Iraqi Shiites Debate Federalism Again

Parliament Speaker Usama al-Nujayfi’s recent outburst about potential Sunni separatism has had the side effect of a limited resurgence of discussion of federalism among Iraq’s Shiite Islamist factions.

So far, the contributions to this reawakened debate follow patterns that are familiar to those who followed the previous discussion about federalism south of Baghdad in the 2005–2007 period: The Shiite Islamists remain divided on federalism, with many signalling only limited interest in the concept as such, and most players being explicitly opposed to the idea of a single Shiite region that was propagated by ISCI and the Hakim family from 2005 onwards. Only some Kurds keep calling for a tripartite Iraq made up by ethnic and sectarian regions.

A typical example are recent statements by Shakir al-Darraji, from the State of Law bloc of Prime Minister Nuri al-Maliki. While correctly conceding that the creation of new federal regions are the prerogative of popular initiatives in the governorates, Darraji warns against any new regions at the current stage given the security situation and the heated political atmosphere. Specifically, he warns against a single Shiite region: Such a region would not be in the interest of the Sunnis and Kurds, Darraji says, before adding that the considerations of Iraq’s interest as a whole should be given due weight in any renewed federalism discussion. Symptomatically perhaps, in his interview, Darraji also gave an erroneous account of the legal framework for forming new regions: By saying that any three governorates have the constitutional right to form a new region he reiterated the provisions of the Transitional Administrative Law from 2004 rather than those of the new constitution in 2005 (which allows for any combination of governorates into federal regions, excepting Baghdad, as well as uni-governorate federal regions.)

For his part, Muqtada al-Sadr has commented on the recent threat by Usama al-Nujayfi by challenging the inhabitants of these regions to prove their interest in federalism in a referendum. He added that he was against any kind of federalism that would lead to partition… Also, to the extent that there are departures from this general trend, they relate to Basra – as they always did in the past. In a recent statement Jawad al-Bazuni, a young deputy from Basra affiliated with Daawa (Tanzim al-Iraq) exhibits this tendency. Echoing pro-federal tendencies in evidence among State of Law deputies who captured the governorate council in Basra in January 2009, Buzuni says the creation of multiple federal regions would be the best solution in Iraq in the context of enduring political tension. Buzuni also highlights the Kurdish experience as a successful case of federalism.

Perhaps the greatest surprise in all of this has come from a “Sunni source” – Nujayfi himself. In media comments subsequent to the latest controversy about his statements, Nujayfi revealed that in addition to the petition by the Basra governorate council for a federalism referendum that was submitted in the second half of 2010 (but has so far remained unaddressed by the government in Baghdad in violation of the law on implementing federalism), a similar petition from the governorate council in Wasit, signed by 16 out of 28 council members, was submitted some 2 months ago. This is interesting because Wasit has not figured prominently in past discussions of federalism among Iraqi Shiites. The existence of an oilfield operated by a Chinese company in the governorate adds to the complexity of centre–periphery relations in this case, as does the fact that the State of Law alliance is severely divided there, with a recent split between the Shahristani and the Maliki blocs (the Shahristani supporters have joined independents and the Iraqi Constitutional Party). The exact political configuration behind the latest pro-federal move remains unclear, but an ISCI politician played a key role in making the first moves in 2010.

The Iraqi Parliament Finally Passes the 2011 Budget

After a marathon session in the Iraqi parliament, Iraqi politicians today passed the budget for 2011.

The  key figures are as follows: Income, 80.9 trillion Iraqi dinars (ID); expenditure, 96.6 trillion ID (of which 30 trillion ID is investment); deficit 15.7 trillion ID. The budget is based on an expected daily oil export of 2,2 million barrels and an oil price of USD 76.5 per barrel.

The big money in this budget goes to the central government in Baghdad and the Kurdish Regional Government, underlining the asymmetrical nature of Iraq’s federalism despite constitutional provisions that arguably could have given the unfederated governorates more rights and money. The biggest single ministry spending post is defence and security with 14 trillion; unless it is a typo education will get 9 trillion which seems generous compared with the military spending. It is interesting that the petrodollar scheme that was introduced in 2010 and gave a dollar for each barrel of exported oil to the producing governorates is perpetuated (to total some 1.6 trillion ID), and will also include petrodollars that accrued in 2010 but have yet to be spent. There had been some discussion that the scheme would be made universal to all of Iraq at the expense of the producing governorates, but instead the two ideas appear to have been merged into one as the ministry of finance is given the task of allocating additional petrodollars based on national production to all governorates based on population (i.e. a lot less per governorate than the producing governorates get under the original scheme). Kurdistan is excepted from the petrodollar arrangement until it has sent in an audited account of its oil-industry activities for 2010–2011.

