U.S. diplomat in line for Iraqi oil profits

OSLO — Peter W. Galbraith, an influential former U.S. ambassador, is a powerful voice on Iraq who helped shape the views of policymakers like Vice President Joseph Biden and Sen. John Kerry. In the summer of 2005, he was also an adviser to the Kurdish regional government as Iraq wrote its constitution — tough and sensitive talks not least because of issues like how Iraq would divide up its vast oil wealth.

Now Galbraith, 58, son of the renowned economist John Kenneth Galbraith, stands to earn perhaps a hundred million or more dollars as a result of his closeness to the Kurds, his relations with a Norwegian oil company and constitutional provisions he helped the Kurds extract.

In the constitutional negotiations, he helped the Kurds ram through provisions that gave their region — rather than the central Baghdad government — sole authority over many of their internal affairs, including clauses that he maintains will give the Kurds virtually complete control over all new oil finds on their territory.

Galbraith, widely viewed in Washington as a smart and bold foreign-policy expert, has always described himself as an unpaid adviser to the Kurds, although he has spoken in general terms about having business interests in Kurdistan, as the north of Iraq is known.

So it came as a shock to many last month when Norwegian investigative journalists at the newspaper Dagens Naeringsliv began publishing documents linking Galbraith to a specific Norwegian oil company with major contracts in Iraq.

Enormous stake

Interviews by The New York Times with more than a dozen current and former government and business officials in Norway, France, Iraq, the United States and elsewhere, along with legal records and other documents, reveal in considerable detail that he received rights to an enormous stake in at least one of Kurdistan's oil fields in spring 2004.

As it turns out, Galbraith received the rights after he helped negotiate a potentially lucrative contract that allowed the Norwegian oil company DNO to drill for oil in the Dohuk region of Kurdistan, the interviews and documents show.

He says his actions were proper because he was at the time a private citizen deeply involved in Kurdish causes, both in business and policy.

When drillers struck oil in a rich new field called Tawke in December 2005, no one but a handful of government and business officials and members of Galbraith's inner circle knew that the constitutional provisions he had pushed through months earlier could enrich him so handsomely.

As the scope of Galbraith's financial interests in Kurdistan become clear, they have the potential to inflame some of Iraqis' deepest fears, including conspiracy theories that the true reason for the American invasion of their country was to take its oil. It may not help that outside Kurdistan, Galbraith's influential view that Iraq should be broken up along ethnic lines is considered offensive to many Iraqis' nationalism.

Biden and Kerry, who do not advocate such a partitioning, were not aware of Galbraith's oil dealings in Iraq, aides to both say.

Official left "speechless"

Some officials say his financial ties could raise serious questions about the integrity of the constitutional negotiations. "The idea that an oil company was participating in the drafting of the Iraqi Constitution leaves me speechless," said Feisal Amin al-Istrabadi, a principal drafter of the law that governed Iraq after the U.S. ceded control to Iraqis in 2004.

DNO's chief executive, Helge Eide, confirmed that Galbraith helped negotiate the Tawke deal and advised the company during 2005. But he said Galbraith had acted solely as a political adviser and that the company never discussed the constitutional negotiations with him. "We certainly never did give any input, language or suggestions on the constitution," Eide said.

Galbraith confirmed that he did work as a mediator between DNO and the Kurdish government until the oil contract was signed, and said he maintained an "ongoing business relationship" with the company throughout the constitutional negotiations in 2005 and later.

"I see no conflict"

He contends that his largely undeclared dual role was entirely proper.

"What is true is that I undertook business activities that were entirely consistent with my long-held policy views," Galbraith said in his response. "I believe my work with DNO [and other companies] helped create the Kurdistan oil industry which helps provide Kurdistan an economic base for the autonomy its people almost unanimously desire."

"So, while I may have had interests, I see no conflict," Galbraith said.

Galbraith was recalled last month as a U.N. envoy in Afghanistan after saying the August presidential election was rigged in favor of U.S.-backed President Hamid Karzai. .

Karzai accused Galbraith of "foreign interference" in the ballot counting.

Galbraith served as the first U.S. ambassador to Croatia during the 1990-95 wars that dismantled the former Yugoslavia.

Information from Seattle Times archives is included in this report.