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4 US eyes still on the
Iraqi prize By Michael Schwartz
low prices for fuel and food
staples. In a country with, by 2005, somewhere
between 30% and 70% unemployment, average wage
levels under $100 per month, and escalating
inflation, these Saddam-era subsidies meant the
difference between basic subsistence and disaster
for a large proportion of Iraqis.
Independent journalists Basav Sen and Hope
Chu summarized
the
new agreement thusly:
A move that appears on the surface
to be beneficial for Iraq - debt cancellation -
is being used as a tool of control by the World
Bank, the IMF and the wealthy creditor
countries. What is more, it is a tool of control
that will last long after the withdrawal of US
combat forces.
Zaid al-Ali, an
international lawyer working on development issues
in Iraq, described the agreement as a "perfect
illustration of how the industrialized world has
used debt as a tool to force developing nations to
surrender sovereignty over their economies".
The newly elected Iraqi National Assembly
promptly denounced this agreement as "a new crime
committed by the creditors who financed Saddam's
oppression". This forceful expression reflected
the opinions of the assembly's constituents. After
all, 76% of Iraqis believed that the main reason
for the Bush administration's invasion was "to
control Iraqi oil".
As it happened, the
protest did not prevent that government from
endorsing the deal. Otherwise, it faced the
prospect of the US - which still had operational
control over Iraqi finances - simply appropriating
most of its revenues for debt service. When the
agreement was announced, interim oil minister
Thamir Ghadbhan, a British-trained technocrat,
publicly protested the provisions eliminating fuel
and food subsidies. He was subsequently pushed
out.
The US then began pressuring the
Iraqi government to draft a definitive
petrochemical law that would conform to the IMF
guidelines. Given the levels of resistance to the
very idea, this work was conducted in secret and
took until the end of 2006 to complete. As
independent journalist Joshua Holland described
the process:
Just months after the Iraqis elected
their first constitutional government, USAID
[United States Agency for International
Development] 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" ... The Iraqi
Parliament had not yet seen a draft of the oil
law as of July [2006], but by that time ... it
had already been reviewed and commented on by US
Energy Secretary Sam Bodman, who also "arranged
for [Oil Minister Hussain] al-Shahristani to
meet with nine major oil companies - including
Shell, BP, ExxonMobil, ChevronTexaco and
ConocoPhillips - for them to comment on the
draft".
Even the Iraqi Study Group,
Baker's commission, got into the act at the end of
2006, devoting three pages of its proposal for a
partial redeployment of US forces from Iraq to
exhorting the Iraqis to enact a petrochemical bill
that would place its oil reserves in the hands of
the major oil companies.
The proposed
petrochemical bill When the "Draft
Hydrocarbon Law" was finally delivered to the
Iraqi Parliament on February 18, key provisions
had already been leaked and immediately denounced
by the full spectrum of the Iraqi opposition.
Taking turns registering dismay were the majority
of the Parliament, a wide range of government
officials, the leadership of major Sunni political
parties, the union of oil workers, the Sadrists -
the most powerful Shi'ite grouping - and the
visible leadership of the insurgency.
All
this led to many changes in the law, including the
removal of all mention of either privatization or
PSAs, which would have given multinational oil
companies 15-25 years of basically unregulated
operational control over Iraqi oil facilities. The
amended version in no way excluded the use of
PSAs, but it removed the explosive designation
from the actual wording of the law.
It is
worth reviewing the logic of PSAs to understand
why the US was so determined to make them a part
of the law, and why many Iraqis were so
ferociously opposed.
PSAs are generally
applied in circumstances where there is a strong
possibility that oil exploration will be extremely
costly or even fail, and/or where extraction is
likely to prove prohibitively expensive. To offset
huge and risky investments, the contracting
company is guaranteed a proportion of the profits,
if and when oil is extracted and sold. In the most
common of these agreements, the proportion remains
very high until all development costs are
amortized, allowing the investing company to
recoup its investment expenditures (if oil is
found), and then to be rewarded with a
larger-than-normal profit margin for the remainder
of the contract, which in the Iraqi case could
extend for up to 25 years.
This is perhaps
a reasonably fair, or at least necessary, bargain
for a country that cannot generate sufficient
investment capital on its own, where exploration
is difficult (perhaps underwater or deep
underground), where the actual reserves may prove
small, and/or where ongoing costs of extraction
are very high.
None of these conditions
apply in Iraq: huge reservoirs of easily
accessible oil are already proved to exist, with
more, equally accessible fields likely to be
discovered with little expense. This is why none
of Iraq's neighbors use PSAs. Saudi Arabia,
Kuwait, Iran and the United Arab Emirates all pay
the multinationals a fixed rate to explore and
develop their fields; and all of the profits
become state revenues.
The advocates of
PSAs in Iraq justify their use by arguing that $20
billion would be needed to develop the Iraqi
fields fully and that favorable PSAs are the only
way to attract such heavy doses of finance capital
under the current highly dangerous circumstances.
This assertion seems, however, to be little more
than a smokescreen. No major oil companies are
willing to invest in Iraq now, no matter how sweet
the deal. If order were restored, on the
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