The Report
of the Iraq Inquiry
535.
The British
Embassy Baghdad provided an update on the oil sector in
January
2008.307
The Embassy
reported that with negotiations stalled, the KRG had
passed
its own
regional Hydrocarbons Law in August 2007 and “vigorously resumed
signing
contracts”.
Dr Shahristani had pronounced those contracts illegal and void
and the
Iraqi Government
had threatened to boycott all companies that signed contracts
with
the KRG.
536.
The Iraqi
Government and the KRG continued to discuss a Hydrocarbons Law,
but
“fundamental
personality clashes and political obstacles” remained and early
progress
was
unlikely. The US continued to “shepherd” the negotiations, but to
little effect.
537.
In the update,
the Embassy did not report on or propose any UK action
with
respect to
the Hydrocarbons Law.
538.
The Embassy
also reported that, as those negotiations continued, the
Iraqi
Government
was pursuing technical service agreements (TSAs) with IOCs to
improve
oil
production in five major oilfields. The Embassy commented that the
TSAs were
less attractive
to IOCs than PSAs and would increase production by only a
“fraction”
of what
might be achieved under PSAs. There remained substantial political
resistance,
“on
sovereignty grounds”, to PSAs within the Iraqi
Government.
539.
Oil production
in 2007 had averaged 2.1m bpd, the same as in 2006. Higher
oil
prices –
US$73 a barrel in 2007 against US$65 in 2006 – had meant higher
revenues –
US$41bn in
2007 against US$31bn in 2006.
540.
Section 9.7
describes discussions within the UK Government from autumn
2008
on the
transition to a normal bilateral relationship with
Iraq.
541.
On 9 December,
the Overseas and Defence Sub-Committee of the Committee
on
National
Security, International Relations and Defence (NSID(OD)), the
successor to
DOP(I),
discussed a paper entitled ‘Iraq: Arrangements for
Transition’.308
An annex
to
the paper
suggested that the key elements of future relations with Iraq
should be:
•
diplomatic
and political activity,
•
economic
development,
•
defence,
•
energy,
•
commercial,
and
•
education.
307
Telegram
2973/08 Baghdad to FCO London, 27 January 2008, ‘Hydrocarbons Law:
Deadlock
Continues’.
308
Minutes, 9
December 2008, NSID(OD) meeting; Paper, 8 December 2008, ‘Iraq:
Arrangements
for
Transition’.
454