Deadline looms on unsettled oil issue

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Iraq's proposed oil law, a key U.S. benchmark for political progress, remains in sharp dispute one week before the government's self-imposed deadline for passage, and some say it could create more divisions in the fractured country.

"In general, it is a step forward for the Iraqi political process," said Yahia Said, a London-based analyst with the Revenue Watch Institute who has been closely involved in talks on the draft law.

But Mr. Said and others caution that even if the measure is enacted this summer, Iraq lacks the institutional capability to implement it.

"The design of the law is one thing and implementation is another. There are constraints of capacity," he said in a telephone interview from London.

"A lot more will depend on implementation and the structures established to implement the law. This is one of the weakest elements," he said.

The law, running 33 pages in its third and current draft, lays out terms for the control and management of Iraq's oil fields, with the goal of boosting production and revenues for the benefit of all Iraqis.

The Bush administration has pressed hard for passage in the hope that sectarian tensions fueling the violence in Iraq can be eased by ensuring that Sunnis, Shi'ites and Kurds will benefit fairly from the oil wealth.

But with negotiators rapidly approaching a deadline on Thursday, the factions remain deeply divided on the sharing of revenues, the extent of the role of international companies in the development of fields and the scope of a national oil company.

All the parties agree that Iraq needs outside capital and expertise to develop the potential of its oil fields.

Kate Dourian, a Dubai-based analyst for the oil industry publication Platt's, said the draft law appears to be deliberately vague about the terms that will be offered to foreign companies.