June 17 (Bloomberg) -- On a Monday morning in early June, about 700 workers crammed into an auditorium at the Iraqi Oil Ministry in Baghdad to meet with Minister Thamir Ghadhban. Their complaint: They wanted their bosses fired.

Fanning themselves in the heat, worker after worker stood up to demand the ouster of managers belonging to the former ruling Baath Party, and the right to elect new chiefs. In an office two floors above the auditorium, Kanaan al-Hitti, a division chief at the State Company for Oil Projects, said his job is threatened twice over: American occupying forces also may oust him on the grounds that he belonged to the Baath Party.

The management turmoil is one reason why Iraq's oil production is taking longer than expected to return to what it was before the invasion that toppled former President Saddam Hussein. Vice President Richard Cheney said on April 9 that Iraqi oil fields could be pumping as much as 3 million barrels a day by the end of the year. Instead, Iraq is only producing about 700,000 barrels of oil a day, about $21.2 million worth.

``Personnel issues take up 80 to 90 percent of my time,'' said Jabbar al-Leaby, director general of the South Oil Company, the largest of Iraq's two oil production companies. He'd rather spend his time repairing installations damaged by looters. ``It was never like this before. It gets in the way of everything.''

Since U.S. troops swept into Baghdad, Ghadhban, a 30-year veteran of the Iraqi Oil Ministry, and his executives have struggled to restart oil production amid widespread looting of oil installations. They face mounting anger about shortages of gasoline and cooking gas. Yet they spend their days coping with upheavals in the 50,000-employee industry.

Ballot Boxes

During an interview in al-Leaby's office in the southern oil town of Basra, workers in the corridor deposited paper ballots in a cardboard box to elect the head of a workshop. Two aides worked to keep several dozen other people from entering the office. They wanted to raise issues ranging from complaints about managers to seeking back pay to asking for jobs for relatives.

It's much the same for other managers. ``Thamir spends 90 percent of his time on human resource issues,'' said Gary Vogler, a former Mobil executive who's been in Baghdad since April 20 advising the Iraqi Oil Ministry. ``Imagine a major U.S. company going through a major problem that suddenly decides to throw out managers.''

Ghadhban has allowed some elections to take place. ``Some were properly organized, others weren't,'' he said. He formed an advisory committee to steer the election process and told workers that he only wants elections for unit managers, just below director general, not for the directors general who run the 20 companies making up the ministry.

Oil Exports

Oil is Iraq's only export; last year's $12 billion of exports accounted for half the Iraqi economy, according to the Energy Information Agency of the U.S. Department of Energy.

Returning the industry to its prewar output is essential for putting Iraq's economy back on its feet. Its oil reserves, the world's second-biggest behind Saudi Arabia, are largely unexploited. A UN resolution passed May 22 placed Iraq's oil sales for the time being under the supervision of a U.S.-run occupation authority.

Paul Bremer, who heads the occupation authority, issued an order May 16 making it illegal to be a member of the Baath Party, which seized power in a 1968 coup and was the only legal party under Saddam Hussein's regime. He said party members must be removed from positions of power, though he said he will allow for some leeway in applying the rule.

``Our objective in de-Baathification is to go after people who made up the core of Saddam Hussein's regime,'' Bremer said at a June 2 press conference. ``I am fully aware of the difficulties it creates. I reserve a broad latitude to make exemptions.''

De-Baathification

Two weeks earlier, U.S. advisers to the Oil Ministry had confirmed its 20 directors general, as well as Ghadhban as minister. Since Bremer's order, four of the directors general have been fired and seven others may be dismissed, say two Iraqi oil executives familiar with the situation. Ghadhban and U.S. officials won't provide figures, saying the process of vetting managers is continuing.

De-Baathification is especially popular with lower level workers, as shown by Ghadhban's meeting with employees of the State Company for Oil Projects. Executives, even those who weren't party members, say they are largely opposed.

``Imagine a country run by a single party for 35 years,'' said Mohammed al-Jibouri, who himself was elected in mid-May as head of SOMO, the ministry's marketing arm, and who never joined the party. ``The party people here weren't part of the security or intelligence services. They were working in the oil industry. It's all very destructive.''

Qualified Managers

Executives say that with all the reconstruction required in Iraq's oil industry, they can't afford to throw out qualified managers. That's especially the case because computers were rare and even many that existed were lost to looters.

Much knowledge, such as Iraq's monthly oil production figures, is in people's heads. In interviews, executives frequently consult scribbled notes when looking for answers.

Excessive de-Baathification will backfire on the U.S. occupying forces, said Dathar al-Khashab, general manager of Midland Refineries Co., which runs the refinery at Daura just outside Baghdad and said he never joined the party.

Many Iraqis already blame the U.S. authorities for lack of telephone service, erratic electricity supply, and scarcity of gasoline.

Production First

``The most important thing now is to produce products,'' al- Khashab said, wearing blue workman's overalls in his office in the midst of a refining complex that occupies 1.9 square miles. ``If you don't care about that, then throw out all the Baathists but then bear the consequences. People waiting at the petrol pumps are blaming the U.S. If you want longer queues and more bad talk about the U.S., then fine.''

Even U.S. advisers to the oil industry say they find the policy and the elections an added hurdle. ``There are extremely competent people and we find that they were members of the party,'' said Vogler, the former Mobil executive advising Ghadhban. ``You have a tremendous fuel crisis and an organization dedicated to solving it, and then you have de-Baathification.''

Executives who joined the party give various reasons. Al- Hitti at the State Company for Oil Projects said he joined the party in 1975 to get a promotion to a job that required party membership. He insists that since then he's never been promoted over more qualified candidates because of his party membership. Employees at the meeting with Ghadhban contested that.

Personality Cult

One senior executive, who asked not to be named, said he joined in the 1970s when the Baathists stood for secular pan- Arabism, public works projects and mass educational programs. As the party transformed itself into a personality cult for Saddam Hussein who proceeded to invade Iran and Kuwait, it was too dangerous to openly renounce membership, he said. Instead, he concentrated on his job and took no part in party activities.

Philip Carroll, a former Fluor Corp. and Shell Oil Co. chief executive officer who is the senior U.S. adviser to the Iraqi oil industry, said while he supports the policy of removing from power people who ran the Hussein regime he does have sympathy for those affected.

``I often ask myself what I would have done had I lived under such a ruthless regime where you could go to prison for making one comment,'' he said in an interview in a reception room of Hussein's former palace, which is now work and sleep quarters for the U.S. occupation authorities. ``Each person is different. The reasons for joining the party could range from dedication to Saddam Hussein to wanting to get your kid into college.''

Carroll and Bremer would not discuss individual cases.

Democracy?

Ghadhban, 57, wasn't a Baath Party member and spent 48 days in jail in 1992 for criticizing the regime. ``This is not my business so I don't want to go into details,'' he said when asked about it in an interview. ``Ask the people who issued such declarations.''

As for elections, Vogler said he's never seen anything like it in his 30 years in the oil industry. He said Ghadhban seems to be in control of the situation, limiting elections to mid- management positions to allow workers to let off steam.

``You have to scratch your head and wonder if they are taking democracy beyond what it's supposed to be,'' Vogler said. ``Thamir has recognized that it's not a long-term solution, but short term it's something he's willing to work with. You've got to support him because it's something he knows best.''

Last Updated: June 16, 2003 19:01 EDT