Bush's Petro-Cartel Almost Has
by Joshua Holland
www.alternet.org, October 16 and
Even as Iraq is on the verge of splintering
into a sectarian civil war, four big oil companies are on the
verge of locking up its massive, profitable reserves, known to
everyone in the petroleum industry as "the prize."
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.
Iraq's energy reserves are an incredibly
rich prize; according to the US Department of Energy, "Iraq
contains 112 billion barrels of proven oil reserves, the second
largest in the world (behind Saudi Arabia) along with roughly
220 billion barrels of probable and possible resources. Iraq's
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
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 North Sea where production costs are $12-16
And Iraq's 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
"Iraq 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 Iraq's
vast Western desert. It's one of the last "virgin" fields
on the planet, and it has the potential to catapult Iraq to number
one 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 Kirkuk, and in the South near
Basra. The Nation's Aram Roston predicts Iraq's Western desert
will yield "untold riches."
Iraq also may have large natural gas deposits
that so far remain virtually unexplored.
But even "untold riches" don't
tell the whole story. Depending on how Iraq's 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 Iraq 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 U.S., could even pull out of the cartel entirely.
Both independent analysts and officials
within Iraq's Oil ministry anticipate that when all is said and
done, the big winners in Iraq will be the Big Four -- the American
firms Exxon-Mobile and Chevron-Texaco, and 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 U.S. companies will
win the lion's share of contracts. "The feeling is that the
new government is going to be influenced by the United States,"
During the twelve-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 U.S. ultimately received
37 percent of Iraq's oil during the 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 fifty 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 U.S. 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 after which they had long lusted.
If the U.S. invasion of Iraq had occurred
during the colonial era a hundred years earlier, the oil giants,
backed by U.S. forces, would have simply seized Iraq's 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 Iraq's Southern oil fields in 2002, Colin
Powell dismissed the idea as "lunacy").
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 Iraq oil-grab is a classic case study.
It's clear that the U.S.-led invasion
had little to do with national security or the events of September
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 Afghanistan."
On March 7, 2003, two weeks before the
U.S. attacked Iraq, the UN's chief weapons inspector, Hans Blix,
told the UN 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 Iraq 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
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 Iraq's oil wealth had been
under way for longer still.
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 Taskforce. 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 Iraq and an accompanying list
of "Iraq 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 thirty countries--but not the United States--were either
in discussions over or in direct negotiations for rights to some
of the best remaining oilfields on earth.
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 Taskforce 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 Iraq,
and actions regarding the capture of new and existing oil and
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
Iraq's Oil Minister in 2005. The group concluded that Iraq's oil
"should be opened to international oil companies as quickly
as possible after the war."
But the execs from Big Oil didn't just
want access to Iraq's 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 Iraq's oil.
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 thirteen 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,
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 Iraq,
where there are large fields which are already known and which
are cheap to extract. For example, they are not used in Iran,
Kuwait or Saudi Arabia, all of which maintain state control of
In fact, Muttit adds, of the seven leading
oil producing countries, only Russia has entered into PSAs, and
those were signed during its own economic "shock therapy"
in the early 1990s. A number of Iraq's oil-rich neighbors have
constitutions that specifically prohibit foreign control over
their energy reserves.
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 Iraq's 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 U.S. 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 Iraq's oil for the first time in the thirty years
since the sector was nationalized in 1975.
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
While [U.S. Ambassador to Iraq Zalmay]
Khalilzad and his team of US and British diplomats were all over
the scene, some members of Iraq's 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 DC, the
stage was set for foreign multinationals to assume effective control
of as much as 87 percent of Iraq's 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
revenues 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 Iraq's emerging elite and
lock the new Iraqi government onto a path that would lead to the
Big Four's desired outcome.
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 U.S. oil companies "and
European companies, probably."
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 Iraq's oil fields. "American companies
will have a big shot at Iraqi oil," Chalabi told the Washington
Post in 2002.
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 port
of Khor 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 Iraq's foreign debt in perspective,
if the country's economy were the size of the United States',
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
Debt-relief activists Basav Sen and Hope
Chu wrote that the move "seemed inexplicable at first."
But it soon became clear that Iraq's debt-relief program was,
in fact, a way of locking in Iraq's economic transformation.
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
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 Iraq's 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 Iraq," 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
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 Iraq's 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 Iraq 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 Iraq's odious debt, he had a direct interest in
making sure he didn't get it.
Another major creditor was Saudi Arabia.
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 Iraq, 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 Kuwait, a country with a per capita GDP of over $19,000, for
the five months Saddam occupied his neighbor in late 1990 and
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
"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 Iraq's nascent government, not controlling
it, and it's an important distinction. Before and since the "handover"
to Iraq's 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 Iraq's oil industry during the transition
period. According to the Guardian, the group "would represent
Iraq 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 Iraq crisis -- "developing contingency plans for Iraq's
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 United States,
was a former CEO of the Fluor Corp., a well-connected oil services
firm with extensive projects in Saudi Arabia and Kuwait, and at
least $1.6 billion in contracts for Iraq's reconstruction. He
was joined by Gary Vogler, a former executive with ExxonMobile,
in Iraq's Office of Reconstruction and Humanitarian Assistance.
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 Iraq" 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 U.S.
with key decision makers from the Iraq Ministry of Oil."
Terry Adams and Bob Morgan of BP, and
Mike Stinson of ConocoPhillips would also serve as advisors during
After the CPA handed over the reigns to
Iraq's 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 U.S.
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 Iraq's 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 Iraq." According to Platform, just weeks after the
invasion, in a meeting with oil company execs and Australian Foreign
Minister Alexander Downer in London, 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 Iraq"
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,
Iraq's 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."
Washington has its hands all over the
drafting of that law. Early on, in 2003, USAID commissioned BearingPoint,
Inc. -- the new name for the scandal-plagued Arthur Anderson Consulting
-- to submit recommendations for the development of Iraq's 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 U.S. 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 Iraq in order to facilitate the country's "orderly
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 China
may well receive the first deal in post-Saddam Iraq (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 Iraq's chances to build an autonomous and
potentially prosperous country down the road.
It's possible that the administration
and its partners badly overplayed their hand. Iraq's 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 United States is an occupier, not a liberator,
and is convinced that it intends to stay in Iraq 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 Iraq's government won't make it to December;
at this writing, rumors of a "palace coup" are swirling
around Baghdad, according to Iraqi lawmakers.
What is clear is that the future of Iraq
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 Washington, told me that
the disposition of Iraq's oil wealth is "definitely causing
problems on the ground," but the entire topic is taboo in
polite D.C. circles. "Nobody in Washington 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.
Joshua Holland is an AlterNet staff writer.