Suspicious oil deals dissipate Iraq’s resources

Former Iraqi Oil Minister Issam al-Chalabi told The Arab Weekly the licences bind Iraq to unfair contracts for more than 25 years.
Sunday 02/02/2020
A sector in jeopardy. A policeman is seen at West Qurna-1 oil field in Basra, January 9. (Reuters)
A sector in jeopardy. A policeman is seen at West Qurna-1 oil field in Basra, January 9. (Reuters)

LONDON - Analysts said they deplored the decision by the resigning Iraqi government to adopt suspicious deals that waste the country’s oil wealth. The move, an apparent violation of the government’s interim powers, was made despite Iraq’s political crisis and the mass protests pressuring the government.

The interim government approved a new round of licences, which had first been granted nine years ago by Hussain al-Shahristani, oil minister in the government of Iraqi Prime Minister Nuri al-Maliki. Subsequent investigations claimed the deals were corrupt and unfair to Iraq.

Oil experts said the deals were harmful to Iraqi expertise, mortgaged the country’s economy to foreign interests and incurred tremendous losses to the state treasury. They added to rampant corruption at that time, inflated government spending and killed investment and development programmes, the experts said.

Former Iraqi Oil Minister Issam al-Chalabi said resigning Prime Minister Adel Abdul-Mahdi’s ordering of the Oil Ministry to sign the eighth round of the oil licences was not within the powers of the caretaker government.

Chalabi told The Arab Weekly those licences bind Iraq to unfair contracts for more than 25 years and constitute a painful blow to the country’s economic interests.

He said history would never pardon those who contributed to squandering Iraq’s oil wealth through contracts that offer oil companies unfair privileges against the country’s interests. He stressed that the contracts had been evaluated by Iraqi oil experts who confirmed violations of Iraq’s national interests.

Chalabi said the recommendations regarding the contracts forced the government of former Prime Minister Haider al-Abadi to refuse to ratify them, despite efforts by former Oil Minister Jabbar al-Luaibi. However, Luaibi ratified the previous round of contracts just before the 2018 elections, maintaining “legitimate” banditry, Chalabi said.

He added that official data confirmed that policies adopted since the 2003 US-led invasion intentionally impedes development of the Iraqi oil industry. He said the burning of 58.3% of the gas associated with oil production in the Basra, Maysan and Dhi Qar oil fields was an indication of waste.

Experts have expressed concern about having the associated gas burned. They said not forcing foreign contracting companies to invest in exploitation of associated gas exacerbates the problem.

It appears the aim behind the neglect was to maintain Iraq’s dependence on Iranian gas. Iraq imports about 28 million cubic metres of Iranian gas to run factories and power plants.

The United States has given Baghdad an exemption from sanctions imposed on Iran but there is talk about the possibility of not renewing the exemption.

The scandal of the oil licences is linked to Shahristani because he had promoted them in coordination with senior party leaders and tried to replace national oil exploitation expertise and management with foreign companies. The contracts made no provision for ensuring transfer of technology or training and developing local professionals.

Iraqis remember Shahristani’s promises on October 12, 2009, to boost oil production to 12 million barrels per day within six years and make Iraq one of the largest oil-exporting countries in the world. Observers interpreted those statements as propaganda to win approval for the licensing deal. Ten years later, Iraq’s oil production is 4.6 million barrels per day.

Oil theft is another aspect of how Iraq’s wealth is wasted. Reports indicate that smuggled oil is stolen from punctured pipelines or warehouses. Also, oil derivatives intended for government departments or companies were illegally taken and sold.

Another illegal practice is reselling subsidised imported oil derivatives abroad because that makes them cheaper than local products in neighbouring countries. Thieves also exploit apparent laxity in surveillance at Iraqi ports and export more than is being declared in cargo manifests by rigging measuring devices.

In a report on Basra, the major oil producing governorate in Iraq, the International Crisis Group said: “The militias in this city have penetrated the security services and are engaged in armed battles over oil and that oil smuggling in the city had led to the creation of extremely complex and powerful oil mafia networks.”

In April 2014, Abadi called on the Integrity Committee to investigate allegations published by the Australian Fairfax Media website and the Huffington Post, a US website, under the headline “This is How the West Bought Iraq” and take appropriate legal action.

The story was one of the largest bribery scandal allegations in the world and it involved Shahristani, Luaibi and other Iraqi officials, who allegedly facilitated the sale of billions of dollars of oil to Western countries through Unaoil, a company owned by Iranian businessman Ata Ahsani.

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