Wednesday, September 22, 2010

Iraq’s Petroleum Revenue Is Being Distributed Without A New Oil Law

One complaint often made about Iraq, its reconciliation process, and oil industry is the fact that it has not passed a natural resource law that would provide an equitable distribution of its petroleum revenues, which account for 90% of the government’s money. What this argument ignores is the fact that Article 112 of the Iraqi Constitution states:

"First: The federal government, with the producing governorates and regional government, shall undertake the management of oil and gas extracted from present fields, provided that it distributes its revenue in a fair manner in proportion to the population distribution in all parts of the country."

This requirement that the provinces be given a budget according to their population has been followed every year since 2005 when the constitution was passed. In 2009 for example, Anbar with the sixth largest population outside of the three Kurdish governorates, got the sixth largest budget. Muthanna, with the smallest population outside of Kurdistan, received the smallest outlay.

Provinces: Population – 2009 Provincial Budgets
1. Baghdad: 6,995,000 - $551 million
2. Ninewa: 2,820,000 - $236 million
3. Basra: 2,408,000 - $201 million
4. Sulaymaniya: 2,159,800 – Kurdistan N/A
5. Irbil: 1,845,200 – Kurdistan N/A
6. Dhi Qar: 1,687,000 - $143 million
7. Babil: 1,574,000 - $134 million
8. Anbar: 1,427,000 - $112 million
9. Diyala: 1,323,000 - $104 million
10. Salahaddin: 1,158,000 - $97 million
11. Tamim: 1,129,000 - $99 million
12. Najaf: 1,113,000- $93 million
13. Wasit: 1,056,000 - $91 million
14. Qadisiyah: 1,033,000 - $86 million
15. Maysan: 944,000 - $80 million
16. Karbala: 902,000 - $78 million
17. Muthanna: 650,000 - $56 million
18. Dohuk: 616,600 – Kurdistan N/A

The 2010 budget also includes special provisions for oil producing provinces, and those with religious sites. This year the central government will pay each governorate that produces petroleum $1 per barrel. $20 will also be given for each foreign visitor traveling to a province, which is aimed at Najaf, Karbala, Baghdad, and Salahaddin that have famous Islamic shrines visited by thousands of pilgrims annually. This was included in the legislation in part to appease complaints from the south that produces the vast majority of Iraq’s oil, but who feels like it is not benefiting enough from their natural wealth.

Since 2005 Baghdad has been following the constitution and providing each province with funding based upon their population. Oil producing governorates are also getting extra money this year. Since almost all of Iraq’s revenue comes from petroleum it can be said that profits from that industry are being distributed throughout the country. How a new hydrocarbon law would affect that is unknown, but it would seem that complaints that one not being passed is holding up oil money being distributed are misplaced.

SOURCES

Bender, David, “Iraq oil and its future,” The Call, Foreign Policy, 8/24/10

Iraqi Constitution, 2005

Ricks, Thomas, “Did the Iraqi surge succeed?” Best Defense, Foreign Policy, 7/26/10

Special Inspector General for Iraq Reconstruction, “Quarterly Report to the United States Congress,” 4/30/09
- “Quarterly Report to the United States Congress,” 10/30/09
- “Quarterly Report to the United States Congress,” 4/30/10

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