Page 4 - DMEA Week 38

DMEA COMMENTARY DMEA

Consolidation concerns as Iraq

relaunches INOC

Iraq is laying the groundwork for the re-launch of the Iraq National Oil Co. (INOC) to oversee
the development of the country’s oil sector. However, given the country’s record with

corruption, there are fears about the consolidation of power

WHAT: BAGHDAD has taken steps in recent weeks to infrastructure and been the only authority
INOC is set to be re-create the Iraq National Oil Co. (INOC) as the allowed to sign contracts with IOCs investing in
re-launched with the country seeks to restructure the key sector. As oil and gas and other parts of the energy sector.
Minister of Oil at its helm. the stage is set for the re-emergence of INOC, As if this was not enough power concentrated
Oil Minister Ihsan Ismaael is being charged with in one place, the company would also have had
WHY: running the firm in addition to his ministerial the power to create a fund to distribute the prof-
The company was first duties. its, while controlling any future sovereign wealth
established in the 1960s The government has been planning the move fund and being in full control of all investments
but was folded into the for more than 18 months, though efforts to date in strategic projects in areas of the country in
Ministry of Oil around 20 have been delayed by objections by the Federal which it operates and in industrial and agricul-
years later. Supreme Court to proposed changes to the 2018 ture projects on any land it owns.
INOC legislation, which were deemed to have It was therefore unsurprising that former
WHAT NEXT: been unconstitutional. INOC senior economist and now independent
There were grave Last week, Iraq Oil Report said that it had consultant Ahmed Mousa Jiyad said that Article
concerns about the seen a document from the Secretary General 12 of the legislation was “the most ridiculous,
amount of control that of the Council of Ministers providing further disintegrative, destructive and unconstitutional
would have been held detail on the moves. It said that on August 17 aspects of this law”.
by INOC under the 2018 the cabinet had decided to amend the INOC In a critique published in March 2018, he said
proposal, and work is law, creating the INOC governing board and that Article 12 “provides the legal cover for for-
being carried out to advisory board and conducting a valuation of all malised corruption and kleptocracy by assigning
address these issues. companies to be moved from the Ministry of Oil the three funds [the Citizens Fund, Generations
(MoO) to INOC authority. Fund and Reconstruction Fund] at least 10% of
In addition, it elected to task the Oil Minis- the revenues of the oil exports at the discretion
ter “to perform the tasks of INOC director in of the INOC’s board of directors.”
addition … to start the formation of the board In addition to the oddity of an NOC con-
to ensure the implementation … and to start its trolling these funds rather than the government,
tasks and responsibilities according to the law.” INOC would be unlikely to be capable of man-
INOC, which was established in 1966, but aging such funds, given that its area of expertise
was incorporated into the MoO in 1986, will be would presumably be oil and gas development.
a “separate corporate entity enjoying financial Meanwhile, INOC’s powers would have
and administrative autonomy, represented by extended yet further, with all revenues generated
the president.” from the export and sale of oil and gas “consid-
Talks remain ongoing over the company’s ered as financial revenues for INOC”, according
reformation. to Jiyad.
He added: “This is a flagrant violation of the
Scrutiny Constitution, which states that oil and gas belong
When the INOC law was proposed in 2018, it to the Iraqi people and not a financial return to
came under fire. This was not without reason, one public company.”
though, and given Iraq’s colourful history with Not pulling any punches, Jiyad concluded:
corruption, it was perhaps for the best that it was “By considering these state sovereign oil export
not passed as drafted. revenues as financial revenues for a public
Under the legislation, INOC would have company deprives these revenues of sovereign
controlled all hydrocarbon revenues and deter- status, thus exposing them to all forms of sei-
mined what was to be passed to the national zure and confiscation in implementation of
treasury. It would have owned all upstream, any judicial action in any place where the pro-
midstream, downstream, marketing and tanker ceeds exist, and exposes oil export revenues to
interests and the associated pipeline and export many high risks.

P4 www. NEWSBASE .com Week 38 24•September•2020