[DEBATE] : Are U.S. Oil Companies Going to "Win" the Iraq War?

[Riaz K Tayob]

  Are U.S. Oil Companies Going to "Win" the Iraq War?  (3 comments )
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"The U.S. invasion of Iraq was not preemption; it was ... an avaricious, 
premeditated, unprovoked war against a foe who posed no immediate threat 
but whose defeat did offer economic advantages." - Michael Scheuer, the 
CIA's senior expert on al-Qaeda until he quit in disgust with the Bush 
administration, in Imperial Hubris.

Remember oil? That resource we didn't go to war for in Iraq?
Well, you'll have a tough time convincing anyone in Iraq of this 
particular claim if a new oil law set to go before the Iraqi Parliament 
within weeks (or even days) becomes the law of the land.

On Monday, the Bush administration and U.S. oil companies came one step 
closer to "winning" the war in Iraq when the Iraqi Cabinet passed this 
new national oil law.

The brainchild of the Bush administration and its corporate allies, the 
law is the smoking gun exposing Bush's war for oil.

The Oil Law

If passed, the law would transform Iraq's oil system from a nationalized 
model all-but-closed to U.S. oil companies, to a commercialized model, 
all-but-fully privatized and opened to U.S. corporate control.

Before the U.S. invasion of Iraq, U.S. oil companies were shut out of 
Iraq's oil industry with the exception of limited marketing contracts.

As a result of the invasion, if the oil law passes, U.S. oil companies 
will emerge as the corporate front-runners in line for contracts giving 
them control over the vast majority of Iraq's oil under some of the most 
corporate-friendly terms in the world for twenty to thirty-five years.

The law grants the Iraq National Oil Company oversight only over 
"existing" fields, which is about one-third of Iraq's oil. Exploration 
and production contracts for the remaining two-thirds of Iraq's oil will 
be opened to private foreign investment. Neither Iraqi public nor 
private oil companies will receive any preference in contracting decisions.

The contracts allow for foreign companies to take ownership of Iraq's 
oil fields without actually having to get to work for as long as seven 
years. Thus, the companies can take advantage of the incredibly weak 
negotiating position of the Iraqi government at a time of foreign 
occupation and civil war, while simultaneously being able to "ride out" 
the current "instability" in Iraq.

Foreign companies do not have to reinvest any of their earnings in the 
Iraqi economy, hire or train Iraqi workers, transfer useful technology, 
or partner with Iraqi companies.

The exact contract model is yet to be determined, but it appears that 
Production Sharing Agreements (PSAs) are yet again on the table. These 
are the contract-darlings of international oil companies that grant 
foreign companies greater control, profits, and longer contract terms 
than the contracts preferred by the majority of the world's oil 
countries. In fact, PSAs are only used in about 12 percent of the 
world's oil.

If the new law passed, Iraq's oil system would be utterly unique in the 
Middle East and in virtually any oil rich nation. For example, Kuwait, 
Iran and Saudi Arabia all maintain nationalized oil systems and have 
outlawed foreign control over oil development. They all hire foreign oil 
companies as contractors to provide specific services, as needed, for a 
limited duration, without giving the foreign company any direct interest 
in the oil produced. Iraq, freed from the pressure of a foreign 
occupation, would likely do the same.

The Propaganda

Contrary to the Bush administration's claims, Iraq does not need foreign 
oil corporations in order reap the benefits of its oil. Prior to the 
U.S. invasion, Iraq produced an average of 2.5 million barrels of oil a 
day. Since the invasion, the Iraqis have averaged approximately 2.2 
million barrels of oil a day. This amount has dropped recently due to 
the surge in violence to about 1.7 million barrels a day. Because Iraq's 
oil is the cheapest in the world to produce, only about sixty cents a 
barrel, and oil is selling today at $61 per barrel - the return on any 
investment is enormous. At its current low rate of production, Iraq is 
expected to generate more than $30 billion from its oil this year alone 
- more than enough to keep the industry running and the economy stable.

The administration has been selling the law as a way to bring increased 
equality and stability to Iraq. It is correct on one point. The law does 
introduce a very equitable distribution of Iraq's oil revenues from the 
central government based on population. However, the benefits of this 
new provision are dramatically reduced if the majority of Iraq's 
revenues are going overseas.

The law is likely to bring far more instability to Iraq. In fact, many 
Iraqi oil experts are already referring to the draft law as the "Split 
Iraq Fund," arguing that it facilitates plans for splitting Iraq into 
three ethnic/religious regions. The experts believe the law undermines 
the central government and shifts important decision-making and 
responsibilities to the regional entities. This shift could serve as the 
foundation for establishing three new independent states, which is the 
goal of a number of separatist leaders.

