Balancing Economic Reform with Human Rights and Rule of Law: The Future of Iraq's National Oil Companies

Euthanasia of National Oil Companies: A Human Rights and Rule of Law Perspective

The Iraqi economic system prior to 2003 was predominantly socialist, with the state controlling economic ownership and management, leaving little room for private sector involvement. This system was characterized by limited transparency and accountability, often benefiting those in power.

Following 2003, Iraq transitioned towards a democratic system, as outlined in Article No. (1) of the Constitution, which describes Iraq as a democratic, federal state. This shift was intended to foster a capitalist economy, with many officials advocating for the privatization of state institutions. However, the current economic framework appears to be a hybrid system lacking clear direction, with remnants of socialist thinking persisting among both officials and citizens.

Human Rights and Rule of Law Concerns:

1. Transparency and Accountability: The shift towards centralizing control over profitable companies raises concerns about transparency and accountability. Ensuring that decision-making processes are open and accountable is crucial to prevent corruption and abuse of power.

2. Economic Rights: The restriction of company powers could adversely affect economic rights, including the right to work and fair remuneration. Employees' incentives and benefits are being reduced, which may lead to dissatisfaction and decreased productivity.

3. Social Services and Employee Welfare: The government's direction in reducing allocations for social services and employee conditions undermines social welfare. It is essential to protect workers' rights and ensure that they receive adequate support and benefits.

4. Impact on Public Services: The potential decline in company performance due to centralized control could affect the availability and quality of public services, impacting citizens' rights to access essential services.

Suggestions for Improvement:

- Strengthen Legal Frameworks: Implement robust legal frameworks that promote transparency, accountability, and anti-corruption measures within public companies.

- Protect Workers' Rights: Ensure that any economic reforms or restructuring efforts safeguard employees' rights, providing fair wages, benefits, and working conditions.

- Promote Inclusive Economic Policies: Develop economic policies that are inclusive and consider the needs of all citizens, particularly marginalized groups, to ensure equitable access to economic opportunities.

- Enhance Public Participation: Encourage public participation in economic decision-making processes to ensure that policies reflect the needs and interests of all stakeholders.

- Foster an Attractive Investment Environment: Create a stable and predictable investment climate by upholding the rule of law, protecting property rights, and providing incentives for both domestic and foreign investors.

By integrating human rights and rule of law principles into economic policies, Iraq can work towards a more equitable and sustainable economic system that benefits all citizens.

Euthanasia of National Oil Companies

The Iraqi economic system before 2003 was a socialist system that placed all economic matters in the hands of the state in terms of ownership and management, with a minimal role for the private sector that was almost invisible, as well as a joint sector primarily for those in power.

After 2003, with the fall of the socialist system and the advent of a democratic system, as described in Article No. (1) of the Constitution—which states, "The Republic of Iraq is a single, independent, federal state with full sovereignty, the system of government in it is a democratic, representative republic, and this constitution guarantees the unity of Iraq"—the trend shifted towards a capitalist economic system. The slogan for most officials became the privatization of state institutions.

A simple look at the direction of the Iraqi economy shows that it is a hybrid system lacking clear direction and methodology; it is neither fully socialist nor capitalist. The mindset of both Iraqi citizens and officials remains steeped in socialism, with officials wanting control over everything and citizens expecting appointments, land plots, and other benefits from the state.

From this mindset, certain decisions have been made, such as:

First Decision: In the 2024 budget, the Iraqi government decided to transfer profitable oil and non-oil companies from a self-financing system to a centralized one. This move restricts powers and centralizes them in Baghdad, reversing the financial freedom these companies previously enjoyed regarding projects, salaries, and allocations.

This decision has several implications:

1. It reinforces governmental control over public companies, akin to a return to the previous regime, despite Public Companies Law No. 22 of 1997 being legislated during that era.

2. It restricts companies' powers, impacting their performance and productivity. For instance, simple needs that were previously managed within the company's operating budget now require Ministry of Finance approval, complicating processes and increasing bureaucracy.

Second Decision: Increasing the share of profits allocated to the public treasury from companies' revenues. The law regulating public companies (Law No. 22 of 1997) set specific percentages for profit distribution, but this decision increases the treasury's share from 45% to 75%.

Third Decision: Increasing salaries for members of parliament by 30% while reducing allocations for employees in profitable public companies.

Successful Experiences:

1. Management of the Majnoon Oil Field: After Shell's withdrawal in 2018, national management was granted powers similar to foreign companies, leading to successful operations.

2. Reconstruction of the Northern Refinery: Despite severe damage from conflict, national efforts successfully rehabilitated the Baiji Refinery after a decade-long halt.

The success of these endeavors was due to granting financial freedoms and exceptions, demonstrating that autonomy can lead to effective outcomes.

Conclusion:

1. Decisions aimed at increasing state revenues must address how to manage increased employee appointments and low oil export prices.

2. Restricting company powers will likely decrease oil company performance.

3. Governmental actions negatively impact social services, employee conditions, and scientific research.

4. Profitable companies may become unprofitable over time due to restrictions, affecting future petroleum derivative production.

5. These decisions could lead to dissatisfaction among employees in the oil sector.

6. While private sector companies enjoy spending freedoms leading to success, public companies face restrictions that hinder performance.

The shift towards centralization contradicts global practices that favor decentralization and efficiency.