January 7, 2007
The Independent (UK)

Future of Iraq: The Spoils of War

How the West will make a killing on Iraqi oil riches

by Danny Fortson, Andrew Murray-Watson and Tim Webb

Iraq's massive oil reserves, the third-largest in the world, are about to be thrown open for large-scale exploitation by Western oil companies under a controversial law which is expected to come before the Iraqi parliament within days.

The US government has been involved in drawing up the law, a draft of which has been seen by The Independent on Sunday. It would give big oil companies such as BP, Shell and Exxon 30-year contracts to extract Iraqi crude and allow the first large-scale operation of foreign oil interests in the country since the industry was nationalised in 1972.

The huge potential prizes for Western firms will give ammunition to critics who say the Iraq war was fought for oil. They point to statements such as one from Vice-President Dick Cheney, who said in 1999, while he was still chief executive of the oil services company Halliburton, that the world would need an additional 50 million barrels of oil a day by 2010. "So where is the oil going to come from?... The Middle East, with two-thirds of the world's oil and the lowest cost, is still where the prize ultimately lies," he said.

Oil industry executives and analysts say the law, which would permit Western companies to pocket up to three-quarters of profits in the early years, is the only way to get Iraq's oil industry back on its feet after years of sanctions, war and loss of expertise. But it will operate through "production-sharing agreements" (or PSAs) which are highly unusual in the Middle East, where the oil industry in Saudi Arabia and Iran, the world's two largest producers, is state controlled.

Opponents say Iraq, where oil accounts for 95 per cent of the economy, is being forced to surrender an unacceptable degree of sovereignty.

Proposing the parliamentary motion for war in 2003, Tony Blair denied the "false claim" that "we want to seize" Iraq's oil revenues. He said the money should be put into a trust fund, run by the UN, for the Iraqis, but the idea came to nothing. The same year Colin Powell, then Secretary of State, said: "It cost a great deal of money to prosecute this war. But the oil of the Iraqi people belongs to the Iraqi people; it is their wealth, it will be used for their benefit. So we did not do it for oil." . . .


Enver Masud, "A Clash Between Justice and Greed, Not Islam and the West," The Wisdom Fund, September 2, 2002

Enver Masud, "Iraq: Divide and Rule, 'Ethnic Cleansing Works'," The Wisdom Fund, October 10, 2006

Antonia Juhasz, "It's Still About Oil in Iraq," Los Angeles Times, December 8, 2006

Danny Fortson, "Iraq poised to end drought for thirsting oil giants," Independent, January 7, 2007

[A new Iraqi oil law will most likely be voted on in Parliament in the next few weeks, before the arrival of Bush's 21,500 men, and it should be in effect in March. The law is Anglo-American Big Oil's holy grail: the draft has been carefully scrutinized by Washington, Big Oil and the International Monetary Fund, but not by Iraqi politicians. The profit-sharing agreements enshrined by the law are immensely profitable for Big Oil. And crucially, the law prevents any Iraqi government from nationalizing the oil industry - as the majority of Organization of Petroleum Exporting Countries (OPEC) member states did. In essence, it's a game of "if you nationalize, we invade you - again". So the law fulfills the early-2003 neo-con boast of "we are the new OPEC".--Pepe Escobar, "Surging toward the holy oil grail," Asia Times, January 12, 2007]

"The Official Draft of the Oil and Gas Law of The Iraq Republic," Al-Ghad, January 15, 2007

Juan Gonzalez, "Oily Truth Emerges in Iraq," New York Daily News, February 22, 2007

Pepe Escobar, "US's Iraq oil grab is a done deal," Asia Times, February 28, 2007

[Prime Minister Nouri al-Maliki fears the Americans will withdraw support for his government - effectively ousting him - if parliament does not pass a draft oil law by the end of June--"Al-Maliki tells aides U.S. benchmark deadline is June 30 or his ouster possible," Associated Press, March 13, 2007]

[The Iraq National Oil Company would have exclusive control of just 17 of Iraq's 80 known oil fields, leaving two-thirds of known - and all of its as yet undiscovered - fields open to foreign control. . . .

The international oil companies could also be offered some of the most corporate-friendly contracts in the world, including what are called production sharing agreements. These agreements are the oil industry's preferred model, but are roundly rejected by all the top oil producing countries in the Middle East because they grant long-term contracts (20 to 35 years in the case of Iraq's draft law) and greater control, ownership and profits to the companies than other models. In fact, they are used for only approximately 12 percent of the world's oil.

Iraq's neighbors Iran, Kuwait and Saudi Arabia maintain nationalized oil systems and have outlawed foreign control over oil development. They all hire international oil companies as contractors to provide specific services as needed, for a limited duration, and without giving the foreign company any direct interest in the oil produced.--Antonia Juhasz, "Whose oil is it, anyway?," International Herald Tribune, March 13, 2007]

[Some Iraqi oil experts and politicians are aghast over their government's approval of a bill that many fear will deliver the country's oil wealth to international firms on a platter. . . .

It was adopted "to satisfy US President George W. Bush," who called on the newly installed Maliki government last June to restore electricity in Iraq, adopt a new investment law and restructure the oil industry,--"Iraq experts say draft oil industry law fraught with problems," Agence France-Presse, March 18, 2007]

[The legislation pending now in Washington requires the President to certify to Congress by next October that the benchmarks have been met-specifically that the Iraqi hydrocarbon law has been passed. That's the land mine: he will certify the American and British oil companies have access to Iraqi oil. This is not likely what Congress intended, but it is precisely what Mr. Bush has sought for the better part of six years.--Richard w. Behan, "If the Iraqis Get Revenue Sharing, Exxon Gets Their Oil,", March 30, 2007]

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