Iraq Oil - A Permanent US Presence
1/11/2007
Bush's Petro-Cartel Almost Has
By Joshua Holland, AlterNet
Posted on October 16, 2006
Iraq
is sitting on a mother lode of some of the lightest, sweetest, most
profitable crude oil on earth, and the rules that will determine who
will control it and on what terms are about to be set.
The
Iraqi government faces a December deadline, imposed by the world's
wealthiest countries, to complete its final oil law. Industry analysts
expect that the result will be a radical departure from the laws
governing the country's oil-rich neighbors, giving foreign
multinationals a much higher rate of return than with other major oil
producers and locking in their control over what George Bush called
Iraq's "patrimony" for decades, regardless of what kind of policies
future elected governments might want to pursue.
true potential may be far greater than this, however, as the country is
relatively unexplored due to years of war and sanctions." For
perspective, the Saudis have 260 billion barrels of proven reserves.
Iraqi
oil is close to the surface and easy to extract, making it all the more
profitable. James Paul, executive director of the Global Policy Forum,
points out that oil companies "can produce a barrel of Iraqi oil for
less than $1.50 and possibly as little as $1, including all
exploration, oilfield development and production costs." Contrast that
with other areas where oil is considered cheap to produce at $5 per
barrel or the
And
oil sector is largely undeveloped. Former Iraqi Oil Minister Issam
Chalabi (no relation to the neocons' favorite exile, Ahmed Chalabi)
told the Associated Press that "
has more oil fields that have been discovered, but not developed, than
any other country in the world." British-based analyst Mohammad
Al-Gallani told the Canadian Press that of 526 prospective drilling
sites, just 125 have been opened.
But the real gem -- what one oil consultant called the "Holy Grail" of the industry -- lies in
to No. 1 in the world in oil reserves. Sparsely populated, the western
fields are less prone to sabotage than the country's current centers of
production in the north, near
But even "untold riches" don't tell the whole story. Depending on how
petroleum law shakes out, the country's enormous reserves could break
the back of OPEC, a wet dream in Western capitals for three decades.
James Paul predicted that "even before
had reached its full production potential of 8 million barrels or more
per day, the companies would gain huge leverage over the international
oil system. OPEC would be weakened by the withdrawal of one of its key
producers from the OPEC quota system." Depending on how things shape up
in the next few months, Western oil companies could end up controlling
the country's output levels, or the government, heavily influenced by
the
Both independent analysts and officials within
will be the Big Four -- the American firms Exxon-Mobile and Chevron,
the British BP-Amoco and Royal Dutch-Shell -- that dominate the world
oil market. Ibrahim Mohammed, an industry consultant with close
contacts in the Iraqi Oil Ministry, told the Associated Press that
there's a universal belief among ministry staff that the major
During
the 12-year sanction period, the Big Four were forced to sit on the
sidelines while the government of Saddam Hussein cut deals with the
Chinese, French, Russians and others (despite the sanctions, the United
States ultimately received 37 percent of Iraq's oil during that period,
according to the independent committee that investigated the
oil-for-food program, but almost all of it arrived through foreign
firms). In a 1999 speech, Dick Cheney, then CEO of the oil services
company Halliburton, told a London audience that the Middle East was
where the West would find the additional 50 million barrels of oil per
day that he predicted it would need by 2010, but, he lamented, "while
even though companies are anxious for greater access there, progress
continues to be slow."
Chafing
at the idea that the Chinese and Russians might end up with what is
arguably the world's greatest energy prize, industry leaders lobbied
hard for regime change throughout the 1990s. With the election of
George W. Bush and Dick Cheney in 2000 -- the first time in
history that two veterans of the oil industry had ever occupied the
nation's top two jobs -- they would finally get the "greater access" to
the region's oil wealth, which they had long lusted after.
