Iraq, Oil, Law And Order  

The Gulf Daily News has a report claiming that the Iraqi deputy PM believes that proposed Iraq oil law will be signed into law shortly - just in time for the conference in Dubai that will carve up the "undiscovered oil" between the various international oil companies.

The International Herald Tribune has a letter from a French reader asking everyone to wake up and understand what this law really means - it means the Iraq invasion was about the oil.

While the vast majority of those who opposed the U.S. invasion of Iraq speculated that the real reason to invade had to do with control of Iraqi oil, they had no proof. Over the years the media has been strangely silent concerning the commercial oil deals made in Iraq during the occupation.

Now the truth is evident as the United States pulls out all the stops to manipulate the Iraqi Parliament to pass an oil law in September that would give control of Iraqi oil to foreign interests, in particular, U.S. oil companies. For decades, Iraqi oil was nationalized and the extraction/production was run by Iraqis. This new legislation gives much control of Iraq's vital natural resource to foreign oil companies, notably American ones closely associated with the Bush/Cheney administration.


Wake up, Americans. Understand the real reasons behind this war. Stand up, Iraqis. Do not allow your government to give away your natural resources under foreign pressure. If the law is passed unchanged, it would not be long before millions of Iraqis come to realize that they've been sold-out by their leaders. God forbid the violence that would result as long as such law were in place.

It is time for the American people to support the Iraqi people. They can do this by urgently demanding a full account of the Bush administration's role in the attempted theft of Iraq's natural resources.

"The Control Of Oil" is such a commonly used phrase when it comes to the Iraq war that I wish everyone who wants to claim the war isn't about the oil had read the book before they start sounding off - its almost impossible to convince garden variety neocons that this really is just the latest in a long line of our oil wars in Iraq over the past century (and I've tried this on quite a few occasions) - even if they know nothing of the history of oil or the history of Iraq they'll just parrot the standard propaganda lines about (non existant) weapons of mass destruction or spreading "freedom and democracy" (while still backing any American politician who calls for the new Iraqi government to be replaced whenever it doesn't do what it is told) and ignore both history and common sense.

There were 3 particular items which came to mind when I first read about the proposed oil law - John Blair's comments about old oil discoveries in Iraq being suppressed (back in the days when oil was in gross oversupply rather than the more balanced supply / demand situation of recent years), the maps of Iraq that were some of the few artifacts to emerge from Dick Cheney's secretive "energy taskforce" meetings back in 2000 and Daniel Yergin's description of Iraq as "the greatest prize in all history".

Although its original concession of March 14, 1925 covered all of Iraq, the Iraq Petroleum Co., under the ownership of BP (23.75%), Shell (23.75%), CFP (23.75%), Exxon (11.85%), Mobil (11.85%), and Gulbenkian (5.0%), limited its production to fields constituting only one-half of 1 percent of the country’s total area. During the Great Depression, the world was awash with oil and greater output from Iraq would simply have driven the price down to even lower levels. Delaying tactics were employed not only in actual drilling and development, but also in conducting negotiations on such matters as pipeline rights-of-way. While such tactics ensured the limitation of supply, they were not without their dangers. If the Iraqi government learned that IPC was neither actively seeking new fields not exploiting proved and productive areas, it might withdraw or narrow IPC’s concession, or worse, award it to some independent willing and anxious to maximize production.

Suppression of Discoveries

From almost the beginning of its operations IPC not only suppressed production in Iraq (as well as in nearby lands) but went to considerable lengths to conceal that fact from the Iraqi government.

Of the many concession areas exclusively preempted by IPC, none was rapidly developed. IPC had held the area east of the Tigris River in the Mosul and Baghdad vilayets since1931, and by 1950 the only developed field was Kirkuk. Qatar is another illustration of “sitting on” a concession. Fearful that the area would fall to outside interests, Anglo-Iranian in 1932 obtained a two-year exclusive license for a geological examination of this peninsula. These exploration rights were expanded into a concession in 1935, and in 1936 were given to IPC under the terms of the Red Line Agreement. BP and Shell, however, were not anxious to develop more production in the Persian Gulf because of the effect this would have upon production in Iran. Although Mobil wanted more crude from the Persian Gulf, drilling did not start until three years and five months after the signing of the geological survey. A productive well was completed in 1939, and a few others were drilled after the war began; but in 1941, an official (Mr. Sellers) wrote: “….. as there is excess of petroleum products available from AIOC and Cal-Tex in Persian Gulf, it is obvious productive wells in Qatar will not be expedited at present time.” Commercial production in substantial quantities did not begin until 1950- eighteen years after the first exploration of the area.

An interesting case of “technical compliance” is provided by IPC’s actions concerning a concession in Syria. In 1933, IPC had obtained drilling permits in Syria, and two years later suggested that the Syrian government grant it a blanket concession over a large part of Syria, similar to the Iraq concession. Negotiations were opened for this purpose, but in view of the time which the negotiations would take, the IPC groups “agreed that the Company should drill shallow holes which would constitute technical compliance with Company’s obligations, the Syrian government should be informed of the Company’s intentions to do so.” Negotiations dragged on and the British High Commissioner of Syria suspended the acceptance of any further drilling permits. But IPC was prepared to receive this blow with equanimity; the general manager wrote: “…..we have been steadily complying with the letter of the Mining Law by drilling shallow holes on locations where there was no danger of striking oil…….” However, when IPC encountered difficulty in getting the Syrian Parliament to ratify the concession, “serious drilling” was recommended by the High Commissioner and by the general manager of IPC. The latter wrote the secretary of IPC: “You should explain to the Groups that neither the High Commissioner, nor myself, are actuated by a hell for leather rush to find oil; we want to set up a convincing window dressing that we are actually working the concession……the High Commissioner can exert far more justifiable pressure in getting our concession ratified by the succeeding ministry than he would be justified in exerting if we merely stood by, content to watch events, doing nothing…..”

In outlining to the groups the obstacles which stood in the way of obtaining better concession terms from Syria, the general manager of IPC also revealed the government’s opinion of IPC: among the obstacles faced by IPC was the “Government’s convinction that we did not intend to find oil, and if we found it we would advance a thousand and one reasons for not producing it. In these circumstances my plan was to obtain terms that would be light to bear so long as we explored without result, whilst conceding to Government that if we did find oil, we would produce or pay.”

