A plan for the flow of Iraq’s oil money

Kai Ryssdal Jan 17, 2007

A plan for the flow of Iraq’s oil money

Kai Ryssdal Jan 17, 2007

KAI RYSSDAL: There are, and this is just a guess, thousands of things that have to happen before Iraq starts making the money it should from its oil fields. But Reuters is reporting today there’s a tentative deal to share that money when and if it starts coming in.

We called Alistair MacDonald, the Reuters bureau chief in Baghdad, earlier today. I asked him if this agreement might eventually become law.

ALISTAIR MACDONALD: There is fairly broad support. The committee that has drafted it is . . . does represent pretty much all the major political factions in Parliament. So, that gets it off on a good start. At this stage, certainly we don’t see surprises with people come backing out of it now.

RYSSDAL: What does this law have to say about how oil revenues are going to be distributed internally among the various regions and sides?

MACDONALD: Mmmm. Well it’s very clear in the sense that they say it will be distributed to different provinces and regions, according to their population. And that remains something of a possible controversy, because nobody is very sure what the population of Iraq is, or what the populations of the different provinces are. It’s been a long time since there was a census, and so . . . and there’s been a lot of population movement with the security problems that we’ve seen. But it is fairly clear that the central government will be the key player centralizing revenue and then distributing it.

RYSSDAL: What does the law have to say about the role of foreign oil companies coming in and getting the oil out of the ground?

MACDONALD: Well, it basically says, “Come one, come all.” They want foreigners to come and help. They want investment. They need technology. There have been decades of neglect and problems for the Iraqi oil industry. Some vast potential industries, the third-biggest known reserve, possibly bigger. They want foreigners to come in.

What it doesn’t do is spell out the exact terms on which foreigners can come in. We already know from a previous piece of legislation that foreigners are not entitled to own the oil. That is clearly owned by the Iraqi state. But they are going to be offered deals to share in the profits as a reward for their exploration and exploitation of these fields.

But what this law doesn’t do — and it’s something that the foreign oil companies are already waiting to see before they’re prepared to start seriously getting into talking about spending money in Iraq — is just how much of a share of profits foreign oil companies are going to be offered in order to tempt them into this very difficult environment.

RYSSDAL: Are they going to come unless that difficult environment gets a lot more secure?

MACDONALD: Clearly not. I mean, we talked today to some of the big Western oil companies. They’re saying, “Look, you know, nobody’s gonna come if our employees and our contractors are gonna be abducted, shot or killed. It’s good that they’re solving these legal problems, but until they solve the security problem, we’re not interested.”

But there are, on the other hand . . . We’ve seen big interest already from countries that are keen for oil and are, perhaps, in the view of some Western executives anyway, a little bit less concerned about the security risks. The Russians have already been long-involved in Iraqi oil. And the Indians, too, have very, you know, big and growing energy needs, and are close by and they’re also going to be interested. So, the security is a big issue, but it may . . . differently for different companies.

RYSSDAL: Alistair MacDonald is the Baghdad bureau chief for the Reuters news agency. Reuters reports today that there’s a deal that’s been reached among Iraqi officials to share Iraqi oil revenues. Mr. MacDonald, thanks a lot for your time.

MACDONALD: Thank you.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.