A confidential intelligence report prepared for U.S. officials this week concludes a key U.S. benchmark of progress in Iraq, a law to divide oil revenues equitably among the provinces, "will not be agreed by September, even if cosmetic legislation is put in place."
An agreement on how to divide oil profits among Shiite, Sunni and Kurdish areas is one of 18 key benchmarks of progress to be reviewed by the U.S. in September.
More than 90 percent of Iraq's revenue comes from the export of oil.
But the report, obtained by the Blotter on ABCNews.com, says the issues the three sides are too far apart to agree on are the "role of foreign companies in the oil sector" and the division of the oil profits.
The report also includes a grim assessment of the possibility of an increase of oil output in Iraq despite its huge reserves.
It concludes that security in Iraq is so unstable "it is unlikely that any major foreign oil company will be able to invest in Iraq during 2008 (unless they are heavily underwritten by the U.S. government)."
The report says the Kurds favor foreign oil companies playing a larger role, but that is opposed by many Shi'a in the south "because of a fear they will lose control of their assets to outsiders."