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Iraqi Cabinet members approve draft version of oil law

An oil tanker is seen in Basra this month. Iraq is nearing passage of a bill that would manage its vast oil wealth. (ESSAM AL-SUDANI/AFP/Getty Images)

BAGHDAD -- The Iraqi Cabinet approved a draft law yesterday to manage the country's vast oil industry and distribute its wealth among the population -- a major breakthrough in US efforts to press the country's Shi'ite, Sunni, and Kurdish groups to reach agreements to achieve stability.

Parliament will take up the measure when it reconvenes early next month after a recess. With all major parties endorsing the bill, approval is likely -- although some politicians predicted a vigorous debate on some of the details.

Many Iraqis fear the measure will effectively hand the country's major natural resources over to foreign oil companies. Supporters maintain that oil giants have the billions of dollars needed to upgrade the country's decrepit wells, pipelines, and port.

"I very much hope the main political groups will rise to the occasion" and approve the bill in parliament, Deputy Prime Minister Barham Saleh, a Kurd, said. Iraq has some of the world's largest petroleum reserves, and supporters hope the legislation will encourage major oil companies to invest billions -- if the security situation improves.

However, the bill had been bogged down for months in infighting between Prime Minister Nouri al-Maliki's Shi'ite-led government and the self-ruled Kurdish administration of northern Iraq over who had the final say in negotiating contracts and managing the revenues.

Under the oil legislation, regional administrations will be empowered to negotiate contracts with international oil companies. The contracts will be reviewed by a central government committee in Baghdad headed by the prime minister.

Under the measure, revenues will be distributed to all 18 provinces based on population size -- a concession to the Sunnis whose central and western homeland has relatively few proven reserves. Most of Iraq's oil is in the Kurdish north and Shi'ite south, and many Sunnis fear they would be cut out of a fair share.

Maliki announced the decision after the Kurds accepted the draft oil bill over the weekend -- nearly two months after the government's own deadline for enacting a new oil law.

The Bush administration has been urging the Iraqis to finish the new oil law.

In Washington, White House spokesman Tony Snow called the new oil law the "key linchpin" in Iraq's recovery because it gives "everybody a shared economic interest in working together."