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The blessing of the oil

Norad, Statoil and Hydro are building up the oil industry in Iraq, where the sky is darkened by riots and sabotage attacks on the country's oil installations. This is how companies get positioned in one of the world's richest oil countries.


[Iraq] The red-green government, with the SV in the lead, has withdrawn Norway's military forces from occupied Iraq.

But without debate, the Red Greens have continued a controversial and little-known project the Bondevik government gave clear signal in 2005. With NOK 27,5 million, the Norwegian Petroleum Directorate, supported by Statoil and Norsk Hydro, is helping to build up the oil sector in Iraq. There, more American soldiers are now trying to crack down on insurgents and secure oil installations against sabotage. The agreement was signed with a temporary Iraqi government without petroleum legislation.

The project is part of the Oil for Development program, which was started by the Bondevik government just before it went off.

- We want to contribute to large oil revenues being used to reduce poverty in Africa and elsewhere, that the oil becomes a blessing and not a curse, said Minister of Development Hilde Frafjord Johnson (Krf) when the program was

launched September 2 last year.

But the program, which has now become part of Erik Solheim's (SV) main development assistance pillar, raises several fundamental questions: Which countries is it acceptable for Norwegian oil expertise to engage in? And to what extent is the assistance linked to Norwegian oil companies' pursuit of profits and new concessions?

No legislation

The questions concern Norway and the red-green government, especially in relation to Iraq.

The agreement between Norway and Iraq, which was signed on 26 May last year, was signed by Iraq as a temporary government in a country that did not have – and still does not have – petroleum legislation.

- The previous interim government in Iraq did not have the authority to enter into agreements with other countries. Therefore, a non-binding MoU agreement (Memorandum of Understanding) was entered into between the Norwegian Petroleum Directorate and the Ministry of Oil in Iraq, explains Øystein Kristiansen, project manager at the Norwegian Petroleum Directorate.

On the load, the Norwegian Petroleum Directorate, among others, got Norsk Hydro and Statoil as partners. The latter also helped to prepare the draft program for oil cooperation with Iraq.

At the same time, both Norsk Hydro and Statoil have signed their own non-binding MoU agreements with Iraq. As a result, the companies have positioned themselves in relation to the expected battle for concessions in the country with one of the largest oil reserves in the world, both through their own agreements and through the Petroleum Directorate's agreement.

- This puts the Oil for Development program in an even worse light than before. This is obviously a game from Norwegian companies to obtain licenses, and clearly shows Norway's double

morality. It is wrong to support a regime in Iraq that is legitimized by an occupying power. If Norwegian aid is used for this, the Oil for Development program buries itself, says oil researcher Helge Ryggvik at the Center for Technology, Innovation and Culture at the University of Oslo.

However, Norwegian aid funds are already in use. According to Norad, they have so far paid out NOK 5,1 million to the Norwegian Petroleum Directorate

the oil cooperation with Iraq, which will last through the agreement in 2007.

Brought in harbor of red green

In fact, it was only under the red-green government that the economic side of the deal was brought into port. On November 4, last year, the Norwegian Petroleum Directorate and Norad signed a contract, which means that Norad will allocate a total of NOK 27,5 million to the Iraq project.

The Norad funding document identifies several risk factors for the project. The country is in a "warlike" situation. Nevertheless, Norad concludes with support for the oil assistance.

- It seems very strange that the red-green government has maintained support for the project in today's Iraq. This is a wrong priority, says Halle Jørn Hanssen, leader of the Forum for Development and the Environment (Forum).

The question is whether Iraq meets the criteria for being selected for the Oil for Development program.

Norad is currently publishing the program's web pages on the Internet. Here it states that countries that can qualify for Norwegian support must be in a situation where respect for human rights, law and order is at an acceptable level, or that it is well documented that they are on the right path. A political will must be documented for improved governance and the fight against corruption.

However, reports daily ticking in from Iraq tell the opposite. And for the rebels, the oil installations are a daily target in their opposition to the sitting regime and the American military apparatus.

Breach assumptions?

In the book Understanding Iraq (2005), US Middle East expert William R. Pork describes why many Iraqis view the US invasion as an attempt to gain control of the country's oil. These include the Bush administration's privatization of the oil industry, how the occupying authorities have sold Iraqi oil to US and UK oil companies at underpriced prices, and the attempt to break up OPEC.

According to Pork, 19 out of $ 20 billion – from bank reserves and sales of Iraqi oil – has so far been used to cover the reconstruction of the country and keep the occupation forces going.

- Norway's oil assistance to Iraq is a consequence of the pressure to be one of the United States' "decent" nations, says Forum chairman Halle Jørn Hanssen. He has not registered a debate on this issue in the development assistance environment in Norway.

Genuine development policy

Leiv Lunde, former secretary of state for Hilde Frafjord Johnson, is the head of the Oil for Development program in Norad.

He states that he became Secretary of State for Frafjord Johnson in February 2005, after the decision that Norway to assist Iraq in the oil sector was made.

Lunde rejects claims that the program promotes the commercial interests of Norwegian oil companies.

- The program is governed by development policy objectives. We choose which countries we will get involved in based on where we think we can contribute best, says Lunde.

He points out that the program today is the heaviest in East Timor.

- There are no Norwegian companies present. Oil cooperation with East Timor is genuinely based on development policy, says Lunde.

Still, he is aware that the Oil for Development program's list of countries largely coincides with where Statoil, Norsk Hydro and other Norwegian companies are located.