Other than that, the Maliki government has gone some way towards compromise with the Kurds on oil export. Whether it has gone all the way, as Maliki appeared to promise in an early-February interview when he said that the KRG oil contracts had been fully approved, simply remains unclear in the current budget. Maliki recently backtracked in a televised press conference and put the taped video on his website, thereby seemingly reverting to the previous agreement between the oil ministry in Baghdad and the Kurdish authorities of paying costs but not profits for the foreign companies. As expected, the key numbers pertaining to this issue are not included in the budget law as such, and even in the annexes – not yet published by parliament – they are unlikely to specify the exact payment that will be given to the foreign companies. But it is interesting that in a leaked version of these numbers that has failed to receive much attention, from the Sumaria news agency on 9 February, a heading of around 2.05 trillion ID was set aside as “contribution to the costs of exporting oil including entitlements under the contracts signed with foreign companies in Arbil”.

المساهمة في كلفة انتاج النفط الخام المصدر بضمنها مستحقات عقود شركات النفط الأجنبية في إقليم اربيل

It is noteworthy that this heading, without the Kurdistan portion, has featured in Iraqi budgets going back at least to 2008, and has increased annually – apparently from 800 billion ID in 2008 via 1.3 trillion ID last year. Thus the increase from last year may well reflect some natural growth in the cost of oil production in other parts of Iraq on top of payment for the Kurdish exports. At any rate, total Iraqi exports are estimated at 800 million barrels for 2011, meaning this allocation of money, the equivalent of USD 1.7 billion, should add up to around 2 dollars per barrel on average, though with Maliki having recently acknowledged a greater per-barrel cost for Kurdistan than the rest of Iraq, and with that leaked budget draft certainly making reference to “contracts”. Additionally, there was also a significant heading of 3.2 trillion ID for unspecified “investment projects of the foreign oil companies”. Again, these numbers relate to a leaked version of the full budget from 10 days ago; today some confusion has been thrown into the mix by a Reuters report to the effect that the budget supposedly includes “$2.05 billion to pay oil firms investment costs” which sounds very similar to the 2.05 trillion ID reported on 9 February except that they applied to Iraq’s total exports. It is impossible to verify this before the annexes to the budget are published; in 2010 some annexes weren’t published at all. (Update: Figures more or less similar to those reported by Sumaria on 9 February have now been confirmed by sources that have seen the final annexes. The “investment projects” are thought to relate to contracts signed by Baghdad for the south and hence the share of the firms operating in Kurdistan is presumably to be taken from the USD 1.7 billion heading for general export costs.)

At any rate, money has definitely been set aside for exports for Kurdistan to resume, and the Kurds skilfully managed to avoid controversy over the issue in parliament by seeking assurances from the finance minister from Iraqiyya instead of attempting to spell the issue out in the budget law itself. Some commentators have hinted that there may be transparency issues here, but DNO regularly reports its profits so some numbers should emerge eventually. It is of course remarkable that a party like Iraqiyya should go as far as this in underwriting a Galbraithian economic model for Iraq, but it can be explained in terms of realpolitik with reference to the party’s ongoing campaign to seek Kurdish support for the establishment of the strategic policy council that at least its leader, Ayad Allawi, remains focused on.

The bigger challenge for the Kurds these days seems to come from the people in their own streets. That applies to other parts of Iraq too: Tension is simmering in Kut and Ramadi as well. In other words, the test for all of Iraq’s leaders going forward, regardless of whether they are Shiites, Sunnis or Kurds, is whether they can do more than divvying up the spoils between themselves and actually deliver the services and jobs that the Iraqi people are asking for. The budget is only a first step.

Note: The exchange rate for the Iraqi Dinar (ID) has been calculated at 1,200 ID to the US dollar. “Billions” and “trillions” are given in accordance with Anglo-American usage in which a billion is the same as a “milliard” in many European languages and Arabic and a trillion is 1,000 “milliards”.

DNO Statement Sheds Light on the Maliki/Shahristani Controversy; Maliki Fudges It during Press Conference

It seems perhaps somewhat unusual that the fourth quarterly report of a Norwegian oil company should provide relevant information for understanding the tectonics of centre–periphery relations in Iraq, but that’s exactly what it’s like in today’s Iraq. Thanks to a political situation in which both the secular Iraqiyya and the Shiite Islamist National Alliance are interested in obtaining Kurdish support, most of their political leaders are reluctant to talk publicly about the specifics of Baghdad–Arbil relations. As a result, we get situations like the apparent Maliki–Shahristani controversy over oil exports from Kurdistan, with intense speculation in the international financial press as to whether the oil contracts of the Kurdistan Regional Government (KRG) have been approved by Baghdad or not, and with a virtual media blackout on the same issue in Iraqi media leading to a confused situation.

