Pepe Escobar: On the New Iraq Oil Law

From Asia Times
As usual with Escobar a hard hitting article, quite different both in tone and substance from most of the main line press reports--when the press even notices.

Middle East
Feb 28, 2007



THE ROVING EYE
US's Iraq oil grab is a done deal
By Pepe Escobar

"By 2010 we will need [a further] 50 million barrels a day. The Middle East, with two-thirds of the oil and the lowest cost, is still where the prize lies." - US Vice President Dick Cheney, then Halliburton chief executive officer, London, autumn 1999

US President George W Bush and Vice President Dick Cheney might as well declare the Iraq war over and out. As far as they - and the humongous energy interests they defend - are concerned,



only now is the mission really accomplished. More than half a trillion dollars spent and perhaps half a million Iraqis killed have come down to this.

On Monday, Prime Minister Nuri al-Maliki's cabinet in Baghdad approved the draft of the new Iraqi oil law. The government regards it as "a major national project". The key point of the law is that Iraq's immense oil wealth (115 billion barrels of proven reserves, third in the world after Saudi Arabia and Iran) will be under the iron rule of a fuzzy "Federal Oil and Gas Council" boasting "a panel of oil experts from inside and outside Iraq". That is, nothing less than predominantly US Big Oil executives.

The law represents no less than institutionalized raping and pillaging of Iraq's oil wealth. It represents the death knell of nationalized (from 1972 to 1975) Iraqi resources, now replaced by production sharing agreements (PSAs) - which translate into savage privatization and monster profit rates of up to 75% for (basically US) Big Oil. Sixty-five of Iraq's roughly 80 oilfields already known will be offered for Big Oil to exploit. As if this were not enough, the law reduces in practice the role of Baghdad to a minimum. Oil wealth, in theory, will be distributed directly to Kurds in the north, Shi'ites in the south and Sunnis in the center. For all practical purposes, Iraq will be partitioned into three statelets. Most of the country's reserves are in the Shi'ite-dominated south, while the Kurdish north holds the best prospects for future drilling.

The approval of the draft law by the fractious 275-member Iraqi Parliament, in March, will be a mere formality. Hussain al-Shahristani, Iraq's oil minister, is beaming. So is dodgy Barnham Salih: a Kurd, committed cheerleader of the US invasion and occupation, then deputy prime minister, big PSA fan, and head of a committee that was debating the law.

But there was not much to be debated. The law was in essence drafted, behind locked doors, by a US consulting firm hired by the Bush administration and then carefully retouched by Big Oil, the International Monetary Fund, former US deputy defense secretary Paul Wolfowitz' World Bank, and the United States Agency for International Development. It's virtually a US law (its original language is English, not Arabic).

Scandalously, Iraqi public opinion had absolute no knowledge of it - not to mention the overwhelming majority of Parliament members. Were this to be a truly representative Iraqi government, any change to the legislation concerning the highly sensitive question of oil wealth would have to be approved by a popular referendum.

In real life, Iraq's vital national interests are in the hands of a small bunch of highly impressionable (or downright corrupt) technocrats. Ministries are no more than political party feuds; the national interest is never considered, only private, ethnic and sectarian interests. Corruption and theft are endemic. Big Oil will profit handsomely - and long-term, 30 years minimum, with fabulous rates of return - from a former developing-world stalwart methodically devastated into failed-state status.

Get me a PSA on time
In these past few weeks, US Ambassador Zalmay Khalilzad has been crucial in mollifying the Kurds. In the end, in practice, the pro-US Kurds will have all the power to sign oil contracts with whatever companies they want. Sunnis will be more dependent on the Oil Ministry in Baghdad. And Shi'ites will be more or less midway between total independence in the south and Baghdad's dictum (which they control anyway). But the crucial point remains: nobody will sign anything unless the "advisers" at the US-manipulated Federal Oil and Gas Council say so.

Nobody wants to colonial-style PSAs forced down their throat anymore. According to the International Energy Agency, PSAs apply to only 12% of global oil reserves, in cases where costs are very high and nobody knows what will be found (certainly not the Iraqi case). No big Middle Eastern oil producer works with PSAs. Russia and Venezuela are renegotiating all of them. Bolivia nationalized its gas. Algeria and Indonesia have new rules for future contracts. But Iraq, of course, is not a sovereign country.

Big Oil is obviously ecstatic - not only ExxonMobil, but also ConocoPhillips, Chevron, BP and Shell (which have collected invaluable info on two of Iraq's biggest oilfields), TotalFinaElf, Lukoil from Russia and the Chinese majors. Iraq has as many as 70 undeveloped fields - "small" ones hold a minimum of a billion barrels. As desert western Iraq has not even been exploited, reserves may reach 300 billion barrels - way more than Saudi Arabia. Gargantuan profits under the PSA arrangement are in a class by themselves. Iraqi oil costs only US$1 a barrel to extract. With a barrel worth $60 and up, happy days are here again.

What revenue the regions do get will be distributed to all 18 provinces based on population size - an apparent concession to the Sunnis, whose central areas have relatively few proven reserves.

The Sunni Arab muqawama (resistance) certainly has other ideas - as in future rolling thunder against pipelines, refineries and Western personnel. Iraq's oil independence will not go down quietly - at least among Sunnis. On the same day the oil law was being approved, a powerful bomb at the Ministry of Municipalities killed at least 12 people and injured 42, including Vice President Adel Abdul Mahdi. Mahdi has always been a feverish supporter of the oil law. He's a top official of the Shi'ite party, the Supreme Council for the Islamic Revolution of Iraq (SCIRI).

A whole case can be made of SCIRI delivering Iraq's Holy Grail to Bush/Cheney and Big Oil - in exchange for not being chased out of power by the Pentagon. Abdul Aziz al-Hakim, the SCIRI's leader, is much more of a Bush ally than Maliki, who is from the Da'wa Party. No wonder SCIRI's Badr Organization and their death squads were never the target of Washington's wrath - unlike Muqtada al-Sadr's Mehdi Army (Muqtada is fiercely against the oil law). The SCIRI certainly listened to the White House, which has always made it very clear: any more funds to the Iraqi government are tied up with passing the oil law.

Bush and Cheney got their oily cake - and they will eat it, too (or be drenched in its glory). Mission accomplished: permanent, sprawling military bases on the eastern flank of the Arab nation and control of some of largest, untapped oil wealth on the planet - a key geostrategic goal of the New American Century. Now it's time to move east, bomb Iran, force regime change and - what else? - force PSAs down their Persian throats.