The Federation of Oil Unions of Iraq and the Federation of Workers Councils & Unions in Iraq have condemned the Oil Ministry's decision to award a foreign consortium the contract to develop Rumaila, the country's largest producing oilfield.

"We have written a letter to BP and the British consul in Basra, warning them against entering Basra as it will be illegal ... If they do, we will protest and strike," Faleh Aboud Amara, a top official with the Federation of Oil Unions, told Reuters.

Unions were one of the opponents of the ministry's plan to award foreign company contracts to develop as many as eight oil and gas fields in Iraq's first major energy auction last month, a centrepiece of government efforts to more than double output of around 2.5 million barrels per day.

Just one field was awarded in the 30 June auction. Bidding revealed a big gap between what the government thought should be paid for the work and what companies considered fair.

But Oil Minister Hussain Shahristani is likely to pull out all the stops to make sure the Rumaila deal, in which BP and CNPC promise to increase the field's output to 2.85 million bpd, almost three times its current capacity, goes ahead.

BP had no comment and no one at the British embassy could be reached for comment, Reuters said.

Ali Abbas Khafif, head of the Worker Councils & Unions' branch in Basra, Iraq's southern oil hub, told the news agency the Rumaila deal would violate Iraqi law because it was brokered in the absence of new national energy legislation, whose passage has been held up for years by a bitter feud between Arabs and minority Kurds.

He also complained about the terms of the fixed-fee contract, which he said would over compensate companies, and said such deals might lead to greater unemployment in the oil sector.

The union strategy centres on efforts to scare off companies thinking about coming to Iraq, where sectarian bloodshed has ebbed but violence still poses a major threat, Khafif said.

"We have the ability to halt their work entirely. We can mobilise people against them. We will use sit-ins and strikes," he told Reuters.

Yet union clout in Iraq is not strong. Saddam Hussein effectively banned them in 1987 and they have scant legal protection today.

"Unions don't have enough power to stop these contracts. The labour movement in Iraq is not organised enough to give it influence over political decisions," Saad Saloum, a professor and political analyst at Baghdad University, told Reuters.

Abboud said the oil union has 10,000 active members in Basra, against an estimated 46,000 oil workers there.

Parliamentarian Nassir al-Esawi told the news agency unions had no special protections under Iraqi law, on the same legal footing as civil societies like aid groups. Some in the labour movement accuse the Maliki government of trying to weaken them even further.

Iraqi lawmakers also insist foreign oil deals they have not approved are invalid, and some within the state oil industry also oppose auctioning off fields in production.

The minister has also come in for criticism from foreign companies, who prefer more lucrative production sharing deals and who complained of his exacting terms in last month's auction.

The conflicting critiques may, in the end, signal that Shahristani has struck the right balance between nationalism and pragmatism, but the firestorm he faces is not likely to go away.

There is less opposition to ministry plans for a second round at the end of the year for 11 fields yet undeveloped.

Ali Hussain Balou, the head of parliament's oil and gas committee and a vocal opponent of Shahristani, acknowledged that union influence was limited but said that it would grow.

"Iraq is on a democratic course. If these unions are not powerful today, they will be tomorrow," he told Reuters.

Published: 13 July 2009 13:11 GMT  | Last updated: 23 July 2009 10:36 GMT