U/S JEFFERY'S MEETING WITH PM ADVISOR ON

C O N F I D E N T I A L BAGHDAD 004024

SIPDIS

SIPDIS

STATE FOR NEA-I, EEB
DOE FOR GEORGE PERSON

E.O. 12958: DECL: 12/10/2017
TAGS: ECON EFIN EINV EPET ETRD PREL IZ
SUBJECT: U/S JEFFERY'S MEETING WITH PM ADVISOR ON
HYDROCARBON LAW

REF: BAGHDAD 4005

Classified By: ECON Counselor Todd Schwartz, reasons 1.4 b,d


1. (U) SUMMARY: Thamir Ghadban, Advisor to the Prime
Minister, on December 5 discussed the "way forward" for
hydrocarbon law enactment with a delegation led by Under
Secretary Jeffery. END SUMMARY.

SIPDIS


2. (U) Participants: U/S Jeffery, Thamir Ghadban, Ron
Jonkers, Tom Pierce, Abdulilah K. Al-Amir (Oil Advisor),and
Ed Parks.


3. (C) Ghadban said progress towards enacting a hydrocarbons
law requires the necessary "political will" from both the GOI
and the KRG. For example, the GOI believes that prior to
issuance of production sharing contracts/production sharing
agreements (PSC/PSAs) the Ministry of Oil (MOO) needs to be
consulted. But this consultation has not happened in the
recent 20-plus PSC/PSAs awarded in the Kurdish Region, he
said. Ghadban insisted that Iraq's existing oil law notice
and consultation procedures must be followed prior to
awarding any contracts. Since these procedures were not
followed, the new PSC/PSAs issued in Kurdistan over the past
six months are not legal, according to Ghadban.
Additionally, the contracts are blocking progress on national
legislation, including the Oil Framework Law, the Revenue
Sharing Law, and the new INOC Law.


4. (C) Ghadban warned that if the KRG continues to
unilaterally award PSC/PSAs in the Kurdish Region, this will
further stiffen the GOI's opposition and deminish its
interest in negotiating further compromises. Ghadban added
that this may also negatively impact the revenue sharing
discussions, and future deliberations on Constitution Article
140 (Kirkuk).


5. (C) Ghadban reported that the Federal Government's
coalition (excluding the KRG Parties) is losing internal
consensus in support of a new hydrocarbons law. Ghadban
added that public and personal attacks by KRG officials,
including against MOO Shahristani, have angered the GOI's
coalition. Thus, further compromises on the draft
Hydrocarbons Law are becoming more difficult. Ghadban
suggested that the KRG should come to the GOI with a proposed
political solution to the current impasse. PM Maliki has
done all he can do and believes the matter now rests with the
COR, according to Ghadban.


6. (C) Issues still in dispute, according to Mr. Ghadban,
include:
-- should Iraq stay with existing Oil Law, or pass a new one;
-- how to form Federal the Federal Oil & Gas Council (FOGC);
-- how the FOGC decides on contracts to be awarded and
whether COR reviews its decisions;
-- does MOO review contracts before execution;
-- will contracts include a PSC/PSA format;
-- will new INOC Law govern GOI's regional operating
companies, or will MOO;
-- to what extent will INOC in Kurdistan be managed by Kurds;
-- will model contract and four Annexes be part of new
Hydrocarbon Law, or left for FOGC decision;
-- whether the 20-plus new Kurdish PSC/PSAs are legal or not;
-- how will oil & gas revenues be split and is the formula
part of the new Hydrocarbon Law, or in separate law;
-- will there be a cap on revenues allocated for "sovereign
expenditures" (e.g the Public Distribution System (PDS),
etc.);
-- will such a cap be decided by the Central Government only,
or together with the Provincial Governments;
-- will the Kurdish revenue share be outside the Federal
Budget, or included within;
-- will KRG sign more PSC/PSAs and, if so, will GOI decline
to negotiate further.


7. (U) The delegation cleared this message prior to
departure.
BUTENIS