Local Governments Oppose Baghdad Gas Deals

The oil ministry’s auction of three natural gas fields this week have been angrily opposed by all the governorates in which they are located, with provincial officials threatening legal action against Baghdad and warning that they will refuse to cooperate with the developers.

Bids were granted to companies from Turkey, Kuwait, Kazakstan and South Korea to develop gas fields holding approximately ten per cent of the country’s reserves. The fields in Anbar, Diyala and Basra are primarily being developed for domestic consumption to improve Iraq’s feeble power supply, oil ministry officials said.

But provincial council members maintain the oil ministry overstepped its bounds – and may have violated the constitution – by holding the auction without consulting local officials. The provinces say they want more control over their natural resources and assurances that the developments will benefit their economies.

The dispute reflects ongoing tensions between local authorities and Baghdad over management of the country’s vast natural resources. The proposed hydrocarbons law, drafted in 2007, regulates the management and contracting of natural resources between local and federal authorities – though it has been stalled for years. Parliament was expected to debate the legislation after the March elections, but this has been held up by the bitter political disputes that have left the country without a functioning government.

Iraq has the fourth-largest proven oil reserves in the world, and is believed to have the tenth-largest gas reserves. Most of the country’s natural resources are undeveloped.

In western Anbar governorate, the council is threatening to sue the oil ministry for not consulting local authorities on the auction bid. It says it will not assist the foreign firms that won the right to develop Akkas, a large gas reserve near the Syrian border.

While no laws exist to regulate Iraq’s natural resources, local officials point to Article 109 of the constitution, which mandates that the federal government should manage oil and gas “with the producing governorates and regional governments”.

“The council will not provide any kind of cooperation or support or facilities to those companies that won the bid,” Jasim al-Halbusi, the head of the provincial council, told IWPR.

Asked if there could be attacks on the foreign companies developing the field, Halbusi responded, “The central government will bear the responsibility for ignoring the decision of Anbar’s local government and the demands of Anbar’s people.”

“Signing the contract regarding Akkas gas field without listening to our decision [to refuse the deal] will stoke problems between the local and federal governments.”

Once the centre of the Sunni insurgency, Anbar is now largely controlled by local tribes who defected from groups such as al-Qaeda. Security has improved there since 2007 but remains a major concern, particularly for foreigners.

Oil Minister Hussein al-Shahristani called on local authorities to cooperate with the firms that won the gas field auction, warning that “the government will be very strong and severely punish everyone who hinders development of these contracts”.

Anbar’s provincial council announced its opposition to the auction days before bidding opened in Baghdad. The conflict between Anbar and central government began earlier this year when the oil ministry turned down a proposal by local officials to have a consortium of Turkish and German companies develop Akkas, Mezher Hasan al-Mullah, head of Anbar council’s investment committee, said. The council threatened to reject the oil ministry’s proposals after their own was turned down, Mullah said.

In Diyala and Basra, officials claimed they were never officially notified about the auction. The oil ministry maintains that it has the right to sign development contracts for oil and gas, and that local officials were well aware of the auction, which was originally scheduled for September.

But Ahmed al-Seleti, a member of the Basra provincial council, insisted, “This is an important issue for the province, and we should not be excluded like this. Perhaps after several years we will need another revolution to nationalise oil.”

Sadiq al-Musawi, deputy governor of Diyala, also claimed that the development contracts were illegal because local authorities were not consulted, although he said his council did not intend to take the dispute further. Basra officials said they are to discuss taking action against the oil ministry over the deals.

In addition to threatening to sue the government for not consulting local authorities, Anbar’s provincial council is considering organising demonstrations and may go on strike to protest the oil ministry’s decision, Halbusi said.

Still, Tariq Harb, a legal expert, said the contracts are “legal and constitutional, and the provinces have no power to object to the contracts or the bid results”.

Thamir al-Ghadban, prime minister Nuri al-Maliki’s oil adviser, said the gas development projects will improve quality of life in the provinces by providing electricity and jobs.

And Ali Jihad, the oil ministry spokesman, said the ministry will discuss the contracts with both local officials and citizens and does not believe security will be a concern, adding, “I don’t think there will any problems.”

But local opposition to the projects is clear. Residents of Basra, Anbar and Diyala said they were angry about the contracts, maintaining that the money would not trickle down to citizens if it was controlled by Baghdad.

“The revenue from the gas will go to Baghdad and the situation here will still be miserable,” said Sheikh Salam Ajmi, a Fallujah tribal leader who participated in a demonstration in the city this week.

Basim Saeed, a 45-year-old teacher in Diyala, said the local government should stop international companies from working in the provinces.

Calling them “vampires who want to suck the blood of locals by making a deal with Baghdad”, he added, “If those firms try to come here and exploit our wealth they will be in trouble and won’t be able to get out of it.”

Reporting by IWPR Iraq senior local editor Abeer Mohammed in Baghdad and IWPR-trained journalist Uthman al-Mukhtar in Fallujah. IWPR-trained journalists Ali Mohammed and Ali Abu Iraq contributed to this report from Diyala and Basra.