Not surprisingly, IPC’s policies of “sitting on” concessions endowed the company with the stigma of restrictionism. In 1936, the question arose as to whether IPC should negotiate directly, or indirectly through an intermediary, for concessions in Turkey, Saudi Arabia, and Yemen; the general manager of IPC stated that in his opinion:

…..the indirect method…..might in the long run produce rather better terms than would be given to a company whose proprietors already hold many oil concessions, who have been identified with a policy of restrictive production, and whose object in obtaining fresh oil territory would not be associated with any irrepressible urge for intensive exploitation.

By 1938, IPC’s reputation for obstructionism had become firmly established throughout the Middle East. The general manager of IPC, who had been engaged in discussions on the Bahrein and Basrah concessions, described the attitude of the “various authorities and rulers” toward the IPC in these words:


From the earnestness of their address in my conversation with various authorities and rulers on the subject of production, they will brook no sitting on concessions, regardless of what loopholes the terms may give us, particularly us, whom, one and all, they suspect as capable of cheating on production, the future leaves them cold; they want money now.

The pressure of governments and of public opinion appears to have induced IPC to dispense with some of its restrictions. In 1938, one oil company official wrote:

"As regards the BOD and Basrah concessions it is the consensus of opinion of the Groups that it will be necessary to explore these concessions and if satisfactory oil is found, that same should be exploited, even though the production and the reserves from the IPC concession would amply cover the crude oil requirements of the Groups. We are led to this conclusion since we do not believe that public opinion or the Government would permit that these large areas were either left unexplored or unexploited if production were found."

World War II interrupted the operations of IPC in most of its concessions, and political disturbances handicapped its activities since that time. Yet even after allowing for these difficulties, in 1948 production in Iran was seven times larger than in Iraq, while in 1936 production in Iran was a little more than double that in Iraq. In Saudi Arabia commercial production did not begin until 1938, but by 1948 it was almost six times the production of Iraq.

The restrictive policies of the Iraq Petroleum Company during its early years have been summarized as follows:

Following the discovery of oil in Iraq in October, 1927, these three groups (BP, Shell, and Exxon-Mobil) employed a variety of methods to retard developments in Iraq and prolong the period before the entry of Iraq oil into world markets. Among the tactics used to retard the developments of Iraq oil were the requests for an extension of time in which to make the selection plots for IPC’s exclusive exploitation, the delays in constructing a pipeline, the practice of preempting concessions for the sole purpose of preventing them form falling into other hands, the deliberate reductions in drilling and development work, and the drilling of shallow holes without any intention of finding oil.

Restrictive policies were continued even after a pipeline was completed, for in 1935, IPC’s production was a shut back several hundred thousand tons. Moreover, for a time, a sales coordinating committee was established to work out a “common policy regarding the sale of Iraq oil.” Again in 1938 and 1939, the Big Three opposed any “enlargement of the pipeline and the corresponding increase in production” on the ground that additional production would upset the world oil market. Although the Big Three eventually conceded to the demands of the French (CFP) for some expansion, no action was taken until after World War II.

While the restriction of Iraqi production during the 1930’s had its roots in the generally depressed economic conditions of the time, the continued curtailment of Iraq’s output after World War II stemmed from different causes. With the development of Saudi Arabia and Kuwait, the US firms- which owned 100 percent of the former and 50 percent of the latter- gained large-scale sources of supply that were far more attractive to them than Iraq, where their ownership interest was only 23.75 percent. A later complication was the emergence of Libya as an important and largely uncontrollable source of Middle East countries. To the question of whether Libyan output could be accommodated within the limits of the overall growth rate Page answered, “Of course, with Iraq down.” Indeed, keeping Iraq “down” was the only means by which the high growth rates of iran and Saudi Arabia could be sustained in the face of Libya’s expansion without creating a price-reducing surplus.

That the IPC continued its restrictive practices into recent years I corroborated by an excerpt from what Senator Muskie referred to as “this intelligence report,” which he read into the record of the Senate Subcommittee on Multinational Corporations on March 28, 1974. According to the Senator, the report was “dated February 1967 and it has to do with this question of the potential in Iraq.”

In 1966 a study was made of the geological, geographical and other petroleum exploration data of the areas of Iraq relinquished by IPC, Iraq Petroleum Co. The purpose of the study was to help government let new concessions and obtain more advantageous terms from foreign oil firms. The study indicated that the untapped reservoirs of oil in Iraq appear to be fantastic.

There is every evidence that millions of barrels of oil will be found in the new concessions. Some of those new vast oil reservoirs had been discovered previously by IPC but they were not exploited because of the distance to available transportations, the heavy expense of building new pipelines and the fact that IPC has had a surplus of oil in its fields that are already served by existing pipelines.

The files yielded proof that IPC had drilled and found wildcat wells that would have produced 50,000 barrels of oil per day. The firm plugged these wells and did not classify them at all because the availability of such information would have made the companies’ bargaining positions with Iraq more troublesome. Many of these areas had been returned to the Government in settlement of the petroleum concession conflict between the Government and IPC. ...

While I've been over this ground a number of times - see How Much Oil Does Iraq Have ?, Blood And Oil, Twilight In The Desert ?, The Iron Butt Strategy and Honest John ?, its worth rehashing it a few more times given that we seem to be approaching crunch time in terms of establishing a legal basis for our oil grab - Joshua Holland has one of the better explanations of the significance of Iraq's oil - "Bush's Petro-Cartel Almost Has Iraq's Oil.

Iraq is sitting on a mother lode of some of the lightest, sweetest, most profitable crude oil on earth, and the rules that will determine who will control it and on what terms are about to be set.

The Iraqi government faces a December deadline, imposed by the world's wealthiest countries, to complete its final oil law. Industry analysts expect that the result will be a radical departure from the laws governing the country's oil-rich neighbors, giving foreign multinationals a much higher rate of return than with other major oil producers and locking in their control over what George Bush called Iraq's "patrimony" for decades, regardless of what kind of policies future elected governments might want to pursue.

Iraq's energy reserves are an incredibly rich prize. According to the U.S. Department of Energy, "Iraq contains 112 billion barrels of proven oil reserves, the second largest in the world (behind Saudi Arabia), along with roughly 220 billion barrels of probable and possible resources. Iraq's true potential may be far greater than this, however, as the country is relatively unexplored due to years of war and sanctions." For perspective, the Saudis have 260 billion barrels of proven reserves.

