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Commerce Seeks Adviser for Iraq Oil Interests

By Walter Pincus
Monday, September 10, 2007

The United States is getting ready now for the Iraqi government to get its house in order and pass a detailed law that will govern the future handling of its vast oil fields, which contain the world's third-largest proven petroleum reserves.

In preparation for that moment, and in apparent hope that the United States will be central to the process for years to come, the Commerce Department is seeking an international legal adviser who is fluent in Arabic "to provide expert input, when requested" to "U.S. government agencies or to Iraqi authorities as they draft the laws and regulations that will govern Iraq's oil and gas sector."

The Government Accountability Office report on Iraq last week found that the benchmark efforts to develop a new oil system were still in early stages. The framework of a new law with provisions for revenue sharing and restructuring of the Oil Ministry has been drafted, but the single, new Iraq National Oil Co. remains to be formed.

Nonetheless, the Commerce proposal put out Aug. 21 predicts that "as part of a U.S. government inter-agency process, the U.S. Department of Commerce will be providing technical assistance to Iraq to create a legal and tax environment conducive to domestic and foreign investment in Iraq's key economic sectors, starting with the mineral resources sector."

And it added: "Through this initiative, Iraqi officials will be able to access the expertise of world-class professors and practitioners; they will also attend technical workshops which will address Iraq-specific legal and tax issues."

According to the January 2007 Special Inspector General for Iraq Reconstruction report, Iraq's petroleum sector faces serious technical challenges in virtually every aspect of its operations, from procuring, transporting and storing crude and refined products to managing price controls and imports, fighting smuggling and corruption, improving budget execution and sustaining operations.

But Iraq is not a novice in the oil business.

The U.S. Department of Energy reported that in 1989, under Saddam Hussein, Iraq produced almost 3 billion barrels of oil a day. It had an oil ministry at the time and regional oil companies operating its major fields in the north and south of the country. It was a founding member, with Iran, Kuwait, Saudi Arabia and Venezuela, of the Organization of the Petroleum Exporting Countries, which was created in Baghdad in September 1960.

Based on the Commerce proposal, the United States has decided that Iraq needs a U.S.-funded expert who will be responsible "to review draft [Iraq] subsoil laws and draft subsoil regulations to ensure their compliance with international legal standards" and share his or her conclusions with U.S. agencies "or with Iraqi authorities."

In addition, the contractor is to review "the draft by-laws of the Iraqi agencies that will be created to grant exploration and exploitation licenses, to enter into joint venture agreements with foreign firms . . . . and to regulate Iraq's hydrocarbon sector." The contractor is "to plan technical workshops and seminars geared toward the legal issues critical to the oil and gas sectors."

This is not viewed as a short-term relationship. The proposal says the contract will run from the date of the award through July 31, 2008, and has two 12-month extension options through July 31, 2010. During that time period, the contract lawyer is expected to spend no less than 360 hours (45 days equivalent full time) on Iraq oil matters. Commerce said it would take into consideration the contractor's teaching and research commitments when setting dates for finishing projects.

There is one recognition that given the situation in Iraq, things may change for the United States in that country. The proposal states that "in case of events beyond the control of the parties," the Commerce Department and the contractor "will agree upon a new schedule and period of performance."

National security and intelligence reporter Walter Pincus pores over the speeches, reports, transcripts and other documents that flood Washington and every week uncovers the fine print that rarely makes headlines -- but should. If you have any items that fill the bill, please send them tofineprint@washpost.com.

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