December 10, 2009 / 7:00 PM / 8 years ago

SCENARIOS-Will Iraq honour deals with oil majors after polls?

5 Min Read

* Iraq's oil auction begins on Friday

* Will deals hold past March election?

By Suadad al-Salhy and Ahmed Rasheed

BAGHDAD, Dec 10 (Reuters) - Iraq will on Friday begin a hotly anticipated auction of contracts to develop 10 oilfields, some of the world's most promising and easily accessible, but will the deals be honoured after a March general election?

Iraq's politicians are deeply divided along sectarian and ethnic lines, and the cabinet and lawmakers are at loggerheads over whether parliament should have a say over oil deals. Modern hydrocarbon laws governing Iraqi oil have not yet been passed, and the independent-minded oil minister has many enemies.

After a previous contract auction in June, Iraq's government has already ratified one deal for BP (BP.L) and China's CNPC to develop the Rumaila supergiant oilfield, and has initial agreements with groups led by Italy ENI (ENI.MI) and Exxon Mobil (XOM.N) for two other fields.

What Do Oil-Savvy Politicians Say?

Opinions are largely split between allies and non-allies of Prime Minister Nuri al-Maliki, although even some traditional government critics stand behind the deals.

"According to Iraqi law these contracts will be illegal if they were passed without parliament approval. To solve this problem, we need to pass the hydrocarbon law, which could provide a better legal framework for all future contracts," said Ali Hussain Balou, head of parliament's oil and gas committee.

The Oil Ministry, which has Maliki's backing, insists parliamentary approval is not necessary.

"The deals are perfect in terms of developing our damaged oil industry with lowest costs. An elected government endorsed these deals and all decisions made must be respected by the next one," said Abdul-Hadi al-Hasani, deputy head of parliament's oil and gas committee and a Maliki ally.

What Do Main Election Competitors Say?

Maliki's State of Law coalition, one of the main contenders in the March polls, will surely honour the oil deals should it hold onto the clout it currently enjoys.

Some political groups say they will respect the contracts, but that could change in political wrangling during the formation of a new government after the March election.

The Supreme Islamic Iraqi Council (ISCI), which heads the Iraqi National Alliance, a coalition likely to be Maliki's main challenger at the ballot box, will also stand by the contracts, said Jalal al-Din al-Sagheer, a senior ISCI member.

"Of course it will be obligatory for the next government to honour these deals, regardless of reservations of any political entities right now. For that reason we advise that these contracts should be shown to parliament (before they are signed) so there is political consensus to ward off future problems."

Salim al-Jubouri, a senior member of the Iraqi Islamic Party, an important Sunni Muslim political group and frequent critic of Maliki's Shi'ite-led government, agrees.

"What this government signs will also be a commitment for the next government. They are signing in their official capacity (as government officials) ... and in the end it will be very difficult to go back on these agreements," said Jubouri, who is also the deputy head of parliament's legal committee.

"Maybe those individuals who signed can be held to account for their mistakes, but the deals will remain valid."

The Islamic Party is the biggest member of the main Sunni group contesting Iraq's March polls.

Iraq's ethnic Kurds are another of Iraq's key political players, and they are seen as powerbrokers and kingmakers because of their skilled manoeuvring.

"These contracts will hold because they are legal, and they have no connection with political differences between the government and parliament," said Feriyad Rawanduzi, spokesman for parliament's Kurdish bloc.

What Do Iraqi Legal Experts Say?

Lawyers disagree about the legality of the contracts.

"There is no doubt all oil deals were made in accordance with valid laws, and the next government is obliged by all means to respect them," said Tareq Harb, a leading Iraqi lawyer.

Ahmed Azzawi, a corporate lawyer, was not so sure, and pointed to an oil contract Iraq had originally signed under former leader Saddam Hussein with China's CNPC.

CNPC has started work on the Ahdab oilfield since Saddam's fall, but Iraq renegotiated the deal to gain better terms.

"Iraq is a country of contradictions where anything could happen, that's what we've seen with the Chinese oil company ... As long as there are no hydrocarbon laws outlining the relationship between foreign firms and Iraq, these contracts will always remain in doubt," he said. (Additional reporting by Waleed Ibrahim, Writing by Mohammed Abbas: Editing by Michael Christie and Keiron Henderson)

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