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Allawi: oil deals should be honored but reviewed, altered
Former Iraqi Prime Minister Ayad Allawi, leader of the Iraqiya political bloc, in his Baghdad office.
By Ben Lando of Iraq Oil Report
May 11, 2010
BAGHDAD - Former Prime Minister Ayad Allawi said it is in Iraq's interest to honor the contracts signed by the central and Kurdistan regional governments with foreign oil companies but calls them ad hoc developments in an oil sector that lacks policy and planning.
"They have to be respected because ultimately it is in the interest of Iraq," Allawi told Iraq Oil Report in an interview in his Baghdad office, referring to the bad precedent that would be set by tossing out deals signed with major international companies.
"Of course we should honor this ultimately, but there has to be some changes indeed to all this," he said when asked about the deals Baghdad signed. "We can't just simply rely on a judgment of the minister or an individual."
Iraq's Oil Ministry has signed 10 contracts with foreign oil companies since November – and renegotiated a Saddam Hussein-era deal in late 2008 – to develop oil projects aimed at drastically boosting production capacity. The Kurdistan Regional Government (KRG) has signed nearly 30 deals with foreign firms to prospect and produce oil in its undeveloped, northern autonomous provinces.
When asked specifically whether he thought the KRG contracts should be reviewed or altered, Allawi didn't have a yes or no answer, but reiterated his call for a broadly accepted and outlined policy or risk disintegration of the country.
"They have to be viewed within an internal Iraqi structure and the internal policy of the country which is called Iraq. Basra should do the same. Suleimaniya should do the same," he said, referring, respectively, to the southern oil hub and one of the three KRG provinces (Erbil and Dohuk being the others). "If we don't, then of course Basra can do what it likes, Suleimaniya can do what it likes, Erbil can do what it likes."
Allawi said the country must decide whether to fully privatize, fully nationalize, or have a hybrid of the two. It must also define the exact roles for the central and local governments in setting and implementing oil policy.
Allawi pressed for the same policy decisions and legislation which have been stalled by Iraqi politics since 2006, by the same factions that are battling to put together a governing coalition to rule the next four years.
Allawi's Iraqiya list earned 91 seats in the preliminary count of the March 7 elections. Prime Minister Nouri al-Maliki's State of Law list won 89 seats, one of which will be filled by Oil Minister Hussain al-Shahristani.
While the two lists could unite and cross the 163-seat threshold needed to form a governing coalition, Maliki has not yet agreed to a one-on-one meeting and instead has allied loosely with the second runner up Iraqi National Alliance (INA), members of which Allawi blames for orchestrating the disqualification of Iraqiya candidates for alleged ties to the Baath Party of Saddam Hussein.
In the interview, Allawi responded to questions about oil policy decisions made over the past four years by saying the broad strategy for Iraq as an oil power needs to be laid out and enshrined into law.
He said the Ministry of Oil shouldn't be both operator and regulator of the oil sector, and instead a new national oil company should be stood up.
"We need to protect the interest of the Iraqi people by creating an outfit that competes with other companies and investors and can go to bed with other investors to develop the capabilities and local capabilities of Iraq by creating a national oil company," he said, adding that he's not sure the contracts signed by the national or regional government allows for this.
"The most important thing is we don't know what policy drove these agreements and … how Iraq is going to benefit from these agreements, not only in financial terms but in capability and personnel training. It's not enough to train an engineer. We want an Iraqi outfit like (Abu Dhabi National Oil Company) ADNOC, like Saudi Arabian Aramco," he said. "We need to have this embedded in the policy; embedded in the contracts."
Some have criticized recent contracts on the grounds that they have not been approved by the full Parliament. A former member of parliament has filed a lawsuit challenging the legality of the deals, claiming they violate both the Saddam Hussein-era laws that are still in force and the new, vague Iraqi Constitution.
Allawi said resolving such disputes would simply require a thorough explanation from the government as to the pros and cons of the contracts.
"I can't see this as an obstacle, a big issue," he said.
He also urged Iraq pass laws governing redistribution of the oil revenues.