November 22, 2005
The Independent

Iraq's Oil: The Spoils of War

by Philip Thornton

Iraqis face the dire prospect of losing up to $200bn (£116bn) of the wealth of their country if an American-inspired plan to hand over development of its oil reserves to US and British multinationals comes into force next year. A report produced by American and British pressure groups warns Iraq will be caught in an "old colonial trap" if it allows foreign companies to take a share of its vast energy reserves. The report is certain to reawaken fears that the real purpose of the 2003 war on Iraq was to ensure its oil came under Western control.

The Iraqi government has announced plans to seek foreign investment to exploit its oil reserves after the general election, which will be held next month. Iraq has 115 billion barrels of proved oil reserves, the third largest in the world.

According to the report, from groups including War on Want and the New Economics Foundation (NEF), the new Iraqi constitution opened the way for greater foreign investment. Negotiations with oil companies are already under way ahead of next month's election and before legislation is passed, it said.

The groups said they had amassed details of high-level pressure from the US and UK governments on Iraq to look to foreign companies to rebuild its oil industry. It said a Foreign Office code of practice issued in summer last year said at least $4bn would be needed to restore production to the levels before the 1990-91 Gulf War. "Given Iraq's needs it is not realistic to cut government spending in other areas and Iraq would need to engage with the international oil companies to provide appropriate levels of foreign direct investment to do this," it said.

Yesterday's report said the use of production sharing agreements (PSAs) was proposed by the US State Department before the invasion and adopted by the Coalition Provisional Authority. "The current government is fast-tracking the process. It is already negotiating contracts with oil companies in parallel with the constitutional process, elections and passage of a Petroleum Law," the report, Crude Designs, said.

Earlier this year a BBC Newsnight report claimed to have uncovered documents showing the Bush administration made plans to secure Iraqi oil even before the 9/11 terrorist attacks on the US. . . .

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Enver Masud, "A Clash Between Justice and Greed, Not Islam and the West," The Wisdom Fund, September 2, 2002

Enver Masud, "New Iraq Constitution a Pretext for Exploitation," The Wisdom Fund, September 16, 2003

Lutz Kleveman, "The New Great Game," Guardian, October 20, 2003

Glenn Frankel, "U.S. Mulled Seizing Oil Fields In '73," Washington Post, January 1, 2004

Daniel Howden and Philip Thornton, "The Pipeline That Will Change the World," Independent, May 25, 2005

Francis A. Boyle, "Iraq and the Laws of War," International Clearing House, October 14, 2005

VIDEO: "The Oil Factor: Behind the War on Terror," Democracynow.org, October 22, 2005

[The Kurdistan Democratic Party, which controls a portion of the semiautonomous Kurdish enclave in northern Iraq, last year quietly signed a deal with Norway's DNO to drill for oil near the border city of Zakho.--Borzou Daragahi, "Kurdish Oil Deal Shocks Iraq's Political Leaders: A Norwegian company begins drilling in the north without approval from Baghdad," Los Angeles Times, December 1, 2005]

[The country's financial future will instead be dictated by a new colossal economic occupation, complete with ground forces, tanks, foreign military bases--Joshua Frank, "Let the Drilling Begin," CounterPunch.org, December 28, 2005]

[. . . current Iraqi oil policy will allocate the development of at least 64% of Iraq's reserves to foreign oil companies. Iraq has the world's third largest oil reserves.

Figures published in the report for the first time show:

* the estimated cost to Iraq over the life of the new oil contracts is $74 to $194 billion, compared with leaving oil development in public hands. These sums represent between two and seven times the current Iraqi state budget.

* the contracts would guarantee massive profits to foreign companies, with rates of return of 42% to 162%.

The kinds of contracts that will provide these returns are known as production sharing agreements (PSAs). PSAs have been heavily promoted by the US government and oil majors and have the backing of senior figures in the Iraqi Oil Ministry. Britain has also encouraged Iraq to open its oilfields to foreign investment.

However PSAs last for 25-40 years, are usually secret and prevent governments from later altering the terms of the contract.-- Greg Muttitt, "Crude Designs: The Rip-Off of Iraq's Oil Wealth," carbonweb.org, November 2005]

[ . . . a 323-page plan, which was written by big oil, which is the secret but official plan of the United States for Iraq's oil, written by the big oil companies out of the James Baker Institute in coordination with a secret committee of the Council on Foreign Relations. I know it sounds very conspiratorial, but this is exactly how they do it. It's quite wild. And it's all about a plan to control Iraq's oil and make sure that Iraq has a system, which, quote, "enhances its relationship with OPEC." In other words, the whole idea is to maintain the power of OPEC, which means maintain the power of Saudi Arabia.Greg Palast, "Armed Madhouse," democracynow.org, May 15, 2006]