With considerable fanfare, Iraq’s cabinet last week announced approval of a draft law that would permit foreign investment in the nation’s oil industry and provide for distribution of oil revenues among the regions and thus the country’s main sectarian blocs. Details of the draft are tricky. Revenues from current oil fields are to be shared according to population. Yet no recent census has been taken. The Kurdish region in the north and the provinces can sign new oil contracts, but these must be reviewed by an independent federal committee, which is not yet appointed. There is concern that foreign oil companies might try to get better terms by playing the provinces against one another.

But some oil experts are sceptical of the significance of the measure. “It will not mean anything on the ground,” says A F Alhajji, an oil economist at Ohio Northern University in Ada. As long as Iraq suffers from political instability, major oil companies will shy away. “The situation is so bad no one in his right mind wants to go there to be attacked or nationalised a second time.” Fearing the consequences, “The oil companies never supported the invasion,” Dr. Alhajji adds. Iraq’s oil remains important to a world highly reliant on petroleum and its by-products. Iraq has proven reserves of 115 billion barrels and, according to Iraqi oil economist Muhammad-Ali Zainy, another 215 billion to 240 billion barrels are not yet proven.

Because of sabotage by insurgents, Iraqi oil production has been running at less than 2 million barrels per day, down from 2.8 million barrels before the invasion of Iraq in March 2003. To Alhajji, the “rush” to approve the draft law reflects the need of the Iraqi government and the Bush administration to show some success — “even if it is as cosmetic as the new oil law.” Zalmay Khalilzad, United States ambassador in Iraq, stated the draft was the “first time since 2003 that all major Iraqi communities have come together on a defining piece of legislation.”

The draft law “reverses everything that has happened in the Middle East since 1901,” charges Rashid Khalidi, director of the Middle East Institute at Columbia University. Implying that American occupiers have had much influence on the measure, Khalidi asks: “Does [Vice President] Cheney think he can stand against history? “Alhajji notes that contracts signed “under duress” are not legally binding.

After Iran nationalised its oil industry in the 1950s, British lawyers for the Anglo-Persian Oil Company (now British Petroleum) contested the action in the International Court in the Hague and lost, despite Britain’s superpower status then.

In the future, Iraqi lawyers could similarly argue that any oil deal signed while Iraq was occupied, was done under duress and thus was invalid. After reading the draft law in Arabic last week, Alhajji says, “It is so broad and loose, it has no significance.” Often, he says, nationalism in oil-rich nations rises during and after occupation. That “will cause problems.” — The Christian Science Monitor