State IG to look at U.S. role in Iraq oil deals

Responding to a request by four Senate Democrats, the State Department's inspector general has announced an inquiry into the department's policy on western oil company contracts in Iraq.

"I have initiated a review of the responses provided to Congress recently on issues surrounding oil contracts, oil field development and U.S. policy in Iraq," Acting State Department Inspector General Harold Geisel wrote in a June 22 letter obtained by CongressDaily.

The letter to Senate Armed Services Committee Chairman Carl Levin, D-Mich., and Sens. Charles Schumer, D-N.Y., John Kerry, D-Mass., and Claire McCaskill, D-Mo., refers to material State gave the House Oversight and Government Reform Committee for its investigation into a deal involving Texas-based Hunt Oil Co., as well as other potential oil contracts.

An IG spokesman said the documents gathered for the committee offer a starting point for the new probe, which will address several questions from the senators. The spokesman said the review is not yet a formal investigation.

The inquiry is the latest development in a controversy that arose last September when Hunt Oil announced a contract with the Kurdistan Regional Government to explore oil fields there. Hunt Oil's deal appeared to complicate Iraqi efforts to enact a national oil-sharing law, which the United States backs.

State Department officials said at the time they had discouraged Hunt Oil from signing the agreement based on a policy of opposing actions that would impede agreement on an oil law.

But the Oversight and Government Reform panel's investigation found no evidence State officials in Iraq warned Hunt against the contract. According to Hunt employees' notes, officials from a U.S. regional reconstruction team told the company the "U.S. has no policy, for, nor, against."

Those findings and reports that State officials have advised the Iraqi government during negotiations to award five western oil companies no-bid contracts to explore oil fields have drawn congressional scrutiny.

The Senate Democrats asked Geisel to investigate if there was a clear department policy discouraging oil contracts between private companies and regional governments, and if there is a policy on the type of no-bid contracts under negotiation. The senators asked if such policies had been communicated to State officials and consistently applied.

A State Department spokesman declined to comment on the IG's review.