If the
oil fields. Much has changed since then in terms of international
custom and law (when then-Deputy Secretary of Defense Paul Wolfowitz
did in fact suggest seizing
Understanding
how Big Oil came to this point, poised to take effective control of the
bulk of the country's reserves while they remain, technically, in the
hands of the Iraqi government -- a government with all the trappings of
sovereignty -- is to grasp the sometimes intricate dance that is modern
neocolonialism. The
It's
clear that the U.S.-led invasion had little to do with national
security or the events of Sept. 11. Former Treasury Secretary Paul
O'Neill revealed that just 11 days after Bush's inauguration in early
2001, regime change in Iraq was "Topic A" among the administration's
national security staff, and former Terrorism Tsar Richard Clarke told
60 Minutes that the day after the attacks in New York and Washington
occurred, "[Secretary of Defense Donald] Rumsfeld was saying that we
needed to bomb Iraq." He added: "We all said … no, no. Al-Qaeda is in
On
March 7, 2003, two weeks before the United States attacked Iraq, the
U.N.'s chief weapons inspector, Hans Blix, told the U.N. Security
Council that Saddam Hussein's cooperation with the inspections protocol
had improved to the point where it was "active or even proactive," and
that the inspectors would be able to certify that Iraq was free of
prohibited weapons within a few months' time. That same day, IAEA head
Mohammed ElBaradei reported that there was no evidence of a current
nuclear program in
and flatly refuted the administration's claim that the infamous
aluminum tubes cited by Colin Powell in making his case for war before
the Security Council were part of a reconstituted nuclear program.
But
serious planning for the war had begun in February of 2002, as Bob
Woodward revealed in his book, Plan of Attack. Planning for the future
of
In
February of 2001, just weeks after Bush was sworn in, the same energy
executives that had been lobbying for Saddam's ouster gathered at the
White House to participate in Dick Cheney's now infamous Energy Task
Force. Although Cheney would go all the way to the Supreme Court to
keep what happened at those meetings a secret, we do know a few things,
thanks to documents obtained by the conservative legal group
JudicialWatch. As Mark Levine wrote in The Nation($$):
… a map of
oil foreign suitors" were the center of discussion. The map erased all
features of the country save the location of its main oil deposits,
divided into nine exploration blocks. The accompanying list of suitors
revealed that dozens of companies from 30 countries -- but not the
Levine wrote, "It's not hard to surmise how the participants in these meetings felt about this situation."
According
to the New Yorker, at the same time, a top-secret National Security
Council memo directed NSC staff to "cooperate fully with the Energy
Task Force as it considered melding two seemingly unrelated areas of
policy." The administration's national security team was to join "the
review of operational policies towards rogue states such as
At the
State Department, planning was also underway. Under the auspices of the
"Future of Iraq Project," an "Oil and Energy Working Group" was
established. The full membership of the group -- described by the
Financial Times as "Iraqi oil experts, international consultants" and
State Department staffers -- remains classified, but among them,
according to Antonia Juhasz's "The Bush Agenda," was Ibrahim Bahr
al-Uloum, who would serve in Iyad Allawi's cabinet during the period of
the Iraqi Governing Council, and later as
But the execs from Big Oil didn't just want access to
oil; they wanted access on terms that would be inconceivable unless
negotiated at the barrel of a gun. Specifically, they wanted an Iraqi
government that would enter into production service agreements (PSAs)
for the extraction of
PSAs,
developed in the 1960s, are a tool of today's kinder, gentler
neocolonialism; they allow countries to retain technical ownership over
energy reserves but, in actuality, lock in multinationals' control and
extremely high profit margins -- up to 13 times oil companies' minimum
target, according to an analysis by the British-based oil watchdog
Platform (PDF).
As Greg Muttit, an analyst with the group, notes:
Such
contracts are often used in countries with small or difficult
oilfields, or where high-risk exploration is required. They are not
generally used in countries like
In fact, Muttit adds, of the seven leading oil producing countries, only
PSAs
often have long terms -- up to 40 years -- and contain "stabilization
clauses" that protect them from future legislative changes. As Muttit
points out, future governments "could be constrained in their ability
to pass new laws or policies." That means, for example, that if a
future elected Iraqi government "wanted to pass a human rights law, or
wanted to introduce a minimum wage [and it] affected the company's
profits, either the law would not apply to the company's operations or
the government would have to compensate the company for any reduction
in profits." It's Sovereignty Lite.
