Former diplomat denies oil dealings influenced views

Galbraith helped Iraqi Kurds keep rights to fields

Peter Galbraith said his business dealings in Kurdistan are not a conflict of interest because he was a private citizen. Peter Galbraith said his business dealings in Kurdistan are not a conflict of interest because he was a private citizen.
By Farah Stockman
Globe Staff / October 15, 2009

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WASHINGTON - Peter Galbraith, a former American diplomat who has been among the most forceful advocates for Iraqi Kurds to retain control over the oil in their region, acknowledged yesterday that he has had business dealings involving oil companies in Iraqi Kurdistan since 2004.

But Galbraith, a key adviser to Iraqi Kurdish politicians who also helped shape US public opinion on Iraq with his writings, said his business relationships did not drive his support for the Kurdish cause, or present a conflict of interest, because he was working as a private citizen at the time.

“The business interest, including my investment into Kurdistan, was consistent with my political views,’’ he told the Globe. “These were all things that I was promoting, and in fact, have brought considerable benefit to the people of Kurdistan, the Kurdistan oil industry, and also to shareholders.’’

It is not illegal or unheard of for former US officials to do business with people they worked with during their time in government. But ethical questions often arise when such dealings become public.

Some analysts said yesterday that Galbraith stood to gain personally from language that he helped draft for the Iraqi Constitution when he was advising Kurdish leaders during negotiations with Iraqi and US officials in 2005. They said his business ties should have been publicly disclosed at the time.

“Galbraith has been such a central person to the shaping of the Iraqi Constitution, far more than I think most Americans realize,’’ said Reider Visser, a historian of southern Iraq and who edits the Iraq-focused website, “All those beautiful ideas about principles of federalism and local communities having control are really cast in a different light when the community has an oil field in its midst and Mr. Galbraith has a financial stake.’’

Galbraith said in a telephone interview that Kurdish leaders knew of his oil interests, but he was not under any obligation to tell the US and Iraqi officials involved in the negotiations.

The controversy is the latest twist in a high-stakes struggle between Iraq’s Kurds and the central government over oil, the biggest source of the nation’s wealth. In December, the government plans to auction 10 undeveloped oil fields believed to contain reserves worth about $3 trillion at current prices.

It is also another chapter in the storied life of a man who has played many powerful roles.

Galbraith, the son of famed Harvard economist John Kenneth Galbraith, lives in Vermont and mulled a run for governor there earlier this year. Instead, he took a job as a top United Nations official in Afghanistan, but was fired late last month after accusing his boss of covering up election fraud to protect President Hamid Karzai.

Iraq has been a main focus of Galbraith’s career.

His ties to Iraqi Kurdistan date back to the 1980s, when he traveled there as a staffer for the Senate Foreign Relations Committee to research Saddam Hussein’s genocidal attacks on Kurds. Galbraith’s research bolstered support for a US no-fly zone that allowed Iraqi Kurds to set up their own de facto government. In 1993, Galbraith was appointed US ambassador to Croatia, where he became even more deeply convinced that some ethnic minorities should be allowed to govern their own affairs.

In late 2002, as the Bush administration began preparing to invade Iraq, Galbraith worked as a professor at the Naval War College and gave advice to then-Deputy Defense Secretary Paul Wolfowitz on how to handle problems in Kurdistan. But within months of the invasion, Galbraith left the US government and became one of its critics.

In speeches, meetings with US officials, and articles in the New York Review of Books, Galbraith said Kurds should be given maximum autonomy and should have the right to develop their own oil fields, free of control by Iraq’s central government.

But the same time, Galbraith was quietly entering into business deals that gave him a financial stake in the positions he was advocating. In late 2003 and early 2004, he worked as a paid consultant to Kurdish politicians, advising them on legal language they should seek to insert into Iraqi laws to keep future oil development under their control. Later, in 2005, he advised them again on an unpaid basis.

On June 23, 2004, Galbraith and his son, Andrew, registered a Delaware partnership called Porcupine, which entered into a business arrangement with DNO, a Norwegian oil company, according to company documents and a statement recently circulated by Porcupine.

Two days after Porcupine was established, the Kurdistan Regional Government signed a contract to develop Kurdistan’s first oil field with DNO, ushering in a potential economic windfall for the semiautonomous region. DNO eventually struck oil, and currently owns a 55 percent stake in the Tawke field.

But Iraq’s central government has refused to accept the legality of its agreement, creating a heated standoff that has stopped the flow of oil from Kurdistan in recent days.

Rumors of Galbraith’s financial dealings in Iraq have swirled for years. But the level of his involvement was not publicly known until last weekend, when Dagens Naeringsliv, Norway’s largest business newspaper, reported that Porcupine was seeking compensation from DNO in a closed-door arbitration proceeding in London.

Ben Willey, a DNO spokesman, said the company had been “introduced to the Kurdistan opportunity back in 2003 and 2004 by a third party’’ he declined to name. He said the Kurdistan Regional Government gave that third party a 5 percent stake in the DNO deal in 2004, but that the contract was renegotiated last year and “somebody lost out.’’

Now, Willey said, that third party is asking for compensation from DNO, which is set to export roughly 43,000 barrels a day from Kurdistan, earning approximately $30 million annually. Dagens Naeringsliv, said that besides Porcupine, a wealthy Yemeni businessman is also seeking compensation.

Juan Cole, a University of Michigan professor who closely follows Iraq, said the DNO deal could pose an ethical problem because Galbraith “played a significant role’’ in helping to draft constitutional provisions that gave the Kurds control over 100 percent of new oil development.

But Galbraith said yesterday his role in the constitutional negotiations was unpaid and informal, and therefore he was under no obligation to disclose his business interests to the US or Iraqi governments. He also said confidentiality agreements prevented him from publicly disclosing details of the business.

Galbraith said he did make a full disclosure to the UN before his recent job in Afghanistan. A UN official, however, said he was hired over the objections of some officials who believed he was too close to Kurdish leaders seeking to break away from Iraq, a UN member state.