DNO’s press release from its Q4 presentation contains two interesting pieces of information with respect to the controversy. Firstly, it says “DNO has been advised by the KRG that there will be an interim period until a federal petroleum law for Iraq has passed the Iraqi parliament later this year”. It goes on to add, “the commercial terms for the interim period are under evaluation and will be reported to the market in due course”.

What this seems to indicate is that when Maliki said the contracts of the foreign companies operating in Kurdistan would be “respected”, he probably went further than what the rest of his government had agreed to. Had there been full approval of the oil contracts, as Maliki clearly said in early February, there simply would have been no need for the “evaluation” of “commercial terms for the interim period”, or indeed for any “interim period” and a long wait for the oil and gas law at all. In this respect, it should be added that the oil minister, Abd al-Karim Luaybi, has since expressed a point of view that went in the same direction as Shahristani as regards the need for the oil ministry to consider the contracts, although Luaybi did not go as far as Shahristani did in calling for changes to them. Moreover, today, just after his return from Kuwait, Nuri al-Maliki was asked this very question by AFP during a televised press conference in Baghdad. Who was right, Maliki or Shahristani? Maliki fudged it in his answers. He answered that the basic agreement was that concluded between the ministry of oil and the Kurdistan natural resources ministry according to which the central government would cover the “expenses” (nafaqat) of the foreign companies. He then went on to say, “as for the legal aspect [of the contract], that is a different matter” and refused to say anything more, thus clearly making a distinction between paying expenses to the foreign companies and paying profits as per their contracts. In essence, he retreated somewhat from his sensational statement in early February, when one could get the impression that the contracts had been approved.

Maliki at today's press conference in Baghdad

 

It seems clear too, that the budgetary process, which will supposedly culminate with a political meeting tomorrow and a vote in parliament on Sunday, will not bring the clarity to this issue that some had been hoping for. It is interesting in this respect that Farhad Atrushi, a Kurdish deputy, today urged that parliament give the oil and gas committee a greater say in finalising the budget in the last-minute round of adjustments. The Kurds appear to be considering Adnan al-Jannabi, the head of the oil and gas committee and a member of Iraqiyya, as a potential ally in this game – which is remarkable given that Iraqiyya in principle shares Shahristani’s centralist position on oil issues. The reason is probably that some members of Iraqiyya keep courting the Kurds in order to obtain their good offices in their own fight for a national strategic council, and seem prepared to sacrifice other priorities to achieve that aim. In parliament, at least, there appears to be no one from the all-Shiite National Alliance that is following in the footsteps of Abd al-Hadi al-Hassani who used to state a position similar to Shahristani in the previous parliament, and with most deputies preoccupied with securing allocations for their own governorates there has not been much in the way of  discussion about the KRG oil deals in that forum so far.

Nonetheless, going back to the DNO report, it seems that the DNO management may be taking the assurances from their Kurdish paymasters perhaps a little too literally when they matter-of-factly predict the passage of an oil law “later this year”, as if the vote will happen automatically in accordance with the Kurdish demands presented to Maliki as basis for their joining his government. It would perhaps be prudent for DNO to at least take into consideration the possibility that there may conceivably be a somewhat longer “interim period”, since like many of the 18 other promises to the Kurds, Maliki is really powerless to do anything about them except wait for parliament to act. In the meanwhile, the Kurds will come under pressure from the operating companies to fix payments, and Maliki will come under pressure from nationalists who insist on a coordinating role for the oil ministry. It is still unclear, then, what makes the situation today really different from in 2007, when Maliki and the Kurds also failed to agree on an oil and gas law in the end. One potential avenue for compromise is perhaps the fact that in the previous interview with AFP that he effectively repudiated today, Maliki did at least articulate an argument for letting foreign companies who invest in Kurdistan earn more money than those operating in the south because of the risks they take. That argument probably still stands, and should in theory make it possible to reconcile the oil ministry in Bagdhad with Arbil if both sides show some flexibility.

*Originally written on basis of the live broadcast from Iraqiyya and later updated with some minor adjustments on the basis of the recorded version of the press conference, with better sound quality, published by Maliki’s office.

Maliki vs Shahristani?

This is becoming somewhat farcical, but today the Iraqi deputy premier for oil and energy affairs, Hussein al-Shahristani, tells Reuters that the Iraqi premier, Nuri al-Maliki, was misquoted when he said the Kurdish contracts with foreign oil companies had been approved. Shahristani reiterates the argument that he has always made about the need for the central government to review the contracts before they are approved, even going as far as explicitly saying they need to be converted to technical service contracts (more similar to what is being used by the central government for oil contracts in the south).