- We are interested in cooperation with Norwegian companies and think it is positive that they contribute. In some areas, the expertise lies with the companies. But when it comes to which countries we should get involved in, they are chosen based on development policy considerations, and not Statoil and Hydro's interests. We still know that we are in a demanding terrain. We have therefore been very clear on roles, says Lunde.

The forum's chairman, in turn, questions the noble motives.

- It has been a long time since Norway lost its virginity in these matters, says Halle Jørn Hanssen.

Oil must not become a burden

Lunde recognizes that Norwegian companies can generally get a positive image in other countries because of Norway's efforts through the Oil for Development program.

- At the same time, we work against corruption and for transparency in the oil industry. It is a risk factor that Norwegian companies must take with them, says Lunde.

Today, through the Oil for Development program, Norway is involved in about 20 countries. Lunde emphasizes the program's main rationale that oil should benefit poor people in these countries, rather than becoming a burden.

The two countries Norway has been most involved in are Mozambique and Angola. Norway has given around NOK 100 million to Mozambique over the past ten years. In Angola, Norway has been for fifteen to fifteen years and provided tens of millions to capacity building in the oil sector.

- Has development aid made oil in these countries a blessing for the poor?

- In Mozambique, oil extraction has not started yet. But we have been the largest contributor and are reasonably confident that we have contributed to a good starting position for the country when the distribution of blocks to the oil companies will now start. When it comes to Angola, it has been demanding with civil war and major governance challenges. But we have chosen to be there partly because we are in demand and because we see the opportunity for dialogue, says Lunde.

Statoil and Norsk Hydro are otherwise heavy in Angola, while Norsk Hydro has interests in Mozambique.

- Oil has not yet become a blessing to the poor in Angola. But we are a small player in the country. We have chosen to contribute, but it is clear that in light of China's billions of dollars in oil credits, our efforts will soon be like drops in the ocean, says Lunde.

Will not cancel

[Iraq] Development Minister Erik Solheim believes Norway's participation in the Oil for Development program is clearly separated from the Norwegian companies' commercial interests in Iraq. Solheim denies that Norwegian oil aid is linked to the US military presence in Iraq and says it is not appropriate to cancel the program.

- This is a program entered into by the Bondevik government. It is not natural to suspend Norwegian commitments as long as Iraq has a government that is recognized by the UN, Norway and the international community in general. The agreement is of course with the Iraqi government and without any connection to the US-led coalition, says Erik Solheim.

- Both Statoil and Norsk Hydro are partners to the Norwegian Petroleum Directorate in the agreement with Iraq, and that they have their own agreements with Iraq. Is the development program a door opener for Norwegian oil companies?

- In Iraq and everywhere else, there must be a clear division of roles between the Norwegian Petroleum Directorate and Norwegian companies. Everything takes place in total openness. The agreement with Iraq has been entered into by the Norwegian Petroleum Directorate. Statoil and Hydro are subcontractors of specific expertise. The oil for development program must be kept completely separate from the companies' commercial interests, the Minister for Development Aid answers.

Uncertainty in SVs

[oil policy] Despite strong opposition to US warfare in Iraq, Ny Tid's call shows that Norwegian support for the Iraqi oil sector is a difficult topic for SV politicians – and little known.

- I see the dilemma that the project takes place in a civil war-like situation. But I must say that I like this move from the Bondevik government better than that they contributed with Norwegian forces after the invasion of Iraq. It is also better that we contribute to oil expertise in Iraq than that American companies such as Halliburton do, says SV's member of the Foreign Affairs Committee, Ågot Valle, who is not in favor of a reassessment of the agreement with Iraq now.

Central board member Ingrid Fiskaa, who is also the leader of the Peace Initiative, did not know about the agreement when Ny Tid contacted her.

- We have not discussed this matter in

central board of SV. But I think there is every reason to look critically at the agreement with Iraq. This is hardly a good use of aid money, she says.

Nor does party secretary Edle Dåsvand know about the agreement with Iraq itself.

- Subject to the fact that I do not know the details of the agreement, I would say that it is positive that Norway contributes when we are asked to help build the infrastructure around the oil resources in Iraq. It is important in relation to the building of democracy in

the country, and a much better way to help the Iraqis than to use military force, says Dåsvand.

Ivar Johansen, a member of the Oslo City Council and with a long time in the Norwegian peace movement, is more concerned.

- The government must look at this again. It is not natural that we have an agreement with the current regime in Iraq and support the development of the oil sector in the country, says Johansen.

Iraq agreement:

  • The agreement on oil cooperation between the Petroleum Directorate and the Ministry of Oil in Iraq was signed on May 26 last year. Statoil, Norsk Hydro, INTSOK and Petrad are partners. The agreement is valid for the period from 2005 to 2007. Norad contributes NOK 27,5 million. The agreement is based on technical and institutional assistance, and deals with things such as technology transfer, training, building a computer system and helping Iraqis to get the most oil out of the country's huge oil field.

Oil for development:

  • The Oil for Development Program was launched by the Bondevik Government in September 2005. The goal is to assist resource-rich developing countries so that their oil wealth leads to economic growth and poverty reduction, and that it is environmentally sustainable. The investment entails an extra grant of NOK 50 million per year for five years from 2006. Through the program, Norway is currently active in Angola, Cambodia, Iraq, Madagascar, Mozambique, Nicaragua, Nigeria, São Tome and Principe, South Africa, Sri Lanka, Sudan, Tanzania, East Timor, Uganda, Vietnam and the Philippines.

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