The Iron Butt Strategy  

Posted by Big Gav in

Billmon may be retired but his spirit lives on, with Fire Dog Lake invoking the name of the great man (and one of his quotes) as they consider the waiting game between the Iraqis and Dick Cheney over who gets to control Iraq's oil.

Josh then elaborated that "there's only one goal that makes sense of [the Bushite] strategy. . . . to permanently dominate the cluster of oil fields in southern Iraq, Saudi Arabia, Kuwait and Iran," before being reminded of a key point by a reader:
While it's tempting to try to find some method to the madness of the last few years, you won't find it in a 50-year plan to control the oil supply of the Middle East. That's a pipe dream that didn't survive the occupation.

To which Marshall responded:
To a degree I agree the whole 'control the natural resources of the region' idea didn't survive 'first contact', to paraphrase the US Army line about military planning. But denial is a useful thing. And a lot of the flailing about of recent years, actually most of it, has been an effort to find some way to sustain the original vision.

That's exactly where we've been for the past few years. I don't think I ever used this phrase in a post, but in a brief email exchange with Billmon in 2005 I referred to it as an "iron butt" strategy — just as various Iraqi factions are trying to wait us out and grab for power as we leave, Dick Cheney and his ilk think we can wait them out (even though they live there!) as long as the American public can be numbed to the ongoing death toll.

It's not that the chaos in Iraq is an intentional mechanism by which the U.S. neocons/hawks sought to impose their will on the country (or region's) resources, but from their perspective it's a tolerable fallback position to keep Iran anyone else from gaining control until they can figure out a way to turn events back in their favor. And if all it costs are the lives of American soldiers, hey, that's cheap as far as they're concerned.

The main obstacle to Cheney's colonial dreams, though, is that the Iraqis aren't a bunch of helpless pre-industrial natives; they kind of like the idea of controlling all that oil, too (and the wealth it implies). That's a key reason to why the resistance to the U.S. designs on Iraq has been so fierce — all the factions, not to mention the neighboring countries, know what's at stake and have no intentions of rolling over. ...

For example, you know that oil law the U.S. has been so hot and heavy to get the Iraqis to pass? It turns out that after months of massaging, the ltext of the law doesn't guarantee Western oil companies anything; it just doesn't exclude the possibility that they may get some lucrative deals. Oh, and during those months, billions of dollars' worth of oil is unaccounted for, with one of the prime suspects being the Shiite militias/political parties that make up the government. I don't think they're about to pass a law that gives them a worse deal than what they're getting off the books now.

The Americans aren't the only ones who can play realpolitik, you know.

The Fire Dog Lake comments point to a Dennis Kucinich speech to the US Congress last week entitled "The Truth About Oil and Iraq" which outlines most of the "greatest prize of all" case I've been making these past few years (and at much greater length, though he doesn't seem to touch on the suppressed oil discoveries aspect) and how the Iraqi oil law that the Bushies are so keen for the Iraqis to pass is the vehicle for them to gain "legal" control over this oil again - something they've been thirsty for for 40 years.
Mr. Speaker, there is an issue of critical importance facing this Congress, and that issue relates to whether or not this Congress should pass legislation to continue to fund the war in Iraq.

The legislation contains a particular provision that would lead to the privatization of Iraq's oil, a provision that I'm quite concerned about, because I think that if we take that position, it will make it very difficult for us to ever be able to end the war.

So today I'm going to lay out the case as to why this provision that's in the bill would advance privatization and as to what the options are for this Congress.

As many know, the administration has set forth several benchmarks for the Iraqi Government, including the passage of a hydrocarbon law by the Iraqi Parliament. The administration has emphasized only a small part of this law, what they call the "fair distribution," that's in quotes, of oil revenues.

