Iraq: Sunni group warns of oil rip-off.

"We caution the parliament that it is faced with a historical responsibility and it will have to choose between: siding by the people in preserving its right and the right of its future generations from squandering and exploitation by the pharaohs of the age, and siding by the occupier and its conspiracies to seize this great national wealth," the Association of Muslim Scholars said in a statement posted Tuesday on its Web site.

The AMS, which globalsecurity.org calls "the highest Sunni authority in Iraq," urged any law governing Iraq's vast oil and natural gas reserves to preserve nationalization and limit foreign ownership.

... The statement said such a law shouldn't be passed while the country is occupied by foreign forces or while it is in the midst of war. "What is the logic of passing such a law in such circumstances?" it said.

"We caution them that the Iraqi people is watching all these scenes and will not allow anyone to trade in its resources." Link

A CONTRACTUAL RIP-OFF

The debate over oil "privatisation" in Iraq has often been misleading due to the technical nature of the term, which refers to legal ownership of oil reserves. This has allowed governments and companies to deny that "privatisation" is taking place. Meanwhile, important practical questions, of public versus private control over oil development and revenues, have not been addressed.

The development model being promoted in Iraq, and supported by key figures in the Oil Ministry, is based on contracts known as production sharing agreements (PSAs), which have existed in the oil industry since the late 1960s. Oil experts agree that their purpose is largely political: technically they keep legal ownership of oil reserves in state hands, while practically delivering oil companies the same results as the concession agreements they replaced.

Running to hundreds of pages of complex legal and financial language and generally subject to commercial confidentiality provisions, PSAs are effectively immune from public scrutiny and lock governments into economic terms that cannot be altered for decades.

In Iraq's case, these contracts could be signed while the government is new and weak, the security situation dire, and the country still under military occupation. As such the terms are likely to be highly unfavourable, but could persist for up to 40 years.

Furthermore, PSAs generally exempt foreign oil companies from any new laws that might affect their profits. And the contracts often stipulate that disputes are heard not in the country's own courts but in international investment tribunals, which make their decisions on commercial grounds and do not consider the national interest or other national laws. Read more