IRAQ'S OIL WAS ALWAYS THE PRIZE

Iraqi oil workers are waking up to the fact that a proposed hydrocarbon law the Bush administration wants the Iraqi Parliament to pass will effectively place the country’s massive oil reserves in the hands of big US-British oil giants for decades to come.
Many Iraqis are only realizing now what experts have been saying since 2003 that the invasion of Iraq was about oil and not about America’s security. The new law would transfer the majority of Iraq’s oil from the Iraqi government and hand it to multinational oil companies linked mostly to the US, though the British would have a slice of the action. There would be no benchmarks establishing how much of their profits oil companies would have to invest in Iraq.
The law would not pass muster in any other oil producing country in the world, especially one with the huge reserves Iraq has. It was drawn up by Bearing Point, a Virginia company that received a $240 million contract within weeks of the Iraq invasion to work with the Iraqi oil ministry. At that time, Ahmed Chalabi, the darling of the Washington neocons was heralding a new Iraq in which an American-led group of oil companies would take over and manage the country’s oil reserves. Chalabi was not alone. In 2004, as L Paul Bremer was vacating Iraq where he had been virtually its ruler, he passed the baton for economic reconstruction, in particular Iraq’s oil future, to a former CIA source, Iyad Allawi and his close associate, Adel Abdul Mahdi. Within months Allawi presented proposals for a new petroleum law to Iraq’s Supreme Council, calling for an end to nationalization and the privatization of the oil industry. To close observers it was clear Allawi was the US man chosen to do its bidding in the critical area of oil. Since then the US has put continuous pressure on the Iraqis to privatize their oil. A draft of the new law was shown to the Bush Administration in 2006 but the Iraqi parliament was not allowed to see it until February this year.
This is no surprise to those who have closely studied the Bush Administration’s bogus case for going to war and more importantly the activities of vice president Dick Cheney, beginning with his first ten days in office in January 2001. He was the number two in an Administration staffed mostly by former oil company executives who understood the importance of Iraq’s oil reserves. None was better informed or better placed to plan to control those reserves than Cheney.
During week two of the Bush presidency, Cheney set up the National Energy Policy Development Group that later became known as the vice-president’s “Energy Task Force.” He has since used executive privilege to hide the activities of that that group and its meetings with heads of the big energy companies in the US. But Freedom of Information Act searches have provided us with insights into what Cheney was up to in prior to, and after 9/11. He was drawing up lists of companies and countries keen to get their hands on Iraq’s oil. The lists were entitled “Foreign Suitors for Iraqi Oil Contracts as of March 5, 2001.”
On his mind would have been the following concerns. If the oil embargo imposed on Iraq after the 1991 Gulf War was lifted there were plenty of suitors in the wings anxious to control the exploration and production of Iraq’s oil and its huge reserves. Cheney knew Saddam had no love of the US and would freeze out US companies. The winners would be Russia, China and France, especially Russia that had signed billion dollar deals with Saddam. The losers would be US- based Exxon Mobil and Chevron Texaco, as well as BP Amoco and Dutch Shell in the UK.
Cheney knew Iraq possessed oil riches beyond belief. It had enough oil for the US to break the Saudi-OPEC stranglehold on world oil prices. Iraq’s oil was high grade and easily refined. More importantly Cheney knew it would be cheap to extract it from the ground because most of it was in shallow wells 1,400 to 2,000 feet beneath the desert floor. In total, the reserves were reckoned to be several hundred billion barrels with at least 120 billion barrels already located. There was enough to put Iraq in the top tier of oil producers for well into the latter half of this century.
An article by James A. Paul in Global Policy Forum in December 2002 contained observations that were to prove prescient considering they were written before the Iraq invasion. Paul wrote:
“Oil analysts believe a US-controlled Iraqi government would quickly make deals with the companies for privatized production. Such deals though possibly agreed in advance of the war would be justified by the new government on the basis that only the companies would be able to quickly resume post war production…”
In other words, Paul was saying that after an invasion the US would have enough troops on the ground to ensure oil production was brought up to speed and oil facilities protected. But he went further and predicted that US control of Iraqi oil would have a strategic impact in terms of global oil production because Iraq would no longer be under the Arab umbrella of OPEC. He hinted that the US after an invasion might pull Iraq out of OPEC:
“OPEC would be weakened by the withdrawal of one of its key producers from the OPEC quota system. Indeed OPEC might face the paradox that a US military government of occupation in Iraq would be an OPEC member. Alternatively such a government might pull out of the producers’ cartel.”
Paul also foresaw a take-over of Iraq’s oil as prelude to the US putting pressure on Kuwait, Iran and Saudi to de-nationalize their oil companies and allow US-UK oil giants a 50-50 split in the production and profits from their oil. Privatization of Iraq’s massive reserves, he believed, could be manipulated to destabilize the big Arab players by temporarily lowering the price of oil.
During the planning for the invasion of Iraq the Cheney-Bush focus on Iraq’s oil did not diminish. Evidence of that can be seen in the fact that the State Department was tasked to examine ways to control Iraqi oil post invasion. In the four months leading up to the beginning of the war, the State Department’s Oil and Energy Working Group burned its own midnight oil planning for the future of Iraq’s energy reserves. The Group looked at all the data on the country oil sites and agreed with Dick Cheney’s secret energy committee that Iraq “should be opened to international oil companies as quickly as possible after the war.” By international oil companies, the State Department meant US and British oil giants.
The State Department’s planners devised a method of privatization through what they called PSAs - Production Sharing Agreements. They were in effect contracts whereby big oil companies would get the most profitable deals. The Iraqi government would still have ownership but exploration and production would be in the hands of US and British multinationals. According to oil experts familiar with PSAs they are only used in relation to 10% of world oil because they are weighted in favor of private companies and not in favor the nations who own the oil.
Everything was going Cheney’s way well before the invasion and it only got better a month after the war began when a new Iraqi oil minister was appointed by the US Coalition Provisional Authority chief, L Paul Bremer. The minister quickly announced that Iraq would tear up all previous oil contracts agreed by Saddam, leaving the “Suitors” - Russians, Chinese and French - out in the cold. During what became a bizarre post invasion period, CPA chief Bremer, sometimes known as “Gerry” ran Iraq like ancient Rome, hiring and firing at will, while making sure he chose the right Iraqis to handle the oil issue. One of his appointees, Adel Abdul Mahdi, announced at the end of 2004 that a new petroleum law would open up Iraq to foreign oil companies. Mahdi pointed out that American oil companies and their investors in particular would be heartened with that prospect.
A proposed new law - the one now before the Iraqi parliament - began to take shape and at its core were recommendations that had come from another of Bremer’s appointees, the former CIA asset, Iyad Allawi. He had cleverly drawn up a plan to turn over all oil sites not under development to US oil companies, leaving 17 developed sites to be controlled by a future Iraqi government. Foreign oil companies would be left controlling over 80% of Iraq’s oil, amounting possibly to more than 200 billion barrels.
Iraqi oil workers and senior members of the Shiite majority are beginning to realize what has been happening under their noses. The Kurds were the first to spot the subterfuge and have threatened to block the new law but their efforts may have come too late. White House pressure on the Nouri al-Maliki government to pass the oil privatization law has been unrelenting. After all, oil was the prize that sparked the invasion and there will be no draw down of US troops until Bush and Cheney are sure Iraq’s oil production and exploration are in the hands of US-British oil giants.