The
deals are so onerous that they govern only 12 percent of the world's
oil reserves, according to the International Energy Agency.
Nonetheless, PSAs would become the Future of Iraq Project's
recommendation for the fledgling Iraqi government. According to the
Financial Times, "many in the group" fought for the contract structure;
a Kurdish delegate told the FT, "everybody keeps coming back to PSAs."
Of course, the plans for
legal framework for oil have to be viewed in the context of the overall
transformation of the Iraqi economy. Clearly, the idea was to pursue a
radical corporatist agenda during the period of the Coalition
Provisional Authority when the
occupation forces were a de facto dictatorship. And that's just what
happened; under L. Paul Bremer, the CPA head, corporate taxes were
slashed, a flat-tax on income was established, rules allowing
multinationals to pull all of their profits from the country and a
series of other provisions were enacted. These were then integrated
into the Iraqi Constitution and remain in effect today.
Among
the provisions in the Constitution, unlike those of most oil producers,
is a requirement that the government "develop oil and gas wealth …
relying on the most modern techniques of market principles and
encouraging investment." The provision mandates that foreign companies
would receive a major stake in
Herbert
Docena, a researcher with the NGO Focus on the Global South, wrote that
an early draft of the constitution negotiated by Iraqis envisioned a
"Scandinavian-style welfare system in the Arabian desert, with Iraq's
vast oil wealth to be spent upholding every Iraqi's right to education,
health care, housing, and other social services." "Social justice," the
draft declared, "is the basis of building society."
What happened between that earlier draft and the constitution that Iraqis would eventually ratify? According to Docena:
While [U.S. Ambassador to Iraq Zalmay] Khalilzad and his team of
constitutional committee were reduced to bystanders. One Shiite member
grumbled, "We haven't played much of a role in drafting the
constitution. We feel that we have been neglected." A Sunni negotiator
concluded: "This constitution was cooked up in an American kitchen not
an Iraqi one."
With a
constitution cooked up in D.C., the stage was set for foreign
multinationals to assume effective control of as much as 87 percent of
oil, according to projections by the Oil Ministry. If PSAs become the
law of the land -- and there are other contractual arrangements that
would allow private companies to invest in the sector without giving
them the same degree of control or such usurious profits -- the
war-torn country stands to lose up to 194 billion vitally important
dollars in revenue on just the first 12 fields developed, according to
a conservative estimate by Platform (the estimate assumes oil at $40
per barrel; at this writing it stands at more than $59). That's more
than six times the country's annual budget.
To
complete the rip-off, the occupying coalition would have to crush Iraqi
resistance, make sure it had friendly people in the right places in
http://www.alternet.org/story/43045/
_____
(Part Two)
By Joshua Holland, AlterNet
October 17, 2006
http://www.alternet.org/story/43077/
With
140,000 U.S. troops on the ground, the largest U.S. embassy in the
world sequestered in Baghdad's fortified "Green Zone" and an economy
designed by a consulting firm in McLean, Va., post-invasion Iraq was
well on its way to becoming a bonanza for foreign investors.
But
Big Oil had its sights set on a specific arrangement -- the lucrative
production sharing agreements that lock in multinationals' control for
long terms and are virtually unheard of in countries as rich in easily
accessible oil as Iraq.
The
occupation authorities would have to steer an ostensibly sovereign
government to the outcome they desired, and they'd have to overcome any
resistance that they encountered from the fiercely independent and
understandably wary Iraqis along the way. Finally, they'd have to make
sure that the Anglo-American firms were well-positioned to win the
lion's share of the choicest contracts.
Dealing
with the most likely points of opposition began almost immediately.
While the Oil Ministry, famously, was one of the few structures the
invading forces protected from looters in the first days of the war,
the bureaucracy's human assets weren't so lucky. With a stroke of the
pen, Coalition Provisional Authority boss L. Paul Bremer fired hundreds
of ministry personnel, ostensibly as part of the program of
"de-Baathification." But, as Antonia Juhasz, author of "The Bush
Agenda," told me, "it wasn't an indication that they were a party to
Saddam Hussein's crimes … they were fired because they could have stood
in the way of the economic transformation." Some fraction were
certainly hard-core Baathists, but they were all veterans of the
country's oil sector; they knew the industry, they knew what the norms
in neighboring countries were and they had no loyalty to the occupation
forces. Some had to go.