Iraqi oil is close to the surface and easy to extract, making it all the more profitable. James Paul, executive director of the Global Policy Forum, points out that oil companies "can produce a barrel of Iraqi oil for less than $1.50 and possibly as little as $1, including all exploration, oil field development and production costs." Contrast that with other areas where oil is considered cheap to produce at $5 per barrel or the North Sea, where production costs are $12 to $16 per barrel.

And Iraq's oil sector is largely undeveloped. Former Iraqi Oil Minister Issam Chalabi (no relation to the neocons' favorite exile, Ahmed Chalabi) told the Associated Press that "Iraq has more oil fields that have been discovered, but not developed, than any other country in the world." British-based analyst Mohammad Al-Gallani told the Canadian Press that of 526 prospective drilling sites, just 125 have been opened.

But the real gem -- what one oil consultant called the "Holy Grail" of the industry -- lies in Iraq's vast western desert. It's one of the last "virgin" fields on the planet, and it has the potential to catapult Iraq to No. 1 in the world in oil reserves. Sparsely populated, the western fields are less prone to sabotage than the country's current centers of production in the north, near Kirkuk, and in the south near Basra. The Nation's Aram Roston predicts Iraq's western desert will yield "untold riches."

Iraq also may have large natural gas deposits that so far remain virtually unexplored.

But even "untold riches" don't tell the whole story. Depending on how Iraq's petroleum law shakes out, the country's enormous reserves could break the back of OPEC, a wet dream in Western capitals for three decades. James Paul predicted that "even before Iraq had reached its full production potential of 8 million barrels or more per day, the companies would gain huge leverage over the international oil system. OPEC would be weakened by the withdrawal of one of its key producers from the OPEC quota system." Depending on how things shape up in the next few months, Western oil companies could end up controlling the country's output levels, or the government, heavily influenced by the United States, could even pull out of the cartel entirely.

Both independent analysts and officials within Iraq's Oil Ministry anticipate that when all is said and done, the big winners in Iraq will be the Big Four -- the American firms Exxon Mobile and Chevron, the British BP Amoco and Royal Dutch Shell -- that dominate the world oil market. Ibrahim Mohammed, an industry consultant with close contacts in the Iraqi Oil Ministry, told the Associated Press that there's a universal belief among ministry staff that the major U.S. companies will win the lion's share of contracts. "The feeling is that the new government is going to be influenced by the United States," he said. ...

Eric Stoner has an article in the Huffington Post on Bush's Crude Intentions in Iraq.

With the U.S. consuming a quarter of the world's petroleum, President Bush courageously admitted the obvious during his 2006 State of the Union address: "America is addicted to oil." While recognizing that you have a problem is laudable, and the first step on the road to recovery, we must now be honest with ourselves and ask some tough questions.

Knowing that addiction can drive normally kind, law-abiding people to steal or even to violence in the single-minded pursuit of a fix, is America guilty of such behavior in Iraq?

With the third largest proven oil reserves in the world -- estimated to be around 115 billion barrels -- and much left to be discovered, Iraq does have quite the stash. Critics of the war have never shied from making this connection. Neither, for that matter, have the vast majority of the Iraqi people. According to one recent poll, 76 percent of Iraqis believe that the real reason for the invasion was a U.S. desire "to control Iraqi oil."

The Bush administration, on the other hand, despite its ever-evolving rationale for attacking Iraq -- from nonexistent WMDs to spreading democracy in the Middle East -- has consistently denied such crude motives. "This is not about oil," Defense Secretary Rumsfeld flippantly told Al Jazeera on the eve of the invasion, "and anyone who thinks it is, is badly misunderstanding the situation." Recent moves in Washington, however, tell a different story.

President Bush and the Democrat-led Congress are currently putting intense pressure on the government of Prime Minister Nouri al-Maliki to pass a controversial new oil law as one of the main "benchmarks" that must be met to show political progress. In what amounts to little more than high stakes blackmail, U.S. lawmakers included language in the $100 billion war supplemental that threatens to cut off reconstruction aid if these targets are not reached by the time General Petraeus makes his much-anticipated report to Congress, which is now set for September 11th.

While U.S. officials and the mainstream media have generally billed this law as a measure that will equitably distribute Iraq's massive oil revenues -- projected to reach $31 billion this year -- between the country's different sectarian groups, this is far from a complete or accurate picture of its contents. Rather than originating in Baghdad, the law was first conceived within the bowels of the State Department prior to the war. The U.S. then brought in BearingPoint, a private contractor, to assist Iraq's Ministry of Oil with the actual writing of the text.

After its completion, in a thoughtful gesture to their occupiers, executives from the major U.S. oil companies and the International Monetary Fund were given the opportunity to offer their comments on the draft. Only then was the Iraqi Parliament shown the law. The end result is hardly surprising.

Except for three vague sentences that deal with revenue sharing, the rest of a 33-page draft of the law effectively lays the foundation for the privatization of Iraq's oil industry, which was nationalized in 1972.

Under the proposed law, international oil companies could be granted 30 year-long contracts that would give them far greater ownership of and profits from Iraqi oil fields than they would be allowed by other possible models for the development of the country's oil sector. Indeed, every other major oil producer in the region -- including Saudi Arabia, Kuwait, and Iran -- maintains a nationalized oil system that forbids foreign control of its oil reserves.

According to Antonia Juhasz, an analyst with Oil Change International, the oil law would also not require foreign companies "to invest their earnings in the Iraqi economy, partner with Iraqi companies, hire Iraqi workers or share new technologies."

To the great consternation of the Bush administration, the oil law has been stalled in the Iraqi Parliament for months.

Somehow, amidst the horrific violence that surrounds them, the Iraqi people are catching wind of the grave threat that this law poses to their country's long-term economic prosperity, and are voicing their opposition. "We reject this kind of agreement absolutely," Faleh Abood Umara, general secretary of the Iraqi Federation of Oil Unions, said in a recent interview. "The law will rob Iraq of its main resource: its oil. It will undermine the sovereignty of Iraq and our people."

This may in fact be one of the few issues that actually unites all Iraqis. According to a poll released several weeks ago, almost two out of three Iraqis -- including a majority of every ethnic and religious group -- oppose the privatization of their oil resources.

