Page 2 of 2 The Iraq oil grab that went
awry By Dilip Hiro
national
population - by the London Spectator showed that
while 23% believed the reason for the
Anglo-American war on Iraq was "to liberate us
from dictatorship", twice as many responded, "to
get oil" (Cited in Dilip Hiro, Secrets and
Lies: Operation 'Iraqi Freedom' and After, p
398).
As Iraq's principal occupier, the
Bush White House made no secret of its plans to
dismantle that country's strong public sector
quickly. When the first US
proconsul, retired General Jay Garner, focused on
holding local elections rather than privatizing
the country's economic structure, he was promptly
sacked.
Hurdles to oil privatization
impassable Garner's successor, L Paul
Bremer III, found himself dealing with Philip
Carroll - former chief executive officer of the US
operations of (Anglo-Dutch) Royal Dutch Shell in
Houston - appointed by Washington as the Iraqi oil
industry's supreme boss. Carroll decided not to
tinker with the industry's ownership and told
Bremer so. "There was to be no privatization of
Iraqi oil resources or facilities while I was
involved," Carroll said in an interview with the
BBC's Newsnight program on March 17, 2005.
This was, however, but a partial
explanation for why Bremer excluded the oil
industry when issuing Order 39 in September 2003
privatizing nearly 200 Iraqi public-sector
companies and opening them up to 100% foreign
ownership. The Bush White House had also realized
by then that denationalizing the oil industry
would be a blatant violation of the Geneva
Conventions, which bar an occupying power from
altering the fundamental structure of the occupied
territory's economy.
There was, as well,
the vexatious problem of sorting out the 30 major
oil-development contracts Saddam's regime had
signed with companies based in Canada, China,
France, India, Italy, Russia, Spain and Vietnam.
The key unresolved issue was whether these firms
had signed contracts with the government of Saddam
Hussein, which no longer existed, or with the
Republic of Iraq, which remained intact.
Perhaps more important was the stand taken
by Grand Ayatollah Ali Sistani, the senior Shi'ite
cleric in the country and a figure whom the
occupying Americans were keen not to alienate. He
made no secret of his disapproval of the wholesale
privatization of Iraq's major companies. As for
the minerals - oil being the most precious -
Sistani declared that they belonged to the
"community", meaning the state. As a religious
decree issued by a grand ayatollah, his statement
carried immense weight.
Even more
effective was the violent reaction of the
industry's employees to the rumors of
privatization. In his Newsnight interview
Jibury said, "We saw an increase in the bombing of
oil facilities and pipelines built on the premise
that privatization is coming."
In the
immediate aftermath of the invasion, much
equipment was looted from pipelines, pumping
stations, and other oil facilities. By August
2003, four months after US troops entered Baghdad,
oil output had only inched up to 1.2 million
barrels per day (mbpd), about two-fifths of the
pre-invasion level. The forecasts (or dreams) of
American planners that oil production would jump
to 6mbpd by 2010 and easily fund the occupation
and reconstruction of the country were now seen
for what they were - part of the hype disseminated
privately by American neo-cons to sell the idea of
invading Iraq to the public.
With the
insurgency taking off, attacks on oil pipelines
and pumping stations averaged two a week during
the second half of 2003. The pipeline connecting a
major northern oilfield near Kirkuk - with an
export capacity of 550,000-700,000 barrels per day
- to the Turkish port of Ceyhan became
inoperative. Soon, the only oil being exported was
from fields in the less disturbed, predominately
Shi'ite south of Iraq.
In September 2003,
President Bush approached Congress for $2.1
billion to safeguard and rehabilitate Iraq's oil
facilities. The resulting Task Force Shield
project undertook to protect 340 key installations
and 6,400 kilometers of oil pipeline. It was not
until the spring of 2004 that output again reached
the prewar average of 2.5mbpd - and that did not
hold. Soon enough, production fell again. Iraqi
refineries were, by now, producing only two-fifths
of the 24 million liters of gasoline needed by the
country daily, and so there were often days-long
lines at fueling stations.
Addressing the
26th Oil and Money conference in London on
September 21, 2005, Issam Chalabi, who had been an
Iraqi oil minister in the late 1980s, referred to
the crippling lack of security and the lack of
clear laws to manage the industry, and doubted
whether Iraq could return to the 1979 peak of
3.5mbpd before 2009, if then.
Meanwhile,
the Iraqi government found itself dependent on oil
revenues for 90% of its income, a record at a time
when corruption in its ministries had become
rampant. On January 30, 2005, Stuart W Bowen, the
special inspector general appointed by the US
occupation authority, reported that almost $9
billion in Iraqi oil revenue, disbursed to the
ministries, had gone missing. A subsequent US
congressional inspection team reported in May 2006
that Task Force Shield had failed to meet its
goals because of "lack of clear management
structure and poor accountability", and added that
there were "indications of potential fraud" that
were being reviewed by the inspector general.
The endorsement of the new Iraqi
constitution by referendum in October 2005 finally
killed the prospect of full-scale oil
privatization. Article 109 of that document stated
clearly that hydrocarbons were "national Iraqi
property". That is, oil and gas would remain in
the public sector.
In March 2006, three
years after the Anglo-American invasion of Iraq,
the country's petroleum exports were 30-40% below
pre-invasion levels.
Bush pushes for
flawed law In February 2007, in line with
the constitution, the draft hydrocarbon law the
Iraqi government presented to Parliament kept oil
and gas in the state sector. It also stipulated
re-creating a single Iraqi National Oil Co that
would be charged with doling out oil income to the
provinces on a per capita basis. The Bush
administration latched on to that provision to
hype the 43-article Iraqi bill as a key to
reconciliation between Sunnis and Shi'ites - since
the Sunni areas of Iraq lack hydrocarbons - and so
included it (as did Congress) in its list of
"benchmarks" the Iraqi government had to meet.
Overlooked by Washington was the way that
particular article, after mentioning
revenue-sharing, stated that a separate Federal
Revenue Law would be necessary to settle the
matter of distribution - the first draft of which
was only published four months later in June.
Far more than revenue sharing and
reconciliation, though, what really interested the
Bush White House were the mouthwatering incentives
for foreign firms to invest in Iraq's hydrocarbon
industry contained in the draft law. They promised
to provide ample opportunities to America's oil
majors to reap handsome profits in an oil-rich
Iraq whose vast western desert had yet to be
explored fully for hydrocarbons. So Bush pressured
the Iraqi government to get the necessary law
passed before Parliament's vacation in August - to
no avail.
The Bush administration's
failure to achieve its short-term objectives does
not detract from the overarching fact -
established by the copious evidence marshaled in
this article - that gaining privileged access to
Iraqi oil for US companies was a primary objective
of the Pentagon's invasion of Iraq.
Dilip Hiro is the author of
Secrets and Lies: Operation 'Iraqi Freedom' and
After, as well as, most recently, Blood of
the Earth: The Battle for the World's Vanishing
Oil Resources, both published by Nation
Books. (Copyright 2007 Dilip Hiro.)
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