January 10, 2007

Eyes on the Prize: About that Oil...

I have long maintained that one standard condemnation of the Iraq catastrophe -- "It's all about the oil!" -- is dangerously superficial. If that is the totality of one's criticism of this latest manifestation of our foreign policy, a foreign policy that has been operative without interruption for more than a century, it verges on the trivial. The crucial and much more fundamental argument concerns the general motives and goals of our foreign policy, which have now been grafted into our governing system itself. I began discussing these issues in the first part of my "Dominion Over the World" series, and I will explain them further in the upcoming installments (some of which will be posted in the next few days). The obsession with oil and the means by which we seek to ensure its plentiful supply represent only one consequence of deeper, much more far-reaching beliefs.

Nonetheless, the significance of oil in the more general scenario is very considerable. The following is deserving of some attention. The ongoing, ever-worsening destruction of Iraq and its peoples is so terrible that it defies comprehension. It is difficult to believe that it could be made even more horrifying, although Bush seems determined to push the limits of what is possible to human beings when they embark on a path of ungraspable carnage.

Given the destruction that we have already caused -- in a nation that never attacked us and that did not threaten us, and which our leaders knew constituted no serious threat -- I am reduced to observing that this represents confirmation of some of the worst suspicions held by many people. If anything could be designed to provoke further hatred and resentment of the United States (and of Britain to a lesser degree), I cannot imagine what it might be:
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.
In a certain way, I suppose one must almost admire the brazen evil exhibited by those "oil industry executives and analysts" (as well as by the defenders of this criminal war and occupation) who say this "is the only way to get Iraq's oil industry back on its feet after years of sanctions, war and loss of expertise." Of course, those sanctions, that war, and the loss of expertise are all the embodiments and results of our actions -- and now it is Western companies closely allied with the criminal governments that perpetrated those very acts that will benefit from the catastrophe their own governments created. This is the apotheosis of a phenomenon I have written about before: the internationalization of corporate statism. The alliance between nominally "private" companies and government that is destroying what little remains of freedom here at home is now exported overseas -- and the chief beneficiaries of war and slaughter are those companies most closely allied with the state.

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


Supporters say the provision allowing oil companies to take up to 75 per cent of the profits will last until they have recouped initial drilling costs. After that, they would collect about 20 per cent of all profits, according to industry sources in Iraq. But that is twice the industry average for such deals.

Greg Muttitt, a researcher for Platform, a human rights and environmental group which monitors the oil industry, said Iraq was being asked to pay an enormous price over the next 30 years for its present instability. "They would lose out massively," he said, "because they don't have the capacity at the moment to strike a good deal."


Several major oil companies are said to have sent teams into the country in recent months to lobby for deals ahead of the law, though the big names are considered unlikely to invest until the violence in Iraq abates.

James Paul, executive director at the Global Policy Forum, the international government watchdog, said: "It is not an exaggeration to say that the overwhelming majority of the population would be opposed to this. To do it anyway, with minimal discussion within the [Iraqi] parliament is really just pouring more oil on the fire."
One can only conclude that the proponents of this new law are determined to enshrine the United States among the most vilified nations in history. This is one of the surest routes leading to future 9/11s, and much, much worse.

Here are some further details from another article in the Independent:
Now, unnoticed by most amid the furore over civil war in Iraq and the hanging of Saddam Hussein, the new oil law has quietly been going through several drafts, and is now on the point of being presented to the cabinet and then the parliament in Baghdad. Its provisions are a radical departure from the norm for developing countries: under a system known as "production-sharing agreements", or PSAs, oil majors such as BP and Shell in Britain, and Exxon and Chevron in the US, would be able to sign deals of up to 30 years to extract Iraq's oil.


Critics fear that given Iraq's weak bargaining position, it could get locked in now to deals on bad terms for decades to come. "Iraq would end up with the worst possible outcome," said Greg Muttitt of Platform, a human rights and environmental group that monitors the oil industry. He said the new legislation was drafted with the assistance of BearingPoint, an American consultancy firm hired by the US government, which had a representative working in the American embassy in Baghdad for several months.

"Three outside groups have had far more opportunity to scrutinise this legislation than most Iraqis," said Mr Muttitt. "The draft went to the US government and major oil companies in July, and to the International Monetary Fund in September. Last month I met a group of 20 Iraqi MPs in Jordan, and I asked them how many had seen the legislation. Only one had."


The Independent on Sunday has obtained a copy of an early draft which was circulated to oil companies in July. It is understood there have been no significant changes made in the final draft. The terms outlined to govern future PSAs are generous: according to the draft, they could be fixed for at least 30 years. The revelation will raise Iraqi fears that oil companies will be able to exploit its weak state by securing favourable terms that cannot be changed in future.

Iraq's sovereign right to manage its own natural resources could also be threatened by the provision in the draft that any disputes with a foreign company must ultimately be settled by international, rather than Iraqi, arbitration.


Iraqi trade union leaders who met recently in Jordan suggested that the legislation would cause uproar once its terms became known among ordinary Iraqis.

"The Iraqi people refuse to allow the future of their oil to be decided behind closed doors," their statement said. "The occupier seeks and wishes to secure... energy resources at a time when the Iraqi people are seeking to determine their own future, while still under conditions of occupation."

The resentment implied in their words is ominous, and not only for oil company executives in London or Houston. The perception that Iraq's wealth is being carved up among foreigners can only add further fuel to the flames of the insurgency, defeating the purpose of sending more American troops to a country already described in a US intelligence report as a cause celebre for terrorism.
The articles contain still more information about this.

As the stories note, Dick Cheney said it this way in 1999: "By 2010 we will need [a further] 50 million barrels a day. The Middle East, with two-thirds of the oil and the lowest cost, is still where the prize lies." In her typically detestable way, Ann Coulter said it more directly: "Why not go to war just for oil? We need oil."

This will surely go down as one of the most vilely despicable episodes in our nation's history.

Be sure to read Werther on this subject as well, and you will learn more about BearingPoint and how this unholy alliance between business and government works.