Iraq Urged to Open More Oil Fields to Boost Stability
Sept. 10 (Bloomberg) -- The U.S. ambassador to Iraq urged the Iraqi government to open more oil fields to investors, saying that along with a hydrocarbons law, the move would be a “game changer,” boosting economic self-sufficiency and undercutting terrorism.
“A market economy generating sustained economic growth and increased employment opportunities will weaken insurgent and extremist networks,” Christopher Hill, 55, told the House Foreign Affairs Committee today in prepared testimony.
In his first congressional testimony since being posted to Iraq in April, Hill said it is time for Iraqis to begin taking charge of their economic destiny. He praised the Iraqi people for “rejecting retribution and a new cycle of violence” in the aftermath of recent attacks, including the Aug. 19 bombings of the Finance and Foreign Ministries.
As U.S. forces pull out by an August 2010 deadline, the capabilities of the Iraqi government to secure the country and expand the economy are becoming a bigger focus of American efforts. Iraq holds the world’s third-largest oil reserves.
Hill called the economy “a work in progress, beset by drought, inadequate reforms and falling oil prices earlier this year, which hurt the budget.” To ensure long-term growth and stability, Iraq needs to diversify its economy with greater foreign investment, he told lawmakers.
Kurdish Tensions
The tension in oil-rich northern Iraq between the semi- autonomous Kurdish regional government and Arabs is one of the dangers still facing Iraq, Hill told the panel.
Hill said he just visited Iraqi Kurdistan to confer with President Massoud Barzani on how to resolve territorial disputes between Arabs and Kurds.
A suicide bomb ripped through the Kurdish village of Wardek, near Mosul in northern Iraq, at about midnight, killing at least 19 people and wounding dozens more. Wardek lies about 220 miles (354 kilometers) north of Baghdad in Nineveh province. The region, disputed by Kurds and Arabs, is one of the most volatile in Iraq.
House Foreign Affairs Committee Chairman Howard Berman, a California Democrat, raised concerns about clashes between Iraq’s military and the Kurdish Peshmerga militia. He also cited Iran’s possibly destabilizing influence in the region.
“Iran needs to do a much better job of respecting Iraq’s sovereignty,” Hill said. “And they should start by ceasing to provide weaponry to various extremist groups in Iraq.”
Fiscal Policy
While working to manage threats from outside and ease political frictions inside Iraq, the Iraqi government should also pursue a responsible fiscal policy, Hill said.
Iraq should negotiate a stand-by lending agreement with the International Monetary Fund and make changes needed to join the World Trade Organization, he said.
“We can be helpful, but on the economy, the time has come for the Iraqis to step up to the plate,” he said, referring to the need to better mobilize the nation’s oil wealth.
A second round of bidding from international oil companies competing for access to develop oil fields is set for December and “needs to be a success,” Hill said.
Unrestrained by OPEC quotas, Iraq is offering 10 projects covering more than a dozen oil fields for development in its second oil-licensing round since the 2003 U.S.-led invasion.
The undeveloped fields are estimated to contain 41 billion barrels of oil, more than a third of Iraq’s total reserves, according to the U.S. Energy Information Administration.
Oil Law
In the absence of an oil law, Iraqi Oil Minister Hussain al-Shahristani has said that only Cabinet approval is necessary for contracts in the licensing rounds to be legal. Still, oil executives are concerned that a potential change in government after scheduled January elections may alter any contracts signed this year.
Lawmakers have yet to approve a hydrocarbons law governing contracts with international companies and exports from the Kurdish region.
Hill said companies should not expect the energy law to be passed before the January voting.
In a brief interview following the testimony, he said while it is realistic that the measure will pass next year, it will take “a lot of work and a lot of time and some serious leadership to push it through.”
Iraqi oil production has averaged 2.4 million barrels a day this year, the same as in 2008 and 2001, according to Bloomberg estimates. It collapsed to near zero during the 2003 invasion.
More than 20 companies, including eight of the world’s top 10 non-state oil producers such as The Hague-based Royal Dutch Shell Plc and ConocoPhillips in Houston, submitted bids for $16 billion of technical service contracts for six producing oil fields and two gas fields offered in the first oil licensing round in June.
London-based BP Plc, Europe’s second-largest oil company, and Beijing-based China National Petroleum Corp. won work on the Rumaila field, the only contract awarded out of eight Iraq offered.
Several House members pressed Hill on what the U.S. is doing to protect residents of Camp Ashraf, home to about 3,500 supporters and relatives of the People’s Mujahedeen, an exiled Iranian opposition force, in Diyala province north of Baghdad.
Iraqi security forces violently took over the camp on July 28-29, an assault during which 11 residents were killed, more than 500 wounded and 36 detained, according to Majid Roshani, a spokesman for U.S. Committee for Camp Ashraf Residents.
The camp was disarmed by the U.S. in 2003 and responsibility for security at the camp passed from U.S. to Iraqi forces in February.
Hill told the committee the U.S. had received written assurances from the Iraqi government that it will treat the group “humanely and will not forcibly transfer them to any other country.”
Roshani said his group has implored U.S. officials to insist that Iraqi forces withdraw from the camp and the U.S. temporarily deploy forces to ensure humanitarian conditions.
