurds in particular have been eager to press ahead, and even signed some small PSA deals on their own last year, setting off a struggle with Baghdad. These issues now appear to have been resolved, however: a revenue-sharing agreement based on population was reached some months ago, and sources have told the IoS that regional oil companies will be set up to handle the PSA deals envisaged by the new law.
The Independent on Sunday has obtained a copy of an early draft which was circulated to oil companies in July. It is understood there have been no significant changes made in the final draft. The terms outlined to govern future PSAs are generous: according to the draft, they could be fixed for at least 30 years. The revelation will raise Iraqi fears that oil companies will be able to exploit its weak state by securing favourable terms that cannot be changed in future.
Iraq's sovereign right to manage its own natural resources could also be threatened by the provision in the draft that any disputes with a foreign company must ultimately be settled by international, rather than Iraqi, arbitration.
In the July draft obtained by The Independent on Sunday, legislators recognise the controversy over this, annotating the relevant paragraph with the note, "Some countries do not accept arbitration between a commercial enterprise and themselves on the basis of sovereignty of the state."
It is not clear whether this clause has been retained in the final draft.
Under the chapter entitled "Fiscal Regime", the draft spells out that foreign companies have no restrictions on taking their profits out of the country, and are not subject to any tax when doing this.
"A Foreign Person may repatriate its exports proceeds [in accordance with the foreign exchange regulations in force at the time]." Shares in oil projects can also be sold to other foreign companies: "It may freely transfer shares pertaining to any non-Iraqi partners." The final draft outlines general terms for production sharing agreements, including a standard 12.5 per cent royalty tax for companies.
It is also understood that once companies have recouped their costs from developing the oil field, they are allowed to keep 20 per cent of the profits, with the rest going to the government. According to analysts and oil company executives, this is because Iraq is so dangerous, but Dr Muhammad-Ali Zainy, a senior economist at the Centre for Global Energy Studies, said: "Twenty per cent of the profits in a production sharing agreement, once all the costs have been recouped, is a large amount." In more stable countries, 10 per cent would be the norm.
While the costs are being recovered, companies will be able to recoup 60 to 70 per cent of revenue; 40 per cent is more usual. David Horgan, managing director of Petrel Resources, an Aim-listed oil company focused on Iraq, said: "They are reasonable rates of return, and take account of the bad security situation in Iraq. The government needs people, technology and capital to develop its oil reserves. It has got to come up with terms which are good enough to attract companies. The major companies tend to be conservative."
Dr Zainy, an Iraqi who has recently visited the country, said: "It's very dangerous ... although the security situation is far better in the north." Even taking that into account, however, he believed that "for a company to take 20 per cent of the profits in a production sharing agreement once all the costs have been recouped is large".
He pointed to the example of Total, which agreed terms with Saddam Hussein before the second Iraq war to develop a huge field. Although the contract was never signed, the French company would only have kept 10 per cent of the profits once the company had recovered its costs.
And while the company was recovering its costs, it is understood it agreed to take only 40 per cent of the profits, the Iraqi government receiving the rest.
Production sharing agreements of more than 30 years are unusual, and more commonly used for challenging regions like the Amazon where it can take up to a decade to start production. Iraq, in contrast, is one of the cheapest and easiest places in the world to drill f