Oil, of course, can be politically explosive at the best of times, let alone the worst. So, when the country with the third largest oil reserves in the world debates the future of its endowment during a time of civil war, people sit up and take notice. The Iraqi government is working on a new hydrocarbons law that will set the course for the country's oil sector and determine where its vast revenues will flow. The consequences for such a law in such a state are huge. Not only could it determine the future shape of the Iraqi federation -- as regional governments battle with Baghdad's central authority over rights to the riches -- but it could put much of Iraqi oil into the hands of foreign oil companies. <skip>

Nevertheless, the draft law lays the ground work for private oil companies to take large stakes in Iraq's oil. The new law would allow the controversial partnerships known as 'production sharing agreements' (PSA). <skip>

It's also dangerous. It means governments are legally committing themselves to oil deals that they've negotiated from a position of weakness. And, the contracts typically span decades. Companies argue they need long-term legal security to justify huge investments in risky countries; the current draft recommends 15 to 20 years. <skip>

Last week, the Iraqi Labor Union Leadership suggested the same. "The Iraqi people refuse to allow the future of their oil to be decided behind closed doors," their statement reads. "(T)he occupier seeks and wishes to secure themselves energy resources at a time when the Iraqi people are seeking to determine their own future while still under conditions of occupation." Many worry instability would only get worse if the public feels cheated by the government and multinationals -- the Iraqi constitution says the oil belongs to the Iraqi people. The Labor Union Leadership warned: "We strongly reject the privatization of our oil wealth, as well as production sharing agreements, and there is no room for discussing the matter. This is the demand of the Iraqi street, and the privatization of oil is a red line that may not be crossed." <skip>

Critics say the US is leaning on the IMF and World Bank to push Iraq into signing oil contracts fast, so western firms can secure the oil before Chinese, Indian and Russian firms do. An IMF official told SPIEGEL ONLINE that "passage of a hydrocarbon law is not a condition for financial support from the IMF." Nevertheless, Iraqi authorities found it necessary to promise the IMF a draft petroleum law by the end of this year -- this in the same letter that says "we will take whatever steps are necessary to ensure that the program remains on track."