Iraqi Unions Slow Progress of Oil Industry Development

Iraqi workers demonstrating in Basra. (image: uslaboragainstwar.org)

The Iraqi government gets more than ninety percent of its revenue from energy exports, primarily oil, which also generate over 70 percent of the nation’s total economic activity.  For a nation with rampant unemployment and a low standard of living, widespread sectarian strife and frequent out-and-out conflict, as well as an infrastructure that is still shattered eight years after the invasion, there would seem to be no greater priority than ramping up its one and only productive industry to bring in the foreign exchange and revenue it desperately needs for investment, social welfare, government operations, and—last but certainly not least—security. One would think that all Iraqis would recognize this, and would rally behind any proposition that stood to make its oil sector more productive and profitable.

One would think. However, this is Iraq, where it seems that if you ask three people the time, you’ll get four different answers, and where forging a national consensus is like trying to build a skyscraper on shifting desert sands. Iraq’s labor unions are rallying against, not for, recent and proposed deals to bring foreign investment and expertise in to help the nation’s oil industry, Reuters reported this morning.  Specifically, unions are lobbying against Iraq’s new contracts with BP and China’s CNPC to develop the nation’s largest oil field. The unions feel that the contracts would overcompensate the foreign firms, though the foreign firms themselves feel they are being undercompensated (or rather, overcharged). While both unions and oil companies obviously have their own interests in mind and cannot be taken as unbiased actors, it’s worth noting that out of eight fields bid out for development last month, foreign firms only tendered acceptable bids for one—suggesting that the oil companies are right, and that what the Iraqi government wants to charge is too high, not too low.

Perhaps a better sense of what’s really driving the unions’ opposition can be found in their own press statements.  The unions have explicitly linked oil development with the U.S. occupation—they believe that the United States-led coalition invaded Iraq in the first place mainly to control its oil wealth. Once you start from that proposition, that foreign corporations are part of a foreign occupation and are there to rob your nation of its patrimony, opposition to development deals with international companies is almost a given.

In addition, the unions have objected to what they see as the privatization of Iraq’s oil wealth. Iraq’s oil sector, like those of other Middle Eastern nations, has been nationalized for years, since the 1960s. The unions believe that national assets should be 100-percent controlled by the nation, for the benefit of its people, and not by or for foreign entities. Again, this is a philosophical starting point that practically guarantees conflict with any attempts to bring in foreign partners and vendors.

That’s not to say that the unions are not also acting in the interest of their members, or Iraqis generally. Their demands that the oil ministry pay workers a living wage reliably and on time, help provide housing to disposed workers, and look for ways to increase employment, are all legitimate and understandable demands. And certainly, the history of the Middle East generally, and Iraq specifically, makes wariness and cynicism about foreign powers and businesses healthy. The Middle East’s history does not breed trust in other countries, or faith in their good will.

But at the same time, Iraq manifestly lacks the money and expertise to exploit its prodigious oil wealth—the third largest proven reserves in the world. That’s why foreign firms were invited into the country in the first place.  Without more petrodollars, Iraq will lack the resources to rebuild itself, to grow and diversify its economy, to protect itself, and to take care of its people. Given that, it would seem that even an imperfect deal now, that starts to throw off dollars, euros, and yuans, would be a good start. After all, you can always look to negotiate better deals later.

But again, this is Iraq, where nothing is simple. For example, as the unions also object, the BP and CNPC deals were cut  without a framework in place of overarching national energy legislation—legislation that has been held up for years in Parliament, despite its enormous importance, due to disagreements between Arab and Kurdish citizens. Having staked out a position contrary to foreign partnership and investment, it is difficult to see Iraqi labor unions backing away from their opposition. The question then becomes, what can they do about these foreign partnerships and deals—can they scuttle them?

Maybe. Union membership is far from universal in Iraq’s oil sector. In Basra, for example, out of 46,000 oil workers, 10,000 are active union members. Unions also lack special legal protections, which makes it easier for the government to take strong action against them. Therefore, despite a history of unionism going back to the 1950s (though suppressed for many years under Saddam Hussein), Iraq’s unions are not particularly strong. However, in a country that is already a fairly hostile place for international, especially Western, firms to operate, strikes, work stoppages, protests, and possibly additional violence could be the straw that breaks the camel’s back and makes foreign development of Iraq’s oil resources unworkable.

There’s no way to tell yet what will happen—it’s simply too early to know. At a minimum, though, this latest complication suggests that it is also too early for either Iraq or the rest of the world to count on an increase in Iraq’s oil production. As with so many things in the Middle East, the future remains uncertain.