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Norway's Oil Industry and the Partitioning of Iraq

By Reidar Visser (http://historiae.org)
7 December 2005, postscript note added 11 January 2006

On 29 November 2005, the tiny Norwegian oil company DNO announced the start-up of drilling activities near Zakho in northern Iraq, under a deal signed with Kurdish regional authorities in the summer of 2004. Helge Eide of DNO has repeatedly told the media that he considers the arrangements to be in accordance with the Iraqi constitution.

The legal basis of this interpretation is in itself problematic. In the first place, DNO entered its contract with Kurdish authorities back in 2004, at a time when no Iraqi constitution was effective. The sole legal framework at that point was the Transitional Administrative Law – a document that enjoyed scant legitimacy among massive sections of the Iraqi people, and that failed to address exhaustively the question of management of oil and gas resources.

By the same token, the new Iraqi constitution, adopted in October this year, provides no unequivocal answers as to how proceeds from the energy sector are to be distributed between the centre and the regions. Only vague and unspecified mechanisms about “cooperation” and distribution in “a just manner” are mentioned, and there is a stated intention to employ oil revenues to rectify patterns of regional under-development created by the former regime.

In this legal haze, DNO has tried to create the impression of a loophole, in that a constitutional distinction is made – at least implicitly – between “existing” oil fields and “future” ones as far as the “administration” of oil production is concerned. This interpretation is inspired by the fact that residual powers rest with the regions under the constitution, and that only “existing” fields are explicitly mentioned in the first paragraph of its article 109. But it is hard to see how any oil field, whether “existing” or “future” could be exempt from the subsequent paragraph of the same article: “The federal and the producing regional and governorate authorities shall jointly [italics added, ma‘an in the Arabic] devise the necessary strategic policies for the development [italics added] of the oil and gas wealth in a way that achieves the highest possible benefit for the Iraqi people…” Additionally, the question of resource ownership remains unresolved altogether. The studiously ambiguous article 108 simply reads, “oil and gas are the property of the entire Iraqi population, in all the regions and governorates”.

A third legal problem is the status of today’s Iraqi constitution, which more than anything has the appearance of “work in progress”. In an attempt at mollifying critics of the document, Iraqi legislators last October adopted a package of last-minute amendments and additional clauses to the constitution. Crucially, these clauses include provisions for a parliamentary committee to reassess the current charter early next year. The recommendations of the committee are in turn to be presented to parliament in a single batch and will require only an absolute majority (instead of the standard two thirds majority for such changes) before they are put to another referendum.

This point leads on to more fundamental ethical and normative questions concerning DNO’s actions in Iraq. It would be totally erroneous to consider Iraq’s transitional and constitutional processes as closed chapters. The clause that opens for a one-off constitutional amendment package (with a lower than usual threshold for affecting change) was a deliberate effort to reach out to radical Iraqi groups that sympathise with the armed anti-occupation resistance. Instilling moderation among these groups will require incentives that can render participation within the system a meaningful alternative. The vision of an Iraq whose oil resources are shared by the entire population, the inhabitants of the oil-deficient western regions included, is central to any such effort at rapprochement.

Should these attempts at integration get derailed, more radical groups are certain to emerge from the sidelines. Among the Sunni Arabs, support for the armed resistance will grow stronger. Among the Kurds, powerful voices are already calling for Kurdish independence. And now even some Shiites have begun advocating territorial consolidation in a unified Shiite entity – an entirely new trend among a community traditionally renowned for its commitment to Iraqi unity and to multi-ethnic coexistence. This latter development is a turn of events that transforms abstract scenarios of territorial fragmentation and partition into a very real and acute challenge to Iraq’s political stability.

Into this arena, enter Norway’s DNO. Because of DNO’s actions, Kurdish politicians will feel encouraged in their ongoing efforts to secure bilateral deals with foreign investors – a strategy they have been pursuing ever since 2003. Pro-regional forces around southern Basra may show a greater appetite for such arrangements as well, thus underlining the atmosphere of an ongoing process of partition. Supporters of Iraqi nationalism will in turn react negatively. There will be claims that the proceedings of the Kurds and DNO testify to the growing impotence of Baghdad, and that developments show how the very idea of an Iraqi national community is on the wane. Comments along these lines, directed specifically at DNO’s activities in Iraq, are already to be found in Iraqi discussion groups on the internet.

Such developments will be unhelpful to the upcoming re-negotiation of the Iraqi constitution – a process that will require moderation on all sides, not brinkmanship and maximalist demands. A pivotal problem is that DNO’s activities play right into the hands of those seeking to discredit federalism as a viable option for the new Iraq. Clichés like “federalism means division” and “federalism is a plot directed by the US, Israel and international capitalism” will get nourishment and may once again come to the fore.

Why should a Norwegian company have taken the lead among those intervening in an already complex Iraqi political process? Perhaps it may be a simple matter of unawareness as to the potential controversies over concepts like “regionalism” – in European political discourse generally considered a positive term, but in Iraq still a vexed issue. Perhaps the reason may be that Norway itself lacks a colonialist past – experiences that have taught other Europeans about the political sensitivities of ethnic and religious tensions. Maybe it is because Norwegians tend to translate their sympathies for the sufferings of the Kurds into rather uncritical embraces of the most nationalist wings of the Kurdish political movements. Whatever the reason, it surely is a great disappointment that Norway’s first venture off the beaten track in Iraq has been undertaken in a manner that will do nothing but muddle the complicated ongoing process of transition.

As a minimum of respect for Iraq’s efforts to build a new democracy, foreign companies involved in the country should postpone any bilateral oil and gas deals with regional authorities until the constitutional process has been concluded, with a more precise definition of the relationship between Baghdad and the regions. This may well lessen profits in the short run. But to those with longer-term interests in the Middle East, such a course of action would mean avoiding ethical pitfalls and stigmas far more damaging to a company’s credibility in the region.

Postscript note added 11 January 2006: DNO struck oil at Tawke 1 in late December 2005, and has now brought a second argument into the debate: that an article of the Iraqi constitution (presumably 137) supposedly establishes legality for all decisions made by the Kurdish regional authorities prior to the adoption of the new constitution in 2005. This too is highly problematic, as the final sentence of article 137 adds “as long as this [i.e. these decisions by the regional authorities] does not contradict the constitution” – thus effectively bringing the debate back to square one. In a press release, DNO also engages in imaginative interpretation of the second part of article 109, attempting to reduce it to a question of “a strategic plan” for “managing pipelines and keeping production within OPEC quotas”. The main problem in this regard is that it is ultimately Iraq’s future constitutional court (the Federal Supreme Court) – not DNO or the Kurdish regional government – which has the authority to interpret the constitution. The composition of this court has not yet been agreed and will be decided by future parliamentary legislation.

 

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