{ "id": "RL34064", "type": "CRS Report", "typeId": "REPORTS", "number": "RL34064", "active": false, "source": "EveryCRSReport.com, University of North Texas Libraries Government Documents Department", "versions": [ { "source": "EveryCRSReport.com", "id": 356841, "date": "2010-03-03", "retrieved": "2016-04-07T01:55:09.867658", "title": "Iraq: Oil and Gas Sector, Revenue Sharing, and U.S. Policy", "summary": "Development in Iraq\u2019s oil and natural gas sector is proceeding, amid ongoing debates. Iraqis 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 the administrative status of the city of Kirkuk and proposed amendments to articles of Iraq\u2019s constitution that outline federal and regional oil and gas rights also are highly contentious. \nBoth the Bush Administration and the 110th Congress considered the passage of oil and gas sector framework and revenue-sharing legislation as important benchmarks that would indicate the Iraqi government\u2019s commitment to promoting political reconciliation and providing a solid foundation for long-term economic development in Iraq. Obama Administration officials and some Members of the 111th Congress have expressed similar views. In the absence of new comprehensive legislation to manage the energy sector and distribute energy export revenues, interim revenue-sharing mechanisms have been implemented, while both the national government and the Kurdistan Regional Government have signed oil and natural gas contracts with foreign firms.\nThe 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\u2019s oil and natural gas resources. However, Iraq\u2019s current Council of Representatives (parliament) did not take action to consider proposed energy sector reform legislation because of broader political disputes. Observers and U.S. officials remain focused on the outcome of the March 2010 Iraqi national election as an indicator of future trends. \nIn January 2010, the Council of Representatives adopted Iraq\u2019s 2010 budget, which includes a deficit of more than $19 billion because of increased spending and stagnant oil production and export levels in Iraq. The budget also includes a controversial revenue distribution mechanism that will reward specific energy resource producing governorates. Iraq has secured a $3.6 billion stand-by arrangement with the International Monetary Fund (IMF) and a total of $500 million in loans from the World Bank to cover a portion of the expected 2010 deficit, as U.S. officials continue to warn that reduced revenues and spending may jeopardize Iraqi investments in infrastructure and security forces needed to fully stabilize the country.\nThe military strategy employed by U.S. forces in Iraq has sought to create a secure environment in which Iraqis can resolve core political differences as a means of ensuring national stability and security. However, it remains to be seen whether proposed oil and gas legislation and ongoing interim efforts to develop Iraq\u2019s energy resources will promote reconciliation or contribute to deeper political tension. U.S. policymakers and Members of Congress thus face difficult choices with regard to engaging Iraqis on various policy proposals, related constitutional reforms, and oil and natural gas development contracts, while encouraging Iraqi counterparts to ensure that the content of proposed laws, amendments, and contracts reflects acceptable political compromises. This report reviews policy proposals and interim contracts, analyzes the positions of various Iraqi political actors, and discusses potential implications for U.S. foreign policy goals in Iraq. 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