Identifier
Created
Classification
Origin
10BAGHDAD456
2010-02-20 13:58:00
CONFIDENTIAL
Embassy Baghdad
Cable title:
OIL MINISTER TO CHANGE SIGNING BONUSES FOR 2009
how-toVZCZCXYZ0002 RR RUEHWEB DE RUEHGB #0456 0511358 ZNY CCCCC ZZH R 201358Z FEB 10 FM AMEMBASSY BAGHDAD TO RUEHC/SECSTATE WASHDC 6736 INFO RUCNRAQ/IRAQ COLLECTIVE RUEHC/OPEC COLLECTIVE RHEBAAA/USDOE WASHDC RUEAIIA/CIA WASHDC RUEKJCS/DIA WASHDC RHEHNSC/NSC WASHDC RUEKJCS/SECDEF WASHINGTON DC
C O N F I D E N T I A L BAGHDAD 000456
SIPDIS
E.O. 12958: DECL: 02/20/2020
TAGS: EPET ENRG ECON EINV EAID PREL IZ
SUBJECT: OIL MINISTER TO CHANGE SIGNING BONUSES FOR 2009
FIRST BID ROUND CONTRACTS
REF: (A) BAGHDAD 28 (B) BAGHDAD 135 (C) BAGHDAD 256
(D) BAGHDAD 308
Classified By: ACMAT Patricia Haslach for reasons 1.4 (b) & (d)
C O N F I D E N T I A L BAGHDAD 000456
SIPDIS
E.O. 12958: DECL: 02/20/2020
TAGS: EPET ENRG ECON EINV EAID PREL IZ
SUBJECT: OIL MINISTER TO CHANGE SIGNING BONUSES FOR 2009
FIRST BID ROUND CONTRACTS
REF: (A) BAGHDAD 28 (B) BAGHDAD 135 (C) BAGHDAD 256
(D) BAGHDAD 308
Classified By: ACMAT Patricia Haslach for reasons 1.4 (b) & (d)
1. (C) Oil Minister Hussain al-Shahristani told Assistant
Chief of Mission for Assistance Transition (ACMAT) Haslach
and U.S. Forces-Iraq (USF-I) Deputy Commanding General for
Support (DCG) Hunzeker on February 11 that the refundable
signing bonuses, stipulated in the three contracts awarded
from the first oil bid round last June, were actually loans
that must be approved by parliament. However, to avoid
submitting these contracts to parliament, Shahristani said he
intended to make the signing bonuses nonrefundable. (Note:
The signing bonuses in the seven contracts awarded from the
second bid round last December have always been
nonrefundable. End note.) Shahristani said he intends to
pursue this alternative because parliament (Council of
Representatives) approval is not practical until after a new
parliament is seated at an indeterminate, but presumably far
off, time in the future. Both ExxonMobil and Occidental
Petroleum are in consortia awarded contracts from the first
bid round and would be affected by Shahristani's intentions.
Comment
--------------
2. (C) Until now, the Ministry of Oil (MOO) has insisted that
the refundable signing bonuses were not loans and therefore
did not require parliament approval (ref D). MOO had even
argued this point in the Federal Supreme Court case against
Prime Minister Nouri al-Maliki and Oil Minister Shahristani
(ref D). Shahristani's apparent concession may indicate he
concluded that MOO's argument would not prevail in court.
3. (SBU) Converting the signing bonuses from refundable to
non-refundable would unfavorably change the economics of
MOO's contracts awarded to international oil companies (IOCs)
as a result of Iraq's first oil bid round. The financial
calculations used by the IOCs in determining whether to
accept these contracts assumed reimbursement of the signing
bonuses over time, although this reimbursement is diminished
by the time value of money.
4. (SBU) The refundable signing bonuses stipulated in the
contracts awarded from the first bid round are two to five
times larger than the nonrefundable signing bonuses
stipulated in the contracts awarded from the second bid
round. Converting these larger refundable bonuses to
nonrefundable would therefore penalize IOCs with first
bid-round contracts in comparison with IOCs with second
bid-round contracts.
5. (U) We will follow up with our IOC contacts to better
understand the potential impact of Shahristani's intentions.
End comment.
FORD
SIPDIS
E.O. 12958: DECL: 02/20/2020
TAGS: EPET ENRG ECON EINV EAID PREL IZ
SUBJECT: OIL MINISTER TO CHANGE SIGNING BONUSES FOR 2009
FIRST BID ROUND CONTRACTS
REF: (A) BAGHDAD 28 (B) BAGHDAD 135 (C) BAGHDAD 256
(D) BAGHDAD 308
Classified By: ACMAT Patricia Haslach for reasons 1.4 (b) & (d)
1. (C) Oil Minister Hussain al-Shahristani told Assistant
Chief of Mission for Assistance Transition (ACMAT) Haslach
and U.S. Forces-Iraq (USF-I) Deputy Commanding General for
Support (DCG) Hunzeker on February 11 that the refundable
signing bonuses, stipulated in the three contracts awarded
from the first oil bid round last June, were actually loans
that must be approved by parliament. However, to avoid
submitting these contracts to parliament, Shahristani said he
intended to make the signing bonuses nonrefundable. (Note:
The signing bonuses in the seven contracts awarded from the
second bid round last December have always been
nonrefundable. End note.) Shahristani said he intends to
pursue this alternative because parliament (Council of
Representatives) approval is not practical until after a new
parliament is seated at an indeterminate, but presumably far
off, time in the future. Both ExxonMobil and Occidental
Petroleum are in consortia awarded contracts from the first
bid round and would be affected by Shahristani's intentions.
Comment
--------------
2. (C) Until now, the Ministry of Oil (MOO) has insisted that
the refundable signing bonuses were not loans and therefore
did not require parliament approval (ref D). MOO had even
argued this point in the Federal Supreme Court case against
Prime Minister Nouri al-Maliki and Oil Minister Shahristani
(ref D). Shahristani's apparent concession may indicate he
concluded that MOO's argument would not prevail in court.
3. (SBU) Converting the signing bonuses from refundable to
non-refundable would unfavorably change the economics of
MOO's contracts awarded to international oil companies (IOCs)
as a result of Iraq's first oil bid round. The financial
calculations used by the IOCs in determining whether to
accept these contracts assumed reimbursement of the signing
bonuses over time, although this reimbursement is diminished
by the time value of money.
4. (SBU) The refundable signing bonuses stipulated in the
contracts awarded from the first bid round are two to five
times larger than the nonrefundable signing bonuses
stipulated in the contracts awarded from the second bid
round. Converting these larger refundable bonuses to
nonrefundable would therefore penalize IOCs with first
bid-round contracts in comparison with IOCs with second
bid-round contracts.
5. (U) We will follow up with our IOC contacts to better
understand the potential impact of Shahristani's intentions.
End comment.
FORD