It is rather remarkable for the deputy premier to contradict the premier on such a key issue, and the suggestion about a “misquote” does not quite make sense: Maliki was presenting an elaborate argument about the geological differences between Basra and Kurdistan and the interview included several comments which all went in the same direction. Surely no simple “misunderstanding” can assert itself in this way across a whole section of an interview even though it seems likely that the interview with Shahristani was conducted in English and the one with Maliki in Arabic? Nonetheless, the refutation seems to reflect the prevailing mood in the Iraqi oil ministry, where Reuters reported astonishment and even disbelief during the weekend when the news of Maliki’s comments broke. No one, it was said, had heard anything.

So who is right and who is wrong? On the one hand, Shahristani himself has a record of recent misquotes, as when he allegedly said Iraq would reach an oil production of 4 million barrels per day at yearend – a figure which was promptly adjusted downwards by one million bpd by the oil ministry. But Maliki has also been acting strangely since the start of his second term. First, there was the seemingly suicidal attempt to alienate almost every force in Iraqi politics by attaching IHEC and other independent commissions to the executive, which just weeks ago brought about an alliance of critics reminiscent of the opposition Maliki was facing in early 2010 at the time of the budget. And then there was this latest episode involving the Kurdish oil deals, in which Maliki seemed to abruptly give up his pretensions to keep Baghdad as the ultimate power broker as far as the energy sector is concerned.

Perhaps what we are seeing is Maliki’s old tendency of turning to the Kurds in times of trouble, which was evident already in autumn 2009. If that is the case, the key question is how many members of his own Shiite alliance are willing to follow him in that direction, and how far are they willing to go when it comes to making concessions to the Kurds on issues like oil/energy, Kirkuk and generally enshrining the kind of quota-based, ethnicity-oriented political system that the Kurds are seeking. The latest move by Maliki was surprising in that it seemed to indicate that Shiite attempts to assert a centralist policy in energy questions were dead; Shahristani’s response today suggest that the centralist/nationalist element in the National Alliance, which also includes Sadrist and Turkmen components, is still there and at least is putting up some kind of resistance when it comes to independent energy deals by provincial authorities. Alongside Maliki and Shahristani, a third force to watch for is erstwhile Daawa member Ibrahim al-Jaafari, now parliamentary head of the National Alliance bloc, who is cutting a dominant figure both in parliament and at NA meetings, sometimes at the expense of Maliki himself. Jaafari was famously deselected as premier for a second term in 2006 thanks in part to Kurdish pressure.

A meeting of the National Alliance on 31 January 2011. Maliki is sitting to the right of Ibrahim al-Jaafari.

Meanwhile, parliament was supposed to have done the second reading of the budget today, but the budget had not arrived in parliament from government! The second reading was postponed until tomorrow, to be followed by a vote later in February.

Maliki Capitulates on the Kurdish Oil Deals

Comments to AFP by Iraqi Prime Minister Nuri al-Maliki today on the oil deals signed by the Kurds are nothing short of sensational. That exports from the Kurdistan fields will go ahead has been rumoured for some time, but the more crucial point is the clear assertion by Maliki that the contracts signed by the Kurds with foreign companies will be honoured.

To appreciate the extent of the change of Maliki’s position, one needs only remember the vehement criticism of these bilateral deals by his point men on energy issues like Hussain al-Shahristani and Abd al-Hadi al-Hassani. It was this kind of opposition that led to the breakdown of the first export attempt back in summer 2009. In fact, just weeks ago, oil ministry officials were adamant that even if the exports were to be resumed, costs only (and not profit) were to be paid to the operating foreign companies by the central government.

In terms of the perennial debate about the constitutional right of provincial entities to sign contracts without reference to Baghdad, Maliki appears to sidestep the question somewhat by offering an ad hoc justification to the effect that oil drilling in the Kurdish areas is technically more difficult than in the south and for this reason it is permissible to accord greater profits to the companies that invest in the north than those operating in the south (where technical service contracts and more modest per-barrel remuneration have been the norm for foreign companies dealing with Baghdad). In this way, it looks as if the affair has been dressed up as the oil ministry “recognising” the deals because of the special geological challenges presented by the Kurdistan region, but it still begs the question of whether any deal signed by the Kurds in the future, regardless of profits etc., will automatically be recognised. The question is important, because according to the constitution, existing governorates can do exactly the same as federal regions as far as oil is concerned, and the issue of bilateral energy deals between governorates and foreign companies therefore forces its way onto the agenda as a potential domino effect that could gradually make Baghdad less influential in the energy sector (and, arguably, in governing the country as a whole). What if an existing governorate can reiterate the Kurdish argument about having a particularly challenging environment for drilling oil or gas?

