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Tue 24 Apr 2007 02:43 PM

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Iraqi, Kurdish officials to iron out oil law

Officials will meet this week to iron out disputes over the control of the world's third largest oil reserves.

Officials from Iraq's central government and the Kurdistan region will meet this week to iron out last-minute disputes over a draft oil law that will decide control of the world's third largest oil reserves.

Oil Minister Hussain al-Shahristani said last week the law would be ready for submission this week to parliament, and he expected lawmakers to make no major amendments.

But Kurdish energy officials have called the draft's annexes unconstitutional, raising the prospect of more disagreements and delays that dogged the lengthy law-writing process.

The oil law, which Washington sees as a key step toward reconciling Iraq's warring communities, is vital to attract investment from foreign firms to boost the Arab nation's oil output and rebuild its shattered economy.

Ashti Hawrami, minister of natural resources in the autonomous Kurdistan region, told Reuters his objections centred on annexes of the law that would wrest oilfields from regional governments and place them under a new state-oil company.

Nechirvan Barzani, the Kurdish regional prime minister, said Kurds wanted to include a separate law on oil revenue management that would set up a Kurdish fund as part of a "package deal" with the oil law.

"The oil draft law and the oil revenues distribution law should be passed together in parliament. Without the revenues law the oil draft law would be incomplete," Barzani told Reuters.

"The oil revenues should be deposited in a special account and the share of the Kurdish region must be defined clearly and we have no objection if this account is run by Iraq or an international committee".

The central government wants revenues put in a central account and distributed according to Iraq's population.

Most of Iraq's proven oil reserves are in the Shi'ite south and in the Kurdish north.

A fair distribution of Iraq's oil wealth is vital for national reconciliation because Sunni Arabs, who live in central and western Iraq, fear a bad deal would cut them off from any windfall should security improve enough to substantially boost production. Sunni Arabs are the backbone of the insurgency.

Signalling U.S. frustration, U.S. Defense Secretary Robert Gates last week urged Iraq's leaders to pass reconciliation benchmarks by the end of the summer, including the oil law.

DEVIL IN THE DETAILS

The draft, passed by the cabinet in February and hailed at the time by Prime Minister Nuri al-Maliki as a pillar of Iraqi unity, did not formalise divisive issues such as how revenues would be shared and who would gain control of discovered but undeveloped oilfields - the federal or regional - governments.

Those details were to be clarified in the annexes.

Shahristani, who has said he will listen to the Kurdish government's opinions this week, said in January that the national oil company will be given control of the country's most prized oilfields, and fields on their periphery.

Hawrami said draft annexes would give the state oil company control of an unacceptably high 80 percent of Iraq's oil reserves. He said an Iraq National Oil Company (INOC) should maintain control of producing fields, but did not have the expertise or capital for discovered but undeveloped fields.

The annexes under dispute include: current productive oil fields; discovered and undeveloped oil fields; discovered and undeveloped oil fields; and expeditionary areas.

Mahmoud Othman, an independent Kurdish legislator in Baghdad, said he was confident the law would pass.

"The United States put pressure on the Kurds to agree the draft law and I am sure they will put pressure on them to agree the appendixes," he told Reuters.

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