As civil war boils, the country's future depends on how sectarian groups divide what's underground

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Iraq's Grim Oil Politics
As civil war boils, the country's future depends on how sectarian groups divide what's underground

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Oil was supposed to be Iraq's savior, with Bush administration officials promising that profits from oil revenues would pay for reconstruction. It was the Oil Ministry, almost alone among government buildings, that the U.S. forces protected after the fall of Baghdad.

But it's turned out to be another factor in the country's rapid decline. Regular insurgent attacks on the pipelines and oil facilities—the first three years saw at least one attack a week on average—have meant that production is only now reaching prewar levels. Iraq still has to import a majority of its fuel. Nearly four years into the war, the country has had four oil ministers. A recent study by economist Colin Rowat at the University of Birmingham revealed that if you factor out foreign aid, Iraq's GNP is actually $27 billion less than it should be because of the war. And all these factors will come to the fore in early 2007, when the Iraqi Parliament is supposed to pass the country's new "hydrocarbon law," legislation that would spell out who gets the oil money now and who profits from any future discoveries.

The hydrocarbon law, though crucial, is beset by sectarian backstabbing. Each side has written its own draft of the law—there are at least three currently floating around—and the Kurdish draft is the most professionally done, says a Western diplomat who advises Iraq's Oil Ministry. Barham Salih, a Kurd and Iraqi vice president involved in the bill, says his goal is to make Iraq the Arab world's first "petro-democracy"; the Kurds have already cut a deal, independent of the central government, with a Norwegian firm to start test-producing oil in the first quarter of 2007. Another key player involved in writing the law—Finance Minister Bayan Jabr—is considered one of the worst sectarian offenders. He was pushed out of running Iraqi's Interior Ministry in June 2006 because Shiite death-squad activity ballooned under his watch.

The infighting has also produced a big controversy over what has not been spent on much-needed investments. According to the Western diplomat, in 2005 to 2006 some $3 billion wasn't spent from the Oil Ministry's budget, and $4 billion to $5 billion wasn't spent in 2003 to 2004. Jabr is also accused of squirreling away funds for southern Iraq. "We have to take the power away. We have to pry their hands from the power," says the Western diplomat.

more:http://www.msnbc.msn.com/id/16299313/site/newsweek/