10.3 | Reconstruction: oil, commercial interests, debt relief, asylum and stabilisation policy

376. The 6 January 2004 meeting of ISOG was advised that a forthcoming presentation

by the Iraqi Minister for Oil to the Iraqi Governing Council on the future of the oil sector

might not give due weight to “good governance issues”.203 The UK would need to

consider whether it needed to intervene; poor governance would delay investment in the

oil sector and be a breach of resolution 1483.

377. Mr Neil Hirst, Head of the DTI’s Energy Markets Unit, wrote to the Cabinet Office

the following day to set out the issue in more detail.204 He advised that how the oil sector

was handled would have major implications for the future prosperity and stability of

Iraq. The UK Government had launched a major international initiative – the Extractive

Industries Transparency Initiative (EITI), led by DFID – to achieve transparency of

natural resource accounting in the developing world. The principle of transparency of

accounting was also set down in resolution 1483.

378. Mr Hirst identified two key principles that needed to be established:

• a separation of powers between the Iraqi Government as owner and regulator

of energy resources, and the operating company (probably, at least initially,

nationally owned) which developed those resources; and

• full transparency of oil accounts, payments and budgets.

379. It was unclear to what extent the US would be prepared to exert their influence to

help achieve good governance in the oil sector, particularly in the light of their lukewarm

response to the EITI.

380. Section 10.1 describes the development of DFID’s Interim Country Assistance Plan

(I-CAP) for Iraq in December 2003 and January 2004. The I-CAP set priorities for DFID’s

work in Iraq.

381. The I-CAP was agreed at the 22 January 2004 meeting of the AHMGIR.205

382. Before the meeting, a DFID official advised Mr Hilary Benn, the International

Development Secretary, that as a result of consultation within Whitehall, DFID had

agreed to engage in oil sector governance to help ensure transparency in the use of

oil revenues.206

383. The I-CAP defined 10 priorities for 2004, including “establishing transparent

systems to ensure that oil revenues are spent for the benefit of all Iraqi people”.207

384. Ms Hewitt wrote to Mr Straw, copied to Mr Blair and members of the AHMGIR,

on 16 January seeking agreement that the UK should give a high priority, in the period

203 Minutes, 6 January 2004, Iraq Senior Officials Group meeting.

204 Letter Hirst to Fergusson, 7 January 2004, ‘Iraq Oil Industry Governance’.

205 Minute Dodd to Buck, 21 January 2004, ‘Iraq: Senior Officials Group’.

206 Minute Drummond to Malik, 21 January 2004, ‘Iraq: Ministerial’.

207 Department for International Development, Iraq: Interim Country Assistance Plan, February 2004.

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