Page 4 - MEOG Week 38

MEOG COMMENTARY MEOG

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.

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

P4 www. NEWSBASE .com Week 38 23•September•2020