Kurds go it alone with international oil deals

Kurdish authorities in northern Iraq are offering hugely lucrative oil deals to European and American companies without consulting either the US administration in Baghdad or any other Iraqi groups. The move threatens to raise new problems over the future ownership of Iraq's vast oil reserves.

The Patriotic Union of Kurdistan (PUK), which controls the Sulaymaniyah region as part of the regional government of Kurdish Iraq, has in recent weeks started seeking investment from international companies interested in oil exploration and production.

While most companies appear wary of getting involved in deals with the regional authorities in the absence of a settled – and internationally approved – government in Baghdad, the proposed deals represent a challenge to the US-led occupying force. Some have even suggested the proposals may be an effort by the PUK to present any new government in Baghdad with a fait accompli.

Samples of the proposed "production-sharing agreements" seen by The Independent on Sunday reveal that the PUK authorities are offering investors an attractive deal. The initial share of profits would be split 60:40 in favour of the oil company, dropping to around 50:50 once a specified level of production is reached. "They are extremely favourable terms," said Gordon Barrows, of the Barrows Company, a US-based publisher of international oil laws and contracts and the company that obtained the contract.

The future of Iraq's oil reserves, which some predictions place at up to 112 billion barrels with more to come, is one of the most contentious issues facing the US and Britain as they seek to rebuild Iraq in the aftermath of the ousting of Saddam Hussein. While both Washington and London denied that oil was a factor in their decision to go to war, many of their critics, including most Iraqis, believe that a wish to secure the world's second largest supplies played a large part in shaping the decision to opt for military action. Washington is keen to use Iraq's oil wealth to at least partly pay for the country's rebuilding.

There are few major companies that would not wish to secure deals to develop Iraq's oil reserves, and Mr Barrows said he believed the PUK had proposed the deals to most major firms. Britain's two largest companies, BP and Royal Dutch Shell, have both expressed an interest in doing deals when a government has been established in Baghdad.

"We have always said we would be interested in the prospect of investing in Iraq, but that would be when there is a stable, long-term administration there," said David Nicholas, a spokesman for BP. Both he and a spokesman for Shell denied that they had been in talks with the PUK.

For its part, the PUK admits that it has been offering the deals. It started sounding out interest last July for production in the Taqtaq area north of Kirkuk, but found no takers. Since the US-led occupation of Iraq the PUK has been offering the deals once again, hoping to increase production in the area, which some sources suggest is only producing 5,000 barrels a day.

Mohammed Ismail, director of the PUK's office in Washington, said: "It is true [that we are offering contracts]. I don't know the names of the companies involved."

US 'to draft in 9/11 police chief'

By Phil Reeves in Baghdad

The US civilian administrator in Iraq, Paul Bremer, has said that Bernard Kerik, the New York Police commissioner who co-ordinated safety and rescue work after the 11 September attacks, should help secure law and order in Iraq.

The Americans are trying to step up the effort to restore stability and law in the city, where more than 240 people have died from gun wounds in little more than three weeks during post-Saddam score-settling, racketeering, battles over looting, and clashes between US soldiers and Iraqis.

Yesterday, the Allies faced a new problem as reports surfaced that anti-US Shias were attacking liquor stores in Baghdad and threatening violent punishment against Muslim women who failed to wear headscarves.

Such actions fly in the face of the Allies' claims to bethe sole, absolute authority in Iraq. The US military believes it is curbing the lawlessness in Baghdad. But the task is formidable. The city is awash with guns, and looters have attacked properties ranging from former luxury homes of Saddam's spies to sites that the US believes could contain Iraq's alleged chemical and biological weapons. Small groups are also resisting the occupation.

Battalion commander Lt-Col Scott Rutter said his forces had cracked a stolen car ring and arrested up to 160 "hardcore" looters. He claimed crime was declining but said there had been a rise in shootings at US army positions.