IRAQ - Iraqi Oil Being Partitioned.

With foreign oil firms having won production sharing agreements (PSAs) in northern Iraq from the local Kurdish governments, pro-Sadr Shiite leaders in the southern provinces of Basra, Zi Qar (Nassiriyah) and Misan (on the Iranian border north of Basra) announced on Aug. 10 that - unless the US-led assault on Najaf stopped - they will form a state of their own and secede from today's Iraq. Then foreign oil companies awaiting PSAs in Kurdistan (northern Iraq) said they might soon bid for similar deals in the southern oil producing zone, which includes many fields that need development.

Whether or not the US will allow Iraq to be partitioned in this way remains to be seen. But from the outcome of the fighting in Najaf so far, it had become clear by Aug. 15 that the US had lost control of Falluja, Ramadi and Mosul - key cities in the Sunni Triangle. Now the US is thinking Baghdad and the Shiite south are winnable.

Until recently, the Financial Times noted on Aug. 14, just about the only visitors to the Taqtaq depression in Kurdistan were monogamous men heading to the local spring, whose waters were reputed to have the power to grant second wives. "Now oilmen in four-wheel-drive vehicles are racing over its stony grazing grounds, conducting seismic surveys". A Turkish company, General Energy, has brought in 70 workers, including 10 Turks, to drill wells, striking oil in all three. "The potential of the field looks good", the FT quoted the company's chairman, Mehmet Sepil, as saying. Sepil obtained drilling rights in the 350 sq km concession in a PSA with the Kurdish regional government based in Suleimaniya three months before the war. He was quoted as adding: "I think in northern Iraq there are very good fields, but there is not yet enough production".

The FT said the prospect was exciting the Kurds, "hopeful at last of acquiring their own source of oil wealth and reducing their dependence on Baghdad". In addition to the Tactac field, 20 miles north-east of Kirkuk, Suleimaniya has signed a similar PSA with a second Turkish company, Petoil, to drill at Chya Surkh, on the Iranian border, and entered into talks with an Australian firm surveying gas fields in Chanchamal.

These contracts have sparked a dispute with Baghdad, however, which claims the right to sign oil deals. Baghdad's Oil Ministry says the contracts signed with the Kurdish government are invalid. The FT quoted Ameer Abdillilah, a senior Oil Ministry official, as saying: "It is illegal for any party to conduct negotiations with any party outside the Ministry of Oil. We don't recognise them. We choose the companies". Firms found negotiate-ing with the Kurds, he warned, will be barred from bidding for the greater prize of projects elsewhere in Iraq, the first three of which the ministry is to award this month.