U.S. Diplomatic Adviser's Troubling Role in Oil Politics

WASHINGTON - In 2003, U.S. diplomatist Peter Galbraith resigned at the end of a distinguished, 24-year government career. Over the years that followed, he worked as a contract-based adviser to leaders in Iraq's Kurdish community, while also arguing passionately in public media that Iraq's Kurds should be given maximum independence from Baghdad - including full control over any new sources of oil.

But in June 2004, more quietly, Galbraith also established a small, U.S.-registered company, Porcupine, that held a five percent stake in a newly exploited oilfield in Iraqi Kurdistan, a Norwegian daily revealed last Saturday.

The daily, Dagens Naeringsliv, had been investigating the increasingly troubled relationship between Porcupine and a privately-owned Norwegian firm, DNO, which partnered with Porcupine in the Kurdish-Iraqi oil project. Journalists at the daily said that discovering that Porcupine's hitherto secretive owner was Galbraith came as a complete surprise.

Galbraith also won international headlines in another recent Norway-related story. In late September, he broke publicly with Kai Eide, the Norwegian head of the United Nations Assistance Mission in Afghanistan (UNAMI), over how to respond to allegations of fraud in Afghanistan's August election.

Galbraith had been working as Eide's deputy since March. He resigned in late September, accusing Eide of trying to hide evidence of large-scale fraud committed during the election.

There are many parallels between the constitutional/legitimation challenges the U.S. occupation force and its allies face in Afghanistan today and those faced by the U.S. and its allies in Iraq, 2003-08.

One key challenge for U.S. decision-makers is how to generate a local "host nation" government using the democratic processes that most U.S. citizens say they want - but one that is also prepared to work very closely indeed with Washington, which most citizens of the occupied countries are reluctant to do.

Prior to the 2003 U.S. invasion of Iraq, Peter Galbraith was a strong voice advocating the invasion. Immediately after the invasion, he was one of three or four high-level U.S. officials and advisers who started designing a completely new Constitution for the country.

(The Fourth Geneva Convention of 1949 specifies that an occupation force should keep existing governance and constitutional arrangements in place, as far as possible, until it withdraws.)

Galbraith had long been a strong sympathizer of the Iraqi Kurds' desire for strong autonomy or even complete independence from Baghdad. In his 2006 book "The End of Iraq", he wrote that he started consulting with the Kurdish leaders on constitutional issues "two weeks after the fall of Saddam Hussein".

He continued those consultations through the time of the U.S.'s promulgation of a "Transitional Administrative Law" (TAL) in March 2004 and the adoption of a more permanent new Iraqi Constitution in October 2005.

Adoption of the Constitution was achieved through an Iraq-wide referendum, conducted under the control of the U.S. military.

In both the TAL and the 2005 Constitution, provision was made for any one of the country's 18 provinces, or a group of them, to declare the formation of a "region" that would have extra powers of self-governance. In practice, the only "region" that has formed is the Kurdish Regional Government (KRG), comprised of Iraq's three majority-Kurdish provinces.

In the TAL, the principles for dividing the country's oil revenues were left vague. In the 2005 Constitution, it stated that revenues from the country's existing oil fields, many of which were nearing depletion, would continue to be controlled by Baghdad. It said the "regions" could have a lot more control over any new oil fields to be developed - though the extent of that control was still left vague.

In the meantime, Galbraith and his Porcupine company had acquired their five percent interest in the KRG's new Tawke oil field, and entered into its partnership there with DNO.

Galbraith also argued hard in the discussions over the 2005 Constitution for a clause defining Iraq's governance system as a fundamentally decentralized one in which all residual powers lie with the provinces and "regions". He won that argument, and the clause was put in.

The distinguished Egyptian-American law professor Khaled Abou El Fadl has commented on Iraq's constitution-writing process that it involved, "a lot of authoritative input by various elements in the U.S. as to not just what the Iraqi commitments are going to be but what the occupying country deems to be acceptable".

The radical decentralization of powers that was written into the 2005 Constitution at a time of strong U.S. influence in the country continues to plague Iraq today. This is so even though the U.S. agreed last November to completely withdraw its troops from Iraq; that withdrawal is now well underway, and Washington's power to exert direct influence over Iraqi politics has eroded considerably.

With Washington's ability to bolster the Kurds' position in intra-Iraq negotiations now considerably reduced, the country's Kurds, who form under 20 percent of the national population, and its majority Arabs have gotten into a series of new tussles for power. Not surprisingly these involve both constitutional issues - and oil.

Iraq is scheduled to hold its next nationwide parliamentary election on Jan. 16, 2010. The current lawmakers had a deadline of last Thursday to finish defining the rules under which the election will be held. They missed it - though there is some hope they can reach agreement on this point within the coming days.

This disagreement is over whether the "lists" that each party or coalition will present in each of the country's province-sized constituencies will have a list of names that is "closed", that is unchangeable, or whether on polling day voters can change the order of the names to reflect their own preferences.

This matter pits the Kurdish parties (who want "closed" lists) against all the country's other parties, who profess to prefer "open" lists.

The Kurdish and non-Kurdish parties are at odds, too, over the potentially explosive issue of how voting rolls will be drawn up in the oil-rich environs of the mixed-ethnicity city of Kirkuk.

The province Kirkuk is located in, Salah ad Din, is not affiliated with the KRG. Most Kurds strongly want to bring it under KRG control, while most members of Iraq's Arab and ethnic-Turkoman communities strongly oppose that. (Two deadlines for holding a city-wide referendum on Kirkuk's future, as mandated in the 2005 Constitution, long ago expired.)

Iraq's Arabs and Kurds are also, not surprisingly, waging a stiff war over control of oil exports and revenues. Last June, the Tawke oil field (in which Galbraith once invested) was the first of the KRG's new oilfields to come online. Its operators, who reportedly comprised a 55 percent share owned by DNO, a 25 percent share owned by a Turkish company, and a 20 percent stake directly owned by the KRG, started "exporting" oil to the main body of Iraq.

But the Baghdad government refused to pay the Tawke consortium for this oil, arguing that the whole commercial arrangement whereby the KRG had developed the field was quite illegal.

For their part, the Kurdish parties that are still strong in the central government are threatening to hold up a deal Baghdad wants to conclude with a Chinese company to develop some massive oilfields in southern Iraq.

Meanwhile, the KRG and DNO have had their own, apparently serious, falling-out, which is being litigated in London. It was by investigating the facts of that case that Dagens Naeringsliv discovered the clear material interest that Galbraith earlier had in the whole KRG-DNO deal.

His Porcupine company was cut out of the deal at some point in 2008, for reasons that remain murky. But that development did not negate the fact that for the preceding four years, while Galbraith was an influential participant in Iraq-related constitutional and political discussions, he also had an undisclosed financial interest in a KRG-authorized oil development venture.

Here in the U.S., Galbraith has long been associated with the "liberal hawk" wing of the Democratic Party, which has argued since the early 1990s that U.S. military power can, and on occasion should, be used to impose a U.S.-defined human rights agenda in various parts of the world.

Many members of this group have been liberal idealists - though some of those who, on "liberal" grounds, gave early support to Pres. George W. Bush's decision to invade Iraq later expressed their regret for adopting that position.

Galbraith has never expressed any such regrets, and last November, he was openly scornful of Bush's late-term agreement to withdraw from Iraq completely. The revelation that for many years Galbraith had a quite undisclosed financial interest in the political breakup of Iraq may now further reduce the clout, and the ranks, of the remaining liberal hawks.