EXPERT ANALYSIS: Anbar province, Iraq
Independent analyst Kirk Sowell on Anbar in light of the Akaz gas deal
Kirk Sowell, an independent political analyst at Uticensis Risk Services - www.InsideIraqiPolitics.com - on the province storing both abundant gas and political trouble in Iraq.
On 13 October the Iraqi government signed a deal with South Korea’s KOGAS for the development of the Akaz gas field in Anbar province.
The deal reveals much about Anbar’s promise, ahead of the fourth auction of oilfield services contracts scheduled for March 2012, when three exploration blocks in the province will be up for grabs.
However, the road to doing the deal has been rough, and political tensions – the understanding of which is a necessary part of doing business in Iraq – remain.
Oil companies and the firms that service them in Iraq can learn much about the future project landscape from the progression of the deal and the factors that help and hindered its signature.
Baghdad and Anbar
Baghdad-Anbar relations over the past year have been dominated by conflicts on two parallel tracks.
One has been the struggle between the province and the Shia-dominated government led by Prime Minister Nuri al-Maliki.
While Maliki has asserted federal authority, Anbar officials believe that in the absence of an oil law, they should have a veto, and have attached conditions to approving any deal.
The second has been a long-running security conflict involving what Anbar officials allege to be illegal arrests of local residents.
While the lack of transparent legal process makes it difficult to say with confidence what relationship, if any, might exist between the two dynamics, this very lack of transparency, combined with the timing of some of the arrests, suggests Maliki may be using the security services to exert pressure.
Anbar’s Akaz gas field, discovered in 1992 and the largest in Iraq, was part of the Oil Ministry’s third licensing round on 20 October 2010.
Kazakhstan’s KazMunaiGas and South Korea’s KOGAS won the bidding with a 50% share each (2). The proceedings coincided with vocal opposition to the deal by the local government, led by then-council chairman Jasim al-Halbusi.
The council demanded that gas from Akaz not merely be exported but that the development would create jobs and build other infrastructure, through use of the gas as feedstock for power generation and downstream products. Their protests were effective enough to delay the project.
Yet in December Halbusi met with the Korean and French ambassadors to Iraq, who visited Anbar, and himself traveled to Baghdad and met with then-oil minister, now deputy prime minister, Hussein al-Shahristani. As a result, the 14 December provincial council minutes quote Halbusi as saying Shahristani “told me that he was with us and would support projects in the province.” (3)
Ahmad Abu Risha, head of the Iraqi Awakening Conference, also angled for a role. Abu Risha holds no office, but his party has the most seats in Anbar’s Provincial Council and the governor, Qasim Muhammad al-Fahdawi, was his nominee. Even before the third round, back in 2009, Abu Risha allegedly tried to negotiate a deal with the UAE-based Dana Gas, to the exclusion of Baghdad.
According to the Dubai-based writer Ahmad Salim, Abu Risha appeared to expect to be able to sign a Production Sharing Contract (PSC) on the Kurdistan model. (4) And he appears to have continued to work for a direct agreement between Anbar and an energy company through this year. (5)
Whatever understanding may have been reached in December, minutes published for the council’s meeting on 22 February 2011 meeting show members united in anger that the oil ministry planned a contract signing with the two companies for two days later and had not even invited them to attend.
Council member Mamun Sami Rashid – a former governor and now the chairman of the council, said in reaction “the oil ministry has made a principle out of the marginalization and monopolization of decision-making due to the failure to pass the oil and gas law. We therefore must put forth every effort for the citizens of Anbar who expect much from us. The Akaz field is an opportunity for the future and neglecting it would be a great tragedy.” (6)
The council continued to try to negotiate its own deal, and on 4 May Deputy Governor Saadun Abid al-Shaalan said the council was close to a deal with KOGAS, but that the oil ministry rejected it.
