< Back to Iraqi Dinar in the News August 8th, 2007

Internal conflict: Iraq's oil wars

Iraq's oil reserves could rival those of Saudi Arabia's - but now everyone's fighting over their share.

Iraq has oil reserves that could rival Saudi Arabia's, yet millions of people are living a hand-to-mouth existence. Nine million Iraqis now need immediate emergency aid, as the country's regions and ethnic groups fight over their share of the riches.

A recent study concludes there could be a hundred billion barrels in the barely explored western desert where Iraq's Sunni Arabs live.

The oil law

A new law going through parliament is intended to put the chaotic oil industry in the hands of the central government and encourage foreign investment. Progress is painfully slow, but this is likely to pale into insignificance when subsequent legislation is drawn up dividing the spoils.

Currently, oil ministry police guard Baghdad petrol stations where shortages mean motorists queue for hours -- and sometimes, like one day last week when a suicide bomb went off, they die queuing.

"Where is the oil? Where are the generators? Where is the electricity? I'm addressing Hussein Shahrastani the Oil Minister, who says he's an Iraqi like us and is here to end our suffering. Where are the rights of the destitute? We elected a bunch of thieves. They've stolen our oil. Hundreds of thousands are being slaughtered. You go to a petrol station and you end up getting blown up."
Abu Hamza, labourer

The new oil law, which would allow the big foreign oil companies into Iraq and kickstart the economy has been subverted by sectarian interests. Oil was found in Kirkuk in the 1920s and now the Kurds want control over that while oil was found in the south in the 50s is now wanted by the Shia.

Everyone's agreed on just how crucial the oil law is and the government's been leant on heavily by the Americans to get it enacted.

However, many Iraqis question US motives. Foreign oil companies are chomping at the bit and some in the Iraqi oil sector are wary of allowing big corporations to siphon off any of Iraq's precious oil.

"The Kurdish Coalition's position is different to what's laid down in the law. Their direct control of the oil wells in Kurdistan and over the contracts that have already been signed is against the law."
Alaa Mekki, Iraqi Accord Front

Iraqi parliament action

However, the Iraqi parliament isn't exactly rushing to get the law passed; in fact, last week they knocked off for the rest of the summer.

With the federal law in limbo, the Kurdistan Regional Government provocatively passed its own oil law yesterday, allowing foreign companies to explore for and produce oil on Kurdish territory. Officials there say their new law does not contradict the federal one. However, Sunni Arabs though have complained.

Without a new oil law, all they're left to protect are some obsolete installations.

The man who drafted the law in the first place is dismayed by the way it's been hijacked by sectarian interests. Tariq Shafiq, a petroleum consultant, says, "An oil law is needed to regulate the oil business but it should not be enacted at any cost. If you do not have a proper petroleum law that optimises the management of the resource and unify the country, I'd rather not have it."

However, without the law, however imperfect, Iraqis will have nothing to unlock their oil wealth. Among Baghdad's poor, far from the Green Zone where the politicians barter and bicker over the spoils of unrealised riches, they can't even afford firewood, let alone oil or gas for their stoves.

The trickledown of riches might one day enable some of them to put decent bread on their table.

But critics of the law that's meant to make that possible fear it will simply enrich big foreign oil companies. Designed to unite Iraq in prosperity, the oil law now threatens to fan the flames of its volatile sectarian mix.