The political dynamic that has enabled these development has its roots in late 2009, when it became increasingly clear that Nuri al-Maliki was failing in an attempt to turn his State of Law coalition into a truly national political entity with appeal beyond the Shiite-majority areas of Iraq. Further weakened by the de-Baathification issue and results in the 7 March 2010 elections that were worse than he had hoped for, he needed both Iranian and Kurdish support to clinch a second nomination and to form the government. The Iraqiyya component in the government that was declared in late December was surprisingly strong and the Kurdish one comparatively weak, but Maliki has since come under fire for issues such as attaching the independent commissions to the executive, prompting protests from both the Kurds and Iraqiyya and even a surprise initiative to establish a new federal supreme court. In this kind of situation he is giving concessions to the Kurds even though they alone don’t have the votes to keep him in office. These developments are also a major defeat for his oil minister, Shahristani, who was unable to ramp up short-term production in the south and thereby became dependent upon comparatively modestly sized exports from the north while he is waiting for his own string of deals with foreign companies to come to fruition.

The big question is how Iraqiyya will react, since its constituencies are critical of the Kurdish oil deals and concessions to the Kurdistan Regional Government in disputed questions generally. In that kind of perspective, the logical thing for it would be to withdraw from government and focus instead on an opposition role headed by the speaker of parliament, Usama al-Nujayfi (Adnan al-Janabi of Iraqiyya also won the presidency of the parliamentary oil and gas committee today). However it does seem its members are more concerned with more Byzantine ways of seeking power in government, including vice presidencies (Hashemi) and strategic policy councils (Allawi). In fact, Iraqiyya is rumoured to be asking the Kurds for help in both of these issues, signifying the extent to which Arbil has managed to come out on top in the latest developments despite a somewhat adverse point of departure. At the same time, these latest developments mark a triumph for a primitive, identity-oriented and Balkans-inspired political agenda of potentially destructive ethno-nationalism that many Iraqis had been hoping was on its way out.

False Alarm on Oil Exports or Not?

The surprising aspect of the failure to start oil export from Kurdistan yesterday was not the fact that the target date of 1 February was missed. This happens in Iraqi politics all the time: Each day, for almost every issue of significance, one can find someone saying it will be solved “in two days”, others claiming it will take “two weeks” and some maintaining “the rest of the month” is needed. Rather, the remarkable thing was that the messenger in this case was someone who has a businesslike reputation and is seen as reasonably realistic by friends and opponents alike – the prime minister of the Kurdish Regional Government (KRG), Barham Salih.

It is still unclear whether the delay means the oil-export issue will simply become one among several items in the growing quagmire of pending questions in Iraqi politics or whether a solution is actually around the corner. The new government that was announced in late December 2010 remains incomplete without security ministers. The controversial, US-supported strategic policy council remains bogged down in detailed disputes about the status of its chairman/president (that technical distinction is part of the dispute!) and the country has no legally elected vice presidents (not that they are needed, but this issue keeps deflecting energy from potentially useful discussions). Before parliament can give the budget the full attention it requires, it needs to elect more committee heads and update its own bylaws, and with the recent outrage over Maliki’s moves to bring the “independent” commissions under closer control by the executive, there is more talk than ever about actually trying to craft the special legislation for the federal supreme court called for under the constitution (which requires a two-thirds majority in parliament).

The oil-export issue itself has some additional problematic aspects that have received a certain degree of attention already and are likely to cause more widespread discussion once the issue reaches the full parliament through the budget, regardless of whether oil is actually about to start flowing (and some media reports suggest this is indeed the case). Ever since the first oil-export attempt was aborted in 2009 and local sales of oil were initiated in Kurdistan by the local authorities in order to compensate the foreign companies working there, voices critical of these local sales have been heard in Baghdad. When Ashti Hawrami, the KRG natural resources minister, told The New York Times on 8 July 2010, at a time when the local sales of oil were peaking, that proceeds from oil smuggled to Iran were being used to compensate foreign companies operating in the region, it certainly added to the controversy (even through Hawrami later claimed journalists had failed to understand his distinction between oil and oil by-products). At any rate, going forward, it seems clear that a part of the proposed new deal on oil “exports” from Kurdistan actually involves not exports as such but rather boosting production for local markets, and if this relates to some kind of special quota for Kurdistan that will be exempted from the general, population-based national revenue-distribution formula and hence less transparent – and if local sales are done according to a different formula than export oil (i.e. if more money gets pocketed by the foreign companies) – then it could certainly prompt criticism from Iraqi parliamentarians who are likely to ask tough questions about any deviance from the constitutionally mandated, universal pattern of distribution across Iraq. Again, it is critical to note that as far as oil is concerned, there is not one iota of difference between a federal region and a governorate when it comes to the relevant constitutional provisions.

