According to Christian Berthelsen and Tina Susman in Baghdad, reported in The Sydney Morning Herald (28/02/2007, p.9), the US had long wanted to capitalise on Iraq’s oil resources as a means of paying for the country’s reconstruction since the 2003 invasion. Oil’s importance was reiterated in the Iraq Study Group report released in December. The agreement not only would open up Iraq’s oil industry to international investment – a bonanza for foreign oil companies – but also produce revenue for a nation badly in need of cash to finance its reconstruction.
Inherent differences: Iraq’s oil riches predominantly lie in the Kurdish-controlled north and the Shiite-controlled south. Reaching an agreement required both parties to be willing to share their bounty with Sunnis in the middle – a particularly painful prospect as Sunnis under Saddam Hussein controlled the entire government. In addition, Kurds, who are pushing for a referendum on withdrawal from Iraq, wanted more control to strike contracts with foreign firms and spend profits as they see fit.
US works out a formula: The statement from the office of the US ambassador, Zalmay Khalilzad, who reportedly brokered the deal, said all revenues from oil sales would go into a single national account, but all regions and provinces would have a seat on an energy policy-making body, and provinces would receive shares of revenue and have control over how they spend it. It was unclear what concessions led to the compromise, and the precise terms of the deal were not immediately available.
The Sydney Morning Herald, 28/2/2007, p.9