That
was true at the top as well. Serving as oil minister in the Iraqi
Interim Government was Thamir Ghadbhan, a British-trained technocrat
who at one time had been chief of planning under Saddam Hussein and was
widely respected for his political independence and his opposition to
the previous regime (Saddam had ended up imprisoning him at Abu
Ghraib). But despite working closely with American advisors, Ghadbhan
was replaced with Ibrahim Bahr al-Uloum, a close associate of Ahmed
Chalabi, the exile favored by some war planners to run the country as a
kindler and gentler -- but no doubt just as corrupt -- version of
Saddam Hussein.
According
to Greg Muttit, an analyst with the British oil watchdog Platform,
Uloum at first seemed to be a malleable figure. He told the Financial
Times that he personally favored PSAs and giving priority to
But
Uloum would later publicly protest the elimination of fuel subsidies, a
key provision of the country's economic restructuring, saying, "This
decision will not serve the benefit of the government and the people.
This decision brings an extra burden on the shoulders of citizens." He
was, as the Associated Press reported, given "a forced vacation." It
was, in the end, a permanent vacation; Chalabi, who was deputy prime
minister at the time, took over the job himself (as "acting" minister
for 30 days, but his term would last a year). Chalabi had no previous
experience in the oil biz, but was a reliable, pro-Western figure with
little in the way of nationalist zeal to get in the way of being a good
lap dog. As leader of the Iraqi National Congress, he had said he
favored the creation of a U.S.-led consortium to develop
According
to Alexander Cockburn, Chalabi also orchestrated the ouster of Mohammed
Jibouri, executive director of the state's oil marketing agency, who
had offended the Swiss giant Glencore by telling its executives that
they couldn't trade Iraqi oil after their extensive dealings with
Saddam Hussein.
An
emerging, although still fragile, civil society was another source of
potential trouble. Iraqi trade unions were a thorn in the side of the
CPA -- shutting down the
az-Zubayr in protest of a rip-off deal with the Danish shipping giant
Maersk, halting oil production in the south to demand the rehire of
laid-off Iraqi workers and kicking Halliburton subsidiary Kellogg,
Brown and Root out of their refineries. Perhaps it's not a coincidence,
then, that the only significant law that Paul Bremer left on the books
from the Hussein era was a prohibition against organizing public-sector
workers. Raed Jarrar, an Iraqi analyst with the NGO Global Exchange,
told me, "They're having a lot of legal problems."
Of
course, none of that guaranteed that the Iraqis would stay on the
preferred path, especially after the election of an ostensibly
sovereign government.
And
that's where the most common -- almost ubiquitous -- tool of
neocolonialism, debt, came into play. In this case, massive, crushing
debt run up by a dictator who treated himself and his cronies to
palaces and other luxuries, spent lavishly on weapons for Iraq's war
with Iran -- fought in part on behalf of the United States -- and owed
Kuwait billions of dollars in reparations for the 1990 invasion.
To put
then its obligations in 2004, proportionally, would have equaled around
$55 trillion, according to IMF figures (and that doesn't include
reparations from the first Gulf War).
Clearly,
that amount of debt was unsustainable, and the Bush administration
launched a full-court press to get creditor nations to forgive at least
part of the new government's debt burden. Former Secretary of State
James Baker, long the Bush family's "fixer," was dispatched on a tour
of the world's capitals to cut deals on behalf of the Iraqis.
The
administration raised eyebrows in the NGO community when it adopted the
language of debt-relief activists to frame their pitch. Bush, and
Baker, called it "odious" debt, debt that financed the whims of a
brutal dictator and used against the interests of the Iraqi population.
Under international law, "odious" debt, in theory at least, doesn't
need to be forgiven; it's written off as a dictator's illicit gains. As
one might expect, wealthy creditor nations have long resisted the
concept.
