Iraq Oil Contracts: More Trouble for Schaffer?

by: Colorado Pols

Thu Jul 03, 2008 at 08:51:01 AM MDT

With last week's announcement by the Iraqi government of a new nationwide oil development policy, and contracts with major Western oil companies to modernize Iraq's oil production infrastructure, regional contracts like the one Schaffer landed for Aspect Energy have apparently emerged as a major sticking point.

And the story gets murkier as more is disclosed about these regional deals for oil in Iraq under Congressional scrutiny, a practice the State Department claims to have "discouraged," and the Iraqi federal government insists is illegal--but the Bush administration allegedly encouraged in violation of their own official policy. As the New York Times reports about a similar, contemporaneous oil deal with the one Schaffer negotiated:

Bush administration officials knew that a Texas oil company with close ties to President Bush was planning to sign an oil deal with the regional Kurdistan government that ran counter to American policy and undercut Iraq's central government, a Congressional committee has concluded.

The release of the documents comes as the administration is defending help that United States officials provided in drawing up a separate set of no-bid contracts, still pending, between Iraq's Oil Ministry in Baghdad and five major Western oil companies to provide services at other Iraqi oil fields...

Iraq's oil minister, Hussain al-Shahristani, has condemned the Kurdistan deal as illegal because it was not approved by Iraq's central government and was struck without an oil law, which has still not been passed.

After the deal was signed last year, a senior State Department official in Baghdad criticized it, saying, "We believe these contracts have needlessly elevated tensions between the K.R.G. and the national government of Iraq." [Pols emphasis]

The State Department said Wednesday that it had discouraged the deal. Hunt officials declined to comment, and Kurdish government officials said there was no impropriety.

In a letter to the House Committee on Oversight and Government Reform, whose chairman is Representative Henry A. Waxman, Democrat of California, a State Department official wrote that the department had strongly discouraged Hunt from signing the deal until an oil law had been passed.

The State Department told Hunt that "we continue to advise all companies that they incur significant political and legal risk by signing contracts" before then, wrote Jeffrey T. Bergner, an assistant secretary for legislative affairs at the department, in one of the documents made public on Wednesday.

But in a letter to Secretary of State Condoleezza Rice, Mr. Waxman wrote that the documents his committee had collected "tell a different story about the role of administration officials."

Although this isn't the same contract that Schaffer was involved in, it was in the same period of time and in the same place, and all of these contracts are now the subject of this growing dispute between the Kurdish Regional government and the Iraqi federal government. Most experts regard the settling of the issue of Iraq's oil development and revenue as critical to the country's stability, a key condition for eventual American success and widthdrawal.

Obviously, the first question for Schaffer is whether or not he was similarly "discouraged" by the State Department from pursuing local oil contracts in Iraq without laws in place nationally yet to accomodate them. Then, somebody should ask him how this deal he negotiated with the Kurds squares with official American policy of wanting a national oil development strategy for a unified Iraq.

In fact, a whole slew of questions along the same rather distressing line present themselves, for Schaffer especially given the displeasure voters seem to have these days for the words "oil company" or "Iraq war." Imagine the reaction to putting them together, say, "Bob Schaffer cared more about his oil company than he did about winning the Iraq war."

But if anybody even manages to get as far as we have before Dick Wadhams shuts down the interview we'll be very surprised.