On 11 May, KazMunaiGas announced it was pulling out due to the inability of the council and the oil ministry to reach an agreement on the terms of the deal. That Shaalan mentioned KOGAS in his 4 May statement and not KazMunaiGas suggests they already knew at that point the Kazakh company would not be won over.
This struggle did not take place in a vacuum. Anbar was simultaneously locked in conflict with Maliki over what Anbaris considered to be the illegal arrests of residents, ostensibly as part of the government ‘de-ba’athification’ policy.
While complaints of this sort go back years, arrests by forces under Maliki’s command became prominent in February as the Akaz deal was on the edge.
Finance Minister Rafia al-Isawi intervened in late February and stated they had reached an agreement with Maliki. Yet arrests continued, and on 16 April Deputy Governor Shaalan announced an agreement with Baghdad security officials “to end all warrantless raids and searches… a decision to be implemented beginning today.” Yet this did not last, as on 29 April Baghdad detained a series of Anbar officials, including Council member Faisal al-Isawi, and Fallujah’s police chief, Said Talib.
The conduct of the Maliki government led to the Council appealing directly to Jalal Talabani, the Iraqi President.
Push for autonomy?
Immense popular pressure on both economic and security issues has begun to make Anbari politicians consider a claim for autonomy, despite their prior opposition to the formation of autonomous regions in other parts of the country.
Both Abu Risha and Ali Hatem Sulayman, head of the Dulaim tribe, the largest in the Anbar, began to voice the possibility, although framed mainly as a threat for leverage over Baghdad. What makes both these men unusual among Sunnis is that both are past allies of Maliki.
Whether in response to these moves or for some other reason, in September the Maliki government appeared to at least partially bend to Anbaris’ demands.
Following the Oil Licensing Directorate’s brief on the fourth round exploration contracts, Anbar’s council issued a statement on 24 September expressing “its happiness to see Akaz included in the licensing rounds as long as it serves the people of the province.” (7) The province will be host to adjacent blocks 3, 4 and 5, totaling 22,000 sq km.
The council’s statement quoted several members, and while the tone was more positive toward Baghdad, there was also reservation.
Council member Mazhar Hassan Mulla, chairman of the council’s investment committee, said that the council “will not approve Akaz’s entry” into licensing until it could evaluate the company and its planned projects. Three days later Baghdad announced approval of KOGAS for the contract, which had taken place on 13 September. (8)
Baghdad signed the agreement with KOGAS on 13 October with Second Deputy Governor Fuad Shatat representing the province at the ceremony. While the tenuous rapprochement could have provided a fresh start for Maliki-Anbar relations, it was deeply overshadowed by the explosion of the country’s new de-ba’athification crisis the following week.
This new crisis has no direct link to Anbar or the dispute over Akaz, but has driven support for forming an autonomous region to all-time highs.
The crisis has essentially two elements. One was Higher Education Minister Ali al-Adib’s decision to remove a large number of education employees from their posts, mainly in the majority-Sunni provinces of Salah al-Din and Ninawa.
The other has been a wave of arrests of alleged Baathists, but most of these have been in Shia provinces, and controversial arrests are not new to Anbar.
At the same time, the somewhat more cordial tone of September hardened as on 14 October Second Deputy Governor Fuad Jatab declared that KOGAS’s completion of ancillary projects – housing, electricity – would determine whether Anbar could provide “protection” for operations. This is an implied threat of violence. (9)
Nonetheless, two recent security incidents over the past two weeks may bear more directly on the viability of the Maliki-Anbar relationship.
First, Baghdad Operations Command, which reports directly to Maliki, raided tribal chief Ali Hatem’s compound in Baghdad and detained members of his security detail. They rather implausibly claimed they were carrying out a decision of Baghdad’s Property Disputes Commission.
Second, on 7 November, Governor Qasim Muhammad al-Fahdawi survived his fourth assassination attempt while traveling from Fallujah to Abu Ghraib near Baghdad. Afterward he claimed that while the first three attacks on him were by al-Qaeda in Iraq, this one was executed by “elements in the Iraqi army,” a diplomatic way of accusing Maliki of trying to kill him. Abu Risha, as usual less diplomatic, blamed Maliki and his Dawa Party directly.