Debt-relief activists Basav Sen and Hope Chu wrote that the move "seemed inexplicable at first." But it soon became clear that
The
largest chunk of debt, $120 billion, was owed to the Paris Club, a
group of 19 industrialized nations. Baker negotiated a deal whereby the
Paris Club would forgive 80 percent of Iraq's debt, but the catch --
and it was a big one -- was that Iraq had to agree to an economic
"reform" package administered by the International Monetary Fund, an
institution dominated by the wealthiest countries and infamous across
the developing world for its painful and unpopular Structural
Adjustment Protocols.
The
debt would be written off in stages; 30 percent would be cancelled
outright, another 30 percent when an elected Iraqi government accepted
an IMF structural reform agreement and a final 20 percent after the IMF
had monitored its implementation for three years. This gave the IMF the
role of watchdog over the country's new economy, despite the fact that
its share of the country's debt burden was less than 1 percent of the
total.
Among
a number of provisions in the IMF agreement, along with privatizing
state-run companies (which resulted in the layoffs of an estimated
145,000 Iraqis), slashing government pensions and phasing out the
subsidies on food and fuel that many Iraqis depended on, was a
commitment to develop
oil in partnership with the private sector. Then-Finance Minister Adel
Abdul Mehdi said, none too happily, that the deal would be "very
promising to the American investors and to American enterprise,
certainly to oil companies." The Iraqi National Assembly released a
statement saying, "the Paris Club has no right to make decisions and
impose IMF conditions on
and called it "a new crime committed by the creditors who financed
Saddam's oppression." And Zaid Al-Ali, an international lawyer who
works with the NGO Jubilee Iraq, said it was "a perfect illustration of
how the industrialized world has used debt as a tool to force
developing nations to surrender sovereignty over their economies."
The
IMF agreement was announced in December of 2005, along with a new $685
million IMF loan that was to be used, in part, to increase
oil output. The announcement came a month after Iraqis went to the
polls to vote for their first government under the new Constitution in
order, according to the Washington Post, to spare Iraqi "politicians
from voters' wrath." That was a wise idea; immediately following the
agreement, gas prices skyrocketed and Iraqis rioted.
The icing on the cake is that the deal James Baker negotiated with the Paris Club refers to
as an "exceptional situation"; no precedent was set that would allow
other highly indebted countries saddled with odious debt from their own
past dictators to claim similar relief.
The
deadline the Iraqi government must meet for the completion of its final
oil law in December is a "benchmark" in the IMF agreement.
In an
investigation for the Nation, Naomi Klein discovered that Baker had
pursued his mission with an eye-popping conflict of interest. Klein
discovered that a consortium that included the Carlyle Group, of which
Baker is believed to have a $180 million stake, had contracted with
Kuwait to make sure that the money it was owed by Iraq would be
excluded from any debt-relief package. When Baker met with the Kuwaiti
emir to beg forgiveness for
Another major creditor was
The Carlyle Group has extensive business dealings with the kingdom and
Baker's law firm, Baker Botts, was representing the monarchy in a suit
brought by the families of the victims of 9/11.
The
most recent IMF report (PDF) shows how successfully he failed: "While
most Paris Club official creditors have now signed bilateral
agreements, progress has been slow in resolving non-Paris Club official
claims, especially those of Gulf countries," it says. It's likely that
a country occupied for three years, devastated by 12 years of sanctions
and with a per capita GDP of $3,400, will end up paying reparations to
Iraq
will still face a mountain of debt even if it meets all of the
"benchmarks" required of it -- the IMF expects the country's debt
service to equal five percent of its economic output in 2011 and warns
that even a minor price shock in the oil market "would require
significant borrowing from the international markets to close the
financing gaps."
"Sovereign"
debt is transferable between governments; if a new strongman arises or
Iraq becomes a loose federation, the debt will remain on the books and
defaulting on it, while a possibility, has serious long-term
consequences.
