PRIME MINISTER MALIKI: "NO CHANCE" OF HYDROCARBONS

S E C R E T BAGHDAD 002565

SIPDIS

E.O. 12958: DECL: 09/24/2029
TAGS: PREL ECON ENRG EPET IR IZ SY
SUBJECT: PRIME MINISTER MALIKI: "NO CHANCE" OF HYDROCARBONS
LEGISLATION BEFORE ELECTIONS

Classified By: Ambassador Chris Hill for reasons 1.5 b,d


1. (S) In a September 22 meeting, Iraqi Prime Minister Nouri
al-Maliki told Ambassador that pending hydrocarbons sector
reform legislation "will not see the light of day" during
this session of the Council of Representatives (CoR, the
Iraqi Parliament). The current CoR, Maliki said, is &dead8
and no longer effective, and cannot be relied upon to pass
any legislation. The GOI, he said, is effectively at a
standstill. "If the CoR cannot even pass minor amendments to
investment regulations," he asked, "how can it be expected to
pass four major pieces of legislation?" Progress now on
these bills, he concluded, is "not possible. They must await
the next CoR."


2. (C) Maliki also dismissed an alternative UNAMI proposal to
incorporate revenue sharing (one of the four hydrocarbons
sector bills) as an amendment to the Iraqi Constitution. He
waved the suggestion away, noting that revenue sharing is
"already in the Constitution." He was similarly opposed to a
suggestion that the KRG and GOI could enact parallel
legislation affirming any revenue sharing arrangement.
Revenue sharing is a federal government issue, not an issue
that should be legislated by the KRG parliament, he said.


3. (C) Comment: While the CoR may be a lost cause for now,
Post will continue to press key actors on each side to engage
in discussion and negotiation towards a political agreement
on revenue sharing. Once a political consensus has been
reached, a mechanism for making this agreement permanent must
be identified. Taking into account Maliki's comments, the
most likely mechanism is an improved version of the 2007
draft of the Financial Resources Law (aka, the draft revenue
sharing law). This law has no realistic prospect of passage
prior to the formation of a new government in early 2010.
This delay could give parties an opportunity to make
necessary changes to the draft to bring it into compliance
with best financial management practices. The mechanisms set
forth in the current draft of the revenue sharing law are not
consistent with the operating Financial Management Law, and
therefore would need significant re-drafQg. (The GOI has
made significant progress on fiscal and budgetary regulation
in the last three years, and this bill as drafted does not
meet those higher standards.) We will also continue to
stress our commitment to the goals of transparency,
accountability, and equitable revenue sharing implemented in
a manner that is consistent with the Constitution, the
Financial Management Law, existing bilateral and multilateral
agreements, and internationally accepted
public-financial-management best practices. We will express
our belief that these goals can be met through continued
negotiation between the GOI and KRG of carefully crafted
financial sector legislation and regulation.
HILL