Iraq referendum vote unlikely to bring politcial, energy security

Dubai (Platts)--14Oct2005

As Iraqis head to the polls Saturday to vote on the constitution,
approval or disapproval is unlikely to improve the security situation in the
country enough for rebuilding the energy infrastructure, Iraqi officials said
Friday. 
     Iraqis will set out to vote in what is being described as an historical
referendum. If the constitution is approved, national elections will be held
Dec 15. Iraq is expected to become a loose federal state with strong regional
control, split by the Shi'ite-Muslim south, Sunni center and Kurdish north.
     But rather than lead to stability, federalism could cause greater
political instability as sectarian violence increases and oil sector
reconstruction work languishes.
     "Actually, the constitution will only split Iraqi society," the Sunni
head of the Iraqi Dialogue Council Mohammed Selah Mutlak told Platts Friday
from Baghdad. "It is the start of breaking up the country with federalism."
     The US invasion and the subsequent political process, which started with
the Transitional Administrative Law last year, has left the Sunni minority on
the sidelines, feeling marginalized by a political process dominated by the
Shi'ite and Kurds. Sunnis represent 20% of the country's population, while
Kurds have 15% and the Shi'ite 60% each.      
     In an effort to bring the Sunnis-minority back into the political fold,
Iraq leaders clinched a deal Wednesday allowing for parliament to revise the
constitution after new elections held in December. 
     "There have been some changes to the constitution," Iraqi Islamic Party
official Naseer al-Ani said. "This could change the mind of the Sunnis. But
the changes are still not enough. Federalism is not a good thing for Iraq."
     But Sunni-backed insurgents have already vowed to disrupt violently the
vote and have threatened to kill Iraqi Islam Party leaders after the party
endorsed the constitution. The Committee of Muslim Scholars, the leading Sunni
religious group, has also instructed followers to reject the constitution by
legitimate means.
     "Most of the Sunnis are against the constitution," IDC's Mutlak said.
"Civil war is expected in Iraq." The IDC represents different political and
religious groups in the country, including Shi'ite parites.  
      
     POLITICAL STABILITY NEEDED FOR OIL SECTOR    
     If Iraq does move down the federalism path, as is likely, the country's
different sectarian groups could start fighting over key oil centers, such as
the oil-rich city of Kirkuk and the oil fields straddling the central and
southern regions of the country. 
     Kirkuk is a potential flash point with its 550,000-700,000 b/d oil field
and surrounding oil installations, such as the al-Fatha Bridge, located 110-km
(69 miles) west of the city. 
     "The Kurds will not have the capability of running an oil sector without
Kirkuk," Mutlak said. "They have ambitions to control Kirkuk for the oil. This
could set off fighting between Arabs and Kurds over Kirkuk oil resources." 
     Kurdish officials, like president Jalal Talabani, have said the status of
Kirkuk would be resolved through a political process made through Baghdad.  
     But Iraqi oil ministry officials, who have asked to remain unnamed, have
also said that Kurdish oil ambitions rely mainly on control of Kirkuk and
access to the 310,000 b/d Baiji refinery further southeast. Without either, a
Kurdish oil sector would be constrained. 
     Under the constitution, existing oil fields will be managed by the oil
ministry from Baghdad with coordination with regional government. New
exploration and crude oil fields will be managed by regional governments. The
Kurds, for example, have already signed exploration and oil field study deals
with multinational corporations. 
     In the south, the home to Iraq's largest oil fields--the 800,000 b/d
South Rumaila and the 500,000 b/d North Rumaila--there are fears that the
regional government will further establish closer political and energy ties
with Iran with federalism.
     "Political parties want autonomy so they can have regional political
support and control over oil resources," Mutlak said expressing a sentiment
echoed by other officials in Baghdad. 
     Oil industry sources agree that stability is the first step needed to
boost Iraqi oil production and that without it output and exports will
languish below pre-war levels, raising further concdenrs about federalism.  
     Iraq, with 125-bil bbl in crude reserves, produced around 2.06-mil b/d in
September, or around 90,000 b/d less than the August figure.  
     "Iraq's production is being constrained by sabotage in the north," a
senior oil ministry official said adding that as long as exports to the
Turkish Mediterranean port of Ceyhan remain offline production levels will
remain constrained. "There needs to be stability."
--Glen Carey, glen_carey@platts.com

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