BAGHDAD (AFP) – Iraq’s cabinet on Monday approved a draft oil law — a key plank in moves to reunite the war-torn country — and will submit it to parliament for approval, Prime Minister Nuri al-Maliki said.
The law aims to distribute revenues from crude oil exports equitably across 18 provinces and open the sector to foreign investors.
It has been a subject of fierce debate among leaders from Iraq’s bitterly divided factions.
“This law has been based on our national interest. It will encourage the bringing together of all component parts of the Iraqi people,” Maliki told a news conference.
“This law is a gift to all the Iraqi people,” he added.
Oil exports are Iraq’s single most important source of revenue, despite frequent insurgent attacks on oil facilities.
Since the US invasion of March 2003, which overthrew the late Sunni dictator Saddam Hussein, divisions between Iraq’s communities of Shiite Arabs, Sunni Arabs and Kurds have erupted into open hostility and sectarian bloodshed.
Most oil production is in the Shiite south, and the best prospects for discoveries are in the Kurdish north, while the northern oil city of Kirkuk is disputed between Kurdish and Arab leaders.
US officials have repeatedly urged the Iraqis to adopt a consensus law on sharing revenues and on international investment in order to head off future conflict and allow the oil sector to develop.
Iraq’s proven oil reserves, estimated at 115 billion barrels, are thought to be the third largest in the world, behind Saudi Arabia and Iran.
Since the US invasion, Iraqi production has tumbled from 3.5 million barrels per day to around two million.
Parliament is due to meet in the coming weeks and can be expected to approve the bill quickly, as all parties have been involved in drafting it.
“This law is one of the most important achievements in Iraq since the voting of the constitution,” said planning minister Ali Baban.
“There was clear participation of all political movements in this law, which will boost national unity. This law will create a single oil revenue stream for all Iraqis,” he said.
Baban said foreign oil majors had been waiting for such a law to be passed before deciding on investing in Iraq’s oil industry, which badly needs foreign direct investment after three decades of war and economic sanctions.
The regional government of Iraqi Kurdistan, which has long resisted central control from Arab Baghdad, has fought hard for the right to control oil exploration and production in its lands.
The draft law — in creating a federal oil and gas council and an Iraqi National Oil Company — centralises oil rights, but also takes into account the regions’ rights to oversee prospecting in currently undeveloped fields.
“This oil law, which contains a firm commitment to revenue sharing among the regions and provinces, reaffirms that oil and gas resources are owned by all the people of Iraq,” US ambassador Zalmay Khalilzad said in a statement.
“Under the approved law, oil will become a tool that will help unify Iraq and give all Iraqis a shared stake in their country’s future,” he added.
Nevertheless, the draft law does not solve all the problems facing Iraqi oil, in particular the physical control and protection of infrastructure and the political control of oil-rich regions.
The US State Department praised the step Monday as holding out the primise “that this government is working on behalf of all Iraqis to create an Iraq in which all Iraqis could benefit from their national patrimony.”
“We’d like to congratulate the Iraqi government and their Council of Ministers for the agreement on a hydrocarbons law,” State Department spokesman Sean McCormack said.
“The law would include international standards for transparency, including requirements of public disclosure of contracts and associated revenues. It also would define the Oil Ministry’s role as the primary regulatory agency,” he said in Washington.