Meanwhile, the Kurds have made one important gain in that Khalid Shwani has reportedly been made head of the important legal committee in parliament, a job which the secular Iraqiyya had been seeking. The position is potentially useful, though particularly as a tool of obstruction. The challenge for the Kurds is that their long list of demands to Maliki (the 19 points) involve complicated pieces of legislation on issues like the presidency council and energy that are likely to stay in parliament for a very long time before they ever reach the legal committee, no matter what Shwani does (or what Maliki has promised). Ultimately, though,  it is likely that these elected forums, rather than backroom deals, will decide the overall structure of Iraq’s oil-export regime in the long run, regardless of whether some kind of short-term fudge will enable oil to flow from Kurdistan in the near future.

Maliki and the Kurds: An Apparent Fudge on Oil Exports

Among the first moves of the new Maliki government has been an agreement with the Kurdistan regional authorities (KRG) to resume oil exports from fields in Kurdistan operated by foreign companies that have cut separate deals with the KRG previously. Exports are supposed to start as early as 1 February.

So far, relatively few details about the agreed arrangements have been revealed. Baghdad has reportedly agreed to lower the minimum export requirement for Kurdistan in the annual budget to 100,000 barrels per day (it was originally 150,000 bpd, which the Kurds found somewhat steep), and unlike the previous attempt at starting export in the summer of 2009, Baghdad will this time pay a “contribution” (musahama) towards covering the expenses of the foreign companies that operate in Kurdistan. So far, the exact size of the payment has not been specified, but according to Asim Jihad of the Iraqi oil ministry it will be paid to the Kurdish regional authorities rather than directly to the foreign companies, and there are certain “barter” elements to the deal as well, including improvements to the refining capacity and electricity supply of Kurdistan plus provision of oil for the local market there.

Thus in legal terms, it seems as if the stalemate regarding the contract status of the foreign companies is continuing as before. The Kurds are reluctant to formally submit the contracts to Baghdad for approval since that would mean not only potential challenges to the contract terms but also cession of what the Kurds believe is their sovereign right to conclude such deals with third parties. Baghdad, for its part, is reluctant to pay the companies that operate in Kurdistan directly according to the contract terms, since that would mean recognising the right of federal authorities to sign deals with foreign companies without coordinating with Baghdad – which in turn would mean that not only federal regions but in fact every governorate across Iraq could do the same thing. Since federal regions and governorates have exactly the same residual rights under article 115 of the constitution, it would be potentially suicidal for the central government to admit a residual power to sign contracts for so-called “future fields” without coordination with Baghdad. Under this kind of permissive scenario, Basra, Maysan and Anbar would suddenly negotiate with foreign companies without reference to Baghdad. It seems far more likely that Baghdad is aiming for a restrictive interpretation of article 112, second, that would require coordination with the oil ministry for all future deals as part of the national “strategic policy” on oil – and instead will opt for for temporary, horse-trading solutions of the kind now agreed with the Kurds in the short term while it is working on boosting its own export capacity, which will still take some years.

Thus unlike what happened in 2009, money will this time be paid from Baghdad to Kurdistan, and presumably the Kurds will then pay the operating companies. The problem for the Kurds is that as long as the contracts are not submitted for review (as opposed to just making them public), Baghdad will continue to pay Arbil with reference to its own assessment of reasonable costs rather than in accordance with the lucrative terms of the contracts. Whether this in the long run is actually good enough for the Kurds – and not least their foreign partners – remains to be seen. Clearly, the foreign companies that operate in Kurdistan are not there in order to do non-profit work forever, and the Kurds will be under pressure to pay them more generously instead of simply compensating them for expenses. Other potential hitches regarding the new arrangements relate to parliamentary oversight: Presumably the compensation payments are to be specified in the annexes to the 2011 budget to be debated in February, and presumably the payments due to be transferred to the Kurdish ministry for natural resources as part of the deal will be subject to parliamentary debate in the Kurdish regional assembly as well, where the PUK and Gorran have a history of asking critical questions about the KDP-led oil policy.

Nonetheless, this deal represents an interesting move for the new Maliki government, where a key question since December 2010 has been whether Maliki will lean more towards the Kurds or Iraqiyya in hammering out his policies. Based on the latest move by Maliki to attach the independent commissions to the government, one can start wondering whether he actually has a viable grand strategy at all. He can afford to alienate either the Kurds or Iraqiyya, but not both at the same time. This holds true for the oil sector as well.

More Kurdish Protests against the Budget

It has been reported that 40 Kurdish deputies withdrew from today’s parliament meeting in protest against the revised version of the budget, now presented for its first official reading.

What the Kurds protest against are the limited changes to the previous version. That was tentatively “read” in the parliament earlier, and the Kurds rightly protested that it had not been duly considered in the financial committee. However, even though the procedural objection of the Kurds was sustained and a provisional financial committee formed, the document that was presented today apparently still contained all the clauses to which the Kurds have made exception. Over and above that, the one major change appears to relate to additional funding for the next Arab summit to be held in Baghdad!