Whether the government was involved in the hit on Fahdawi or not, the ultimate success of the Akaz project is going to require a political solution which allows Anbar officials to show their voters that they have delivered on their promises.
Solving this and similar conflicts will also require structural reforms at the federal level, including an oil and gas law which Iraqis can trust and prevent every province from trying to exercise a veto on national energy policy.
A more transparent application of the rule of law in arrest and detention procedures would also help.
BOXOUT - An Appeal to the President
On 25 July Anbar’s Provincial Council published a letter it sent to Iraqi President Jalal Talabani calling for him to intervene between the council and Baghdad (1).
Kirk Sowell translates excerpts from a list of demands which sheds light on the tensions between the regional and national government:
“1 – Use your authority to reverse the death penalty convictions of generals Sultan Hashim and Hussein Rashid, as they were officers carrying out their military duties with military professionalism to implement orders and were not decision-makers
3 – Take into consideration the opinion of the province in the agreement with the company KOGAS, which is investing in the Akaz field, not marginalizing the role of the provincial council, respecting its decisions…
5 – Transfer the commander of Anbar military operations and replace him with another commander and void current operations as they are unconstitutional.
9 – End dependence upon secret testimony and false warrants in the detainment of citizens and the practices of security forces from outside the province and the regional battalion [which reports to Maliki]…
[Other items included giving the province full funding from the budget, building an airport and the establishment of oil refineries in the region.]”
The references to the security services imply a weak understanding of the constitution. Provisions dealing with declaring martial law (Article 61-9) require agreement of both the president and the prime minister, in addition to parliament, and leave power in the hands of the prime minister. It also allows the president to “assume the duties of supreme commander of the armed forces for ceremonial purposes” (Article 73-9).
Kirk Sowell (@IraqiPolitics) is an independent political analyst at Uticensis Risk Services. He publishes a biweekly newsletter on Iraqi politics via www.InsideIraqiPolitics.com. This article is current to 15 November.
1 - Anbar Provincial Council Letter to President Jalal Talabani, July 25, 2011 (http://www.councilalanbar.com/news-233.html).
2 - Iraq’s Third Petroleum Licensing Round, Akkas Contract Area – Bidding Results, October 20, 2010 (http://www.pcld-iraq.com/download.php?file=Press_Release__Akkas.pdf&dir=documents/).
3 - Anbar Provincial Council Minutes, December 14, 2010 (http://www.councilalanbar.com/news-206.html).
4 - Ahmad Abu Risha and Rafia al-Isawi… Most Prominent Leaders of Akaz Project Setting the State…. Buratha News, May 30, 2009 (http://www.burathanews.com/news_article_67005.html). It appears the original source of this article is no longer online. This is the earliest published version still available.
5 - “The Scent of Akaz Compromises the Anbar Provincial Council,” Kitabat, February 6, 2011 (http://www.kitabat.com/i79757.htm).
6 - “Akaz Gas Field and Shortage of Oil Products On the Agenda of the Anbar Provincial Council,” Anbar Provincial Council, February 22, 2011 (http://www.councilalanbar.com/print.php?id=215).
7 - “Anbar Provincial Council Expresses Happiness at Akaz Field Inclusion in Licensing Rounds as Long as it Serves the People of the Province,” Anbar Provincial Council, September 24, 2011 (http://www.councilalanbar.com/news-188.html).
8 - ”Iraq Cabinet Approves KOGAS Deal for Akkas,” Reuters, September 27, 2011 (http://www.reuters.com/article/2011/09/27/iraq-oil-akkas-idUSL5E7KR1XN20110927).
9 - “Anbar Conditions Job Creation to Protection of Akaz Gas Field,” al-Bawaba, October 14, 2011 (http://www.albawwaba.net/economic/53472/).