The law opens the possibility of the regions taking control of Iraq's 
oil, but it also maintains the possibility of the central government 
retaining control. In fact, the law was written in a vague manner to 
help ensure passage, a ploy reminiscent of the passage of the Iraqi 
constitution. There is a significant conflict between the Bush 
administration and others in Iraq who would like ultimate authority for 
Iraq's oil to rest with the central government and those who would like 
to see the nation split in three. Both groups are powerful in Iraq. Both 
groups have been mollified, for now, to ensure the law's passage.

But two very different outcomes are possible. If the central government 
remains the ultimate decision-making authority in Iraq, then the newly 
established Iraq Federal Oil and Gas Council will exercise power over 
the regions. And if the regions emerge as the strongest power in Iraq, 
then the Council could simply become a silent rubber stamp, enforcing 
the will of the regions. The same lack of clarity exists in Iraq's 
constitution.

What is clear, however, is that the foreign oil corporations do have 
their rights clearly established. They have the right to explore, 
produce, control, and have guaranteed revenue from the second largest 
oil reserves in the world.

Of course, we would expect very little in increased stability to follow 
from a U.S. corporate oil-grab of Iraq. The American who will pay the 
heaviest price are likely to be U.S. troops on the ground in Iraq.

Pre-War Planning

We all know that the Bush administration began planning for the Iraq war 
well before the September 11 terrorist attacks. In fact, former Treasury 
Secretary Paul O'Neil has explained that by February 2001, the 
administration was well passed debating whether or not to attack Iraq, 
but rather discussing the logistics of how to invade.

Few people know that just month later, in March 2001; Cheney's Energy 
Task Force was working on a series of maps and lists outlining Iraq's 
entire oil productive capacity and the foreign companies lined-up to 
cash-in.

The task force included representatives from all of the major U.S. oil 
and energy service companies, including Halliburton, Chevron, and 
ConocoPhillips. In addition to maps, they compiled two lists entitled 
"Foreign Suitors for Iraqi Oilfield Contracts as of 5 March 2001" that 
listed all the companies - none of them American - that were in 
negotiations with, or had already signed, oil contracts with Saddam Hussein.

Because of the sanctions against Iraq, however, none of the contracts 
were actually in force. But the writing was on the wall. Global public 
opinion had turned against the sanctions. If the sanctions were removed 
while Saddam Hussein was in power, oil companies from China, Russia, 
France, and elsewhere would get their hands on Iraq's oil, while U.S. 
companies would be left out.

The U.S. State Department's Oil and Energy Working Group began meeting 
in December 2002. By April 2003, the group recommended that Iraq "should 
be opened to international oil companies as quickly as possible after 
the war," using PSAs.

Since then, the Bush administration has invaded Iraq, ousted Saddam 
Hussein, put the pre-existing oil contracts on hold, and has nearly 
succeeded in a four-year long venture to restructure the Iraqi oil 
industry for itself and its corporate allies.

Iraqis Shut-Out

Most Iraqis, including, until very recently Iraqi Parliamentarians, have 
remained in the dark about the new oil law. Iraq's oil workers had to 
travel to Jordan to learn details of the law from the London-based 
research organization Platform. As a result, in September 2006, the 
nation's five trade union federations--between them representing 
hundreds of thousands of workers--released a public statement rejecting 
"the handing of control over oil to foreign companies, whose aim is to 
make big profits at the expense of the Iraqi people, and to rob the 
national wealth, according to long-term, unfair contracts, that 
undermine the sovereignty of the state and the dignity of the Iraqi 
people." They demanded a delay in consideration of any law until all 
Iraqis could be included in the discussion.

It's simple: the Bush administration and Big Oil are trying to get the 
best deal and the most oil possible out of a war-ravaged and desperate 
people. They are holding 25 million Iraqis - and 150,000 American troops 
-- hostage to their oil agenda.

There is time, if we shine enough sunlight, to expose the oil agenda 
driving the war and support Iraqis who believe that now is not the time 
for their government to rush into contracts that will lock in the fate 
of their most valuable resource for a generation.

Oil Change International, Global Exchange, and others organizations and 
communities across the United States and around the world are coming 
together in protest events on March 17-19, to mark the 4-year 
anniversary of the Iraq war.

They are urging environmentalists, climate justice, and peace activists 
to join together in protests at the headquarters and gas stations of the 
oil companies leading the charge in Iraq: Chevron, ExxonMobil, Marathon, 
ConocoPhillips, Shell and BP. Learn more at http://www.PriceofOil.org.

In the Bay Area, activists are planning a Rally, Protest, and Nonviolent 
Direct Action at Chevron's World Headquarters on March 19 from 
7:00-11:00am in San Ramon. Visit http://www.myspace.com/ProtestChevron 
for details.

An international network of groups is organizing protests under the 
heading "Hands Off Iraq's Oil!" Visit their website 
http://www.HandsOffIraqiOil.org/.
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