The Significance of Iraq's New Oil Law

If any further evidence were needed that the Iraq invasion is at least partly about oil this is it. Notice that the oil law is one of the benchmarks set by the Bush administration. Note too that the law is much more friendly to foreign corporations than any laws among Bush allies in the region.


March 13, 2007
Op-Ed Contributor
Whose Oil Is It, Anyway?
By ANTONIA JUHASZ

San Francisco

TODAY more than three-quarters of the world's oil is owned and
controlled by governments. It wasn't always this way.

Until about 35 years ago, the world's oil was largely in the hands of
seven corporations based in the United States and Europe. Those seven
have since merged into four: ExxonMobil, Chevron, Shell and BP. They
are among the world's largest and most powerful financial empires. But
ever since they lost their exclusive control of the oil to the
governments, the companies have been trying to get it back.

Iraq's oil reserves — thought to be the second largest in the world
—
have always been high on the corporate wish list. In 1998, Kenneth
Derr, then chief executive of Chevron, told a San Francisco audience,
"Iraq possesses huge reserves of oil and gas — reserves I'd love
Chevron to have access to."

A new oil law set to go before the Iraqi Parliament this month would,
if passed, go a long way toward helping the oil companies achieve
their goal. The Iraq hydrocarbon law would take the majority of Iraq's
oil out of the exclusive hands of the Iraqi government and open it to
international oil companies for a generation or more.

In March 2001, the National Energy Policy Development Group (better
known as Vice President Dick Cheney's energy task force), which
included executives of America's largest energy companies, recommended
that the United States government support initiatives by Middle
Eastern countries "to open up areas of their energy sectors to foreign
investment." One invasion and a great deal of political engineering by
the Bush administration later, this is exactly what the proposed Iraq
oil law would achieve. It does so to the benefit of the companies, but
to the great detriment of Iraq's economy, democracy and sovereignty.

Since the invasion of Iraq, the Bush administration has been
aggressive in shepherding the oil law toward passage. It is one of the
president's benchmarks for the government of Prime Minister Nuri Kamal
al-Maliki, a fact that Mr. Bush, Secretary of State Condoleezza Rice,
Gen. William Casey, Ambassador Zalmay Khalilzad and other
administration officials are publicly emphasizing with increasing
urgency.

The administration has highlighted the law's revenue sharing plan,
under which the central government would distribute oil revenues
throughout the nation on a per capita basis. But the benefits of this
excellent proposal are radically undercut by the law's many other
provisions — these allow much (if not most) of Iraq's oil revenues to
flow out of the country and into the pockets of international oil
companies.

The law would transform Iraq's oil industry from a nationalized model
closed to American oil companies except for limited (although highly
lucrative) marketing contracts, into a commercial industry,
all-but-privatized, that is fully open to all international oil
companies.

The Iraq National Oil Company would have exclusive control of just 17
of Iraq's 80 known oil fields, leaving two-thirds of known — and all
of its as yet undiscovered — fields open to foreign control.

The foreign companies would not have to invest their earnings in the
Iraqi economy, partner with Iraqi companies, hire Iraqi workers or
share new technologies. They could even ride out Iraq's current
"instability" by signing contracts now, while the Iraqi government is
at its weakest, and then wait at least two years before even setting
foot in the country. The vast majority of Iraq's oil would then be
left underground for at least two years rather than being used for the
country's economic development.

The international oil companies could also be offered some of the most
corporate-friendly contracts in the world, including what are called
production sharing agreements. These agreements are the oil industry's
preferred model, but are roundly rejected by all the top oil producing
countries in the Middle East because they grant long-term contracts
(20 to 35 years in the case of Iraq's draft law) and greater control,
ownership and profits to the companies than other models. In fact,
they are used for only approximately 12 percent of the world's oil.

Iraq's neighbors Iran, Kuwait and Saudi Arabia maintain nationalized
oil systems and have outlawed foreign control over oil development.
They all hire international oil companies as contractors to provide
specific services as needed, for a limited duration, and without
giving the foreign company any direct interest in the oil produced.

Iraqis may very well choose to use the expertise and experience of
international oil companies. They are most likely to do so in a manner
that best serves their own needs if they are freed from the tremendous
external pressure being exercised by the Bush administration, the oil
corporations — and the presence of 140,000 members of the American
military.

Iraq's five trade union federations, representing hundreds of
thousands of workers, released a statement opposing the law and
rejecting "the handing of control over oil to foreign companies, which
would undermine the sovereignty of the state and the dignity of the
Iraqi people." They ask for more time, less pressure and a chance at
the democracy they have been promised.

Antonia Juhasz, an analyst with Oil Change International, a watchdog
group, is the author of "The Bush Agenda: Invading the World, One
Economy at a Time."
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