Trade unions, oil experts, and various political parties in Iraq are all organizing against the law. And having already gone on strike in June, the influential oil workers union has threatened to do so again should the law pass in its current form.

Recently, six female Nobel Peace Prize laureates added their voices to the growing chorus of opposition. In a public statement, they urged: "The U.S. government should leave the matter of how Iraq will address the future of its oil system to the Iraqi people to be dealt with at a time when they are free from occupation and more able to engage in truly democratic decision-making."

If this war is not about oil and we have even some regard for the will of the Iraqis, Congress must prove it by taking this disastrous benchmark off the table.

Also at the HuffPo, Robert Weissman on "The Benchmarks Iraq *Is* Meeting -- and One it Thankfully is Not".

But the news is not entirely bleak.

Apart from some non-trivial accounting issues, the one key area where the Iraqi government is not meeting IMF targets is privatization of the oil sector. (Presumably because this is also a key Congressional benchmark, the government does not acknowledge its growing troubles in this area. Instead, it states, "The GoI will continue its efforts towards developing a competitive and transparent hydrocarbon sector. Draft hydrocarbon legislation will be submitted to the CoR [Council of Representatives] when final agreement between all concerned parties has been reached, possibly in the next few months. The envisaged legislative package includes a draft oil and gas law to regulate the sector, a draft law to reestablish the Iraq National Oil Company, a draft law reorganizing the MoO [Ministry of Oil], and a draft financial management law on the sharing of oil revenues.")

This remarkable -- and welcome -- failure reflects massive Iraqi opposition to Big Oil's designs to gain control of Iraq's oil resources, and the success of an international campaign to shine a spotlight on Big Oil's planned oil grab. Every ethnic and geographic grouping in Iraq believes Iraq's oil should be developed under the control of Iraqi state-owned companies rather than multinationals. Overall, Iraqis hold this position by a two-to-one margin, according to a July poll.

Says Antonia Juhasz of Oil Change International, "everyone thought this law was going to pass because no one knew what it was. Now that people know what it is, it seems far less likely that it will actually pass."

It is far too simple to say that popular mobilization can defeat the IMF's extraordinary power, because there are countless examples of governments imposing draconian IMF policies despite popular uprisings, riots and insurrections. And Iraq appears to be acceding to most of what the IMF has demanded, outside of the crucial oil sector.

But especially because the IMF is now in a weakened state, a mobilized public in borrower countries now has a chance at resisting the IMF's Big Business-friendly, anti-labor, anti-public health, anti-development policies. Iraq has far more resources than the poor African countries still most subject to IMF authoritarianism, but Iraq is also beleaguered by chaos and division exceeding that in all but a few nations. If the Iraqis can push back against the IMF -- and the other powerful actors seeking to transfer control of Iraq's oil to multinational corporate control -- then there should be hope for resistance everywhere.

This reader letter in the Montgomery (Alabama) Advertiser reiterates that the war was about controlling Iraq's oil and the proposed oil law is about stealing the economic gain from that oil.

The Iraq war was, is and remains about privatizing the second largest oil reserve on the planet. Contact your legislators and explain to them there is no honor or victory in chemically bombing a defenseless oil reserve for five years to control this oil. I'm a Vietnam War veteran, Air Force, and our bombing of Fallujah, for instance, was a war crime.

The New Iraq Oil Law seats three American big oil executives on a council controlling revenue, development and production of this oil reserve forever. It begins by giving 70 percent of all Iraqi oil revenue to American oil companies and BP. We have to pay off the Brits. The Sunni, Shia and Kurds will never, never sign it. It is the oily glue holding the tribes together and the Iraqi Federation of Oil Unions, which controls the rigs and their output, threw Halliburton off them in 2003. The oil law would make a gazillion dollars for big oil because only 17 of 80 of the known deposits have been developed. Republicans have no right to murder our soldiers door-to-door, shooting residents to steal an oil reserve.

Republicans have taxed you a trillion to steal oil. How much does it take to make you understand?

AFP reports Iraqi unions are still protesting against the proposed law - Iraq leftists protest key oil bill.

Dozens of Iraqis protested in central Baghdad on Saturday against the expected debate in parliament later this month of a draft oil law Washington deems a cornerstone of reconciliation efforts. The demonstration was called by left-wing groups opposed to moves to open up Iraq's oil and gas sector to Western firms in the same bill that aims to reassure Sunnis that earnings will be fairly shared among the country's divided communities.

Protest organisers used microphones to denounce the draft law, which has already been approved by Prime Minister Nuri al-Maliki's cabinet, saying it should not be passed while the United States is still calling the shots.

"The occupier is trying to impose this law by pressurising the weak Maliki government which rapidly endorsed the law and sent it to the so-called House of Deputies for endorsement," trade union leader Subhi al-Badri told AFP. "The occupier has interfered and even demanded that deputies shorten their leave in order to endorse such a vital law which is the main reason behind the occupation," he added.

Parliament reconvenes for the debate next week after a month's summer holiday but Washington had opposed MPs even taking that recess. "This very law aims at stealing the wealth of Iraq," Badri said. "We will work to bring down the law with the support of five million Iraqi workers and our response will be halting oil exports and dismissing foreign companies from Iraq, including those which have started work."

The international left seems no more impressed by the proposed oil law than the Iraqi left - "21st Century Socialism" (I'm often amazed what Google News offers in response to my queries) has a look at "Iraq: the oil and the endgame".

The argument put by Gary S. Becker on the eve of the March '03 invasion works as proof that achieving the lowest possible world market price for petroleum in the short term is not the consistent over-riding objective of US policy. Other evidence also bears this out. Also in March 2003, former Saudi oil minister Sheikh Zaki Yamani told the BBC that:

US interests would not be served by a very low price.

A number of US states are oil producers, and a low price of oil these states would hit them hard, he said.

When the price of oil collapsed in 1986, George Bush senior - then US Vice President - asked Saudi Arabia to raise the price of oil, he recalled.

"America does not want a very low price of oil, that is obvious," said Sheikh Yamani.

It could be added that low oil prices can also hurt the earnings of the oil companies. Three US oil companies- Exxon-Mobil, Chevron and ConocoPhillips- have declared combined profits of $72.7 billion in 2007.

However, Sheikh Yamani expressed to the BBC his firm view on the importance of oil in motivating the invasion of Iraq:

He said the US is aiming to secure its oil supplies. In his view, the US wants to reduce its dependence on oil from the Gulf, and from Saudi Arabia in particular.