All of this is about bringing different forms of pressure onto
government, the Green Zone has been overrun with "advisers" from Big
Oil. Aram Roston wrote, "It's clear that there is not just the one
Iraqi Oil Ministry, but a parallel 'shadow' ministry run by American
advisers." In business, that's known as "positioning."
Phillip Carroll, a former chief executive with Royal Dutch/Shell and a 15-member "board of advisors" were appointed to oversee
at meetings of OPEC." Carroll had been working with the Pentagon for
months before the invasion -- even while the administration was still
insisting that it sought a peaceful resolution to the
oil sector in the event of war." According to the Houston Chronicle,
"He assumed his work was completed, he said, until Defense Secretary
Donald Rumsfeld called him shortly after the U.S.-led invasion began
and offered him the oil adviser's job." Carroll, in addition to running
Shell Oil in the
After
spending six months in the post, Carroll was replaced by Robert E.
McKee III, a former ConocoPhillips executive. According to the Houston
Chronicle, "His selection as the Bush administration's energy czar in
drew fire from congressional Democrats "because of his ties to the
prime contractor in the Iraqi oil fields, Houston-based Halliburton Co.
He's the chairman of a venture partitioned by the … firm."
The
administration selected Chevron Vice President Norm Szydlowski to serve
as a liaison between the Coalition Provisional Authority and the Iraqi
Oil Ministry. Now the CEO of the appropriately named Colonial Pipeline
Co., he continues to work with the Iraq Energy Roundtable, a project of
the U.S. Trade and Development Agency, which recently sponsored a
meeting to "bring together oil and gas sector leaders in the
Terry Adams and Bob Morgan of BP, and Mike Stinson of ConocoPhillips would also serve as advisors during the transition.
After the CPA handed over the reigns to
interim government, the embassy's "shadow" oil ministry continued to
work closely with the Iraqis to shape future oil policy. Platform's
Greg Muttit wrote that "senior oil advisers -- now based within the
Iraq Reconstruction Management Office (IRMO) in the U.S. Embassy ...
included executives from ChevronTexaco and Unocal." After the handover,
a senior
official said: "We're still here. We'll be paying a lot of attention,
and we'll have a lot of influence. We're going to have the world's
largest diplomatic mission with a significant amount of political
weight."
The
majors have also engaged in good, old-fashioned lobbying. In 2004,
Shell advertised for an Iraqi lobbyist with good contacts among
emerging elites. The firm sought "a person of Iraqi extraction with
strong family connections and an insight into the network of families
of significance within
According to Platform, just weeks after the invasion, in a meeting with
oil company execs and Australian Foreign Minister Alexander Downer in
former British Foreign Secretary Sir Malcolm Rifkind promised to
personally lobby Dick Cheney for contracts on behalf of several firms,
including Shell.
Meanwhile,
major oil firms were positioning themselves so that they'd have the
best contacts in the new government. According to the Associated Press,
"The world's three biggest integrated oil companies" -- BP, ExxonMobil
and Royal Dutch/Shell -- "struck cooperation or training deals with
in 2005. "It's a way to maintain contact and get the oil officials to
know about them," former Iraqi Oil Minister Issam Chalabi told the AP.
And it seems to have worked; in May,
current oil minister, Husayn al-Shahristani, said that one of his top
priorities would be to finalize an oil law and sign contracts with "the
largest companies."
has its hands all over the drafting of that law. Early on, in 2003,
USAID commissioned BearingPoint, Inc. to submit recommendations for the
development of
oil sector. BearingPoint was the firm that designed the country's
economic transformation under a previous USAID contract, so it was no
surprise that its report reinforced the preference for PSAs that
"everybody [kept] kept coming back to" during meetings of the State
Department's "Future of Iraq Project."
In
February, just months after the Iraqis elected their first
constitutional government, USAID sent a BearingPoint adviser to provide
the Iraqi Oil Ministry "legal and regulatory advice in drafting the
framework of petroleum and other energy-related legislation, including
foreign investment." According to Muttit, the Iraqi Parliament had not
yet seen a draft of the oil law as of July, but by that time it had
already been reviewed and commented on by U.S. Energy Secretary Sam
Bodman, who also "arranged for Dr. Al-Shahristani to meet with nine
major oil companies -- including Shell, BP, ExxonMobil, ChevronTexaco
and ConocoPhillips -- for them to comment on the draft."