I want this House to consider the fact that this Iraqi hydrocarbon law contains a mere three sentences that generally discusses the so-called fair distribution of oil. Except for three scant lines, the entire 33-page hydrocarbon law is about creating a complex legal structure to facilitate the privatization of Iraqi oil. As such, it is imperative that Members of Congress read the Iraqi Parliament's bill, because passage of any legislation that includes insisting that the Iraq Government push the passage of a hydrocarbon act puts this Congress on record to promote privatizing Iraq's oil.

Now, I have maintained from the beginning that the war has been about oil. We must not be a party to any attempt to set the stage for multinational oil companies to take over Iraq's oil resources.

There have been several benchmarks set by the administration for the Iraqi Government, including passage of a so-called hydrocarbon law by the Iraqi Parliament. Many inside the Beltway are contemplating linking funding for the war in Iraq to the completion of these benchmarks, including passage of the hydrocarbon law by the Parliament.

This administration has led Congress into thinking that this bill is about fair distribution of oil revenues. In fact, as I mentioned earlier, except for three scant lines, the entire 33-page hydrocarbon law creates a structure to facilitate the privatization of Iraq oil.

Now, the war in Iraq is a stain on American history. Let us not further besmirch our Nation by participating in an outrageous exploitation of a nation which is in shambles due to the U.S. intervention.

Let me provide this House with an analysis of the underlying bill in the Iraqi Legislature, which this administration is trying to get Congress to pass to pressure the Iraqi Government to accept privatization. And this analysis that I'm offering at this moment is a version that passed the Iraqi Cabinet and was referred to the Iraqi Parliament.

The legislation contains only three sentences in regards to the fair distribution of oil, but does not resolve any of the issues facing this challenge. The legislation simply requires that future legislation be submitted for approval; thus, this legislation does not even meet the benchmark of the administration.

The legislation ensures that "chief executives of important related petroleum companies," follow that now, "chief executives of important related petroleum companies" are represented on a Federal Oil and Gas Council, which approves oil and gas contracts. This is akin to foreign oil companies approving their own contracts.

This legislation ensures that the Iraqi National Oil Company, which is the oil company of the people of Iraq, has no exclusive rights for the exploration, development, production, transportation, and marketing. The Iraq National Oil Company must compete against foreign oil companies with rules that benefit the foreign oil companies. This is for their own oil. ...

Now, what are others saying about this draft Iraqi oil law and what it will do? Here's a quote from the Christian Science Monitor of May 18, 2007, in an article entitled "How Will Iraq Share the Oil?" In the U.S., the demand that Iraq pass an oil law is a benchmark that is becoming a flash point. Here's the quote.

"The actual law has nothing to do with sharing oil revenue," says former Iraqi Oil Minister Issam Al Chalabi, in a phone interview from Amman, Jordan. The law aims to set a framework for investment by outside oil companies, including favorable production-sharing agreements that are typically used to reward companies for taking on risk, he says.

"We know the oil is there. Geological studies have been made for decades on these oil fields; so why would we let them," that is, the international oil companies, "have a share of the oil?" he adds. "Iraqis will say this is solid proof that Americans have staged the war ... because of this law."

The next quote comes from the Dow Jones Newswires of March 4, 2007, the headline: "Iraq Oil Law Details Untouched Fields, Blocks -- Document." And the text says:

"Iraq's draft hydrocarbon law, the centerpiece in the development of the country's shaky oil industry, details dozens of untouched oil fields loaded with proven reserves and scores of exploration blocks that may prove a magnet to international oil companies, according to a document seen by Dow Jones Newswires."

In an article from the Dow Jones Newswires again, on March 10, 2007, the headline: "Some Iraqi Politicians Urge Rejection of Draft Oil Law." Here's the text:

"The law, if passed, is expected to open the country's billions of barrels of proven oil reserves, the world's third largest, to foreign investors."

From an article from the American Lawyer, April 25, 2007, "Our Man in Iraq." Here is the text:

"Under the new law, the Iraq National Oil Company would have exclusive control of only about 17 of Iraq's approximately 80 known oil fields." So that number, then, is 17 of Iraq's approximately 80 known oil fields. "The law would also allow the government to negotiate different kinds of exploration and production contracts with foreign oil companies, including production-sharing agreements, or PSAs. Energy lawyers favor these because they allow oil companies to secure long-term deals and book oil reserves as assets on their company balance sheets. Under the proposed law, foreign companies would not have to invest their earnings in Iraq, hire Iraqi workers, or partner with Iraqi companies."

