Iraqi Oil Alarm
For Producers, Consumers
By Nicola Nasser
24 January, 2007
While the Iraqis were busy counting
their death toll of more than 650,000 since March 2003, the United Nations
busy counting their dead of more than 34,000 in 2006 only, the Pentagon
counting more than 3,070 American deaths and the U.S. treasury counting
more than $600 billion of taxpayer money spent so far in Iraq , stealthily
and suddenly the U.S. occupation’s oil prize rang louder than
the war drums to alert the regional oil producers as well as the major
world consumers to guard against the looming threat coming out of Iraq.
After listening to the monotonous and incredible U.S. lies for four
years about “we are not there for Iraq's oil,” the oil truth
is now unfolding. Without a decisive military victory, the U.S. occupation
of Iraq seems to be about to grab its oil prize by establishing a new
sharing arrangement between a major national producer and the multi-national
giants, an arrangement that Washington plans to set as the model to
be followed both by the oil-rich region and the world at large.
This prize has been the dream of the successive U.S. administrations;
on January 18, it came one step closer to reality when Iraq's Oil Committee
approved the new draft hydrocarbon law, sent it to the cabinet within
a week and, when approved, will go to the parliament immediately thereafter.
The early draft of the law was prepared by BearingPoint American consultants,
hired by the Bush administration, and sent to the White House and major
western petroleum corporations in July, and then to the International
Monetary Fund two months later, while most Iraqi legislators and public
remained in the dark.
The approved production-sharing agreements (PSAs) favor investing foreign
oil companies with 70 percent of oil revenue to recoup their initial
outlay, then companies can reap 20 percent of the profit without any
tax or other restrictions on their transfers abroad.
Iraqi Oil File Opened
Several indicators have surfaced recently that point to bringing the
oil factor in Iraq back from the back burner to the forefront of the
public eye. The first has been Ankara’s escalating drive to block
the control of the northern Iraqi oil city of Kirkuk by the Iraqi Kurds,
lest Kirkuk's lucrative oil would be used to fund a bid for secession
from Iraq that could encourage separatist Kurdish guerrillas in Turkey
The second indicator is Iraq’s push forward on oil developments
with Iran and Kuwait to determine control in the future of the cross-border
oil fields, according to the Kuwait Times. Cross-border oil fields were
contested and have been a cause of friction poisoning Iraq’s relations
with its eastern and southern neighbors.
A third indicator that the Iraqi oil file is being wide opened is the
Iraqi - Syrian negotiations on the sidelines of the latest visit to
Damascus by Iraqi President Jalal Talabani to reopen the oil pipeline
between the northern Iraqi city of Kirkuk and the Syrian coastal town
of Banyas on the Mediterranean. This pipeline was reopened in 1997 and
drew U.S. disapproval; American air strikes damaged the Iraqi side of
the pipeline at the start of the U.S.-led invasion. Since then Washington
was reported to favor reopening a Kirkuk-Haifa oil pipeline via Jordan,
which was shut down after the creation of Israel in 1948.
However the new Iraqi draft hydrocarbon law, if passed by the Iraqi
parliament, would be a milestone not only to judge the U.S.-British
invasion of Iraq as a success or a failure, but would more importantly
determine the future network of relations between the oil-producing
countries and the multi-national oil giants, to the detriment of the
major consumers who will be held hostage to the whims of the American
holder of the key to Middle Eastern vital oil resources.
President George W. Bush in his “new Strategy” speech on
January 10 sounded ambiguous and elusive in his definition of the success
he is hunting in Iraq. “A successful strategy for Iraq goes beyond
military operations,” he said, adding: “Victory …
in Iraq will bring something new in the Arab world.” Bush stopped
short of explicitly defining success and victory as economic in framework
that has an oil breakthrough at its core.
In his speech Bush referred only briefly twice to oil. A failure of
the U.S. in Iraq would enable the “Radical Islamic extremists”
to “use oil revenues … to topple moderate governments”
across the region, he warned, and announced that “Iraq will pass
legislation to share oil revenues among all Iraqis,” without even
a hint to any U.S. interest, because he was very well aware of the hornet
nest he would unleash had he prematurely even hinted to his oil prize.
The Republican-Democratic electoral wrangling, no matter how ferocious
it was or would become over internal issues, could not overlap a “red
line” consensus on never compromising the U.S. national oil strategic
interests, which both parties are determined to defend regardless of
how much American or non-American blood would spill in their defense.
The bipartisan Iraq Study Group Report articulated that consensus concisely
in a straightforward language. It is noteworthy that Bush who ignored
the essential recommendations of this report had selectively adopted
recommendations 62 and 63. Recommendation 63 stipulates the US should
“assist” Iraqi leaders in privatizing the national oil industry
into a “commercial enterprise” to encourage investment by
the multi-national oil companies.
Recommendation 62 urges the US government to help draft an Iraqi oil
law that “creates a fiscal and legal framework for investment”
and, in conjunction with the International Monetary Fund [IMF], to “press
Iraq to continue reducing subsidies in the energy sector...until Iraqis
pay market prices for oil products.” The James Baker – Lee
Hamilton Report proposes to make everyday life harder for average Iraqis
so that the U.S. oil industry profits.
