(Adds details, political context, quotes)
By Aref Mohammed
BASRA, Iraq, May 26 (Reuters) - The Iraqi government has replaced some of the top officials in state-owned oil companies in southern Iraq, tightening its grip on an industry that fuels the economy but has been outside of its direct control.
The shake-up, which has largely escaped public notice, affects industries in the southern oil hub of Basra, where 30,000 government troops were deployed in March to clamp down on Shi’ite militias and criminal gangs that dominated the city.
The Baghdad government has removed the heads of the South Oil Company, which is in charge of exports, the South Gas Company and the Iraqi Oil Tankers Company since mid-May, local officials and the Oil Ministry told Reuters.
Analysts warned the move could trigger fresh violence in the unstable but strategic area, home to Iraq’s main oil reserves.
The head of Basra airport has also been replaced by the Transport Ministry in the shakeup, and the local officials said the head of Basra port could be next.
The officials told Reuters the move was an attempt by the central government in Baghdad to take advantage of the improved security situation in Iraq’s second city to wrest control of the industry from the locally powerful Shi’ite Fadhila party.
Iraq, which wants to boost oil exports this year to a post-war high, exports the bulk of its crude through Basra, its gateway to the Gulf, at an average of around 1.5 million bpd a day.
The oil industry provides more than 90 percent of government revenues and is seen as crucial to rebuilding an economy shattered by decades of war and sanctions.
The local officials, speaking on condition of anonymity, accused the government of making politically motivated appointments, saying the incoming general directors were linked to Prime Minister Nuri al-Maliki’s Dawa party.
“Bringing officials close to Dawa to take key posts in the Southern Oil Company is a clear plan to have control over this vital sector before the provincial elections,” said one senior provincial official aligned with Fadhila.
The Oil Ministry defended the shakeup on Monday, saying the officials had been removed under the ministry’s “right man in the right place policy”.
Control of Basra and its oil will be a key prize in the elections due on Oct. 1. Fadhila will be competing with Dawa Party ally the Supreme Islamic Iraqi Council (SIIC) and supporters of cleric Moqtada al-Sadr.
“The move should be recognised as a major development in the intra-sectarian conflict,” Babak Rahimi, a professor at the University of California in San Diego, told Reuters.
“The move by Maliki’s government is risky because its going to upset many local Shia factions, potentially leading to another major military conflict in the port city, where security is still unstable.”
Rahimi said the shakeup was part of a broader conflict between Dawa and SIIC, which were in exile in Iran during Saddam Hussein’s rule, and other factions such as Fadhila.
“The exiled factions are trying to undermine the native Shia factions in light of the October provincial elections,” he said.
Fadhila, whose members include the provincial governor, withdrew from Maliki’s government last year after losing control of the Oil Ministry. But it continues to hold considerable power in the oil industry in southern Iraq.
A letter signed by Oil Minister Hussein al-Shahristani and seen by Reuters, ordered Jabbar al-Ebi, general director of the South Oil Company, to be reassigned as a ministry adviser and his deputy Kifah Nauman to take his place temporarily.
It said the order was effective from May 15, but Ebi was still in his office last week when Reuters called him for comment on his removal. He declined to answer any questions.
Similar letters were sent on the same day to the other two oil officials, officials said.
The Basra Provincial Council has protested that the government is acting illegally by failing to consult it before making the changes.
“The ministry has so far not submitted convincing reasons for changing him. The provincial council has decided not to approve the ministerial order,” said Munadhil Khanjar, head of the provincial council’s economic committee.
Oil Ministry spokesman Asim Jihad denied any irregularities.
“The Oil Ministry has the authority to assign or remove any official from his post under the ministry’s policy — the right man, in the right place,” Jihad said.
He said Ebi’s appointment as a ministry adviser was in fact a promotion, while the general directors of the South Gas Company and Iraqi Oil Tankers Company had been removed because their appointments had never been approved by the cabinet. (Editing by Peter Blackburn) (Additional reporting by Ahmed Rasheed and Ross Colvin in Baghdad, writing by Ross Colvin)