Next, from the U.S. Morning Star Online, January 28, 2007, headlined "Iraqi Officials Insist Oil Law Won't Favor U.S."

"The proposal would provide for production-sharing agreements that would give international firms 70 percent of the oil revenues to recover their initial investments and subsequently allow 20 percent of the profits without any tax or restrictions on transferring the funds abroad."

This from, April 18, 2007, entitled "Time to Do the Math in Iraq":

"The most notable feature of the law is a revival of exploitive type of contact widely used prior to the rise of Arab nationalism in the 1960s, known as a production sharing agreement. Although the Oil Law uses an alternative term, 'exploration and production contract,' the effect is identical. The new arrangement would allow the bulk of Iraq's reserves to be controlled by outside oil companies, privatizing what until now has been a nationalized resource under the auspices of the Iraq National Oil Company. It specifies the royalty that will be paid to Iraq: '12.5 percent of gross production, measured at the entry flange to the main pipeline.' And as if the rest of the law were not already explicit enough, article 35(A) reiterates: 'Holders of exploration and production rights may transfer any net profits from petroleum operations to outside Iraq after paying taxes and fees owed.'" ...

Next, on March 13, 2007, Antonia Juhasz, an oil industry analyst, in an op-ed contribution, asks: "Whose Oil Is It, Anyway?" Here is what Antonia Juhasz writes:

"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," continuing to quote from this article, "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 ..." later, this is exactly what the Iraq oil law would achieve. It does so to the benefit of oil companies but to the great detriment of Iraq's economy, democracy, and sovereignty.

"Since the invasion of Iraq, the administration has been aggressive in shepherding the oil law toward passage. It is one of the administration's benchmarks for the government of Prime Minister Nuri Kamal al-Maliki, a fact that" the administration officials "are publicly emphasizing with increasing urgency." And, that is that these are the benchmarks of the administration.

"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." ...

Let me share with this House some basic facts about Iraqi oil because, over the past several months, we have had many different news agencies citing diverse reports about how much oil Iraq has.

From the Petroleum Economist Magazine, they estimate that Iraq has 200 billion barrels of oil. The Federation of American Scientists' estimate is 215 billion barrels of oil. The Council on Foreign Relations estimates Iraq has 220 billion barrels of oil. And the Center for Global Energy Studies estimates 300 billion barrels of oil. These figures, by the way, from a report from the Brookings Institution dated May 12, 2003.

Now, for the sake of discussion, let's take this figure of 300 billion barrels of oil so we can see how much money we are talking about here. As I mentioned earlier, the price of oil, somewhere around $65 a barrel right now and moving up quickly, as American consumers are finding out. It is not unusual to predict at this moment that the price of oil could go to $70 a barrel. Now, if it does go to $70 a barrel, we are looking here at a potential value of Iraqi oil at being about $21 trillion. Now, if the foreign oil companies have control over 80 percent or more, you start to get an idea of the kind of money that is at stake here and why there is such pressure being put on the Iraqi Government to privatize their oil.

Now, I would like to turn to a quote further talking about the Iraq oil, a basic fact. This, from the Global Policy Forum called "Oil in Iraq: the Heart of the Crisis," December 2002:

"According to the Oil and Gas Journal, Western oil companies estimate that they can produce a barrel of Iraqi oil for less than a $1.50 and possibly as little as $1, including all exploration, oil field development and production costs and including a 15 percent return.

This is similar to production costs in Saudi Arabia, and lower than virtually any country. So again, the desirability of a private corporation having Iraq's oil is that their production costs would be very low.