The Bush administration, even before the 2003 invasion, planned to pass
a new oil law for Iraq that would turn its nationalized oil system over
to private foreign corporate control. Months after the US invasion of
Iraq it was revealed that control of Iraq’s oil fields was one
of the chief issues discussed in Vice President Dick Cheney’s
Energy Task Force meeting with oil executives in 2001.
Bush made his first public demand of the Iraqi government to pass the
oil law in December. Secretary of State Condoleezza Rice, U.S. ambassador
to Iraq Zalmay Khalilzad and General George W. Casey Jr., the senior
American commander in Iraq, repeated the same demand. In July last year,
Energy Secretary Sam Bodman announced in Baghdad that senior U.S. oil
company executives would not enter Iraq without passage of the new law.
Petroleum Economist magazine later reported that U.S. oil companies
put passage of the oil law before security concerns as the deciding
factor over their entry into Iraq. Passing an oil law has been also
a key demand of the United States in providing further military support
to Baghdad’s “national unity government.”
Iraqis in the Dark
This law has been in the works even months before the invasion, when
the Bush Administration brought in Phillip Carroll, former CEO of both
Shell and Fluor, to devise "contingency plans" to pump the
Iraqi oil after the invasion; Carroll was made later the head of the
American "advisory committee" overseeing the oil industry
of the conquered land.
The U.S., the IMF and the major oil giants are using fear to pursue
their agenda of privatizing and selling off Iraq's oil resources. They
are taking advantage of an occupied, war-ravaged and internally divided
nation to get control over as much oil as possible, on the best possible
terms, and to get what they were denied before the war or at anytime
in modern Iraqi history: Access to Iraq's oil under the ground, Iraqi
academic and senior lecturer in Middle East economics at the University
of Exeter, Kamil Mahdi, wrote recently.
Most Iraqis remain 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, five Iraqi trade union
federations 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.” The statement
added that this was a “red line” they would not allow to
Washington has been unsuccessfully trying to camouflage her oil prize
in Iraq since its invasion in 2003 and similarly she can hardly now
smokescreen the oil factor in her escalating crisis with Iran. “Weapons
of mass destruction” or “links to Al Qaeda” were not
the true reasons for the U.S.-British invasion of Iraq as much as the
real reason for the present U.S.-Iran crisis is not about Iran’s
“nukes.” In both cases regime change was the goal, which
if achieved could give Washington an access to almost 20 percent of
the world's proven Iraqi and Iranian oil reserves, respectively the
third and fourth largest in the world.
Iran the Next Target
Iraqi and Iranian oil reserves are targeted per se, but clinching these
assets out of national decision-making would also give Washington control
over about 60 percent of the world's conventional oil reserves located
in essentially five countries in the Arabian Gulf region (described
officially by Iran as “Persian”). Iran's close proximity
to these major oil resources and her balancing power in controlling
access to them have made her the second major obstacle after Iraq that
could block any U.S. strategic drive to gain control over them. In 2003,
about 90% of oil exported from the Gulf transited by tanker through
the Strait of Hormuz, located between Oman and Iran.
The Iraqi bill would allow for the first foreign exploitation of Iraqi
oil reserves since the industry was nationalized in 1972. The introduction
of PSAs would also be a first in the Middle East. Washington wants the
Iraqi law to be the rule that has to apply across the oil-rich region
as well as worldwide. Most members of the Organization of Petroleum
Exporting Countries (OPEC) nationally control their oil industries through
state-owned companies with no appreciable foreign collaboration.
Such an arrangement was impossible to pass through during the bi-polar
world order, but has become possible following the collapse of the former
USSR if the American uni-polar power could rein in the remnants of the
ruling national liberation movements, or could topple them. Within this
context only can the invasion and occupation of Iraq as well as the
U.S.-Iranian current crisis be perceived. Since 1972 and 1979 respectively
the U.S. was denied the banana-republics-styled free hand over Iraqi
and Iranian oil assets. Iraq was invaded and occupied while a regime
change that would secure U.S. control is still in the works. Meanwhile
Iran is being pressured and threatened with more sanctions and a military
U.S. strike to change the regime in Tehran.
The more vulnerable regional oil producers, as well as their counterparts
in central Asia, would be wiser to do their best not to allow the draft
Iraqi law to pass to be the future yardstick to determine their relations
with the multi-national oil giants, and to pre-empt a political and
military environment synonymous to the one prevailing now in Iraq to
be copied in Iran, which would inevitably lead to a gradual erosion
or abrupt end to their beneficial current arrangements.
Voluntarily or grudgingly getting along with Bush’s old or “new”
strategies, would never spare them. They should reconsider because Iraq
was the first target and they are the next targets; Iran also should
reconsider in Iraq because she is “the” next target.
Major oil consumers in China, Japan and Europe should also be alerted
to avert a possible U.S. suffocating monopoly or hegemony on oil resources
at a time their as well as the American demand for oil is on the rise;
their economic competition or cooperation with the U.S. will only be
adversely compromised by Washington’s grip on the vital mineral
that is driving their industrial economies.
Nicola Nasser is a veteran Arab journalist based in Ramallah, West Bank
of the Israeli-occupied Palestinian territories.
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