US ADVISED IRAQI MINISTRY ON OIL DEALS
Andrew E. Kramer

Monday, June 30, 2008 by The New York Times

A group of American advisers led by a small State Department team
played an integral part in drawing up contracts between the Iraqi
government and five major Western oil companies to develop some of
the largest fields in Iraq, American officials say.

The disclosure, coming on the eve of the contracts’ announcement, is
the first confirmation of direct involvement by the Bush administration
in deals to open Iraq’s oil to commercial development and is likely
to stoke criticism.

In their role as advisers to the Iraqi Oil Ministry, American
government lawyers and private-sector consultants provided template
contracts and detailed suggestions on drafting the contracts, advisers
and a senior State Department official said.

It is unclear how much influence their work had on the ministry’s
decisions.

The advisers – who, along with the diplomatic official, spoke on
condition of anonymity – say that their involvement was only to help
an understaffed Iraqi ministry with technical and legal details of
the contracts and that they in no way helped choose which companies
got the deals.

Repeated calls to the Oil Ministry’s press office for comment were
not returned.

At a time of spiraling oil prices, the no-bid contracts, in a country
with some of the world’s largest untapped fields and potential for
vast profits, are a rare prize to the industry. The contracts are
expected to be awarded Monday to Exxon Mobil, Shell, BP, Total and
Chevron, as well as to several smaller oil companies.

The deals have been criticized by opponents of the Iraq war, who
accuse the Bush administration of working behind the scenes to ensure
Western access to Iraqi oil fields even as most other oil-exporting
countries have been sharply limiting the roles of international oil
companies in development.

For its part, the administration has repeatedly denied steering the
Iraqis toward decisions. "Iraq is a sovereign country, and it can
make decisions based on how it feels that it wants to move forward
in its development of its oil resources," said Dana Perino, the White
House spokeswoman.

Though enriched by high prices, the companies are starved for new oil
fields. The United States government, too, has eagerly encouraged
investment anywhere in the world that could provide new oil to
alleviate the exceptionally tight global supply, which is a cause of
high prices.

Iraq is particularly attractive in that light, because in addition
to its vast reserves, it has the potential to bring new sources of
oil onto the market relatively cheaply.

As sabotage on oil export pipelines has declined with improved
security, this potential is closer to being realized. American
military officials say the pipelines now have excess capacity,
waiting for output to increase at the fields.

But any perception of American meddling in Iraq’s oil policies
threatens to inflame opinion against the United States, particularly
in Arab nations that are skeptical of American intentions in Iraq,
which has the third-largest oil reserves in the world.

"We pretend it is not a centerpiece of our motivation, yet we keep
confirming that it is," Frederick D. Barton, senior adviser at the
Center for Strategic and International Studies in Washington, said in
a telephone interview. "And we undermine our own veracity by citing
issues like sovereignty, when we have our hands right in the middle
of it."

United States officials are directly advising Iraq on a host of issues,
from electricity to education. But they have avoided the limelight
when questions turn to how Iraq should manage its oil endowment,
insisting that a decision must rest with the Iraqi government.

The State Department advisers on the Western contracts say they
purposely avoid trying to shape Iraqi policy.

"They have not negotiated with the international oil companies
since the 1970s," said the senior State Department official, who was
speaking about Iraqi oil officials and who is directly involved in
shaping United States energy policy in Iraq.

The advice on the drafting of the contracts was not binding, he said,
and sometimes the ministry chose to ignore it. "The ministry did not
have to take our advice," he said, adding that the Iraqis had also
turned to the Norwegian government for counsel. "It has been their
sole decision."

The advisers say they were not involved in advancing the oil companies’
interests, but rather treated the Oil Ministry as a client, the
State Department official said. "I do not see this as a conflict of
interest," he said. A potential area of criticism, however, is that
only Western companies got the bigger oil contracts. In particular,
Russian companies that have experience in Iraq and had sought
development contracts are still waiting.

Earlier in the occupation of Iraq, American advisers supported the
Oil Ministry’s effort to dismiss claims by the Russian company Lukoil
to a large Saddam Hussein-era deal. The ministry maintains that the
Hussein government canceled the contract three months before the
invasion. Lukoil says the attempt to cancel the deal was illegal
because Mr. Hussein had not appealed to international arbitration
first, as required in the contract terms.

The new oil contracts have also become a significant political issue
in the United States.

Three Democratic senators, led by Charles E. Schumer of New York,
sent a letter to the State Department last week asking that the deals
be delayed until after the Iraqi Parliament passes a hydrocarbons law
outlining the distribution of oil revenues and regulatory matters. They
contend the contracts could deepen political tensions in Iraq and
endanger American soldiers.

Criticism like that has prompted objections by the Bush administration
and the secretary of state, Condoleezza Rice, who say the deals are
purely commercial matters. Ms. Rice, speaking on Fox News this month,
said: "The United States government has stayed out of the matter of
awarding the Iraq oil contracts. It’s a private sector matter."

Advisers from the State, Commerce, Energy and Interior Departments are
assigned to work with the Iraqi Oil Ministry, according to the senior
diplomat. In addition, the United States Agency for International
Development has a contract for Management Systems International, a
Washington consulting firm, to advise the oil and other ministries. The
agency’s program is called Tatweer, the Arabic word for development.

"The legal department of the Ministry of Oil passed us a draft of the
contract," Samir Abid, a Canadian of Iraqi origin who is an employee
of the Tatweer program, said in a telephone interview. "They passed
it to us and asked for our comments because we were mentoring them."

He added: "It was an exercise in deciding how best to do these
contracts. I don’t know if they used our comments or not."

In a statement, the agency said its advisers had reviewed the oil
company contracts, known as technical support agreements: "At the
request of the Ministry of Oil, the Tatweer Energy Team has done
a review of the format, structure and clarity of language of blank
draft contracts."

The statement said the team did not have access to confidential
information from the oil companies.

Consultants said the advice was necessary because the Oil Ministry,
like other sectors of the Iraqi government, has experienced an
exodus of qualified employees and lacks lawyers schooled in drawing
up contracts.

A supervisor with the Tatweer program, who was not authorized to
speak publicly and declined to be quoted by name, said that ministry
officials, many of them near retirement, needed help.

The American government lawyers provided specific advice, the
State Department official said, like: "These are the clauses you may
want. You will need a clause on arbitration. You will need this clause
to make this work."