How
The Bush Administration’s
Iraqi Oil Grab Went Awry
By Dilip Hiro
27 September, 2007
Dissident
Voice
Here
is the sentence in The Age of Turbulence, the 531-page memoir of former
Federal Reserve chief Alan Greenspan, that caused so much turbulence
in Washington last week: “I am saddened that it is politically
inconvenient to acknowledge what everyone knows: the Iraq war is largely
about oil.” Honest and accurate, it had the resonance of the Bill
Clinton’s election campaign mantra, “It’s the economy,
stupid.” But, finding himself the target of a White House attack
— an administration spokesman labeled his comment, “Georgetown
cocktail party analysis” — Greenspan backtracked under cover
of verbose elaboration. None of this, however, made an iota of difference
to the facts on the ground.
Here is a prosecutor’s
brief for the position that “the Iraq War is largely about oil”:
The primary evidence indicating
that the Bush administration coveted Iraqi oil from the start comes
from two diverse but impeccably reliable sources: Paul O’Neill,
the Treasury Secretary (2001-2003) under President George W. Bush; and
Falah Al Jibury, a well-connected Iraqi-American oil consultant, who
had acted as President Ronald Reagan’s “back channel”
to Iraqi President Saddam Hussein during the Iraq-Iran War of 1980-88.
The secondary evidence is from the material that can be found in such
publications as the New York Times and the Wall Street Journal.
According to O’Neill’s
memoirs, The Price of Loyalty: George W. Bush, the White House, and
the Education of Paul O’Neill, written by journalist Ron Suskind
and published in 2004, the top item on the agenda of the National Security
Council’s first meeting after Bush entered the Oval Office was
Iraq. That was January 30, 2001, more than seven months before the 9/11
attacks. The next National Security Council (NSC) meeting on February
1st was devoted exclusively to Iraq.
Advocating “going after
Saddam” during the January 30 meeting, Defense Secretary Donald
Rumsfeld said, according to O’Neill, “Imagine what the region
would look like without Saddam and with a regime that’s aligned
with U.S. interests. It would change everything in the region and beyond.
It would demonstrate what U.S. policy is all about.” He then discussed
post-Saddam Iraq — the Kurds in the north, the oil fields, and
the reconstruction of the country’s economy. (Suskind, p. 85)
Among the relevant documents
later sent to NSC members, including O’Neill, was one prepared
by the Defense Intelligence Agency (DIA). It had already mapped Iraq’s
oil fields and exploration areas, and listed American corporations likely
to be interested in participating in Iraq’s petroleum industry.
Another DIA document in the
package, entitled “Foreign Suitors for Iraqi Oilfield Contracts,”
listed companies from 30 countries — France, Germany, Russia,
and Britain, among others — their specialties and bidding histories.
The attached maps pinpointed “super-giant oil field,” “other
oil field,” and “earmarked for production sharing,”
and divided the basically undeveloped but oil-rich southwest of Iraq
into nine blocks, indicating promising areas for future exploration.
(Suskind., p. 96)
According to high flying,
oil insider Falah Al Jibury, the Bush administration began making plans
for Iraq’s oil industry “within weeks” of Bush taking
office in January 2001. In an interview with the BBC’s Newsnight
program, which aired on March 17, 2005, he referred to his participation
in secret meetings in California, Washington, and the Middle East, where,
among other things, he interviewed possible successors to Saddam Hussein.
By January 2003, a plan for
Iraqi oil crafted by the State Department and oil majors emerged under
the guidance of Amy Myers Jaffe of the James A. Baker III Institute
for Public Policy at Rice University. It recommended maintaining the
state-owned Iraq National Oil Company, whose origins dated back to 1961
— but open it up to foreign investment after an initial period
in which U.S.-approved Iraqi managers would supervise the rehabilitation
of the war-damaged oil infrastructure. The existence of this group would
come to light in a report by the Wall Street Journal on March 3, 2003.
Unknown to the architects
of this scheme, according to the same BBC Newsnight report, the Pentagon’s
planners, apparently influenced by powerful neocons in and out of the
administration, had devised their own super-secret plan. It involved
the sale of all Iraqi oil fields to private companies with a view to
increasing output well above the quota set by the Organization of the
Petroleum Exporting Countries (OPEC) for Iraq in order to weaken, and
then destroy, OPEC.
Secondary Evidence
On October 11, 2002 the New
York Times reported that the Pentagon already had plans to occupy and
control Iraq’s oilfields. The next day the Economist described
how Americans in the know had dubbed the waterway demarcating the southern
borders of Iraq and Iran “Klondike on the Shatt al Arab,”
while Ahmed Chalabi, head of the U.S.-funded Iraqi National Congress
and a neocon favorite, had already delivered this message: “American
companies will have a big shot at Iraqi oil — if he gets to run
the show.”
