In a letter to Secretary of State Condoleezza Rice, the senators warned the contracts could inflame sectarian unrest in the war-torn country, putting the nation's future at stake.
Iraqi oil officials are planning to award a handful of technical service contracts to big Western oil companies such as ExxonMobil Corp. (XOM), Royal Dutch Shell (RDSA), Total SA (TOT), Chevron Corp. (CVX), and BP PLC (BP).
"If the Iraqi government insists on first extending no-bid oil contracts to the big oil companies, political tensions in the region could be ratcheted up to even more dangerous levels," said Sen. John Kerry, D-Mass. "The timing of these contracts has cost us leverage we need to push through the oil laws and runs the real risk of inflaming sectarian tensions."
In the letter to Rice, Sen. Charles Schumer, D-N.Y., said: "We fear that any such agreements signed by Iraq's Hydrocarbon Ministry without an equitable revenue sharing agreement in place would simply add more fuel to Iraq's civil war."
Rice has said the deals are the decision of a sovereign government, and "the United States government has stayed absolutely out of the matter of the awarding of Iraqi oil contracts."
Although the contracts are small and will give the majors no rights to reserves or control over development, they could serve as a critical first step to establishing longer-term relationships in Baghdad and provide technical familiarity with Iraq's fields ahead of what Western executives hope will be more attractive opportunities down the line.
"At a minimum, (the contracts) must be competitively bid and they must be transparent," said Sen. Claire McCaskill, D-Mo. "You're only going to foster more instability, more violence, more corruption and who knows, you'll end up being there for 100 years."
The technical service contracts will be signed under the old hydrocarbons law.
Disputes between the semiautonomous region of Kurdistan and Iraq's central government have delayed the oil and gas law for more than a year.