Basically, the Kurds dislike the clause in the budget that obliges them to stick to an oil production target of 150,000 barrels per day. Or rather, they dislike the conditions attached to this item, i.e. firstly that any failure to produce that much will automatically reduce Kurdistan’s share of the national income from 17%, and secondly that the compensation for expenses that will be paid to foreign companies operating in Kurdistan has not been decided. In other words, there could in theory be a repeat of the stalemate seen in 2009 in which no agreement on the validity of the contracts signed by foreign companies operating in Kurdistan is reached – either because the Kurds refuse to submit the contracts to Baghdad for approval (which would signify an admission of a loss of sovereignty in the oil sector) or because the remuneration offered by Baghdad is seen as inadequate by the Kurds or their foreign partners.

The underlying political dynamic that has enabled this situation to emerge consists firstly of the enduring centralistic tendencies in at least some leading personalities in Maliki’s entourage, and secondly the emergence of Iraqiyya as a potential supporter of these tendencies, for example through people like Rafi al-Eisawi whose finance ministry is directly involved in hammering out the budget. More dialogue is expected before a second reading and then the vote itself, perhaps in February. The problem for the Kurds is that Maliki does not need their votes to pass the budget (which he can do with the support of Iraqiyya alone), and unlike in 2010, the Kurdish president, Jalal Talabani does not have the power to veto it.

Maliki on Track towards Forming the Next Government

UPDATE 20 December 2010: Maliki will reportedly present a partial list of ministers to the Iraqi parliament this afternoon at 4 PM Baghdad time.

UPDATE (2) Maliki may meet Nujayfi tonight but no parliamentary action on the candidates is exptected until tomorrow, at the earliest.

After a stormy session in the Iraqi parliament today which saw both the lifting of de-Baathification measures against three members of Iraqiyya and the withdrawal of Kurdish deputies in protest against the first reading of the budget, it seems as if Nuri al-Maliki, once more, is on track with his agenda for the next government. One of the least noticed items of important news out of Iraq so far is a statement by Safa al-Din al-Safi that Maliki intends to present his cabinet early next week.

Before he does that, it will be interesting to follow the recalibration of parliamentary factionalism that is necessary in order for the next government to achieve the 163 votes it needs. For Iraqiyya, the outcome of today’s session was a mixed bag. The acquittal of Salih al-Mutlak, Zafir al-Ani and Jamal al-Karbuli was logical in so far that their de-Baathification appeared questionable in the first place; however the way it was done today was decidedly messy. By lifting the sanctions against the three, parliament was acting in an extrajudicial way, reportedly on the basis of signed letters in which the three members disavowed any links with the Baath party (some reports suggest a fourth member, Rasim al-Awwadi, failed to produce this kind of letter). A more proper course of action by parliament would have been to sack the de-Baathification committee, enact legislation under chapter 7 of the constitution, or revise the accountability and justice law of 2008. Conversely, by infringing on the authority of the judiciary, it produced a decision that smacks of cliquishness in its narrow focus on three privileged members of Iraqiyya. What about the thousands of other Iraqis that have been targeted by the de-Baathification committee without due process?

Be that as it may, one does get the impression that Iraqiyya leaders are increasingly coming to terms with the prospect of a second Maliki premiership. In so doing, they appear to be following their own agenda rather than the American one, which was always focused on some kind of formal power-sharing through the presidency or more recently via the elusive “national council for high/strategic/whatever policies”. With Maliki possibly pressing for a vote on the next government as early as next week, the prospect of legislating the American-sponsored council before the vote seems increasingly unrealistic – a tendency that was just strengthened by the, um, American-led initiative to pour praise on Maliki in the UN Security Council recently. Symptomatically, perhaps, Rafi al-Eisawi of Iraqiyya was reported as having discussed the proposed law for the council with the US ambassador last week; a more realistic course of action, on his part, would of course have been to engage National Alliance leaders close to Maliki on the subject.

The interesting thing is that Iraqiyya appears to be responding to this new situation with relative calm. Today’s meeting in parliament was characterised by relative harmony between the two sides, with the speaker of parliament, Usama al-Nujayfi, making a big point of congratulating the Shiites on the Ashura holiday, Ayad Allawi returning to parliament and sitting in close proximity to Ibrahim al-Jaafari and Ahmad Chalabi, and Rafi al-Eisawi taking the constitutional oath as a member of parliament – thereby effectively resigning as vice premier and signalling that the end of the first Maliki government must indeed be near. Instead, it was the old tension between the Kurdistan Regional Government (KRG) and the rest of Iraq that came to dominate the session, as Kurdish members (and the deputy speaker) withdrew from the assembly or opted to protest against the first reading of it. Sources in PUK and Goran suggest the core of the protest had to do with the percentage of state revenue set aside for the KRG or ways in which Baghdad was attempting to make it conditional on Kurdish behaviour regarding oil exports; technically, however, it unfolded as a procedural protest against  proceeding with the first reading of the budget without it having been considered in the financial committee first. In so doing, the Kurds appear to be right according to article 128 of the parliament bylaws:

الإجراءات التشريعية
المادة رقم (128)
يحيل رئيس مجلس النواب مشروعات القوانين المقدمة من السلطة التنفيذية الى اللجان المختصة، لدراستها وأبداء الرأي فيها قبل عرضها على المجلس لمناقشتها على ان يجري ذلك بحضور ممثل عن اللجنة مقدمة المشروع.

