Iraq's weakened unions fight foreign oil firms

* Iraq unions deem energy deals illegal

* Labour movement fears unemployment and threatens strikes

By Aref Mohammed

BASRA, Iraq, July 13 (Reuters) - Unions are lobbying against Iraq's new oil contract with BP (BP.L) and China's CNPC, but the weakened labour movement may have a hard time thwarting deals desperately needed to revive a struggling oil sector.

The Federation of Oil Unions of Iraq and the Federation of Workers Councils and Unions in Iraq have condemned the Oil Ministry's decision to award a foreign consortium the contract to develop Rumaila, the country's largest producing oilfield.

"We have written a letter to BP and the British consul in Basra, warning them against entering Basra as it will be illegal ... If they do, we will protest and strike," said Faleh Aboud Amara, a top official with the Federation of Oil Unions.

Unions were one of the opponents of the ministry's plan to award foreign firms contracts to develop as many as eight oil and gas fields in Iraq's first major energy auction last month, a centrepiece of government efforts to more than double output of around 2.5 million barrels per day (bpd).

Just one field was awarded in the June 30 auction. Bidding revealed a big gap between what the government thought should be paid for the work and what firms considered fair.

But Oil Minister Hussain al-Shahristani is likely to pull out all the stops to make sure the Rumaila deal, in which BP and CNPC promise to increase the field's output to 2.85 million bpd, almost three times its current capacity, goes ahead.

BP had no comment and no one at the British embassy could be reached for comment.

Ali Abbas Khafif, head of the Worker Councils and Unions' branch in Basra, Iraq's southern oil hub, said the Rumaila deal would violate Iraqi law because it was brokered in the absence of new national energy legislation, whose passage has been held up for years by a bitter feud between Arabs and minority Kurds.

He also complained about the terms of the fixed-fee contract, which he said would overcompensate companies, and said such deals might lead to greater unemployment in the oil sector.

The union strategy centers around efforts to scare off firms thinking about coming to Iraq, where sectarian bloodshed has ebbed but violence still poses a major threat, Khafif said.

"We have the ability to halt their work entirely. We can mobilise people against them. We will use sit-ins and strikes."