He said the US accused Saudi Arabia of being the main source of terrorist activities, backing them financially and ideologically...

For the US, he said, the real answer is to have Iraqi crude.

Iraq could quadruple its current level of oil production - taking it to eight million barrels a day - by the end of the decade, he said.

And much of it could be exported via the Eastern Mediterranean Sea, ending US dependence on oil passing through the Strait of Hormuz - a narrow waterway leading out of the Gulf.

Yamani's remarks are illuminating. In terms of global political power, the issue is not so much the level of the oil price but who controls the oil price. Traditionally, the US has used its relationship with Saudi Arabia to influence petroleum prices; but that causes the United States to be overly dependent on its relationship with a country whose loyalty may not be reliable. And the USA also needs to guarantee its own supplies of oil.

Black visions

That somebody might wish to control energy supplies in order to politically dominate other countries is publicly recognised by US and other Western elites- except that such motivations are never applied to their own side. Vladimir Putin, for example, is routinely accused of using the gas produced in his own country as a means of blackmailing other European nations. And during the Congressional election campaign in November 2006, feeling the need to augment the case for US troops to stay in Iraq, George W. Bush was reported as follows in the Washington Post:

"You can imagine a world in which these extremists and radicals got control of energy resources," he said at a rally here Saturday for Rep. Marilyn Musgrave (R-Colo.). "And then you can imagine them saying, 'We're going to pull a bunch of oil off the market to run your price of oil up unless you do the following. And the following would be along the lines of, well, 'Retreat and let us continue to expand our dark vision.' "

Bush said extremists controlling Iraq "would use energy as economic blackmail" and try to pressure the United States to abandon its alliance with Israel. At a stop in Missouri on Friday, he suggested that such radicals would be "able to pull millions of barrels of oil off the market, driving the price up to $300 or $400 a barrel."

The Washington Post report included an official clarification:

White House spokesman Tony Fratto said Saturday that Bush's latest argument does not reflect a real shift. "We're still not saying we went into Iraq for oil. That's not true," he said. "But there is the realistic strategic concern that if a country with such enormous oil reserves and the corresponding revenues you can derive from that is controlled by essentially a terrorist organization, it could be destabilizing for the region."


...Fratto... argued that even if radicals could not move the markets dramatically with Iraqi oil, they would use the country as a base to topple other governments in the Middle East such as Kuwait and Saudi Arabia, which would give them "a lot more oil to blackmail with."

It is only natural for US leaders to impute to others the idea of restricting the supply of essential items, produced in ones own country or in territories under ones control, to other nations in order to achieve political ends. When the USA does this, it's not called blackmail, it's called sanctions. But to wield global power it is usually not necessary to issue direct threats. The mere fact of the US military presence in and around the territory of oil-exporting countries is enough to influence political decisions in other oil-importing countries, allies and potential rivals alike. ...

Under conditions of nationalisation and state planning, Iraq's GDP grew by a very impressive 8.7% per annum between 1960 and 1978. Much of the revenue from oil exports was invested in infrastructure and a massive expansion of the education system. Iraq's decades of decline began with the costly eight-year war with Iran; this was succeeded by the mass destruction of the country's industry and infrastructure by the USA during the 1991 Gulf War; subsequent recovery was blocked by twelve years of sanctions.

Nevertheless. The invasion of Iraq offered an opportunity to begin reversing the nationalisations which took place in the OPEC countries during the 1960s and '70s. Gary S. Becker continued:

Coalition forces in Iraq have the chance to set an example for Islamic nations everywhere by promoting prosperity for the downtrodden and disadvantaged through market policies.

But as Becker noted, the downtrodden masses do not appreciate that privatisation would bring them prosperity: instead, they are 'emotionally' attached to the idea of state ownership of oil resources. Hence the need for the occupying power to hold Iraq's 'sovereign' government to timetables for reform.

Iraq's proposed hydrocarbon law was drafted according to US instructions, with input also from the British government and Western oil company lobbyists. Securing its enactment is part of official US policy; it is entrenched in the recommendations of the Iraq Study Group and the President's 'New Way Forward'. The IMF insists that forgiveness of some of Iraq's debt is dependent on the passing of the legislation. While re-establishing a state owned Iraqi National Oil Company and giving it a role in maintaining pipelines and extracting oil from fields which are already being exploited, the law provides for the leasing of the country's vast untapped reserves to foreign companies for periods of up to 35 years, on the basis of licences which are known in the industry as Production Sharing Agreements (PSAs).

The type of contract under which companies can participate in exploiting the oilfields is a key issue. In Saudi Arabia, Kuwait and other Gulf countries, foreign technology is brought in to the petroleum extraction process by means of service contracts with transnational corporations. The oilfields are owned by the state, and production is controlled by state-owned companies.

PSAs are usually permitted by states in areas where it is likely either that oil may not be found, or that the cost of extracting it may be high; thus a company is rewarded by the possibility of a high profit for risking its investment. The corporations which hope to exploit Iraq's easily accesible reserves face risks which are political, rather than geological. ...

Since the draft law was published it has faced resistance from many sectors of Iraqi society. In December 2006, the leaders of Iraq’s five trade union federations, representing half a million organised workers, issued a statement denouncing the draft oil law as privatisation by stealth. They called for the the state owned Iraqi National Oil Company to be given preference in the award of contracts over foreign-owned firms.

While the daily headlines about Iraq cover car bombs, kidnapping and sectarian bloodshed, the struggle against this plunder of the country's resources has not been as widely reported. Oil workers have campaigned against the oil law by going on strike and mobilising street demonstrations.

Anti oil law protests are led by The Iraqi Federation of Oil Unions (IFOU), representing more than half the oil industry’s workforce in the Shia populated provinces of Basra, Maysan, Dhi Qar and Muthana; historically the bedrock of the Iraqi labour movement.

Hundred of Iraqi intellectuals have signed a statement opposing the oil law and proposing that it be put to a referendum. An opinion poll conducted in June and July indicates that the proposed law would be overwhelmingly defeated if a referendum were to be held.

The administration in Baghdad reacted angrily to mass protests, issuing arrest warrants for the president of the IFOU unions, Hassan Jumaa Awad al-Assadi, and his fellow leaders. Iraqi Oil minister Hussain al-Shahristani told UPI: “there are no legal unions in Iraq.” According to a letter written by the general director of the Iraqi oil ministry on 18th July 2007:

"The minister has directed the prohibition of cooperation with any member of any union in any of the committees organised under the name of the Union, as these unions do not enjoy any legal status to work inside the public sector."

