BAGHDAD, April 19: Despite US pledges that Iraq’s oil reserves will benefit only the Iraqi people, people here are wary that US firms may reap a windfall in production revenues and service contracts.

As international petroleum companies eye Iraq’s 112 billion barrels of proven oil reserves, Iraqis stress that the profits must go first and foremost to rebuilding the shattered country.

“If there is a need for foreign companies, there should be transparency in their contracts so that they don’t arouse the suspicion of the Iraqi people,” said economist Humam Shamaa.

“The population is very sensitive on this issue, the oil sector is first priority for reconstruction” as it is Iraq’s only guaranteed source of revenue, said Shamaa.

Iraqi exiles and US officials agreed earlier this month on the need for international companies to participate in rehabilitating and developing Iraq’s oil production, as the country lacks the financial and technical means.

Delegates at that meeting in London said the most likely form of participation would come under production-sharing agreements allowing international companies to be reimbursed for their investment by taking part of the production of the oilfield they develop.

But Taleb Ali, editor of economic weekly Iqtissadi, said foreign firms should “provide consultancy services only” and not get involved in production.

“We can buy the technical equipment we need and we have inside Iraq and abroad competent people to run the sector,” added Ali, whose publication stopped after the start of the US-led invasion of Iraq a month ago.

He said a new post-Saddam government in Iraq should use the country’s oil wealth, the second largest in the world after Saudi Arabia, to maximise development and promote other sectors like tourism.

“The economy was not properly handled under the previous regime,” he said. “Too much was spent on political issues, on things we knew nothing about, like armaments.

“The economy stopped growing in 1980” with the start of the eight-year war with Iran, Ali added. The conflict was followed by the invasion of Kuwait, in 1990, which triggered UN sanctions that are still in force.

Polling people in the street on the oil issue drew some angry reactions as the Iraqi capital recovered from the destrucus, we have nothing, no water, no electricity, no security, we can barely eat and you think about our oil?,” said a woman, too angry to give her name.

“I tell you one thing: the oil of Iraq is for the Iraqis,” said Kazem Abbas, a 50-year-old engineer.

Saddam Hussein played a major role in nationalising Iraq’s oil wealth, in 1972, when he was vice-president.

He reopened the oil sector for foreign investment in the 1990s, signing provisional production sharing contracts with French and Russian companies as a means to enlist their governments’ help to lift the sanctions.

These contracts were waiting for the sanctions to end in order to be implemented, and a question mark hangs over their fate.

US companies, kept at bay under Saddam, are now expected to claim a role commensurate with their country’s leading contribution to the war and opposition groups have said previous contracts should be renegotiated.

Iraq’s oilfields were seized almost intact by the US and British forces who said production can return to its pre-war level of 2.7 million barrels per day within a few months. —AFP