Digging deep

Al Dora oil refinery complex in Baghdad. Active intervention of the Bush administration reportedly facilitated the issue of no-bids contracts to Western companies.

The argument that the war against Iraq was waged to spread democracy and combat terrorism had very few takers from the outset. Now even the George Bush administration has given up this pretence and gone all out to secure the lion’s share of the country’s hydrocarbon resources. Four major Western oil companies – Exxon Mobil, Shell, BP and Total – are on the verge of signing a no-bids contract to exploit Iraq’s vast oil resources. Under the terms of the proposed contract, Shell will gain access to the northern Kirkuk oilfield, BP will operate in the Rumaila oilfield in the south of the country and Exxon in the Zubair oilfields near Basra. According to The New York Times and other American newspapers, the deals have been facilitated by the active intervention of the Bush administration.

Iraq’s oil industry was nationalised by Saddam Hussein in 1972, when Western companies that had monopolised its oil sector were booted out and Iraq’s oil bounty came under the total control of the state for the first time. The oil revenues were used to transform Iraq into one of the most prosperous and developed countries in the region. After Iraq successfully nationalised its oil industry, other countries followed suit. Today, there are very few countries in the world that allow Western oil companies a free hand in exploiting their oil resources. Venezuela and Bolivia recently forced the oil companies to renegotiate their contracts so that the profits could be divided on a 60:40 basis. Russia and Kazakhstan have also renegotiated their contracts with the big oil companies.

The new contracts being contemplated for Iraqi oil, on the other hand, include a provision that could allow the Western companies to garner huge profits. The oil companies will be paid in oil, not cash. Speaking to Newsweek magazine in November last year, the chief executive of Exxon, Lee Raymond, was full of praise for Iraq’s oil-producing potential. He said that Exxon was always aware of this fact. “We were part of the consortium, the four companies that were there” until the early 1970s. American officials claim that the “no-bid” contracts are a “bridging mechanism” to bring modern technology into Iraqi oilfields.

In actual fact, the Bush administration is trying to turn the clock back. The same old companies that were shown the door by the Iraqi people are poised to return. Derrick Z. Jackson, writing in The Boston Globe, observed that it had taken “five years, the death of 4,100 soldiers, and the wounding of 30,000 more to make Iraq safe for Exxon”. More than a million Iraqis have been killed since the American invasion and occupation. Another five million have been turned into refugees.

Forty other companies from all over the world, including those from Russia, India and China, wanted to bid for exploration rights but were not allowed to compete in the new bidding process. Oil companies belonging to these three countries had signed memorandas of understanding with the Iraqi government before the American invasion. Many Iraqis allege that Iraq’s Oil Ministry is supervised by the American advisers who have been around since the occupation began in 2003. The advisers ensured that the claims of Russian and Indian companies were overlooked.

Iraqi officials claim that the Western oil companies have been recalled to boost oil production and attract much-needed modern technology and expertise. It is true that war and international sanctions have severely hampered oil production. All the same, in the mid-1990s Iraq was producing more oil than it is today.

The people of Iraq remember that after the fall of Baghdad, the invading force thought it fit to secure only the Oil Ministry. All other Ministries were left to the mercy of rampaging mobs. Two years before the invasion of Iraq, senior oil industry figures and foreign policy advisers told the Bush administration that the United States would remain a “prisoner of its energy dilemma” as long as Saddam Hussein was in power.

A report brought out jointly by the James A. Baker Institute of Policy Studies and the U.S. Council of Foreign Relations in April 2001 recommended that the U.S. administration should take action, including military action, against the government of Iraq. “Iraq remains a destabilising influence to the flow of oil to international markets from the Middle East [West Asia]. Saddam Hussein has also demonstrated a willingness to threaten to use the oil weapon and to use his own export programme to manipulate the markets. Therefore, the U.S. should conduct an immediate policy review towards Iraq, including military, energy, economic and political/diplomatic assessments,” the report concluded.

The advisory committee that helped prepare the report included representatives of companies such as Shell, Chevron Texaco and BP. These are the companies that are poised to reap the oil bonanza from the “no-bid” contracts awarded by the rubber-stamp government. Iraq sits on an estimated 115 billion barrels of oil and also has an estimated 112 trillion cubic feet of natural gas reserves.

The Wall Street Journal, an ardent apologist for the Bush administration, reported in January 2003 that America’s oil industry chiefs had met Vice-President Dick Cheney to plan the privatisation of Iraq’s oil industry. “Facing a possible war with Iraq, U.S. oil companies are starting to prepare for the day when they may get a chance to work in one of the world’s most oil-rich countries,” the paper reported. Cheney, in a 1999 speech he delivered when he was heading the huge energy services corporation Halliburton, predicted that the U.S. would need an additional 50 million barrels of oil a day by 2010. He said that West Asia, “with two-thirds of the world’s oil and the lowest cost, is still where the ultimate prize lies”.

It was, therefore, not a surprise that in April 2003, soon after the fall of Baghdad, the U.S. State Department recommended that production sharing arrangements should be put in place so that the Western oil companies could immediately start work in Iraq. In his memoir published last year, Allan Greenspan, former Chairman of the Federal Reserve, admitted that “everyone knows: The Iraq War is largely about oil”.

Western oil companies have already signed lucrative contracts in the Kurd-dominated areas of northern Iraq despite the central government in Baghdad deeming such deals as illegal. The government in Baghdad has been trying to pass a “national oil law”, but it has been stymied by the Kurds running their autonomous statelets in the north and by Sunni and Shia parties opposed to the American occupation. Since 2003, the Kurds have signed more than 20 production-sharing agreements, most of them with Western companies.

Many American politicians have protested against the controversial “no-bid” oil deals. Democratic Senators John Kerry, Charles Schumer and Claire McCaskill wrote a letter to Secretary of State Condoleezza Rice urging her to block the contracts. Saying the agreements could “fan the perception that the U.S. involvement in Iraq was motivated by oil”, they urged the Bush administration to postpone the signing of them until the Iraqi government succeeded in passing the long-delayed national hydrocarbon law.

One important reason why Iraqi legislators are taking their time to pass the law is the fear that their oil and gas resources will be once again be monopolised by Western companies. Frederick Barton, senior adviser of the Centre for Strategic and International Studies, a conservative think tank, told The New York Times that the U.S. pretended that “oil is not the centrepiece of our motivation, yet we keep confirming it is”.

There is already a popular backlash in Iraq against the “sweetheart deals” being offered to the Western companies. The Iraqi government had earlier announced that the “short-term” deals with the Western companies would be signed by the end of June. That deadline has passed. Iraqi Oil Minister Hussein al-Shahristani told the media in the last week of June that the government had not finalised any agreement with the foreign companies “because they refused to offer consultancy based on fees as they wanted a share of the oil”. He now says that the government wants a “service contract, not a production-sharing contract”.

Shahristani went on to add that “there is no need to share Iraq’s oil with anybody”. At the same time, the Minster confirmed that the negotiations for the “no-bid” contracts were continuing. •