China Is The Only Winner In This Huge Iraqi Oil Field
China Is The Only Winner In This Huge Iraqi Oil Field

The statement last week from Iraq’s Oil Minister, Ihsan Abdul Jabbar, that the newly resurrected Iraqi National Oil Company (INOC) has been given government approval to acquire ExxonMobil’s 32.7 percent stake in the supergiant West Qurna 1 oil field for up to US$350 million is likely to leave China delighted, the U.S. irritated, and Iraq’s oil industry still unable to achieve any of its key oil output goals. The last iteration of the INOC – created in 1966, before it was effectively closed down in 1987, with its remnants incorporated into the Ministry of Oil (MoO) – was founded on a mandate that included elements that seemed geared towards enabling malpractice of one kind and another. In particular, Article 12 of the law relating to the establishment of INOC contained, as highlighted by the former senior economist with Iraq’s MoO, and subsequently head of the Oslo-based Development Consultancy & Research, Ahmed Mousa Jiyad: “The most ridiculous, disintegrative, destructive and unconstitutional aspects of this law […providing] the legal cover for formalised corruption and kleptocracy by assigning the three funds [‘Citizens Fund’, ‘Generations Fund’, ‘Reconstruction Fund’] at least 10 per cent of the revenues of the oil exports at the discretion of the INOC’s board of directors.” The power of the INOC board of directors, though, could extend further, he added at the time, as under the 2018 version of the law, revenues generated from the export and sale of oil and gas ‘will be considered as financial revenues for INOC’. “This is a flagrant violation of the Constitution, which states that oil and gas belong to the Iraqi people and not a financial return to one public company,” said Jiyad. The full scope of the powers of this new version of the INOC has not yet been fully laid out, which means that no constraints are in place.

Even without a centralised institution such as the INOC to concentrate and control all of the key elements pertaining to by far Iraq’s most lucrative business sector (oil still accounts for around 90 percent of the government’s total revenues), the independent risk analysis firm, Transparency International in its ‘Corruption Perceptions Index’, in which Iraq is always ranked at or near the bottom, perennially notes that the country demonstrates: “Massive embezzlement, procurement scams, money laundering, oil smuggling and widespread bureaucratic bribery have led the country to the bottom of international corruption rankings…and political interference in anti-corruption bodies and politicisation of corruption issues, weak civil society, insecurity, lack of resources and incomplete legal provisions severely limit the government’s capacity to efficiently curb soaring corruption.”

According to a statement made in 2015 by Iraq’s own Oil Minister – and later Prime Minister of Iraq – Adil Abdul Mahdi, Iraq “lost US$14,448,146,000” (that is over 14 ‘billion’, not ‘million’) from the beginning of 2011 up to the end of 2014 in cash “compensation” payments, supposedly to international oil companies and other related entities but in reality, as fully analysed by OilPrice.com here, basically related to the way in which gross remuneration fees, income tax and the share of the State partner was deducted and accounted for in the compensation paid out relating to reduced oil production levels.

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