State authority to run Iraqi oil

In a bid to foster greater patriotic feeling and increase security over Iraq's natural assets the U.S.-led Provisional Authority and Iraqi oil officials are apparently favouring the formation of an state-owned company to run the country's crucial oil industry.

Currently Political and ethnic strife has slowed industry reconstruction and officials believe a state oil company would be more attractive to foreign investment and would boost production without inflaming nationalistic anger over foreign profiteering.

To date the privatisation of the economy has had mixed results and the sensitive nature of the country's oil assets means a national flavour to the industry could minimise criticism that the U.S.-led invasion was an oil grab.

State-run oil industries have already proved to be successful in neighbouring Kuwait and Saudi Arabia, both of which the new authority may be modeled on.

Iraq has the world's second largest known oil reserves, but its oil industry fell into a dilapidated state under Saddam Hussein's rule and its currently producing about half of its pre-war capacity.

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