KRG PM BARZANI ON THE HYDROCARBON LAW

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 004045

SIPDIS

SIPDIS

STATE FOR E, NEA-I AND EEB

E.O. 12958: DECL: 12/11/2017
TAGS: EPET ENRG ECON IZ
SUBJECT: KRG PM BARZANI ON THE HYDROCARBON LAW

Classified By: CETI Ambassador Charles Ries, reasons 1.4 b,d


1. (C) SUMMARY: In an 8 December meeting with U/S Jeffery,
Kurdish Regional Government (KRG) Prime Minister Nechirvan
Barzani requested U.S. support as an "honest broker" between
the central government and the KRG on the national
hydrocarbon law. PM Barzani also outlined his plans to
travel to Baghdad within the next few days to discuss
Peshmerga, Article 140, and hydrocarbon legislation. Of the
four pieces of hydrocarbon legislation, PM Barzani placed
highest priority on passage of a revenue management law,
stating that the framework law might follow if the parties
could reach political agreement to work out the technical
details. PM Barzani pointedly expressed full confidence in
Kurdish Minister of Natural Resources Ashti Hawrami as his
primary representative on the hydrocarbon legislation. END
SUMMARY.


2. (SBU) During an 8 December visit to the Kurdish Region
to discuss hydrocarbon legislation with Kurdish officials,
Under Secretary for Economic, Energy, and Agricultural
Affairs Reuben Jeffrey met with Kurdish Regional Government
Prime Minister Nechirvan Barzani at the "Red House" in
Salahadin, Erbil. In attendance were KRG PM Nechirvan
Barzani, KRG representative to the USG Qubad Talabani, KRG
Head of Foreign Relations Department Falah Mustafa Bakir, KRG
Minister of Natural Resources Dr. Ashti Hawrami, and USG
officials from the Department, the Erbil RRT, and the Embassy.


3. (C) PM Barzani recounted the recent history of
negotiations with the GoI to pass a federal oil and gas law,
with agreements previously reached between the KRG and the
central government in December 2006 and February 2007. He
expressed frustration with the lack of progress after intense
work with Ambassador Speckhard, Vice President al Mahdi, and
Deputy Prime Minister Barham Salih to hammer out the May
version of the revenue sharing law, and wryly observed that
the KRG has never received a copy signed by PM Maliki of the
side agreement, which PM Barzani had signed. Nevertheless,
PM Barzani emphasized the uncertainty of the future USG
presence in Iraq and framed the hydrocarbon law as a counter
to rising Islamic influence in Baghdad. PM Barzani requested
U.S. support as an honest broker in future negotiations of a
hydrocarbon law, but qualified that request with an
expression of concern about the extent of previous USG
pressure to pass the oil framework. "Pressure needs to be
applied elsewhere, quietly,
" he said.


4. (C) PM Barzani described the recent bout of contract
signing by the KRG as an attempt to lead the GoI by example.
He also explained the contract signed with Dana Gas was a
response to the central government's failure to deliver
sufficient fuel and electricity to the KRG or to allocate
sufficient funds to the KRG for that purpose. (NOTE: Dana
Gas signed a service contract with the KRG to begin supplying
gas for power generation from Khor Mor fields in April 2007.
END NOTE)


5. (C) U/S Jeffrey said the USG wants to see definition of a
process to resolve the impasse on the hydrocarbon framework
law and revenue-sharing law. U/S Jeffrey noted that such a
process would require compromises, but should allow agreement
on core principles.


6. (C) In response, PM Barzani categorized revenue sharing
as a political matter and the hydrocarbon framework law as a
technical matter, involving decisions on how many fields
should be allocated to Iraq National Oil Company, how
exploration should proceed, and what model contracts should
look like. Of the four pieces of hydrocarbon legislation, PM
Barzani placed highest priority on passage of a revenue
management law, stating that the framework law might follow
if the parties could reach political agreement to work out
the technical details. Minister Ashti laid out his vision for
a framework to the negotiations, which among other things
required identifying with whom the KRG could negotiate in
Baghdad, and on which of the several draft versions
negotiations should start, with the July 2007 version perhaps
being the easiest to conclude.


7. (C) PM Barzani expressed skepticism that the GoI
reluctance to conclude a law was attributable solely to its
difficult Minister of Oil, and speculated that PM Maliki
might oppose the law as well. PM Barzani outlined his plans
for traveling to Baghdad within the next few days, where he
planned to have "serious discussions" on Peshmerga funding,

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Article 140 implementation over the disputed territories, and
the hydrocarbon law. PM Barzani said he would first speak to
Sunni leaders, to include VP Hashemi, MoPDC Ali Baban, and
Anbari tribal leaders. PM Barzani said he then wanted to
meet with PM Maliki. To work the members of the Council of
Representatives (CoR, the Iraq parliament),PM Barzani
planned to send Dr. Hawrami to the CoR to explain to them the
benefits of foreign investment, highlighting Dr. Ashti's
success in convincing the Kurdistan National Assembly to pass
its KRG Oil and Gas Law in August 2007.


8. (U) This cable was cleared by the delegation prior to
departure.

BUTENIS