The Iraqi government has opted to retain Saddam’s 1987 anti-union decree which deemed all public sector workers to be civil servants, and banned employees of state-owned enterprises from joining trade unions.

Back to the Huffington Post again, this time Charlie Cray on "World Class Racketeering".

It was clear from the start that the Iraqis would not meet the "benchmarks" that Congress and Bush have imposed on it. But anyone who expected them to is deluded. Not simply because the timelines are unreasonable, but because those who want to hold Iraqis "accountable" (as if they are in a position to make such demands) fail to understand what the benchmarks are about to begin with.

Congress might have learned a great deal about one of those benchmarks had it paid attention to a hearing held by the House Committee on Foreign Affairs back on July 18. As experts who have followed Iraq's oil sector explained at the hearing, one benchmark Iraq is being pressured to pass involves not one but a series of hydrocarbon laws (i.e. not just a revenue law that divvies up Iraq's oil revenues between the federal government and the different regions, but also three other interrelated laws that would also establish the oil sector legal framework, the Ministry of Oil and the new Iraqi National Oil Company).

The confusion over what Iraq is being asked to do may be a failure that critics can lay at the media's feet, but the more important issue as far as I can tell is the manner in which these laws are being pushed so aggressively -- which, as Rep. Mike Pence (R-IN) put it, has the potential to "jeopardize [Iraq's] entire constitutional order."

GAO's Joseph Christoff, a key witness at the hearing, explained that Iraq is being pressured to pass the hydrocarbon laws at a time when we don't even know, for example, what regions will even exist that might lay claim to a portion of the oil revenues. The committee responsible for drafting changes to the country's constitution has not even been formed. Thus, the role of the regions and whether or not new regions will be formed, such as a Shi'a region in the South, has not yet been determined, and defining the regions will have some bearing on how the oil revenues would be divided. Other issues that Christoff says should first be resolved include the disposition of Kirkuk and what census would be used to define the populations for purposes of revenue percentages.

"I just can't understand the logic in terms of the sequence here," Rep. Bill Delahunt (D-MA) gasped in astonishment after hearing all this. "It makes little sense to pass a hydrocarbon law in all of its aspects without having the work of the constitutional committees accomplished as a prerequisite."

It's not like there's any need to rush to pass the law for Iraq to produce oil. Iraq has 115 billion barrels of proven reserves in 80 fields (20 of which are currently in production). If it were to build up to a capacity of 10 bbd production, it wouldn't have to discover any new reserves for at least ten years. Yet for some reason the Iraqis are under a lot of pressure to pass a law allowing for the exploration of additional oil. The reason, of course, is because the multinational oil companies, whose own proven oil reserves have been in steep decline, see Iraq's untapped reserves as the bigger prize.

And as Tariq Shafiq, one of the three-member team charged with drafting the petroleum law for the Iraq Ministry of Oil suggested at the hearing, because Iraq itself doesn't need to develop those untapped reserves for another decade, pressure to immediately implement any provision that would open them up for exploration and development "fuels the argument" that the Americans and British "are there for the oil."

There are many indications that the Iraqi people see the game pretty clearly. A Univ. of Michigan poll cited at the beginning of the hearing found that even before the framework draft was introduced, 76 percent of Iraqis believe the U.S. invaded Iraq to control its oil. And opposition to the law has grown precipitously, as word about the specific terms of the law spreads. By pressuring Iraq to pass the benchmark, Bush and Congress risk the perception that they have tried to locked in U.S. control of Iraqi oil before the Iraqi people learn how they were swindled. ...

Reuters reports that BP is ready to take Iraq oil, gas opportunities. Not quite Beyond Petroleum yet it seems.

BP is ready to compete for the opportunities that arise in Iraq's oil and gas sector once the country passes its oil and gas law, a senior executive said on Sunday.

Iraq's parliament has yet to debate the controversial oil law, but was expected to consider it this month. Washington has pushed Iraq for months to speed up passage of the oil law, which is among legislation it sees as pivotal to reconciling warring Iraqis and attracting foreign investment.

"We've studied all of Iraq and absolutely have a view on which are the relatively good looking prospects," Steve Peacock, president of BP's Middle East and South Asia Exploration and Production unit, told Reuters on the sidelines of a conference in Dubai.

I'll bet they've studied the good looking prospects - that data is 80 years old now...

AP reports that the circling vultures really need that oil law - Lack of legal framework keeps oil investors out of Iraq.

Iraqi government officials and energy experts presented detailed plans for exploiting the wartorn country's vast petroleum wealth but admitted that the absence of a law regulating the industry is a bigger obstacle than security to attracting foreign investment.

Government officials at the three-day "Iraq Oil, Gas, Petrochemicals and Electricity Summit" held in Dubai tempered their grandiose projects for exploiting the country's massive oil reserves by admitting that the vital, but contentious, law still needed to be passed. "Security is not stopping investors coming to Iraq, (it is because) they have no laws to protect their investment," Ali al-Dabbagh, the Iraqi government spokesman, told the Associated Press at the start of the conference.

After months of acrimonious debate, a new draft oil law will be discussed in parliament in the coming weeks, which al-Dabbagh hoped would be adopted by the end of the month. ... Despite being some of the largest in the world, Iraq's oil reserves are also some of the least exploited with the worst infrastructure — something Iraq is hoping foreign investors can change.

Bill Bonner at The Daily Reckoning makes a point to fans of the "spreading freedom and democracy in Iraq " conspiracy theory - even Democrats seem to show no sign of embarrassment when it comes to dealing with recalcitrant Iraqi governments - if they don't do what they are told, get rid of them - "Carl Levin Recommends Throwing Out Iraqi Government".

Harper’s reports:

“Returning from a three-day trip to Iraq and Jordan, Senate Chairman of the Armed Services Carl Levin (D., Mich.) declared the Iraqi government ‘non-functional’ and recommended that Prime Minister Nouri al-Maliki and his cabinet be replaced. ‘We care for our people and our constitution,’ said Maliki, who was visiting Syria, ‘and can find friends elsewhere.’ The US Justice Department released documents showing that Dr. Ayad Allawi, Maliki’s chief opponent and the man most likely to replace him as prime minister, is paying the G.O.P. firm Barbour Griffith & Rogers US$300,000 to lobby on his behalf.”