All of
these points of pressure are only what we can see in the light of day.
There is certainly much more occurring under the table. Raed Jarrar
told me that he "was personally familiar with the kind of intimidation
that can be brought by both the
military and civilian" personnel, and that he would be shocked if
"multiple millions of dollars in bribes" were not changing hands. The
IMF noted in its latest report (PDF) that "corruption related to the
production and distribution of refined fuel products was rampant." Last
March, 450 Oil Ministry employees were fired for suspected corruption,
and Mohammed al-Abudi, the Oil Ministry's director general for
rrilling, said that "administrative corruption" was pervasive. "The
robberies and thefts are taking place on a daily basis on all levels,"
he said, "committed by low-level government employees and by high
officials in leadership positions of the Iraqi state." The same day
that the U.N. legitimized the occupation, George Bush signed Executive
Order 13303 providing full legal immunity to all oil companies doing
business in
Yet,
despite a five-year effort, Big Oil still sits on the sidelines, wary
of the disorder and violence that's plagued the country. Ironically, it
appears that
(although it's one negotiated with Hussein's government before the
war). The Kurdish autonomous zone has signed three PSAs -- none with
the majors -- although there is some dispute about their validity (and,
at this writing, there are reports that the Kurds are in negotiations
with Royal Dutch/Shell and BP, among others).
At
this point, the situation is very fluid. Last week, Iraqis were shocked
when a controversial measure that might lead to the country's effective
breakup was passed by Parliament by one vote. The major Sunni parties
and Muqtada al Sadr's ministers boycotted the vote in outrage. Muddying
the waters further is a heated debate about whether a somewhat
ambiguous provision in the Iraqi Constitution already gives provincial
governments the right to hold on to oil revenues rather than send them
to the central government. The results of all of these debates will
have an enormous impact on
It's possible that the administration and its partners badly overplayed their hand.
new government stands on the verge of a complete meltdown, faced with a
crisis of legitimacy based largely on the fact that it is seen as
collaborating with American forces. Overwhelming majorities of Iraqis
of every sect believe the
permanently. "If you go in front of Parliament, Raed Jarrar told me,
"and ask: 'who is opposed to demanding a timetable for the Americans to
withdrawal?' nobody would dare raise their hand." The passage of a
sweetheart oil law could prove to be a tipping point. It's also
possible
What is clear is that the future of
ultimately hinges to a great degree on the outcome of a complex game of
chess -- only part of which is out in the open -- that is playing out
right now, and oil is at the center of it. It's equally clear that
there's a yawning disconnect between Iraqis' and Americans' views of
the situation. Erik Leaver, a senior analyst at the Institute for
Policy Studies in
wants to talk about it," he said. "They don't want to sound like freaks
talking about blood for oil." At the same time, a recent poll asked
Iraqis what they believed was the main reason for the invasion and 76
percent gave "to control Iraqi oil" as their first choice.
Correction:
an earlier version of this article identified BearingPoint, Inc. as a
company spun off from Arthur Anderson Consulting. It is a spin-off from
KPMG, LLC.
View this story online at: http://www.alternet.org/story/43077/
______
[more]
Selling Iraq by the barrel
Asia Times
By Emad Mekay
March 2, 2007
WASHINGTON - The
US-backed Iraqi cabinet approved a new oil law on Monday that is set to
give foreign companies the long-term contracts and safe legal framework
they have been waiting for, but which has rattled labor unions and
international campaigners who say oil production should remain in the
hands of Iraqis.
Independent analysts
and labor groups have also criticized the process of drafting the law
and warned that that the bill is so skewed in favor of foreign firms
that it could end up heightening political tensions in the Arab nation
and spreading instability.
For example, it
specifies that up to two-thirds of Iraq's known reserves would be
developed by multinationals, under contracts lasting for 15-20 years.
This policy
represents a U-turn for Iraq's oil industry, which has been in the
public sector for more than three decades, and would deviate from
normal practice in the Middle East.