A word about the history of oil exploitation in Iraq. Following World War I, the British assumed control of Iraq from the Ottoman Empire. In 1925, a 75-year concession contract was granted to American, French, and British oil companies. By 1930, the consortium was in complete control of all Iraqi oil. The oil companies controlled the oil fields and reaped almost all the profits. It was not until the overthrow of the British-installed monarchy in 1958 that the foreign control of oil was challenged. In 1961, the consortium's rights were limited to current production. And beginning in 1972, Iraq oil resources were nationalized, a process that was finalized in 1975.

Now, here is a statement issued by the Iraqi Labor Union Leadership at a seminar held in December of 2006 to discuss this draft Iraqi oil law: "Iraq is rich in national wealth, foremost among which is its oil wealth, the essence of the economic life for Iraq and the world, which has been a focus of attention of the large, industrialized countries, in particular.

"The British and American oil companies were the first to obtain concessions to extract and invest in Iraqi oil nearly 80 years ago. After Iraq got rid of this octopus network, these foreign oil companies had again attempted to dominate this important oil wealth under numerous pretexts and invalid excuses." ...

Now, I have stated many times on this floor that I believe that the war against Iraq was about oil. Now let me provide you with some quotes that may reflect on my thinking on this.

Mr. Dick Cheney, CEO of Halliburton, in a speech at the Institute of Petroleum in 1999, said, "By 2010, we will need on the order of an additional 50 million barrels a day. So where is the oil going to come from? Governments and national oil companies are obviously controlling about 90 percent of the assets. Oil remains fundamentally a government business. While many regions of the world offer great oil opportunities, the Middle East, with two-thirds of the world's oil and lowest cost, is still where the prize ultimately lies. Even though companies are anxious for greater access there, progress continues to be slow."

In an article from Platform, November 2005, called "Crude Designs: The Rip-Off of Iraq's Oil Wealth." Chapter 4, "Planning Iraq's Oil Future. Pre-invasion Planning." And when you listen to this, it's pretty astonishing to see how all these facts have been available for people to be able to gain, and perhaps only now people are reflecting on the real meaning of this.

This is what Greg Muttitt writes: "Prior to the 2003 invasion, the principal vehicle for planning the new postwar Iraq was the U.S. State Department's Future of Iraq project. This initiative, commencing as early as April 2002, involved meetings in Washington and London of 17 working groups, each composed of 10 to 20 Iraqi exiles and international experts selected by the State Department.

"The 'Oil and Energy' working group met four times between December 2002 and April 2003. Although full membership of the group has never been revealed, it is known that Ibrahim Bahr al-Uloum, the current Iraqi Oil Minister, was a member. The 15-strong oil working group concluded that Iraq 'should be opened to international oil companies as quickly as possible after the war,' and that, 'the country should establish a conducive business environment to attract investment of oil and gas resources.'

"The subgroup went on to recommend production-sharing agreements as their favorite model for attracting foreign investment. Comments by the handpicked participants revealed that 'many of the group favored production-sharing agreements with oil companies.' Another representative commented, 'Everybody keeps coming back to production-sharing agreements.'

"The reasons for this choice were explained in the formal policy recommendations of the working group, published in April 2003," and I quote from this article from Platform:

"Key attractions of production-sharing agreements to private oil companies are that, although the reserves are owned by the state, accounting procedures permit the companies to book the reserves in their accounts; but, other things being equal, the important feature from the perspective of private oil companies is that the government intake is defined in terms of the production-sharing agreement, and the oil companies are therefore protected under a production-sharing agreement from future adverse legislation," which means it would be very tough to be able to have a government, once it gives up its oil wealth, to be able to get it back.

"The group also made it clear that in order to maximize investments, the specific terms of the production-sharing agreements should be favorable to foreign investors: 'PSAs can induce many billions of dollars of direct foreign investment in Iraq, but only with the right terms, conditions, regulatory framework laws, oil industry structure, and perceived attitude toward foreign participation.'