Politically, of course, it is more interesting that Nujayfi of Iraqiyya proceeded to overrule the Kurdish representative Khalid Shwani on this point and let Baqir Solagh, the outgoing finance minister of ISCI, proceed with reading the draft budget without the Kurdish deputy speaker present on his left hand.

In some ways, the sudden tendency of National Alliance leaders over the past few weeks to focus on the constitutional deadline for forming the government (which expires on 24 December) seemed to suggest that it was moving ahead to pre-empt any bids by Iraqiyya to legislate the council for national and instead rely on the “political majority” concept to simply reach the 163 threshold. Today’s developments,  the apparent tendency of Iraqiyya leaders to be satisfied with less, and even rumours that Hussein al-Shahristani may keep the oil minister job in the next government all raise the question of whether Iraqiyya or the Kurds will be the main contributor to that majority. That in turn, of course, would inevitably prompt another question: Does Maliki really need all the 30 plus ministers that are currently under discussion when he theoretically has the option of forming a governance-oriented majority instead?

The Akkaz Revolt: A Test Case for Iraq, and for Iraqiyya

For the past couple of years an interesting energy revolt has been simmering in the mainly-Sunni governorate of Anbar: Local councillors are increasingly expressing a desire for a leading role for the local authorities in developing the Akkaz gas field. When the central government earlier this year included that field in a batch of contracts put up for auction to foreign companies, the local council protested and recently issued a threat about non-cooperation in case the deals went ahead.

Today, the Akkaz field was awarded to a South Korean consortium after an auction in Baghdad. It will be interesting to see not only how the governorate politicians in Anbar react, but also how the Iraqiyya coalition – which is strongly represented locally in Anbar – responds at the national level.

The constitutional facts of the matter are that the central government is supposed to be in the lead when it comes to “existing fields”, albeit in some kind of unspecified cooperation with the local authorities. Back in 2007, when an attempt was made to agree on an oil and gas law, Akkaz – which was discovered in the Saddam Hussein period before 2003 – was listed in the annexes to the draft law in category 3 of “non-producing” fields in need of considerable investment. Of course the oil and gas law was never adopted (and the Kurds protested strongly at the way the annexes were drawn up), and the central government has since gone ahead with the award (or attempted award) of several category 3 fields in previous licensing rounds with foreign companies, including Badra, Gharraf, Kifl and a gas field in Diyala. It is thought that the degree of “coordination” with the local authorities in these mostly Shiite-majority governorates (that is, except Diyala) has been quite minimal, and whereas protests from the local governorates themselves have been limited – and possibly have been ameliorated by the generous fees given to oil and gas-producing governorates in the 2010 budget – a general challenge to the government’s line has been mounted in the courts by Shadha al-Musawi, a former deputy of the old, all-Shiite United Iraqi Alliance, with respect to the contract signed with a British-Chinese consortium for  the supergiant Rumaila field in the Basra area.

Thus, the question is whether the oil ministry needs to do anything more in terms of coordination with the Anbar authorities than they have done in places like Dhi Qar. It is interesting that so far, the vision of a dominant central government in these issues has been promoted by Hussein al-Shahristani, a close ally of Prime Minister Nuri al-Maliki. Conversely, the Kurds and forces close to another Shiite party, the Islamic Supreme Council of Iraq (ISCI) have been accused of abetting regionalist tendencies in Anbar, which used to have a nationalist orientation. Given the current rivalry between Maliki and Ayad Allawi to win over the Kurds in order to form the next government, it would be interesting to see where Allawi’s Iraqiyya really stands on this important issue concerning the key question of whether Iraq should be centralised or decentralised. If Iraqiyya supports the Akkaz revolt against Shahristani, maybe it should stop calling itself Iraqiyya altogether and instead merge with the Kurds and ISCI to form a new parliamentary bloc called Al-Kurdistaniyya? It is noteworthy in this context that the ministry of planning, headed by Ali Baban who is considered quite close to Maliki, recently announced its decision to scrap the question about ethnicity in the forthcoming census – a move likely to meet with Kurdish protests and applause from the Sunni Arabs in northern Iraq.