Pssst…Senator…the Prime Minister of Iraq was elected…elected, remember? You can’t replace him without holding another sham election.

And what’s this? Looking through the headlines, we notice that America is really trying to flex some muscle where Iran is involved. Dave Gonigam, writing for the DR blog explains:

“We begin with what could have been an extremely close call – a raid at the Baghdad Sheraton, during which US forces arrested eight people from the Iranian Electricity Ministry who were in town to negotiate a deal with the Iraqi government. They were later released, found to have done nothing wrong, but only after the intervention of Iraq’s prime minister, Nuri al-Maliki (who says he’s an ineffective doofus?).

“But before it was all over, the eight men were bound and blindfolded, and trotted before TV cameras – which struck me as about as provocative a move as Washington could ever orchestrate. Well, maybe it wasn’t orchestrated, it might well have been an accident, but to give those guys the same treatment as the US embassy hostages in Tehran in 1979 sure seems like rubbing the mullahs’ face in it.

“So that’s one provocation that hasn’t panned out. But there are always presidential speeches. And George W. Bush delivered a doozy yesterday to the American Legion…”

Moving on, the Wall Street Journal has some Big Questions for Big Oil.

As summer draws rapidly to its conclusion, eyes are already turning to the colder months ahead and, inevitably, to the price of oil. In recent weeks, Goldman Sachs analysts have suggested that oil could reach $100 before the end of 2007. A record number of options to buy oil at $100 a barrel have been sold. Some mainstream commentators are even raising the specter of $200 a barrel by mid-2008 if the risk premium -- which industry estimates average at around $34 -- increases in response to Iranian retaliation against further sanctions or growing unrest in Nigeria.

In such circumstances, one would expect such commentators to be bullish about the prospect for independent oil companies (IOCs) such as Exxon Mobil, Royal Dutch Shell and BP. Rising oil prices have pushed these companies' profits sky-high over the past five years. Yet a growing number of industry voices suggest that the era of the vertically integrated supermajor may be over, and that IOCs have been unable to adapt to the new global business environment. ...

IOCs are facing both structural and cyclical challenges. Depressed oil prices throughout the mid- to late 1990s caused a period of low investment in new exploration by IOCs and nationalized oil companies (NOCs) alike, which has left many firms reliant on a relatively smaller number of "superfields" that are beginning to dry up. As the oil price has steadily risen, several governments -- most notably in Russia and Venezuela -- have responded by expropriating foreign-owned oil and gas fields for their own state-run firms, usually under the guise of environmental transgressions or tax irregularities.

Newsweek has an interview with Lee "Jabba" Raymond - "Exxon's ex-CEO admits we need alternatives, but says there's plenty of petroleum left". The Energy Bulletin editors note:

Mr. Raymond's qualifications for giving advice on energy policy:

* Oversaw the scuttling of Exxon's alternative energy program.
* Led Exxon during the years when it aggressively attacked the concept of global warming, and now refuses to discuss it.
* Maintains that we have "plenty of oil" left and shouldn't worry about energy independence.

Presumably, the report mentioned in the article is the National Petroleum's Council voluminous and contradictory, "Facing the Hard Truths About Energy".

Chris Mayer at Whiskey And Gunpowder has a look at "The High Noon of Empire".

It was a cold day in New Haven, Connecticut, in the winter of 1899. That year, an arctic blast created record-making blizzards and snowfall. Ice flows in the Mississippi would run all the way to the Gulf of Mexico. (An event, by the way, recorded only one other time - Feb. 13, 1784).

Nonetheless, a packed house gathered in the old College Street Hall, where William Graham Sumner took the stage. The respected 59-year-old American intellectual delivered a talk titled "The Conquest of the United States by Spain."

It was a provocative title. America had "won" the Spanish-American War in 1898. It had taken possession of Spain's old colonial territories - Puerto Rico, the Philippines, and Guam.

But Sumner was not talking about the physical war. He spoke about the realm of ideas. "Expansionism and imperialism," Sumner warned, "are nothing but the old philosophies of national prosperity, which have brought Spain to where she is now." America, Sumner maintained, had adopted the imperial ideas of its vanquished foe. And it was America that would wind up no different than Spain, which was, in Sumner's words, "a poor, decrepit, bankrupt old state." Those with a nose for empire often mark America's as beginning with the victory in 1898.


I thought of Sumner when I heard Kevin Phillips speak at a recent event held in Washington, D.C. Like Sumner, Phillips is one of those eggs who study empires as biologists study the California condor or the spotted owl. He is the author of an impressive study of the implications of American empire. The title is American Theocracy: The Peril and Politics of Radical Religion, Oil, and Borrowed Money in the 21st Century.

Phillips draws from the experience of empires past, including - as Sumner did - the Spanish empire. He also draws insights from the Dutch, British, Hapsburg, and Roman empires. His book has many threads that show how America is well along the familiar life cycle of empires. But I want to focus on just tw the rise of finance and America's oil dependency.

Empires get hooked on certain fuel sources like dope addicts. The Dutch were masters of wind and water. But their commercial dominance faltered with the rise of coal. Coal fed the British Empire. But it eventually gave way to the oil-powered might of the United States. Phillips maintains that the inevitable transition to a post-oil global economy - whether it is based on natural gas, hydrogen, greater nuclear reliance, renewable energy, or whatever - "could see the United States displaced by a new leading economic power, probably an Asian one." The history of modern empires is one in which transitions to new fuel sources are just not successful.

Instead, the fading empire fights it out. Not surprising that natural resources fueled many conflicts in earlier centuries. North American fisheries. Baltic timber. East Indian spices. Caribbean sugar and salt. The gold and silver of the New World. The powers of empire hinged on the command of valuable natural resources such as these.

Today, that hinge is oil. America's oil infrastructure is old, past its zenith. Meanwhile, the car culture drinks gasoline in rivers with no sign of slowing down. Cars and trucks burn two out of three barrels of oil in the U.S. Of the 530 million cars in the world, more than 200 million are in the U.S. All of this has led to America's consuming 25% of the world's energy while holding only 5% of the resource.

