updated 9/13/2007 7:21:40 PM ET 2007-09-13T23:21:40

Iraq's main political parties are deadlocked over a key oil law and the legislation has been sent back to party leaders to see if they can salvage it, an official involved in the talks said Thursday.

The Wednesday meeting failed after Shiite and Sunni Arab representatives were unable to agree with Kurdish negotiators, said the official, who represented a Shiite party in the talks and spoke on condition of anonymity because he was not authorized to discuss the process.

Deputy Prime Minister Barham Saleh, a Kurd, confirmed there were disagreements but refused to give details. "There are problems but the negotiations are still going on," he told The Associated Press.

The oil legislation is among 18 benchmark laws pushed by Washington to encourage reconciliation among Iraq's ethnic and sectarian factions, and is intended as a way of managing the country's vast reserves while seeking to ensure the profits are shared equitably.

The Iraqi Cabinet approved a draft and forwarded it to parliament last February, a move hailed by the White House as a breakthrough in efforts to approve critical legislation for the nation's future.

But parliament kicked the bill back to the Cabinet, citing legal technicalities and the measure has been bogged down in further negotiations ever since.

At Wednesday's meeting, Shiites and Sunni Arabs agreed on language giving more powers to the predominantly Sunni center of the country — where there is little oil — while Kurds argued in favor of more control for their semiautonomous and oil-rich northern region as outlined in the Cabinet-approved version, the official said.

Other disagreements came over how to manage oil fields, both operating and as-yet undiscovered, the official said.

A question of control
The Shiites and Sunni Arabs argued that contracts covering fields that produce more than 100,000 barrels of oil per day must have parliamentary approval, and that contracts from smaller fields should be approved by the state-run National Oil Co., the official said.

The Kurdish side argued that contracts should be decided by regional authorities, he said.

Complicating matters, the Kurdish self-governing region in northern Iraq in August enacted its own law governing foreign oil investments, angering the central government in Baghdad.

The Kurds have also unilaterally gone ahead and signed contracts with international oil companies, most recently signing a deal last week with Texas' Hunt Oil Co. on production sharing in the region.

Iraq's oil minister Hussain al-Shahristani, a Shiite, declared Monday that the agreement was illegal — underscoring the central government's position that exploration contracts with foreign companies cannot be signed until the new national law is in place.

The Kurdistan Regional Government issued a statement a day later saying al-Shahristani's comments were "unacceptable," and that he "should concentrate on making a positive contribution to the country, rather than undermining the constructive work that the KRG (Kurdistan Regional Government) is carrying out for the benefit of all the Iraqi people."

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