On October 30, Oil and Gas
International revealed that the Bush administration wanted a working
group of 12 to 20 people to (a) recommend ways to rehabilitate the Iraqi
oil industry “in order to increase oil exports to partially pay
for a possible U.S. military occupation government,” (b) consider
Iraq’s continued membership of OPEC, and (c) consider whether
to honor contracts Saddam Hussein had granted to non-American oil companies.
By late October 2002, columnist
Maureen Dowd of the New York Times would later reveal, Halliburton,
the energy services company previously headed by Vice President Dick
Cheney, had prepared a confidential 500-page document on how to handle
Iraq’s oil industry after an invasion and occupation of Iraq.
This was, commented Dowd, “a plan [Halliburton] wrote several
months before the invasion of Iraq, and before it got a no-bid contract
to implement the plan (and overbill the U.S.).” She also pointed
out that a Times‘ request for a copy of the plan evinced a distinct
lack of response from the Pentagon.
In public, of course, the
Bush administration built its case for an invasion of Iraq without referring
to that country’s oil or the fact that it had the third largest
reserves of petroleum in the world. But what happened out of sight was
another matter. At a secret NSC briefing for the President on February
24, 2003, entitled, “Planning for the Iraqi Petroleum Infrastructure,”
a State Department economist, Pamela Quanrud, told Bush that it would
cost $7-8 billion to rebuild the oil infrastructure, if Saddam decided
to blow up his country’s oil wells, according to Washington Post
reporter Bob Woodward in his 2004 book, Plan of Attack (pp. 322-323).
Quanrud was evidently a member of the State Department group chaired
by Amy Myers Jaffe.
When the Anglo-American troops
invaded on March 20, 2003, they expected to see oil wells ablaze. Saddam
Hussein proved them wrong. Being a staunch nationalist, he evidently
did not want to go down in history as the man who damaged Iraq’s
most precious natural resource.
On entering Baghdad on April
9th, the American troops stood by as looters burned and ransacked public
buildings, including government ministries — except for the Oil
Ministry, which they guarded diligently. Within the next few days, at
a secret meeting in London, the Pentagon’s scheme of the sale
of all Iraqi oil fields got a go-ahead in principle.
The Bush administration’s
assertions that oil was not a prime reason for invading Iraq did not
fool Iraqis though. A July 2003 poll of Baghdad residents — who
represented a quarter of the Iraqi national population — by the
London Spectator showed that while 23% believed the reason for the Anglo-American
war on Iraq was “to liberate us from dictatorship,” twice
as many responded, “to get oil”. (Cited in Dilip Hiro, Secrets
and Lies: Operation “Iraqi Freedom” and After, p. 398.)
As Iraq’s principal
occupier, the Bush White House made no secret of its plans to quickly
dismantle that country’s strong public sector. When the first
American proconsul, retired General Jay Garner, focused on holding local
elections rather than privatizing the country’s economic structure,
he was promptly sacked.
Hurdles to Oil Privatization
Prove Impassable
Garner’s successor,
L. Paul Bremer III, found himself dealing with Philip Carroll —
former Chief Executive Officer of the American operations of (Anglo-Dutch)
Royal Dutch Shell in Houston — appointed by Washington as the
Iraqi oil industry’s supreme boss. Carroll decided not to tinker
with the industry’s ownership and told Bremer so. “There
was to be no privatization of Iraqi oil resources or facilities while
I was involved,” Carroll said in an interview with the BBC’s
Newsnight program on March 17, 2005.
This was, however, but a
partial explanation for why Bremer excluded the oil industry when issuing
Order 39 in September 2003 privatizing nearly 200 Iraqi public sector
companies and opening them up to 100% foreign ownership. The Bush White
House had also realized by then that denationalizing the oil industry
would be a blatant violation of the Geneva Conventions which bar an
occupying power from altering the fundamental structure of the occupied
territory’s economy.
There was, as well, the vexatious
problem of sorting out the 30 major oil development contracts Saddam’s
regime had signed with companies based in Canada, China, France, India,
Italy, Russia, Spain, and Vietnam. The key unresolved issue was whether
these firms had signed contracts with the government of Saddam Hussein,
which no longer existed, or with the Republic of Iraq which remained
intact.
Perhaps more important was
the stand taken by Grand Ayatollah Ali Sistani, the senior Shiite cleric
in the country and a figure whom the occupying Americans were keen not
to alienate. He made no secret of his disapproval of the wholesale privatization
of Iraq’s major companies. As for the minerals — oil being
the most precious — Sistani declared that they belonged to the
“community,” meaning the state. As a religious decree issued
by a grand ayatollah, his statement carried immense weight.