There was a time when those numbers went the other way. For most of America's rise to power in the 20th century, it produced far more oil than it consumed. As late as 1964, the U.S. found 48 billion barrels of oil and used only 23 billion. Ever since, it's been getting tighter. By 1988, it was dead even. By 2005, America used 5 times more than it found.

As a result of this great surge in demand, oil has been the magic pixie dust that created many an American fortune. In 1948, half of the 16 richest companies in America were oil companies. As late as 1982, half of the 30 richest Americans counted oil as the initial source of their wealth.

Now America's oil dependence is the Achilles' heel of its international dominance. Phillips quotes Michael Klare, a theorist on the resumption of global resource wars. Klare writes that oil is no longer just a commodity but a national security matter. The U.S. military has become a "global oil-protecting service."

People will say it is not so important to own the resource as it is to have the ability to pay for it. That is true. And that brings us the second mark of empire: the rise of finance at the expense of making things. Empires past all had their manufacturing capabilities hollowed out. In place of that stood the business of financing things, of pushing paper, of printing money.

Spanish observers in the 17th century wrote smugly about how London made fine fabrics, Holland chambrays, Florence cloth, and India linens. But it was Spain that enjoyed these things, because Spain had money. The Dutch and British held a similar conceit. The British economist William Stanley Jevons wrote with assurance: "The plains of North America and Russia are our cornfields, Chicago and Odessa are our granaries, Canada and the Baltic our timber forests, Australia our sheep farms…" and on and on. The whole world worked for Britain, which paid in sterling.

But this prosperity has a sort of soap bubble fragility to it. It depends on debt and easy credit. The empires of the past became bankrupt because of their spendthrift ways and financial ineptitude....

Alex Mitchell at Crikey has an entertaining look at the upcoming APEC summit - "APEC: a week of Kafka, collusion and spooks".

The Federal and NSW security forces have a list of banned citizens, individuals who will be arrested and detained if they go anywhere near next week's APEC summit in downtown Sydney. Who is on the list? It is a secret, replies NSW Police Minister David Campbell.

So how do you know whether you are on it and whether you should risk going into the city?

Oh, replies Campbell, the people on the list know who they are. We are truly in the web of a Kafkaesque nightmare. What is unbearably sickening about the security build-up is the way in which Premier Morris Iemma, Attorney-General John Hatzistergos, Transport Minister John Watkins and Police Minister Campbell practically have hot flushes as they excitedly announce some new draconian onslaught on the rights of the local citizenry.

We have grown accustomed to Federal Attorney-General Philip Ruddock making his death's head pronouncements trashing rights and liberties, but there is something peculiarly odious when it's ALP ministers leading the charge.

Then there's the strange case of Richmond Air Base which has been included in the list of exclusion zones, along with such iconic venues as the Opera House and the Icebergs Club at Bondi. Why Richmond, located more than 40 kms west of Sydney?

Those with a long memory will recall that during Justice Don Stewart's investigation into the CIA-organised Nugan Hand Bank in the early 1980s, Richmond RAAF base was used to move American agents in and out of Sydney to avoid customs, immigration and passport controls. It meant that envoys, spies, Pentagon and FBI officials could travel to Australia and fly out without leaving a single traceable imprint. They could carry their weapons in and out as well.

Not that the media will be sending reporters and photographers to Richmond to keep an eye on the arrivals and departures: the spineless news chiefs in all Sydney media - print, radio and television - have been duchessed by the intelligence services and have agreed not to write anything about the security arrangements that will alarm the general populace or embarrass John Howard's APEC party.

Links:

* The Road To Surfdom - More stern warnings to al Maliki
* Washington Post - Report Finds Little Progress On Iraq Goals. "GAO Draft at Odds With White House" - who are telling us what a great success the escalation has been.
* The Guardian - British army chief attacks US as 'intellectually bankrupt' over Iraq
* SMH - Higher Iraqi Death Toll Linked To US Surge
* SMH - British Troops Move Out Of Central Basra
* Crikey - Surge working well? Let's look at the facts...
* Cryptogon - Iraq: Most Goals for 'Surge' Missed
* Rolling Stone - The Great Iraq Swindle. "Operation Iraqi Freedom, it turns out, was never a war against Saddam ­Hussein's Iraq. It was an invasion of the federal budget, and no occupying force in history has ever been this efficient". Don't forget the oil...
* The Times - Pentagon ‘three-day blitz’ plan for Iran. Real or psy-op ?
* SMH - Iran running '3,000 atomic centrifuges'. Real or psy-op ?
* DailyKos - We Are Going To Hit Iran. Bigtime
* Huffington Post - How I Learned to Stop Worrying and Love Bombing Iran
* Alternet - Do We Have the Courage to Stop War with Iran ?
* Craigslist - So you’re about to be invaded by the United States. "Thirdly, you should expect the widespread destruction of infrastructure."
* The Oil Drum - How To Get A Pipeline Built
* The Oil Drum - Saudi Arabia - production forecasts and reserves estimates
* Jeff Vail - EROEI Short #3: Price-Estimated EROEI
* SMH - Lower Petrol Prcies Linked To Inquiry: NRMA
* Bruce Sterling - Here Come the Khaki Green Sweater Police
* Greg Palast - New Orleans two years after Katrina
* Crikey - APEC anarchy: our man at the planning committees. Having some fun with the latest dire warnings from the bed-wetting neoconservatives at The Oz.
* The Orstrahyun - Tourists Questioned By Police For Taking Photographs In Sydney
* The Orstrahyun - Alan Jones Wants Police To Drive Trucks Into Protest Rallies, Demands Marches Be Made Illegal
* SMH - APEC: The Right To Protest
* Crikey - Paddy McGuinness and ASIO's APEC exclusion list
* SMH - PM Blames APEC Protesters For Tight Security
* SMH - Shady Character Loses His Lunch Watching Activists
* SMH - APEC Undercover Worry Out In The open
* The Piping Shrike - APEC: The summit nobody wants
* Crikey - Brothel Bonanza: Sydney welcomes APEC with open ... arms. Well - somebody wants it.
* Joel Salatin - Everything I Want to Do Is Illegal
* Corrente - John Edwards: No more secret prisons, no more illegal spying on the American people
* Cryptogon - 7/7 Victims Launch Legal Action Against Government
* The Times - Priest offers festival-goers the chance to confess their green sins
* After Gutenberg - Clown Action. This is pretty funny - Clowns vs Nazis.