Iraqi
Regime Set To Hand Over Oil Reserves To US Energy Giants
By Jerry White
12 January, 2007
World Socialist Web
As
the Bush administration prepares to escalate military violence against
the Iraqi people the US-installed regime in Baghdad is set to approve
a new hydrocarbon law that will hand unprecedented control of the country’s
vast oil reserves to US and British energy conglomerates. The new law,
the terms of which were detailed by the British newspaper the Independent
on January 7, makes a mockery of any claims of Iraqi sovereignty and
underscores that the real aim of the bloody enterprise by US imperialism
has been to colonize the country and seize some of the largest untapped
oil resources left on the globe.
The language of the new law—which
is expected to be approved by the Iraqi parliament any day and put into
place by March—was written by a US consulting firm hired by the
Bush administration and presented to the major oil companies and the
International Monetary Fund during the summer. As of December, many
if not most Iraqi parliamentary members had still not seen the legislation.
The Independent, which obtained
a leaked version of the law, reported Sunday, “The Iraqi Council
of Ministers is expected to approve, as early as today, a controversial
new hydrocarbon law, heavily pushed by the US and UK governments, that
will radically redraw the Iraqi oil industry and throw open the doors
to the third-largest oil reserves in the world. It would allow the first
large-scale operation of foreign oil companies in the country since
the industry was nationalised in 1972.” The newspaper added that
the new law would be “radical departure from the norm for developing
countries” and would be the first of its kind for any major oil
producer in the Middle East, where Saudi Arabia and Iran, the world’s
number one and two largest producers, “both tightly control their
industries through state-owned companies with no appreciable foreign
collaboration,” as do most members of the Organization of Petroleum
Exporting Countries (OPEC).
The most significant legal
aspect of the pending legislation is the introduction of so-called production-sharing
agreements (PSAs), in which the state maintains formal ownership of
oil reserves but pours out billions in compensation to foreign oil companies
for their investment in the infrastructure and operation of drills,
pipelines and refineries.
According to the draft of
the legislation, the PSAs in Iraq would be fixed for 30 years or more,
allowing foreign oil companies to maintain favorable arrangements no
matter what a future government might do to regulate their profits,
tax rates or production levels. One provision in an earlier draft of
the new law—which may or may not be retained in the latest version—insists
that any disputes with a foreign company must ultimately be settled
by international, rather than Iraqi, arbitration.
The terms granted under the
new law guarantee will guarantee massive profits to ExxonMobil, Chevron,
BP and other energy conglomerates. While recovering the costs of their
initial investment to develop an oil field, foreign companies will be
able to retain 60 to 70 percent of oil revenue. After recouping their
initial outlay, the companies can take up to 20 percent of the profit.
By contrast, the French oil
company Total signed a deal with Saddam Hussein before the second Iraq
war to develop a huge field that would have allowed the company to retain
only 40 percent of the profits while it was recovering its costs and
10 percent afterwards, according to Dr. Muhammed-Ali Zainy, a senior
economist at the Centre for Global Energy Studies.
Energy experts say the terms
about to be accepted by the Iraqi government are only comparable to
the production-sharing agreements Russia signed with Shell in the 1990s,
following the liquidation of the USSR and the economic “shock
therapy” that accompanied the dismantling of the nationalized
economy.
In the first half of the
twentieth century, under the system of concession agreements, foreign
oil companies controlled the petroleum underneath the ground in their
colonies and paid nominal royalty fees to the so-called national governments.
In the face of the anti-colonial upsurge following World War II, the
multinational energy companies began to promote the system of production-sharing
agreements in opposition to the growing tide of oil industry nationalizations
in the Middle East and elsewhere. First introduced in Indonesia following
the US-backed overthrow of the nationalist Sukarno regime in 1965, such
arrangements allowed foreign companies to extract oil and vast profits
while maintaining the fiction of national sovereignty.
According to International
Energy Agency figures, PSAs are used in connection to only 12 percent
of world oil reserves, in countries were exploration prospects are uncertain
and production costs are high. None of this applies to Iraq, where the
cost-per-barrel of extracting oil is among the lowest in the world because
the reserves are relatively close to the surface, and many fields have
already been discovered but not developed due to years of war and economic
sanctions. Most of Iraq’s giant oil fields have already been mapped
and therefore there are no exploration costs and risks, unlike the North
Sea, the Amazon or from tar sands in Canada, where huge outlays are
required.
The agreement signed by the
US-backed regime in Baghdad harkens back to the concessions system in
British-controlled Iraq. The Independent notes, “Under the chapter
entitled, ‘Fiscal Regime,’ the draft spells out that foreign
companies have no restrictions on taking their profits out of the country,
and are not subject to any tax when doing this.” The draft law
states, “A Foreign Person may repatriate its exports proceeds
[in accordance with the foreign exchange regulations in force at the
time].” Shares in oil projects can also be sold to other foreign
companies: “It may freely transfer shares pertaining to any non-Iraqi
partners.”
A war for oil
Iraq has 115 billion barrels
of known oil reserves—10 percent of the world’s total—and
it is estimated that a fully functioning industry could generate $100
billion in annual revenue. The most important resources are in the Majnoon
and West Qurna fields, close to Basra in the south of the country, which
contain nearly a quarter of Iraq’s proven reserves. On top of
this, Iraq is estimated to have between 100 and 200 billion barrels
of possible reserves, including in the western desert.
These vast untapped reserves
of easily reachable and low-cost oil, not to mention natural gas, have
long been a crucial target of the US and British energy conglomerates,
particularly as the discovery of new oil deposits elsewhere in the world
have drastically slowed and existing reserves have declined. With demand
increasing, particularly from rapidly developing countries such as China
and India, control of Middle East oil, and control of the Iraq’s
vast reserves in particular, became a vital geo-strategic goal for American
imperialism.
As early as the mid-1990s,
there was growing concern that the unraveling of the United Nations
sanctions imposed after the first Gulf War would enable Saddam Hussein
to establish lucrative agreements with French, Russian, Chinese and
other oil companies that would leave the US and Britain out and realign
the global energy industry. Political writer Kevin Phillips noted in
his book American Theocracy: The Peril and Politics of Radical Religion,
Oil and Borrow Money in the 21st Century, “So long as the United
States and Britain could keep these sanctions in place, using allegations
concerning weapons of mass destruction, Saddam could not implement his
own plan to extend large-scale oil concessions (estimated to be worth
$1.1 trillion)” to their economic rivals in Europe and Asia.
Months after the US invasion
of Iraq—and after a long legal battle with the White House—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. Among the items released
under court order were maps of Iraq’s oil fields, pipelines and
refineries, with a supporting list of “Foreign Suitors for Iraqi
Oilfield Contracts,” naming more than 60 firms from 30 countries,
most prominently France, Russia and China, that had projects either
agreed upon or under discussion with Baghdad. The French giant, Total,
for example, was to get the 25-billion barrel Majnoon oil field, while
Russia’s Lukoil had deals to develop the West Qurna fields.
The Independent article on
the new hydrocarbon law noted that it was doubtful that these contracts
would be considered valid by the Iraqi government, and that “ExxonMobil
is now seen by insiders as the frontrunner to nab the rights to the
Majnoon field.”
The actions of the puppet
regime in Baghdad have confirmed the fact—suspected by millions
of people throughout the world—that that an entire country has
been shattered and hundreds of thousands killed in a war for oil and
profit.
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