GOI ENERGY COMMITTEE DISCUSSES HYDROCARBON LAW

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 004534

SIPDIS

SIPDIS

E.O. 12958: DECL: 12/09/2016
TAGS: ECON ENRG PGOV IZ
SUBJECT: GOI ENERGY COMMITTEE DISCUSSES HYDROCARBON LAW
NEGOTIATIONS AND TARIQ AL-HASHIMI

Classified By: Ambassador Zalmay Khalilzad for reasons 1.4 (a) and (b).


1) (C) Summary: The Government of Iraq Energy Committee,
including Minister of Planning Ali Baban, Minister of Oil
Shahristani and Minister of Electricity Karim and Deputy
Prime Minister Barham Salih, met on December 7. The
Ambassador was scheduled to meet DPM Salih separately and
arrived in time for the final part of the discussion. The
group discussed the remaining points of contention regarding
the hydrocarbon law, specifically approval of contracts and
the disputed territories. The GOI officials also emphasized
the need to encourage Tariq al-Hashimi to be a more
constructive partner to Prime Minister Maliki's government.
End summary.

-------------- --------------
Hydrocarbon Law Negotiations: Approval of Contracts
-------------- --------------

2) (C) DPM Salih asked the Ambassador's assistance in trying
to resolve the still open issue of the use of the word
"approval" with respect to contracts. Minister Shahristani
said that the Prime Minister was not happy with any
formulation that did not include the provision that the
Federal Petroleum Committee (FPC) would approve contracts
negotiated by the KRG. The Minister of Planning noted that
Tawafuq also opposed any formulation that did not give
control to the central government. The DPM said that he
thought he could sell a negative formulation to the KRG,
i.e., that there could be a veto of contracts by the FPC, but
not approval. The DPM said he would talk to the Prime
Minister the following day, and that KRG Prime Minister
Nechirvan Barzani would be in Baghdad then as well.

3) (C) DPM Salih complained that Kurdish mistrust of the
central government is not just historical, but also based on
the fact that in the last three plus years there has been no
investment in the KRG in oil and gas. Minister Shahristani
replied that was true for all of Iraq because of the
instability the country faces. (Note: The Ministry of Oil has
spent very little of its capital budget in 2006. End note.)
From the discussion it seemed that the Kurds have resolved
their budget issues with the government, providing some
positive momentum to resolve the "approval" issue.

-------------- --------------
Hydrocarbon Law Negotiations: Disputed Territories
-------------- --------------

4) (C) The group also discussed the treatment of Kirkuk in
the draft, with Minister Shahristani saying that the
hydrocarbon law is not the place to deal with Article 140 of
the constitution, with which the DPM agreed. (Note: Article
140 stipulates that a referendum be held in Kirkuk and other
disputed territories to determine if they should be part of
the KRG. End note.) DPM Salih offered to use his influence
with the KRG to resolve the references to disputed
territories in a way that limited them to oil and gas issues.
Minister Shahristani also said that he would insist that
Kurdish extant contracts be submitted to the FPC for review,
but that this was primarily as a means to also subject Saddam
era contracts to the FPC for review. (Comment: Presumably
this review would allow also for amendment and rejection. End
comment.) He noted that the legal position on the Vietnamese
contract in particular was a problem, since it had been
ratified by the Saddam parliament, giving it a different
legal status. Review of the extant Kurdish contracts probably
crosses a KRG red line, but DPM Salih was fairly optimistic
about being able to sell it to KRG PM Nechirvan Barzani.

--------------
Final Negotiations
--------------


5. (C) The Ambassador offered to use his good offices to
facilitate a resolution and strongly urged the parties to
agree within the next couple of days. DPM Salih agreed that
announcing a completed agreement would go a long way toward
addressing the charge that this Maliki government cannot deal
with difficult issues. On process, Minister Shahristani said
the draft law, which also faces opposition from Fadhila and
the Sadrists, should go to the Shura Council (the Legal
Committee at the Ministerial level) before it is approved by
the Council of Ministers, and that they needed to pay
attention to getting a solid majority, which means keeping
Tawafuq on board. DPM Salih offered to brief the Sunnis on
the benefit of the deal and the group agreed that it would be
good if this issue could be impressed on Tariq al-Hashimi
when he is in Washington DC.

--------------

BAGHDAD 00004534 002 OF 002


Tariq al-Hashimi's Political Power
--------------


6. (C) After the meeting adjourned, DPM Salih, Minister
Shahristani and the Ambassador continued to discuss how to
deal with Tariq al-Hashimi, who apparently is trying to flex
his political muscles by challenging the fuel import
liberalization law, which he must ratify. Such a step would
be egregious, especially since the '07 budget has no
allocation for fuel imports so the situation will be
difficult even with the liberalization law fully implemented.
Minister Shahristani said that he had the impression that
Tawafuq was interpreting the ISG report as implying that the
current political process in Iraq could be reconsidered, and
that the regional conference would lead to a change in their
position under the constitution. Minister Shahristani added
that they need to get this idea out of their heads
immediately or it would greatly complicate the effort to
build a moderate coalition. They should receive an
unequivocal message that the constitutional process is
irreversible. Minister Shahristani argued that when Tariq
al-Hashimi is in the U.S. he should be commended for
struggling against extremists, but reminded that Maliki is
facing the same challenge. Tariq al-Hashimi should also be
recognized for the personal sacrifices he has endured, and
urged to work with Maliki. That having been said, Minister
Shahristani said that PM Maliki believes Tariq al-Hashimi is
close to groups that may well be committing murders and that
is why members of his Personal Security Detail (PSD) were
being detained. Minister Shahristani said the government had
evidence from interrogations for these suspicions.


7. (C) DPM Salih agreed that it would be necessary to
encourage Tariq al-Hahsimi to work to moderate the Sunnis,
but that if the present government fails, it would be the
moderate Shia who would be the biggest losers, followed by
the Kurds. So there was a clear common need for a new Sunni
partner. The discussion concluded with the Ambassador
reminding all that it would be a real shame to lose the
hydrocarbon deal over one word and that they should try to
resolve that problem now.
KHALILZAD