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Summary:
Iraqi leaders continue to debate a package of hydrocarbon sector and revenue sharing legislation that would define the terms for the future management and development of the country's significant oil and natural gas resources. The package includes an oil and gas sector framework law and three supporting laws that would outline revenue sharing, restructure Iraq's Ministry of Oil, and create an Iraqi National Oil Company. Both the Bush Administration and Congress consider the passage of oil and gas sector framework and revenue sharing legislation as important benchmarks that would indicate the current Iraqi government's commitment to promoting political reconciliation and long term economic development in Iraq. Section 1314 of the FY2007 Supplemental Appropriations Act [P.L.110-28] specifically identified the enactment and implementation of legislation "to ensure the equitable distribution of hydrocarbon resources of the people of Iraq without regard to the sect or ethnicity of recipients" and "to ensure that the energy resources of Iraq benefit Sunni Arabs, Shia Arabs, Kurds, and other Iraqi citizens in an equitable manner" as benchmarks. The Administration reported to Congress on these benchmarks in July and September 2007. The draft framework law approved by Iraq's Council of Ministers (cabinet) in July 2007 does not include revenue sharing arrangements. Iraq's Council of Representatives (parliament) has not taken action to consider the legislation to date because of ongoing political disputes. The central importance of oil and gas revenue for the Iraqi economy is widely recognized by Iraqis, and most groups accept the need to create new legal and policy guidelines for the development of the country's oil and natural gas. However, Iraqi critics and supporters of the proposed legislation differ strongly on a number of key issues, including the proper role and powers of federal and regional authorities in regulating oil and gas development; the terms and extent of potential foreign participation in the oil and gas sectors; and proposed formulas and mechanisms for equitably sharing oil and gas revenue. Concurrent, related discussions about proposed amendments to articles of Iraq's constitution that outline federal and regional oil and gas rights also are highly contentious. The current military strategy employed by U.S. forces in Iraq seeks to create a secure environment in which Iraqis can resolve core political differences. However, it remains to be seen whether the package of hydrocarbon legislation under consideration will promote reconciliation or contribute to deeper political tension. Administration policymakers and Members of Congress thus face difficult choices with regard to encouraging consideration of new hydrocarbon legislation and related constitutional reforms while attempting to ensure that the content of proposed laws and amendments reflects compromises reached by and acceptable to Iraqis. This report reviews the package of legislation currently under consideration, analyzes the positions of various Iraqi political actors, and discusses potential implications for U.S. foreign policy goals in Iraq. The report will be updated to reflect new developments. See also CRS Report RL31339, Iraq: Post-Saddam Governance and Security, and CRS Report RS22079, The Kurds in Post-Saddam Iraq.
