The ousting of the Saddam dictatorship has opened up a long suppressed aspiration for democratisation of state and society in Iraq especially for those who embrace social, political, ethnic and national diversity, despite the complex and extremely difficult situation caused by the occupation.
Iraq has huge oil wealth and this will continue to be a key contributor in the future development of her economic and human resources. The safeguarding of this oil wealth for the Iraqi people must be the prime objective of the new Iraqi interim government and any future democratically elected transitional government currently promised for early 2005.
Oil will remain the main backbone of the Iraqi economy in the near future; the way in which oil will be exploited and distributed will certainly determine the form and shape of the future social and political regime in Iraq.
Three possible scenarios are facing the oil industry in Iraq:
1. The privatisation of Iraq’s oil industry (the wholesale sell-off of oil wells and infrastructure to multinational companies).
2. Encouraging foreign international oil companies to invest in the development of Iraq’s oil industry using new forms of contracts different from those applied under the previous regime.
3. The oil industry remains under the control of the public sector, similar to other oil producing countries - Saudi Arabia, Kuwait and the Gulf States.
In order to provide an accurate account of the state of the oil sector in Iraq, one must look at the period of UN sanctions, the impact of the recent war and the subsequent occupation of the country.
UN Sanctions 1990-2003:
The unjust UN sanctions starved the oil industry in Iraq. During the first half of the 1990s, the Iraqi Oil Ministry, in accordance with the UN “oil for food programme” experienced extreme difficulties in importing much needed spare parts for the industry, heavy engineering machinery, new tools and advanced technologies.
Furthermore, the implementation process for those contracts that were signed and agreed was rather slow on both sides - the UN and the former dictatorial regime of Saddam - due to bureaucratic inefficiency and slow hierarchical procedures.
Many contracts were left open without precise completion date. But the recent war of March 2003 and thereafter the prevailing lack of security meant that many previously agreed contracts had to be postponed. However, some goods had arrived by the end of last year (2003).
In addition to the war, the breakdown of social order that took place during its immediate aftermath and the current and continuing lack of security have all intensified the difficulties of the oil sector in Iraq. This is because much heavy oil machinery was stolen and smuggled beyond Iraq's borders. Other machinery and plant was destroyed and damaged deliberately in acts of sabotages or as a direct result of bombing. According to the current Oil Ministry goods that were stolen, damaged or smuggled from the oil sector are very expensive to replace and the ministry has lacked funds up until the second quarter of 2004. This has meant that the ministry was unable to buy new machinery and technology.
The former occupation authority (CPA) did not provide the Iraqi Oil Ministry with sufficient funds for it to invest in the development of the oil industry; but rather was given only enough money to run the ministry and pay wages and other bureaucratic structural costs.
Due to continuous pressure from the Oil Ministry, the occupation authority, and just before it was dissolved by UN Security Council resolution 1546, provided additional money to be spent on the development of the industry, digging new oil wells and improving the structure of others.
The Oil Ministry was allocated $2.1 Billion from the US 18.4 Billion that had been approved by US Congress for the reconstruction of Iraq. The $2.1 Billion was intended for the rebuilding of the outdated oil industry and to import oil industry components, which Iraq lacked as a result of the war and the sanctions. Please note that the decision on the expenditure of the $2.1 Billion remained in the hands of the CPA, and was made by the occupation authority and not the ministry.
Key oil industry plants such as the oil refineries were subjected to armed attacks, looting and sabotage soon after the war. Al Dora refinery and other major plants and key installations in Baghdad and Basra, and the Bejy oil refineries, were looted and severely damaged.
Major Southern Oil plants, such as Al Rumaila and Al Zubair were looted, vandalised and subjected to severe damage. The oil pipe line that transports oil from the south of the country to the north was attacked and damaged by smugglers and saboteurs.
Currently oil production stands at 2.8 million barrels a day. The Oil Ministry is aiming at increasing this level to 4 million barrels a day in four years. To achieve the level of production to 4 million barrel depends on the Ministry's ability to obtain new spare parts, using new structures to restore oil production levels and modernizing the transportation structures of oil (by means of road, sea and overland pipe lines).
The country has huge oil reserves that currently stand as the second in the world. It is possible that Iraq may have the largest oil reserves in the world.
Oil revenues stand at 97% of Iraq national income in hard currency. Hence Iraq’s economy currently entirely depends on oil and for this reason deserves special attention from the current interim government, the future elected government in 2005 and key agencies of the state.
It has been proposed recently to establish an Oil and Gas Commission that would be responsible for overseeing, protecting and modernizing oil production and increasing investment. There is also a desire to establish a National Oil Commission and National Oil Company with many different specialist companies dealing with the production of oil components, including the production of gas.
The IFTU has been informed by reliable sources at the Oil Ministry that if the US and other countries want to buy Iraqi oil they will have to buy it on the open market at competitive prices. The sources said, “Nobody shall get a special rate”
Abdullah Muhsin
IFTU