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Committee Questions State Dept. Role in Iraq Oil Deal

Committee Questions State Dept. Role in Iraq Oil Deal

Published: July 3, 2008

Bush administration officials knew that a Texas oil company with close ties to President Bush was planning to sign an oil deal with the regional Kurdistan government that ran counter to American policy and undercut Iraq’s central government, a Congressional committee has concluded.

Bloomberg News

Ray L. Hunt, the chairman and chief executive of Hunt Oil, in an undated photo.

The conclusions were based on e-mail messages and other documents that the committee released Wednesday.

United States policy is to warn companies that they incur risks in signing contracts until Iraq passes an oil law and to strengthen Iraq’s central government. The Kurdistan deal, by ceding responsibility for writing contracts directly to a regional government, infuriated Iraqi officials. But State Department officials did nothing to discourage the deal and in some cases appeared to welcome it, the documents show.

The company, Hunt Oil of Dallas, signed the deal with Kurdistan’s semiautonomous government last September. Its chief executive, Ray L. Hunt, a close political ally of President Bush, briefed an advisory board to Mr. Bush on his contacts with Kurdish officials before the deal was signed.

In an e-mail message released by the Congressional committee, a State Department official in Washington, briefed by a colleague about the impending deal with the Kurdistan Regional Government, wrote: “Many thanks for the heads up; getting an American company to sign a deal with the K.R.G. will make big news back here. Please keep us posted.”

The release of the documents comes as the administration is defending help that United States officials provided in drawing up a separate set of no-bid contracts, still pending, between Iraq’s Oil Ministry in Baghdad and five major Western oil companies to provide services at other Iraqi oil fields.

In the no-bid contracts, the administration said it had provided what it called purely technical help writing the contracts. The United States played no role in choosing the companies, the administration has said.

Disclosure of those contracts has provided substantial fuel to critics of the Iraq war, both in the United States and abroad, who contend that the enormous Iraqi oil reserves were a motivation for the American-led invasion — an assertion the administration has repeatedly denied.

Iraq’s oil minister, Hussain al-Shahristani, has condemned the Kurdistan deal as illegal because it was not approved by Iraq’s central government and was struck without an oil law, which has still not been passed.

After the deal was signed last year, a senior State Department official in Baghdad criticized it, saying, “We believe these contracts have needlessly elevated tensions between the K.R.G. and the national government of Iraq.”

The State Department said Wednesday that it had discouraged the deal. Hunt officials declined to comment, and Kurdish government officials said there was no impropriety.

In a letter to the House Committee on Oversight and Government Reform, whose chairman is Representative Henry A. Waxman, Democrat of California, a State Department official wrote that the department had strongly discouraged Hunt from signing the deal until an oil law had been passed.

The State Department told Hunt that “we continue to advise all companies that they incur significant political and legal risk by signing contracts” before then, wrote Jeffrey T. Bergner, an assistant secretary for legislative affairs at the department, in one of the documents made public on Wednesday.

But in a letter to Secretary of State Condoleezza Rice, Mr. Waxman wrote that the documents his committee had collected “tell a different story about the role of administration officials.” In letters obtained by the committee, Mr. Hunt informed the President’s Foreign Intelligence Advisory Board, of which he was a member, last July and August that he was pursuing serious business interests in Kurdistan.

“We were approached a month ago by representatives of a private group in Kurdistan as to the possibility of our becoming interested in that region,” Mr. Hunt wrote to the board last July 12. “We had one team of geoscientists travel to Kurdistan several weeks ago and we were encouraged by what we saw.”

In August 2007, Mr. Hunt informed State Department officials directly of his intentions in Kurdistan, and on Sept. 5, three days before the deal was signed, a flurry of e-mail messages among Hunt and State Department officials make clear that the department was aware of what was in the works.

In a message to a colleague with the subject line “Hunt Oil to Sign Contract With K.R.G.,” one State Department official gives a highly detailed summary of the agreement. Mr. Hunt, the official wrote, “is expecting to sign an exploration contract with the K.R.G. for a field located in the Shakkan district, an area under K.R.G. control (inside the Green Line) but technically in Nineveh Governorate.”

“Hunt would be the first U.S. company to sign such a deal,” the official wrote, suggesting that the news should be rushed onto the State Department’s internal distribution network as quickly as possible.

Despite those exchanges, a State Department official said Wednesday that the company had in fact been discouraged from completing its deal.

“All companies, including Hunt Oil, which have spoken with the United States government about investing in Iraq’s oil sector, have and will continue to be given the same advice,” John Fleming, an Iraq press officer in the State Department’s Bureau of Near Eastern Affairs, wrote Wednesday in an e-mailed response to questions. “We advise companies that they incur significant political and legal risk by signing any contracts with any party before a national law is passed by the Iraqi Parliament.”

Another State Department official, who asked to remain anonymous, expressed frustration, saying that a local State Department official in Erbil, the Kurdish provincial capital, who was the head of a so-called Regional Reconstruction Team, tried to dissuade Hunt officials from making the deal.

But no notes were taken at that meeting, the official said, and Hunt representatives later gave a conflicting account of what had been said.

“I have talked to the R.R.T. team leader personally, and he sticks by his story and they stick by theirs,” the State Department official said.

Jeanne L. Phillips, a senior vice president for corporate affairs and international relations at Hunt Oil whose correspondence appears at certain points in the documents released Wednesday, said that because Mr. Waxman’s letter was not addressed directly to the company, she could not comment on it.

“As a matter of company policy, Hunt Oil Company does not comment on correspondence between third parties,” Ms. Phillips wrote in an e-mail message.

An official in the Kurdistan Regional Government reached late Wednesday who asked not to be named said that the government had written some 22 contracts to date.

“Anyone can have a contract with the K.R.G., but it must be accepted and suitable according to assessment by our experts,” the official said. “Hunt is a good company and never had its contracts with us illegally or improperly.”

The documents released by Mr. Waxman also lay bare what has become a serious dispute between the company and the State Department over what was said between them before the deal last year.

For example, a senior Hunt official said he was told by State Department officials during a meeting on June 15, 2007, that the United States government did not object to deals with the Kurdish regional government.

“I specifically asked if the U.S.G. had a policy toward companies entering contracts with the K.R.G.,” the Hunt official, David McDonald, wrote in an e-mail message to a colleague last Sept. 28. The State Department officials, Mr. McDonald wrote, replied that there was no policy, neither for nor against.

His message concluded: “There was no communication to me or in my presence made by the nine State Department officials with whom I met prior to 8 September that Hunt should not pursue our course of action leading to a contract. In fact, there was ample opportunity to do so, but it did not happen.”

The encouragement by State Department officials did not end with the signing of the contract on Sept. 8, the documents suggest. Five days later, a State Department official in the southern city of Basra wrote to Ms. Phillips, “I read and heard about with interest your deal with the regional Kurdish government.”

“I don’t know if you are aware of another opportunity,” the official wrote, mentioning an enormous port project and a natural gas project in the south. After a few more lines, the official concluded, “This seems like it would be a good opportunity for Hunt.”

James Glanz reported from New York, and Richard A. Oppel Jr. from Baghdad. Andrew E. Kramer contributed reporting from Moscow, Mudhafer al-Husaini from Baghdad and an Iraqi employee of The New York Times from Kurdistan.

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