Iraq moves to enhance transparency in extractives sector

Iraq has announced that it intends to become a member of the Extractive Industries Transparency Initiative (EITI), an international scheme that was established to provide a global standard for managing revenues from natural resources. At an anti-corruption conference on Sunday, Prime Minister Nouri Al-Maliki confirmed that Iraq would seek to implement the EITI as soon as possible.

The move is part of efforts tackle corruption through implementing internationally recognised regulatory frameworks, and comes shortly after the successful oil bidding rounds hosted by the Ministry of Oil in December 2009, which resulted in the signing of a number of service contracts with major international oil companies including Shell, Petronas, CNPC and Lukoil. The Minister of Oil, Dr Hussein Al-Shahrastani, predicted that Iraq would produce up to 12 million barrels per day within six years, thus re-establishing the country as a major player in OPEC.

The EITI seeks to enhance governance in the extractives sector by promoting transparency and accountability according to global standards. These standards, which provide a framework for companies and governments to publish their financial transactions, are validated and monitored by a multi-stakeholder group that comprises civil society organizations, as well as the companies involved in the extractive process, and the governments themselves.  Candidate countries have two-years to complete the validation process, which, if successful, would lead to the country’s acceptance as EITI-Compliant. 

Following the Iraqi government’s announcement, Peter Eigen, Chair of the EITI said, “With well managed oil resources, the future of the Iraqi people could be very bright,” adding, “the Government’s plan to implement the EITI is a massive signal of Iraq’s determination to build a brighter future.”

As of yet, only two countries, Azerbaijan and Liberia, are EITI-complaint, with Peru expected to become the third shortly. There are currently 28 candidate countries awaiting approval, the vast majority of them being African countries, but also includes Norway and Albania.

Iraq is set to become a candidate country in February, and would make it only the second country in the Middle East, along with Yemen. It would also become the largest oil producing country to implement the EITI standard.

In addition to the oil and gas industry, Iraq is rich in mineral reserves including sulphur, estimated to be among the largest in the world, as well as gypsum and phosphate. Although it is largely dependent on its oil revenues, experts predict that with the gradual rehabilitation of state-owned enterprises and increased partnerships between the public and private sectors, Iraq’s non-oil extractive industries will contribute significantly to export revenues.

Promoting transparency in Iraq is a critical part of measures to build international credibility and affirm the government’s commitment to tackling corruption. Moreover, it is a means to enhance Iraq’s investment climate by providing safeguards to businesses that remain hesitant about participating in the vast reconstruction process.

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Ali Mawlawi

Iraqi Institute for Economic Reform