Iraq's weakened unions fight foreign oil firms

BASRA, Iraq (Reuters) - Unions are lobbying against Iraq's new oil contract with BP and China's CNPC, but the weakened labor movement may have a hard time thwarting deals desperately needed to revive a struggling oil sector.

The Federation of Oil Unions of Iraq and the Federation of Workers Councils and Unions in Iraq have condemned the Oil Ministry's decision to award a foreign consortium the contract to develop Rumaila, the country's largest producing oilfield.

"We have written a letter to BP and the British consul in Basra, warning them against entering Basra as it will be illegal ... If they do, we will protest and strike," said Faleh Aboud Amara, a top official with the Federation of Oil Unions.

Unions were one of the opponents of the ministry's plan to award foreign firms contracts to develop as many as eight oil and gas fields in Iraq's first major energy auction last month, a centerpiece of government efforts to more than double output of around 2.5 million barrels per day (bpd).

Just one field was awarded in the June 30 auction. Bidding revealed a big gap between what the government thought should be paid for the work and what firms considered fair.

But Oil Minister Hussain al-Shahristani is likely to pull out all the stops to make sure the Rumaila deal, in which BP and CNPC promise to increase the field's output to 2.85 million bpd, almost three times its current capacity, goes ahead.

BP had no comment and no one at the British embassy could be reached for comment.

Ali Abbas Khafif, head of the Worker Councils and Unions' branch in Basra, Iraq's southern oil hub, said the Rumaila deal would violate Iraqi law because it was brokered in the absence of new national energy legislation, whose passage has been held up for years by a bitter feud between Arabs and minority Kurds.

He also complained about the terms of the fixed-fee contract, which he said would overcompensate companies, and said such deals might lead to greater unemployment in the oil sector.

The union strategy centers around efforts to scare off firms thinking about coming to Iraq, where sectarian bloodshed has ebbed but violence still poses a major threat, Khafif said.

"We have the ability to halt their work entirely. We can mobilize people against them. We will use sit-ins and strikes."

WEAK Labor MOVEMENT

Yet union clout in Iraq is not strong. Saddam Hussein effectively banned them in 1987 and they have scant legal protection today.

"Unions don't have enough power to stop these contracts. The labor movement in Iraq is not organized enough to give it influence over political decisions," said Saad Saloum, a professor and political analyst at Baghdad University.

Abboud said the oil union has 10,000 active members in Basra, against an estimated 46,000 oil workers there.

Parliamentarian Nassir al-Esawi said unions had no special protections under Iraqi law, on the same legal footing as civil societies like aid groups. Some in the labor movement accuse the Maliki government of trying to weaken them even further.

Iraqi lawmakers also insist foreign oil deals they have not approved are invalid, and some within the state oil industry also oppose auctioning off fields in production.

The minister has also come in for criticism from foreign firms, who prefer more lucrative production sharing deals and who complained of his exacting terms in last month's auction.

The conflicting critiques may, in the end, signal that Shahristani has struck the right balance between nationalism and pragmatism, but the firestorm he faces is not likely to go away.

There is less opposition to ministry plans for a second round at the end of the year for 11 fields yet undeveloped.

Ali Hussain Balou, the head of parliament's oil and gas committee and a vocal opponent of Shahristani, acknowledged that union influence was limited but said that it would grow.

"Iraq is on a democratic course. If these unions are not powerful today, they will be tomorrow," he said. (Additional reporting by Muhanad Mohammed, Aseel Kami and Khalid al-Ansary in Baghdad and Tom Bergin in London; writing by Missy Ryan; editing by Karen Foster and)