According to local
labor leaders, transferring ownership to the foreign companies would
give the United States a further pretext to continue its occupation -
on the grounds that those companies will need protection.
Union leaders have
complained that they, along with other civil-society groups, were left
out of the drafting process despite US claims that it has created a
functioning democracy in Iraq.
Under the
production-sharing agreements provided for in the draft law, companies
will not come under the jurisdiction of Iraqi courts in the event of a
dispute, nor will they be accountable to the general auditor.
The ownership of the oil reserves under this draft law will remain with the state in form, but not in substance, critics say.
On February 8, the
labor unions sent a letter in Arabic to Iraqi President Jalal Talabani
urging him to reconsider the agreement.
"Production-sharing
agreements are a relic of the 1960s," said the letter. "They will
re-imprison the Iraqi economy and impinge on Iraq's sovereignty since
they only preserve the interests of foreign companies. We warn against
falling into this trap."
Ewa Jasiewicz, a
researcher at Platform, a British human-rights and environmental group
that monitors the oil industry, said: "First of all, it hasn't been put
together in any kind of democratic process. It's been put through a war
and an occupation, which in itself is a grotesquely undemocratic
process."
The law was prepared
by a three-member Iraqi cabinet committee, dominated by the Kurds and
the Shi'ites. It is now expected to be ratified by Parliament because
the powerful faction leaders in the government have cleared it.
The first draft was
seen only by the Iraqi technocrats who penned it, nine international
oil companies, the British and US governments, and the International
Monetary Fund. The Iraqi Parliament will get its first glimpse next
week.
Concerns about the
process are compounded because of the ongoing disputes in Iraq over the
legitimacy of the cabinet and the Parliament, which have been
constructed by the governing council, which itself was created in 2004
by occupation forces along sectarian lines.
In a speech last
month by Hassan Juma, head of the Iraqi Oil Labor Union, posted on the
union's website, he called on the Iraqi government to consult with
Iraqi oil experts and "ask their opinion before sinking Iraq into an
ocean of dark injustice".
The content of the
law has also worried international campaigners and local Iraqi groups
who say that it puts Iraqi oil wealth firmly on the path to full
privatization.
"The hydrocarbon law
reflects the process of readying Iraq's oil for privatization," said
Jasiewicz, "drafted in secret, shaped by foreign powers, untransparent,
undemocratic and forced through under military occupation."
Jasiewicz said the
law can be regarded as the economic goal of the war and occupation and
that "it will be viewed by most Iraqis as not just illegitimate, but a
war crime".
But officials with
the Iraqi government, who have already sent the draft oil law to
Parliament for consideration, say it represents a step forward for the
war-torn country. Under the law, oil revenues would be distributed to
all 18 provinces based on population size, and regional administrations
have the authority to negotiate contracts with international oil
companies.
Prime Minister Nuri al-Maliki, a close ally of Washington, called the law "another founding stone in state-building".
And Oil Minister
Hussain al-Shahristani said: "This law will guarantee for Iraqis, not
just now but for future generations too, complete national control over
this natural wealth."
Initial drafts of the
law starting eight months ago saw squabbles between the Kurdish
factions who control the northern part of Iraq and the Shi'ite-led
regime as they both vied for bigger shares of the country's oil wealth,
estimated at 115 billion barrels. That they have finally come to a
final agreement may be a sign of long-sought stability.
Yet critics,
including Iraqi oil professionals, engineers and union technicians, are
instead calling for technical service contracts, meaning a company
would come in and offer services such as building a refinery, laying a
pipeline, or offering consultancy services, get its fees and then
leave.
"It is a much more
equitable relationship because the control of production, the
development of oil, will stay with the Iraqi state," said Jasiewicz.
"That is the model
that Saudi Arabia, Iran, Kuwait generally operate. There's no other
country in the Middle East with the kind of oil reserves that Iraq has
that would consider signing a production-sharing agreement," she said.
"It's a form of privatization, and that's why those countries haven't
signed these, because it's not in their interests."
(Inter Press Service)