"Recognizing the importance of this announcement, The Financial Times noted: 'Production-sharing deals allow oil companies a favorable profit margin and, unlike royalty schemes, insulates them from losses incurred when the oil price drops. For years, big oil companies have been fighting for such agreements, without success, in countries such as Kuwait and Saudi Arabia.'

"The article concluded that: 'The move could spell a windfall for big oil companies such as ExxonMobil, Royal Dutch/Shell, BP, and TotalFinaElf.'" ...

We all know that the Iraq Study Group, in one of its major recommendations, Recommendation 63, said the United States should encourage investment in Iraq's oil sector by the international community and international energy companies; that the United States should assist Iraqi leaders to reorganize the national oil industry as a commercial enterprise; that the United States should ensure the World Bank's efforts to assure that best practices are used in contracting.

Mr. Speaker, the last 50 minutes that I have spent talking about the effort to try to privatize Iraq's oil, if you go to one of the search engines, you can find perhaps 1 million different citations relating to this. So it is impossible to cover this kind of a subject, even in a period of an hour. But it needs to be said that this administration has pushed the Congress to put language in funding bills for Iraq that would set the stage for the privatization of Iraq's oil.

I am going to quote from the first war supplemental, that the President shall make and transmit to Congress a determination, No. 2, whether the Government of Iraq is making substantial progress in meeting its commitment to pursue reconciliation initiatives, including enactment of a hydrocarbon law. Then under subsection (b), it says if the President fails to make this determination, the Secretary of Defense shall commence the redeployment of our Armed Forces from Iraq.

In other words, privatize your oil, or we are leaving you without having a security and peacekeeping force to replace the United States Army.

In the second supplemental, the administration language promoted the President transmitting to Congress a report in classified and unclassified form, article 2, whether the Government of Iraq has enacted a broadly accepted hydrocarbon law that equitably shares revenues among all Iraqis.

Now again, they don't talk about what the real purpose of the Hydrocarbon Act has been. It is not about sharing revenues equitably; it is about a complex restructuring of Iraq's oil industry for the purpose of turning Iraq's oil over to private oil companies.

Finally, in the third supplemental that is before this Congress this week, there is an article from the Senate side that relates to Iraq oil, and I quote: "The United States strategy in Iraq shall hereafter be conditioned on the Iraqi Government meeting certain benchmarks." And one such benchmark, "enacting and implementing legislation to ensure the equitable distribution of hydrocarbon resources of the people of Iraq." And it goes on to pay homage to the issues of equity and ethnicity.

Madam Speaker, it is clear that the people of Iraq are under enormous pressure to give up control of their oil. When you consider that there was no cause to go to war against Iraq, that Iraq did not have weapons of mass destruction, that Iraq had nothing to do with 9/11, that Iraq had nothing to do with al Qaeda's role in 9/11, that the administration kept changing the reason why we went into Iraq, and here we are, years later, we are still in Iraq, and enormous pressure is being put on the Iraqi Government to privatize their oil. ...

Tell the President, this war is over, Mr. President, and use the money that is in the pipeline to bring the troops home. Let's go and reach out to the international community. With the end of the occupation and the closing of bases, we will have people who will start listening to us internationally, and we will have some credibility.

But the morality which this country rests on, our heart and soul of who we are as Americans, is not reflected by this obscene attempt to steal the oil resources of Iraq. That is why I have chosen to take this time to come before the Congress, to lay these facts out for Members of Congress and for the American people so that you can see without question the relationship between war and this oil and the relationship between the pressure that is being put on the Iraq Government right now and privatization and the continuation of the war.

Let's end this war. Let's end the attempt to control Iraq's oil. Let's challenge the oil companies in this country as this House has done this morning. Let's take a stand for truth and justice. Let's take a stand for what is right. Let us not be seduced by this idea that somehow we have the military might, and we can, therefore, grab other people's resources. That is not what America is about.

America has a higher calling in the world. It is time we began a process of truth and reconciliation in our own country, in reaching out and creating the healing of America. But we must first begin with the truth, and the truth is what I have told this Congress today.


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