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

• Any agreement on resource management must be accompanied by a

guaranteed revenue-sharing formula acceptable to the KRG and Iraq’s

governorates.

• Transparency in the role of government institutions and in the collection and

disbursement of revenues was critical. The UK endorsed the principles of

the EITI.

516. The paper set out the UK’s lobbying strategy in support of those principles, and

stated:

“The current situation is characterised by severe constitutional uncertainty, a low

level of trust between the key players and a lack of sense of urgency on the part

of the Ministry of Oil.

“On most interpretations, the current text of the Constitution leaves the federal

Government emasculated on oil sector management. Promoting the vision outlined

in the main body of this paper will therefore be difficult …”

517. The paper stated that the KRG refused to countenance the possibility that

the “substantive” concessions they had won in the constitutional negotiations –

which gave regional authorities control over the development of new fields and on

some interpretations the rights to revenues from those fields – would be revisited.

Meanwhile, the KRG was “putting facts on the ground” by signing PSAs with

“mainly small, high-risk” IOCs, and moving ahead quickly with its own Petroleum Law.

518. A junior official at the British Embassy Baghdad commented that since 2003

successive interim and transitional Iraqi Governments had not had the opportunity to

address oil sector management.296 The issue was now “rising up the agenda” in Iraq,

and the UK had to be ready to engage at a senior level.

519. The UK first saw a draft of the Hydrocarbons Law in late October/early November

2006.

520. The British Embassy Baghdad reported on 1 November that the Ministry of Oil

had sent a draft Hydrocarbons Law to the Council of Ministers, for consideration before

submission to the Council of Representatives.297 The Embassy had seen a version of

the draft Law. It made clear that oil resources must be controlled by central Government,

and cited Article 109 of the Constitution (which stated that oil and gas resources were

the property of the whole nation) in support of that position. The Embassy commented

that it was unlikely that the KRG would accept the draft.

296 Email FCO [junior official] to Paterson, 21 September 2006, ‘Oil Sector Structure Submission’.

297 eGram 48261/06 Baghdad to FCO London, 1 November 2006, ‘Iraq: Hydrocarbons Law Update’.

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