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Last Updated: Monday, 22 September, 2003, 21:30 GMT 22:30 UK
Iraq oil assets 'up for sale'

By Andrew Walker
BBC economics correspondent in Dubai

Ceyhan oil terminal
Oil is Iraq's most valuable asset
Ali Allawi, the trade minister in the US-backed administration in Iraq, has said that foreign ownership of assets in the country's oil industry has not been ruled out.

In an interview with the BBC during the IMF and World Bank annual meetings in Dubai, Mr Allawi said that he expects some form of foreign involvement in the sector, although there are other possibilities than ownership.

Mr Allawi's remarks follow an announcement on Sunday in Dubai by other members of the administration of sweeping economic reforms.

The announcement included new opportunities for foreign investors, allowing them to own 100% of Iraqi enterprises. But natural resources, including oil - Iraq's most valuable asset - was excluded.

But Mr Allawi has now confirmed that it does not mean that oil is off the menu for foreign investors for good.

Complex

The sector was not covered because the arrangements and regulations needed are far more complex.

There is no final decision on the shape of the oil industry after reform. He said it would be a matter for the oil ministry and the Governing Council to decide.

But he certainly anticipates some private sector role. It might be through equity - owning a share of some oil businesses.

He said that foreign ownership of some Iraqi oil assets is a possibility. But the foreign involvement could also be through technical co-operation or through sharing the revenue of oil remaining under Iraqi ownership.

The prospect of foreign ownership will probably reinforce the views of people who thought oil was the underlying motive for the war - that the United States wanted to get control of the second largest oil reserves in the world.

Mr Allawi said: "this point always comes up". But he doesn't believe it himself.

Sabotage

He said: "If the Americans or other western powers are interested in Iraqi oil, they are interested as consumers, not necessarily to protect it with bayonets".

The revenue from Iraq's oil industry is going to have a central role in financing the country's reconstruction. It is performing far below its potential.

Only Saudi Arabia has larger reserves. But many years of neglect and sanctions have produced a backlog of maintenance.

Now the turmoil of war and sabotage since it ended have added to the industry's problems.

Some conservative think-tanks in the US believe that privatisation of the state owned industry - and allowing foreign investors to take stakes - is the best way of getting new investment and expertise into the business.

But whatever the commercial merits of that approach might be it would be fraught with political problems.


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