Even more effective was the
violent reaction of the industry’s employees to the rumors of
privatization. In his Newsnight interview Jibury said, “We saw
an increase in the bombing of oil facilities and pipelines built on
the premise that privatization is coming.”
In the immediate aftermath
of the invasion, much equipment was looted from pipelines, pumping stations,
and other oil facilities. By August 2003, four months after American
troops entered Baghdad, oil output had only inched up to 1.2 million
barrels per day, about two-fifths of the pre-invasion level. The forecasts
(or dreams) of American planners’ that oil production would jump
to 6 million barrels per day by 2010 and easily fund the occupation
and reconstruction of the country, were now seen for what they were
— part of the hype disseminated privately by American neocons
to sell the idea of invading Iraq to the public.
With the insurgency taking
off, attacks on oil pipelines and pumping stations averaged two a week
during the second half of 2003. The pipeline connecting a major northern
oil field near Kirkuk — with an export capacity of 550,000-700,000
barrels per day — to the Turkish port of Ceyhan became inoperative.
Soon, the only oil being exported was from fields in the less disturbed,
predominately Shiite south of Iraq.
In September 2003, President
Bush approached Congress for $2.1 billion to safeguard and rehabilitate
Iraq’s oil facilities. The resulting Task Force Shield project
undertook to protect 340 key installations and 4,000 miles (6,400 km)
of oil pipeline. It was not until the spring of 2004 that output again
reached the pre-war average of 2.5 million barrels per day — and
that did not hold. Soon enough, production fell again. Iraqi refineries
were, by now, producing only two-fifths of the 24 million liters of
gasoline needed by the country daily, and so there were often days-long
lines at service stations.
Addressing the 26th Oil and
Money conference in London on September 21, 2005, Issam Chalabi, who
had been an Iraqi oil minister in the late 1980s, referred to the crippling
lack of security and the lack of clear laws to manage the industry,
and doubted if Iraq could return to the 1979 peak of 3.5 million barrels
per day before 2009, if then.
Meanwhile, the Iraqi government
found itself dependent on oil revenues for 90% of its income, a record
at a time when corruption in its ministries had become rampant. On January
30, 2005, Stuart W. Bowen, the special inspector general appointed by
the U.S. occupation authority, reported that almost $9 billion in Iraqi
oil revenue, disbursed to the ministries, had gone missing. A subsequent
Congressional inspection team reported in May 2006 that Task Force Shield
had failed to meet its goals due to “lack of clear management
structure and poor accountability”, and added that there were
“indications of potential fraud” which were being reviewed
by the Inspector General.
The endorsement of the new
Iraqi constitution by referendum in October 2005 finally killed the
prospect of full-scale oil privatization. Article 109 of that document
stated clearly that hydrocarbons were “national Iraqi property”.
That is, oil and gas would remain in the public sector.
In March 2006, three years
after the Anglo-American invasion of Iraq, the country’s petroleum
exports were 30% to 40% below pre-invasion levels.
Bush Pushes for Iraq’s
Flawed Draft Hydrocarbon Law
In February 2007, in line
with the constitution, the draft hydrocarbon law the Iraqi government
presented to parliament kept oil and gas in the state sector. It also
stipulated recreating a single Iraqi National Oil Company that would
be charged with doling out oil income to the provinces on a per-capita
basis. The Bush administration latched onto that provision to hype the
43-article Iraqi bill as a key to reconciliation between Sunnis and
Shiites — since the Sunni areas of Iraq lack hydrocarbons —
and so included it (as did Congress) in its list of “benchmarks”
the Iraqi government had to meet.
Overlooked by Washington
was the way that particular article, after mentioning revenue-sharing,
stated that a separate Federal Revenue Law would be necessary to settle
the matter of distribution — the first draft of which was only
published four months later in June.
Far more than revenue sharing
and reconciliation, though, what really interested the Bush White House
were the mouthwatering incentives for foreign firms to invest in Iraq’s
hydrocarbon industry contained in the draft law. They promised to provide
ample opportunities to America’s Oil Majors to reap handsome profits
in an oil-rich Iraq whose vast western desert had yet to be explored
fully for hydrocarbons. So Bush pressured the Iraqi government to get
the necessary law passed before the parliament’s vacation in August
— to no avail.
The Bush administration’s
failure to achieve its short-term objectives does not detract from the
overarching fact — established by the copious evidence marshaled
in this article — that gaining privileged access to Iraqi oil
for American companies was a primary objective of the Pentagon’s
invasion of Iraq.
Dilip Hiro
is the author of Secrets and Lies: Operation "Iraqi Freedom"
and, most recently, Blood of the Earth: The Battle for the World's Vanishing
Oil Resources , both published by Nation Books.
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