WASHINGTON, Feb 27 (IPS) - The U.S.-backed Iraqi cabinet approved a
new oil law Monday that is set to give foreign companies the long-term
contracts and safe legal framework they have been waiting for, but
which has rattled labour unions and international campaigners who say
oil production should remain in the hands of Iraqis.

Independent analysts and labour groups have also criticised the
process of drafting the law and warned that that the bill is so skewed
in favour of foreign firms that it could end up heightening political
tensions in the Arab nation and spreading instability.

For example, it specifies that up to two-thirds of Iraq's known
reserves would be developed by multinationals, under contracts lasting
for 15 to 20 years.

This policy would represent a u-turn for Iraq's oil industry, which
has been in the public sector for more than three decades, and would
break from normal practice in the Middle East.

According to local labour leaders, transferring ownership to the
foreign companies would give a further pretext to continue the U.S.
occupation on the grounds that those companies will need protection.

Union leaders have complained that they, along with other civil
society groups, were left out of the drafting process despite U.S.
claims it has created a functioning democracy in Iraq.

Under the production-sharing agreements provided for in the draft law,
companies will not come under the jurisdiction of Iraqi courts in the
event of a dispute, nor to the general auditor.

The ownership of the oil reserves under this draft law will remain
with the state in form, but not in substance, critics say.

On Feb. 8, the labour unions sent a letter in Arabic to Iraqi
President Jalal Talbani urging him to reconsider this kind of
agreement.

"Production-sharing agreements are a relic of the 1960s," said the
letter, seen by IPS. "They will re-imprison the Iraqi economy and
impinge on Iraq's sovereignty since they only preserve the interests
of foreign companies. We warn against falling into this trap."

Ewa Jasiewicz, a researcher at PLATFORM, a British human rights and
environmental group that monitors the oil industry, told IPS in a
phone interview from London that, "First of all, it hasn't been put
together in any kind of democratic process... It's been put through a
war and an occupation which in itself is a grotesquely undemocratic
process."

The law was prepared by a three-member Iraqi cabinet committee,
dominated by the Kurds and the Shiites. It is now expected to be
ratified by parliament because the powerful faction leaders in the
government have cleared it.

The first draft was seen only by the committee of the Iraqi technocrat
who penned it, nine international oil companies, the British and the
U.S. governments and the International Monetary Fund. The Iraqi
parliament will get its first glimpse next week.

Concerns about the process are compounded because of the ongoing
disputes in Iraq over the legitimacy of the Iraqi cabinet and the
Iraqi parliament, which have been constructed by the
occupation-created governing council, which itself was created in 2004
along sectarian lines.

In a speech earlier this month by Hassan Juma, head of the Iraqi Oil
Labour Union, posted on the union's website, he called on the Iraqi
government to consult with Iraqi oil experts and "ask their opinion
before sinking Iraq into an ocean of dark injustice."

The content of the law has also worried both international campaigners
and local Iraqi groups who say that it puts Iraqi oil wealth firmly on
the path to full privatisation.

"The hydrocarbon law reflects the process of readying Iraq's oil for
privatisation," said Jasiewicz. "Drafted in secret, shaped by foreign
powers, untransparent, undemocratic and forced through under military
occupation."

Jasiewicz said the law can be regarded as the economic goal of the war
and occupation and that "it will be viewed by most Iraqis as not just
illegitimate, but a war crime."

But officials from the Iraqi government, who have already sent the
draft oil law to parliament for consideration, say it represents a
step forward for the war-torn country. Under the law, oil revenues
would be distributed to all 18 provinces based on population size, and
regional administrations have the authority to negotiate contracts
with international oil companies.

Prime Minister Nouri al-Maliki, a close ally of Washington, called the
law "another founding stone in state-building."

"This law will guarantee for Iraqis, not just now but for future
generations too, complete national control over this natural wealth,"
Oil Minister Hussain al-Shahristani has reportedly said.

Initial drafts of the law starting eight months ago saw squabbles
between the Kurdish factions who control the northern part of Iraq and
the Shiite-led regime, as they both vied for bigger shares of the
country's oil wealth, estimated at 115 billion barrels. That they have
finally come to a final agreement may be a sign of long-sought
stability.

Yet critics, including Iraqi oil professionals, engineers and
technicians in the unions, are instead advocating for technical
service contracts, meaning a company would come in and offer services
such as building a refinery, laying a pipeline, or offering
consultancy services, get their fees and then leave.

"It is a much more equitable relationship because the control of
production, development of oil will stay with the Iraqi state," said
Jasiewicz.

"That is the model that Saudi Arabia, Iran, Kuwait generally operate.
There's no other country in the Middle East with the kind of oil
reserves that Iraq has that would consider signing a
production-sharing agreement," she said. "It's a form of privatisation
and that's why those countries haven't signed these because it's not
in their interests." (END/2007)