An informative and hard-hitting article on the new Iraq oil law from an Australian green left newspaper. Notice the quotes from articles before the Iraq invasion relishing the idea that US oil companies would gain a bonanza. Of course it might be some while before any bonanza at the rate security is being established!
Washington’s war for oil profits
8 March 2007
On January 30, 2003, as Washington assembled its military forces for the long-planned invasion of Iraq, US magazine Business Week explained to its corporate readership the expected benefits of the coming US-led occupation: “Since the US military would control Iraq’s oil and gas deposits for some time, US companies could be in line for a lucrative slice of the business”, and thus they could “feel just as victorious as the US Special Forces”.
In the lead-up to the March 2003 invasion, Bush administration officials denied that seizing control of Iraqi’s oil resources was the war’s driving goal. Rather, they claimed, it was to neutralise the threat of Iraqi weapons of mass destruction. The aftermath of the war exposed that the White House had engaged in a campaign of distortions and outright lies about Iraqi WMD, waged with the complicity of the corporate media.
But even as the administration began its “regime change” propaganda blitz in the latter part of 2002, the business pages of major US dailies revealed that US oil companies were gearing up for a “profit bonanza” from the privatisation of Iraq’s oil industry.
The September 20, 2002, San Francisco Chronicle summarised the US business elite’s expectations: “The world’s biggest oil bonanza in recent memory may be just around the corner, giving US oil companies huge profits for decades to come … A new, pro-Western government [in Baghdad] would prompt US petroleum giants to rush into Iraq, dramatically increasing the output of a nation whose oil reserves are second only to that of Saudi Arabia.”
While these expectations have been delayed for several years by the failure of US forces to create a safe business environment in Iraq due to the persistent armed resistance of Iraqis, Washington is now ready to have its Iraqi puppet government legalise the corporate takeover of the country’s oil industry.
The February 21, New York Daily News reported that it had obtained a leaked copy of the proposed new Iraqi oil and gas law. “Under the proposed law, Iraq’s immense oil reserves would not simply be opened to foreign oil exploration, as many had expected. Amazingly, executives from those companies would actually be given seats on a new Federal Oil and Gas Council that would control all of Iraq’s reserves.
“In other words, Chevron, ExxonMobil, British Petroleum and the other Western oil giants could end up on the board of directors of the Iraqi Federal Oil and Gas Council, while Iraq’s own national oil company would become just another competitor.
“The new law would grant the council virtually all power to develop policies and plans for undeveloped oil fields and to review and change all exploration and production contracts …
“Take, for example, the massive Majnoon field in southern Iraq near the Iranian border, which contains an estimated 20 billion barrels. Before Saddam Hussein was toppled by the US invasion in 2003, he had granted a $4 billion contract to French oil giant TotalFinaElf to develop the field.
“In the same way, the Iraqi dictator signed contracts with Chinese, Russian, Korean, Italian and Spanish companies to develop 10 other big oil fields once international sanctions against his regime were lifted.
“The big British and American companies had been shut out of Iraq, thanks to more than a decade of US sanctions against Saddam. But if the new law passes, those companies will be the ones reviewing those very contracts and any others.”
The February 23 British Independent quoted John Teeling, the chairperson of Petrel Resources, a British oil exploration company that has had “interests in Iraq since 1997”: “Iraq has 70 discovered, undeveloped fields. You’d die for any one of them. Even the small ones have a billion barrels. If this isn’t the holy grail, it’s right next door to it.”
The paper noted, “It is hard to exaggerate the scale of the opportunity in Iraq, especially given the fact that foreign companies are, essentially, shut out of the rest of the Middle East and Russia is increasingly hostile to international players.”
Explaining the scale of the oil profits at stake, Teeling told the Independent: “It costs $1 a barrel to get oil out in Iraq. If you’re getting $60 for it, that’s good economics. You don’t have to go to Harvard to figure that out.”
By contrast, it now costs $10 a barrel to extract oil from the North Sea or from the deep-water oil rigs in the Gulf of Mexico.
In a November 2003 article, “Oil Companies in Iraq: A Century of Rivalry and War”, James Paul, executive director of the New York-based Global Policy Forum, wrote: “Assuming 50 years of production and 40% royalties, Iraq could yield annual profits of $80-90 billion per year — more than the total annual profits of the top five [oil] companies, even in the banner year of 2003.”
According to the February 28 Time magazine, the profits could be even greater than Paul estimated. It reported that under the new law, “foreign oil companies will be allowed to cut long-term exploration and development deals with the government for 20 years, renewable for a further five years” with a royalty payment to the Iraqi government of only 12.5%.
Time also reported that, “Barely two days have passed since Iraq’s Prime Minister Nuri al Maliki hailed the country’s new petroleum law… But parliamentarians and Iraq’s oil unions have already begun mobilizing against the draft legislation, arguing that it is a desperate attempt by Maliki’s government to satisfy Western demands, which could damage Iraq’s economic future … There has been no public hearing on the draft, whose details have largely been kept secret.”
“Iraqi lawmakers fumed last July”, the magazine reported, “when US energy secretary Samuel Bodman discussed the draft during a trip to the region” after it had been sent to Bush and major Western oil companies by the White House-commissioned drafting committee.
Time added that Iraq’s oil unions have opposed the law: “Hassan Jumah Awwad al Asadi, head of Iraq’s Federation of Oil Unions, the largest union group, says he intends to mobilize his 23,000 or so members against the draft … ‘If there is no solution we can stop production, stop exports.’ In a more threatening tone, he told union members at a conference on the law in Basra in early February: ‘We strongly warn all the foreign companies and foreign capital, in the form of American companies, against coming into our lands under the guise of production-sharing agreements.’”