US postwar role for oil to be examined at coalition talks

By OGJ editors

WASHINGTON, DC/NICOSIA, Apr. 7 -- UK Prime Minister Tony Blair is expected to press US President George W. Bush to accept greater participation by the United Nations in ruling postwar Iraq at a 2-day meeting that starts Monday in Northern Ireland. But recent statements by key Bush administration officials suggest that the US sees the UN playing largely a humanitarian role in any reconstruction.

Before the summit, Iraqi exiles and senior US officials meeting in London agreed Saturday that international oil companies should take a leading postwar role in reviving Iraq's oil industry. Industry expects that in the coming weeks and months, an interim government will play a decisive role in determining how fast the country's oil assets can be tapped for future investment. In the short term the interim government will also effectively control the country's existing production and exports.

Oil companies are worried that unless the US reaches some kind of compromise with the UN over how future oil contracts are administered via the oil-for-aid program, they may be violating international law. This in turn could future delay exports, experts predict.

Regarding the longer-term issue of investment, US companies have for now largely remained silent on what changes, if any, need to be made to Iraq's state-owned oil company. The Pentagon is said to be favoring a US civilian "oil czar" that would oversee the sector, with some senior positions given to Iraqi exiles. But several multinational companies, including those based in the US, are concerned that the Pentagon plan does not leverage the expertise of the country's existing oil professionals.

"There is a lot of respect for those petroleum engineers," said American Petroleum Institute President Red Cavaney, responding to a question about what role US officials should play in rebuilding Iraq's oil business at a recent press briefing. "People marvel at how much they got done," with limited resources. "It would be a mistake to go and overlay and superimpose. What we (the US government) need to do is. . .to help clear the way and remove obstacles."

US officials have repeatedly insisted that any US role in the country's oil fields will be done on behalf of and for the Iraqi people.

London talks
US officials agree with the view of Iraqi exiles that Baghdad should stay in the Organization of Petroleum Exporting Countries, though there should not be limits on production, Iraqi exiles said following the London meeting. An interim government's early work will focus on the rehabilitation of existing facilities, but talks with foreign oil majors on long-term projects could start quickly, the exiles suggested.

"It is in Iraqis' interest for an interim period of government to be as short as possible," said Dara Attar, an oil consultant representing some opposition groups.

"It was also decided that revenues should be used to reconstruct and develop the country paying special attention to the impoverished oil field regions, and that modern technology and domestic and foreign experts will be crucial to this development," Attar said.

Foreign investment deals, most likely production-sharing contracts, with a fully fledged Iraqi government could come between 6 months and 2 years' time, he said.

"Yes, that is the idea because there is no doubt the oil companies are needed," said Fadhil al-Chalabi, a former under-secretary at the Iraqi oil ministry.

The guidance will go to the US-run interim authority, planning to move into southern Iraq early next week, and any subsequent transitional government.

UK talks
Under pressure from members of his own party, as well as other European leaders, Blair is hoping the temporary administration of Iraq, to be run by retired US Gen. Jay Garner, will last only 2-3 months, before an interim authority with Iraqi participation takes over.

But much may remain unsettled after the meeting, US officials suggested.

A White House spokesman said Monday the meeting would "further the process of considering these questions about post-Saddam Iraq, reconstruction, (and) humanitarian aid."

Sec. of Defense Donald Rumsfeld denied Monday at a press briefing that he wanted the White House to exclude indigenous Iraqis from an interim government.

"The US will not impose a government on Iraq," he said, suggesting later that it was up to Bush to decide what the interim government will look like.

Pentagon officials and some key White House officials, including Vice-Pres. Dick Cheney, reportedly want Iraqi exile Ahmad Chalabi to play a prominent role in postwar Iraq. They also want an interim government set up before the war ends; this civilian authority would oversee parts of the country as they fall under the US military's control.

Meanwhile Sec. of State Colin Powell and White House National Security Advisor Condolezza Rice are said to favor a longer military occupation with an interim government set up only after the entire country is secure. Their transitional civilian government also gives the UN and Iraqi residents a stronger voice.

Sources familiar with the White House's thinking predict however that the Pentagon's model will largely prevail. This means the start of a civilian authority will begin soon, possibly this week with little or no UN involvement.

When and how
A key unanswered question is how long the interim authority will last.

Rumsfeld's deputy, Paul Wolfowitz, said Sunday it may take more than 6 months for an Iraqi government to be established after President Saddam Hussein's regime ends. Department of Defense officials have called a postwar interim government a "bridge," between an imminent US-led civil administration and a new Iraqi sovereign government.

Rice told reporters Apr. 4 the US will coordinate with Iraqis, coalition partners, and the UN to rebuild Iraq, leaving the country "completely in the hands of Iraqis as quickly as possible." She further suggested that both exiles and local leaders within Iraq will contribute to the interim authority.

Three stages planned
The UK strongly prefers a stronger UN role and this could cause problems between the two countries later when the time comes to refigure the UN's oil-for-aid program, analysts predict. But for now the two countries say they have drawn up a 3-stage procedure for post-conflict.

Under Stage 1, the US and UK military will retain security control, while day-to-day life such as utilities, infrastructure, and medical care is run by the US Office of Reconstruction and Humanitarian Aid (ORHA), under Garner.

Stage 2 will see the formation of an Interim Iraqi Administration (IIA), which will not have executive power but will have to work in liaison with ORHA and progressively take over various functions.

Stage 3 will be the move to a representative government that will take over control after democratic elections. No timeframe has been given.

Blair has said publicly he believes the differences between himself and the US over the role of the UN is less stark than reported. But he has made clear does not want the Garner operation to be seen as a US occupying power handing out contracts solely to US firms.

UN officials said Tuesday there is 8 million bbl of oil stored at the Turkish port of Ceyhan and about 100,000 b/d of oil from Kirkuk in northern Iraq is still coming to the terminal via pipeline although no one is lifting the crude because of the war. UN officials say they have legal contracts that allow about 90 days of exports assuming Iraq resumes its prewar production of 2.2 million b/d.

UN officials maintain that the UN, and not the US or its coalition allies, will control those contracts postconflict unless the Security Council revises how the UN enforces its sanctions authority.