Another oily setback for
Washington By Humberto Marquez
Another blow has been dealt to the United States
and its efforts to realign Iraq's oil industry after a
series of attempted suicide boat bomb attacks on
Saturday on the key oil facility at Khor al-Amaya and on
four oil tankers waiting to load at the main Basra
terminal nearby in the south of the country.
Three US sailors died as they battled to fight
off the attackers, and exports from the south were
temporarily halted, further exposing the risks to Gulf
Arab monarchies who produce nearly half of the world's
supplies.
What is alarming to the US is that the
attacks mark the first time that the US military in Iraq
has faced suicide bombers on boats; it was also the most
serious attack yet on the oil industry. The incident is
expected to cause crude prices to soar even higher, and
is a further setback for the long-term goals of the US
to ensure access to steady, secure supplies of
inexpensive crude oil and to start playing a decisive
role in oil markets at the expense of the Organization
of Petroleum Exporting Countries (OPEC).
Media
reports say that the delay alone has cost Iraq 1 million
barrels a day in lost exports - or about US$110 million
in revenue. The smaller Khawr al-Amaya platform, which
handles about 700,000 barrels a day, reopened in Sunday
morning while exports from Basra resumed on Monday.
Risky business Pumping and
transporting oil in Iraq today is risky business,
endangering the lives of foreign oil workers.
Halliburton, the US construction giant that has
benefited so handsomely from oil contracts in Iraq, has
seen 29 of its own employees and contractors killed.
Output is still lower than on March 20, 2003,
when US and British forces launched the invasion of
Iraq, while oil prices are one-third higher. The US
benchmark West Texas Intermediate closed last week at
$37.43 a barrel, compared to last year's average price
of $29, while the OPEC reference price basket stands at
around $32, up from the 2003 average of $28 and the 2002
average of $24.
Iraq's oil output stands at just
over 2 million barrels a day, in a world that consumes
40 times that amount, and the remaining OPEC members -
especially Saudi Arabia - have the ability to increase
short-term production to meet the market's demands.
The invasion and occupation "represent a fiasco
for a huge investment", Francisco Mieres, a Central
University of Venezuela graduate school professor who
specializes in the oil economy, told IPS. "The United
States hoped that a year [after the start of the war],
Iraqi output would exceed 3 million barrels a day of
crude oil that it could purchase for $15 a barrel," he
added.
Although US companies have obtained "a
share of the Iraqi oil business virtually for free", for
the US, "the cost of guarding Middle East oil is
extremely high", said Mieres. Prior to the invasion,
"the Pentagon was already spending $60 billion a year
maintaining its military presence in the Middle East.
Although Saudi Arabia is selling crude to Washington at
a discount of a dollar a barrel, military expenses drive
up the actual cost of each barrel to around $200 for the
United States," he argued.
The invasion has
added $87 billion a year to the US defense budget at a
time when the administration faces a public account
deficit, Mieres pointed out. The average US citizen is
paying for the disruption in the oil industry: petrol
now costs them $1.76 a gallon, 30 cents more than in
March 2003, and prices are expected to continue rising
before the November elections in which President George
W Bush is seeking re-election.
Democratic
presidential hopeful John Kerry has even cracked jokes,
saying gas prices are rising so high that when Bush and
Vice President Dick Cheney leave the White House in
January, they will have to share a taxi.
Obstacles and controversies On the
oil front, "the United States obtained a military
victory but a political defeat, because all signs
indicate that soon there will be neither abundant oil
nor low prices - and particularly not in Iraq," Víctor
Poleo, another professor who specializes in the economy
of oil, told IPS. "International oil prices will be
dictated by scarcity. What will abound are conflicts
over oil," said Poleo.
Nor has the purported
military victory "brought dividends for the United
States in OPEC, which has not recognized the Iraqi
Interim Governing Council and has given it only a voice
but no vote in its meetings," said Mieres.
OPEC
is made up of Algeria, Indonesia, Iran, Iraq, Kuwait,
Libya, Nigeria, Qatar, Saudi Arabia, the United Arab
Emirates and Venezuela. Baghdad is excluded from the
group's quota system and from decisions on increasing or
cutting output. "Even Saudi Arabia ... is distancing
itself from Washington," said Mieres. Before an OPEC
meeting in March, Bush called the leaders of several
Arab oil-exporting countries to urge them to boost
production, but OPEC said no.
The strategy of
using Iraq as a front man for the US within OPEC has not
worked. But it has brought lucrative business to US
companies, especially "ones that have ties with the 'oil
directorate' that is governing in Washington," said
Poleo.
These companies include Halliburton, of
which Cheney was chief executive officer before becoming
vice president; ChevronTexaco, where Bush's National
Security Adviser Condoleezza Rice was formerly an
executive, and UNOCAL, Saic and Bechtel, which also have
close ties to the Republican party.
Halliburton
is emblematic because its subsidiary, Kellogg, Brown
& Root (KBR) , was awarded some $8 billion worth of
contracts in Iraq, including a $1.2 billion deal for
repairing oil industry infrastructure in the country's
south.
The deals have not been without
controversy. KBR has announced that it will reimburse
the government $27.4 million that it overcharged for
supplying meals to US troops. And some media have
reported that KBR employees have taken bribes worth up
to $6 million.
But the biggest obstacle to the
restoration of oil infrastructure has become the Iraqi
resistance, which is mounting an ever-greater number of
attacks on the occupation forces and on Westerners in
general.
Companies from other nations, like
Russia's Lukoil and TotalFinaElf from France, which had
negotiated contracts for exploration and drilling with
the Saddam Hussein regime (1979-2003), "are still there,
but just barely", said Mieres, a former Venezuelan
ambassador to Russia.
On April 12, 12 Russian
oil workers were kidnapped by the Iraqi resistance, and
released the next day. Moscow then recommended all
Russians and Ukrainians in Iraq - most of who are
working in the oil industry - leave the country.
Lukoil, meanwhile, is once again discussing with
authorities in Baghdad the question of developing the
West Qurna-2 field in southern Iraq, which reportedly
contains 6 billion barrels, or 5 percent of Iraq's total
reserves.
But while waiting for the day when it
can begin pumping oil there, Lukoil has been supplying
petroleum by-products to Iraq. In March it signed a
contract to sell Baghdad 180,000 tons of petrol (1.3
million barrels) and 130,000 tons of diesel quarterly -
an illustration of the poor state of Iraq's refining
capacity.
"Geopolitics by force has brought a
cruel paradox," said Poleo. "Cheney and [Defense
Secretary] Rumsfeld's soldiers, who are Halliburton
soldiers, are destroying Iraq, and Halliburton
engineers, who are Cheney-Rumsfeld engineers, are
rebuilding it."
Meanwhile, more sabotage and
bombings are expected in Iraq, with US officials warning
they anticipate violence to escalate in the weeks
leading up to the handover of sovereignty on June 30,
particularly now that it is clear Washington will retain
considerable powers, especially in security matters.
