Oil exploration and production activity is growing fast in southern Iraq.
However, this progress comes with serious and continuing challenges — notably in the area of security. In this overview, we look at southern Iraq's security situation at a time of change and uncertainty, and in the context of often confusing regulation and bureaucracy. We also offer a useful checklist for first-time visitors who want to plan ahead.
Iranian influence
As 2011 draws to a close, IOCs, service companies, subcontractors and security providers in southern Iraq are nervously discussing the possible ramifications of the US withdrawal. High on the list of these ramifications is the response of Iran. It is impossible to ignore the growing influence that Iranian trade in particular is having on the lives of Basrawis. After all Iraq's giant neighbour is only a few kilometres to the east of the city and the Iran/Iraq border actually straddles one of Iraq's, and the world's, biggest oilfields — the Majnoon field.
But commerce is not the only area where Iranian influence can be felt. The hand of Iran is also evident in the disarray within the Iraqi government over negotiations to renew the US military's Status of Forces Agreement (SOFA) and there is a fear that the New Year will see a surge in the activities of Iranian-backed militias. In fact, there is clearly a fear that when the US does leave the country, Iranian influence will translate into something more threatening, either commercially or from a security perspective. But Iran is not the only source of possible friction. The Iraqi government is flexing its muscles in the south in an attempt to quash thoughts of federalism.
Demand for security
As for the concern underlying so much of all the oil industry jitters — the oilfields of the southern Iraqi region — it is clearly proving to be a boom year as the volume of work on the oilfields continues to grow exponentially. However, as one sort of business booms, so too does another: security. Demand for the services of security providers is more than healthy; in fact it may even be outstripping supply — and not just in terms of human capital.
Regulations and hurdles
One of the key pinch points for the growth of this sector is the sourcing of professionally manufactured armoured vehicles which meet the international B6 armouring standard, one of several international standards designed to define the level of protection of armour. In the case of B6 this usually refers to 6 - 6.5mm armour steel. As yet these vehicles are not manufactured in Iraq so the only relatively local source is the UAE.
However, this country recently introduced fairly draconian regulations in order to prevent export to undesirable regimes although the regulations also insist on strict documentation requirements in many other cases. Even if these hurdles can be overcome, the actual process of import into Iraq is a very convoluted one; many customers have had to wait for months while their desperately needed vehicles are marooned in Iraq's chaotic Umm Qasr Port awaiting paperwork and inspection.
Area of concern
One area of concern is whether the boom in demand for security could affect the quality of services in this area, especially if sub-contractors working for IOCs focus too heavily on the money-making opportunities that security promises. However, the IOCs, who are the prime sub-contractors on the fields, continue to set the standards for security in the region. They have instituted rigorous audit programmes to prevent corner-cutting by their own sub-contractors for whom the security element presents a new revenue stream.
And let's not forget the wider context in which all this is taking place: the tentative and uncertain moves towards coherent government that are reflected in confusion and bureaucracy at many levels of authority and regulation.
Situation at the airport
Take, for example, the security control of the airport in Basra, which is getting busier and busier as more and more airlines fly in carrying passengers keen to tap into the lucrative opportunities which the oil boom offers.
Control of this function recently changed hands. It had been supervised by a militia-linked military unit. It has since moved to the control of the Iraqi army. This situation is likely to continue until the wrangling over contracts for an international security company to run the airport is finally resolved.
Whichever company takes over will certainly have its work cut out. The situation at the airport can get quite confusing at the best of times — and not always for obvious reasons. For example, a recent — and entirely arbitrary — ban on expatriate oil staff being delivered to the terminal by their licensed security teams resulted in near farce. Heavily armoured vehicles pulled up in an unguarded dirt car park and cross-decked their precious clients into a rickety bus emblazoned with a photo of Moqtada Al Sadr (head of the feared Jaish al Mahdi militia and the Sadrist political bloc) for the final couple of kilometres journey to the terminal building.
Needless to say IOCs brought an instant halt to travel for their staff, simply refusing to fly their personnel in if they were likely to be exposed in this way. The situation has now calmed somewhat but there is still a great deal of confusion as to who can and cannot enter the airport and approach the terminal.
Delays and frustration
Another area where confusion and arbitrary rulings are causing concern for the oil industry is that of entry visas for the experienced engineers who are so badly needed to get the Iraqi oil industry running smoothly. In the summer rumours began to circulate of an outright ban on all Asians entering Iraq. This was sparked by the growth in the number of Asians filling roles that could, in theory, be filled by Iraq's army of unemployed.
Following a number of false starts it seems that this policy has been implemented for all Asians who cannot demonstrate a higher educational or technical qualification. This has led to delays and frustration for IOCs and service companies, which rely heavily on the Indian subcontinent — and Indonesia — as a pool for cheap, skilled labour.
Coherent policy
While many companies have found ways to get round this ban it is seen as another example of the disjointed nature of Iraqi government. The Ministry of Oil (MOO) is desperate to update its antiquated infrastructure. The rest of the government is struggling to produce a coherent policy direction. Departments seem to stumble over one another in an attempt to stake claims to territory or influence. Meanwhile the continuing problem of the mountain of government compliance paperwork has yet to be resolved.
Threat of violence
The outlook for secure conduct of business is still uncertain, therefore. While the south remains a relatively open environment compared to the rest of Iraq, particularly Baghdad and its environs, there remain huge security challenges to overcome. The explosions on the Rumaila Field, a giant oilfield a little over 30 from the Kuwaiti border in early October remain shrouded in mystery, reinforcing the impression that the threat of violence has far from evaporated.
On the one hand, the disappearance of the US forces completely from the streets may well see a downturn in the improvised explosive device (IED) activity, particularly in Maysan and Dhi Qar provinces. However, it is equally likely to spark some form of turf war for influence over what is fast becoming the most lucrative and prosperous area of Iraq.
Growing friction
And many regional factors are likely to have a bearing on outcomes in southern Iraq. They range in diversity from the potential loss of influence of Iran in Syria through to the growing friction between the Iraqi government and the Kuwaitis over the Mubarak Port development, which has the potential to cause a real rift between the two countries.
A deep suspicion
At the same time, as we have noted earlier, there remains a deep suspicion of Iranian influence among ordinary Iraqis — even the fear that Iraq will find itself as a vassal state of the Iranian regime and subject to an Iranian hegemony of both security and trade through the operational and trade arms of the Iranian Revolutionary Guard Corps.
Positive effect
However, such, possibly exaggerated, fears could have a positive effect, as they have now reached the point where Iranian proxies such as the Sadr bloc feel obliged to publicly disavow any relationship with Iran in order to maintain credibility. This may go some way to ensuring a degree of constraint on Iranian influence over the Iraqi political class.
