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Paper: 'Blood and oil; How the West will make a killing on Iraqi oil riches'

Ron Brynaert
Published: Sunday January 7, 2007
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The front page of Britain's The Independent on Sunday features a photo of a US soldier guarding a burning oilfield in Southern Iraq which was taken on March 23, 2003, three days after the invasion of Iraq officially began. "The spoils of war" reads a large headline banner in grey type, with three letters highlighted in black boldface taken from the word "spoils" to spell out "oil."

Four articles based on a draft of an Iraqi law crafted with help from the US government which was leaked to the paper, detail "How the West will make a killing on Iraqi oil riches."

"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," Danny Fortson, Andrew Murray-Watson and Tim Webb report in the cover story.

According to the paper, the law "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."

"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," the article continues. "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."

'Blood and oil'

A second article begins with the question, "So was this what the Iraq war was fought for, after all?"

"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," the article continues.

Further along, the article claims that the early draft had been "circulated to oil companies in July," but that it's "understood there have been no significant changes made in the final draft."

The "revelation" of the 30-year contracts "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," the paper surmises.

And, in fact, an Iraqi survey conducted last April, which was sponsored by the National Science Foundation, revealed that 76 percent believed that a primary reason the US invaded was "to control Iraqi oil." A "nationally representative samples of the population" 2,701 adult Iraqis was surveyed in the "collaborative project between the University of Michigan Institute for Social Research and Eastern Michigan University."

"That was followed by 'to build military bases' (41 percent) and 'to help Israel' (32 percent)," David E. Kaplan wrote for U.S. News & World Report. "Fewer than 2 percent chose 'to bring democracy to Iraq' as their first choice."

'What they said'

The lengthy second article also contains comments by US and UK officials, made before and after the invasion, declaring that the war wasn't about oil and promising that Iraq's oil revenues belonged to its people and would only be used for reconstruction purposes.

The paper notes how former Secretary of State Colin Powell, in a press briefing held in South Africa on July 10, 2003, responded to a reporter who had asked him to reply to critics who believed Bush "went into Iraq for oil" and that the administration was "trying to secure the west coast of Africa, Liberia, for that same situation, oil."

Powell responded: "We have not taken one drop of Iraqi oil for U.S. purposes, or for coalition purposes. Quite the contrary. We put in place a management system to make sure that Iraqi oil is brought out of the ground and put onto the market in order to generate revenue for the Iraqi people. And we have put in place an auditing system and people who can oversee what we are doing. And the United States government is spending a great deal of money to support our forces over there. 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."

A statement Prime Minister Tony Blair made to Parliament two days before the invasion is also highlighted: "Oil revenues, which people falsely claim that we want to seize, should be put in a trust fund for the Iraqi people."

The article adds that "Vice-President Dick Cheney noted in 1999, when he was still running Halliburton, an oil services company, the Middle East is the key to preventing the world running out of oil," and that as late as June 14, 2006, President Bush, after returning from Baghdad said that he had "reminded the government that that oil belongs to the Iraqi people, and the government has the responsibility to be good stewards of that valuable asset and valuable resource."

Thirsting oil giants

A third article in the paper's business section reports how the law "will radically redraw the Iraqi oil industry and throw open the doors to the third-largest oil reserves in the world," will "allow the first large-scale operation of foreign oil companies in the country since the industry was nationalised in 1972," and "would also be a shot in the arm for the global petroleum industry."

"For more than three decades, foreign oil companies wanting into Iraq have been like children pressed against the sweet shop window desperately seeking to feast on the goodies but having no way of getting through the door," Danny Fortson writes. "That could soon change."

While Exxon, BP and Shell won't "jump into the country until the security situation stabilises," Fortson reports that the industry is "jockeying to stake their claims now for exploitation later."

"It's a mad rush to get something there," Global Policy Forum executive director James Paul tells the paper. "The companies are saying, 'Before any troops are withdrawn, we have to have these contracts.'"

According to Fortson, the foreign oil companies are "desperate to get a foot in the door" for three reasons: First is that "they are struggling to keep production increasing in line with demand," which has "been driven in large part by the growth of the Chinese economy." Second is lower production due to "the tide of oil nationalism in places such as Venezuela, where the stranglehold applied by President Hugo Chavez on the industry...has shifted more pressure on to the rest of the industry. Finally, "the cost-per-barrel of extracting oil in Iraq is among the lowest in the world because the reserves are relatively close to the surface."

'The oil rush'

The leading article in The Independent on Sunday uses a quote by former Illinois Republican lawmaker Everett Dirksen who was born in 1896 and served for thirty-three years as a Congressman and the Senate Minority Leader until his death in 1969 to explain "the oil rush" by the West: "The oil can is mightier than the sword."

"Nowhere does this seem more true than in contemporary Iraq where, despite widespread despair about the war's costs in terms of blood and treasure, US corporations look set to be some of the conflict's few winners," the article states.

Further excerpts from the leading article:

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Of course, the Iraqi oil industry, starved through years of sanctions and now under constant insurgent attack, badly needs Western investment. Only a small proportion of Iraq's known oil fields have been developed, and production still languishes below pre-invasion levels. The neo-conservative dream indulged in by Paul Wolfowitz and Dick Cheney prior to the conflict that the invasion and reconstruction would be self-financed through a twist of the oil taps, dissipated long ago.

In a country where unemployment has hit 70 per cent, a policy that will quicken the pace of economic reconstruction should be universally welcomed. At face value, the measure is not being imposed by the fiat of a US general: it will be voted on in the Iraqi parliament and, if passed, enacted by a democratically elected government. And objections that foreign companies will steal Iraq's birthright seem faintly anachronistic in the global economy: specialist engineering is an international industry these days, and Iraq's command economy, isolated from the rest of the world, urgently requires liberalisation.

But it doesn't demand the fevered imaginings of a conspiracy theorist to think that this law, struck while the beleaguered Iraqi government is facing opposition from all quarters, protects the interests of oil wealth (which is so well represented in the White House) more than it does the Iraqi people. Production sharing agreements don't apply in most other major Middle Eastern oil producers because they are widely thought to grant greater control to companies than governments. With economies so heavily dependent on oil, it's hard to see how countries can truly be self-governing if they sign away influence over their almost exclusive source of wealth.

Legitimate questions must be asked. How did this decision come to be made? How much pressure was President Nouri al-Maliki placed under to bend to the American corporate interests? Conservative US thinktanks such as the Heritage Foundation have been plotting the wholesale privatisation of the Iraqi oil industry for years. Since 2003, the supposed reconstruction of Iraq by US companies has left a bitter taste with most Iraqis who see a symbiotic relationship between the US military and big business that would make a British district commissioner in imperial Africa blush.

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Links to all four articles:

Future of Iraq: The spoils of war

Blood and oil: How the West will profit from Iraq's most precious commodity

Iraq poised to end drought for thirsting oil giants

Leading article: The oil rush