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Landmark Decision in Iraq By: Gregory Gethard
FrontPageMagazine.com | Tuesday, May 12, 2009


“No political dreamer was ever wild enough to think of breaking down the lines which separate the States and compounding the American people into one common mass.” – John Marshall

 

In 1819, the case known as McCuolloch vs. Maryland went before John Marshall’s Supreme Court. Due to rampant inflation and other economic issues in the wake of the War of 1812, the U.S. government created the Second Bank of the United States. Many, including Maryland’s officials, thought this represented a gross misuse of federal power. After a branch of the Second Bank was opened in Baltimore, representatives from the state of Maryland came to impose a tax. This was one of the most important decisions the court ever decreed; it is largely attributed with defining the role of the federal government and the role of the state government. It was a major turning point in American history and, perhaps, the decision which developed America’s concept of a national government.

 

Today, Iraq may be undergoing its own version of that landmark case.

 

For years, Kurdish officials and Baghdad’s central government have fought over the right do develop oil in the north of Iraq. As Iraq’s federalists struggled to come up with a national oil policy, Kurdish officials entered into contracts with foreign firms seeking to strike it rich in the northern part of the country. After Baghdad drew up its policy, the national oil industry said that Kurdistan’s contracts were null and void, claiming that the individual state had no authority to sell these contracts without federal approval. As a result, no oil has been pumped from Iraq’s Kurdish regions.

 

But on Monday, it appeared that some common ground had been reached. Officials announced that, as of June, oil will begin flowing from the Kurdish north through Iraq’s northern pipeline to Ceyhan, a major port in Turkey.

 

In order for officials to reach this deal, both sides had to compromise. Baghdad gave in and finally allowed oil to flow from Kurdistan’s oil fields. In return, all revenue generated from the oil pipelines will go to Baghdad’s central coiffeurs.

 

Iraq’s economic condition has played a large role in the Kurdish/Baghdad agreement. Due to the fall in oil prices, Iraq’s central government has been forced to slash its 2009 budget three separate times. The most pragmatic way to raise revenue is to allow the oil to start flowing from Kurdistan.

 

By the end of June, 100,000 barrels per day of oil are expected to flow from Kurdish oil fields.

By the end of that year, officials hope to reach the 250,000 barrels per day mark.  This is just a small percentage of Iraq’s production of 2 to 2.5 million barrels per day. However, some have estimated that Kurdistan could hold upwards of 25 billion barrels of oil, placing it on par with what currently lies underneath American soil. Recently, Canada’s Heritage Oil, one of 25 foreign companies who entered into a contract with Kurdistan’s regional government, announced that they had discovered a site holding somewhere between 2.3 and 4.2 billion barrels. If the forecasts are true, Kurdistan’s oil fields have a chance to bring enormous wealth to Iraq.

 

Contracts such as the one that Heritage Oil has landed lie at the root of the conflict between Kurdistan and the central government. And while Baghdad will allow the oil to flow from Kurdistan, the federal government still maintains that these contracts are illegal. Explained a spokesman from Iraq’s oil ministry:

 

The Oil Ministry's position has not changed regarding the contracts signed by the Kurdish regional government with the foreign oil companies. Approving the Kurds to export does not mean approving the contracts they have signed.

 

The legitimacy of these contracts remains in flux. However, some do expect that this issue could be revolved shortly. Said Kurdistan’s oil minister:

 

There has never been a dispute that this oil belongs to all of Iraq, including Kurdistan. Nobody objects to that.  Also Iraq desperately needs the oil revenues, and no one can deny that. The rest that needs to be worked out is just rough edges - I am talking about the oil law, the constitution, the legalities.

 

The Iraqi government has faced many stumbling blocks in its efforts to create a national oil policy. Much of the debate has centered around the balance between Iraqi federalism and the rights of Iraq’s various regions. As Radio Free Europe explained in 2007:

 

Seen as a compromise between Sunnis, Shi'a, and Kurds, the law calls for the distribution of oil revenues to the governorates or regions based on population numbers, and grants regional governments or oil companies the right to draw up contracts with foreign companies for the exploration and development of new oil fields.

Regions will be allowed to enter into production-sharing agreements with foreign firms, and a federal Oil And Gas Council will be established to oversee such agreements, holding veto power over the regional governments.

 

The development of a national oil policy is viewed by many as a must for the success of the Iraqi nation. Iraq, which sits on the third biggest known energy reserves in the world, has yet to reach pre-invasion production levels. And, with revenues on the wane, the nation is desperate to sell more oil. In April, Iraqi representatives tried to sell the benefits of the nation at a London conference in attempts to lure foreign investment to the country. Oil companies have been hesitant to invest in the country. While security is still a major concern, a lack of cohesion regarding a federal oil policy has also been a major detriment.

 

However, many feel that an Iraqi oil policy is on the horizon; the new sense of teamwork between Baghdad and Kurdistan does nothing but help.  If a national oil law is in place, that would very likely lead to an influx of investment which would boost Iraq’s oil production. And if Iraq’s oil production is boosted, the government’s coiffeurs will quickly fill, which will befit its citizens.

 

The cooperation between Baghdad and Kurdistan is more than a first step towards a unified oil policy. It could end up as a major evolutionary moment in Iraqi history. The Kurdistan/Baghdad agreement may have finally cemented exactly how the power structure of Iraq’s young, fragile, growing government will work.

 

John Marshall would be proud.


Gregory Gethard is a Philadelphia-based freelance writer.


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