Who Will Possess Iraq’s Oilfields?
By Karen Button
-- -- A friend
wrote recently from Occupied Iraq that with the December
elections over Iraq had truly been stolen. I thought perhaps
they were referring to the stamp of legitimacy elections would
give Iraq’s American-approved government, but they were actually
talking about the final pieces falling in to place for those
who’ve long coveted Iraq’s oilfields.
The "how" begins with Iraq’s new constitution; written largely
behind closed doors and with tremendous US influence, it was
voted into place during October’s referendum. Cleverly, it gives
the impression that Iraq’s oil will remain in the hands of its
people by guaranteeing "oil and gas is the property of all the
Iraqi people" and that revenues from "current fields" will be
fairly distributed across the provinces. The key phrase is
"current fields;" in the following section the document then
requires all future exploration use "the most modern techniques
of market principles and encouraging investment." The modern
investment model being promoted in Iraq during these secret
meetings is production sharing agreements, or PSAs.
Mostly political in nature, PSAs maintain the technicality—and
just as importantly, the appearance—of keeping oil ownership in
government hands, yet the majority of profits goes to private
companies. These agreements are generally used in countries
where oil is either hard to extract and therefore expensive, or
where reserves are small enough that companies may be unwilling
to invest. PSAs guarantee a high profit margin, providing an
enticement to otherwise uninterested oil companies. In Iraq,
where extracting oil is not technologically challenging and
reserves are huge, PSAs don’t make sense—unless they are
intended to benefit someone other than Iraqis.
Oil driving Iraq policies
While world demand for oil increases, supplies continue to
dwindle. In fact, many believe world oil reserves has already
reached its peak and is in decline. Numerous citizen groups and
non-governmental organisations realise the world must
revolutionize its main energy source from fossil fuel to
something ecologically sustainable. Yet, with the world’s
economic stability deeply linked to oil and the corporations who
control it, the fight for possession is fierce. And often
deadly…as is the case in Iraq.
An oil company’s economic health is based on its reserves,
listed as part of its assets. The problem, says James Paul,
executive director of the Global Policy Institute, is that due
to these dwindling supplies, there are not enough reserves for
these corporations to maintain economic health. "Oil companies
cannot replace their reserves. They are frantically looking all
over the world. The companies know oil is running out in the
world, they just don’t say it. Imagine if oil is $100 a barrel
and imagine if your company doesn’t control it."
Then, imagine if those same companies know where to find it.
Iraq has the planet’s second largest known oil reserves. Its
untapped fields account for nearly two-thirds of Iraq’s known
reserves, estimated to be at least 115 billion barrels. Its al-Majnoon
field—a "super-giant" in geological terms—holds an estimated 20
million barrels alone. And that one field, says, Paul would
double the oil giant Exxon’s reserves in one fell swoop. He
maintains that the cost to produce oil in Iraq is cheap—about
$1/barrel—which adds significantly to the profit margin. "If you
figure oil at $50 a barrel and multiply it out," Paul explains,
"it’s a total profit spread of $1 trillion. That’s more than all
companies put together since John D. Rockefeller." As of this
writing, oil stands at $61/bbl; it hit $68/bbl last week and is
expected to climb again.
Before Saddam Hussein nationalized its fields in 1972, Iraq’s
oil was divided according to agreements the British had made
during their occupation of Iraq in the early part of the
The companies, Shell and Anglo-Persian (which later became BP)
had about 50 percent, the French company Foflaq (which later
became Total) had about 25 percent, and it was intended, says
Paul, that the remainder stay in Iraq’s hands. However, "in the
1920s Churchill convinced the British to give some [percentage]
to the Americans, or they would always have trouble." So, Iraq’s
portion of their own oil went to a consortium of American
companies that included Exxon and Unocal. Now, says Paul, "these
companies want back—Shell, BP, Exxon, Chevron—would get the
Iraqi’s organize against globalisation
Iraqi’s though, have no desire to privatise their oilfields. In
fact, Iraq’s oil union is quite strong. They reorganised after
the US-led invasion by August 2003 into ten state-owned
companies in southern Iraq, forming the General Union of Oil
Employees (GUOE). In the following months GUOE was instrumental
in assisting other labor unions to form. Though GUOE remains
independent, other unions have now joined to form the Iraqi
Federation of Trade Unions (IFTU). The newly born labor movement
is strongest in southern Iraq, but is beginning to gather
strength across the country. Now, they are fighting hard for
Iraqi jobs—and against globalisation.
Iraqis know full well that oil is the main reason for the US
invasion and remains the central project in globalising Iraq’s
Crude Designs, a report published by the UK-based
non-governmental organisation Platform and the US’s Global
Policy Institute, oil analyst Greg Muttitt says if current plans
are approved, Iraqi’s will "lose control of more than 85 percent
of their oil resources to foreign multinationals."
The report, published in November, is well-known and hotly
debated in Iraq. At the end of November Al-Jazeera news hosted a
debate between Muttitt and Ahmad Chalabi, who, along with other
interim-government members, participated in State Department
hosted talks about PSAs.
According to Crude Designs, production-sharing agreements
are "beyond the reach of Iraqi courts, public scrutiny or
democratic control." Because they are "subject to commercial
confidentiality provisions, PSAs are effectively immune from
public scrutiny and lock governments into economic terms that
cannot be altered for decades.
"In Iraq’s case, these contracts could be signed while the
government is new and weak, the security situation dire, and the
country still under military occupation. As such the terms are
likely to be highly unfavourable, but could persist for up to 40
years. At an oil price of $40 per barrel, Iraq stands to lose
between $74 billion and $194 billion over the lifetime of the
This is what Iraq’s unions are fighting against. In an excellent
article published by the International Longshore and Warehouse
Union—the first to call for an end to the US occupation—senior
fireman Abdul Faisal Jaleel, from the Basra refinery is quoted.
"We reject foreign investment. We want to keep our own oil
revenues and use them to develop our country with our own
Last June, at the invitation of US Labor Against the War, six
members from GUOE, IFTU, and the Federation of Workers’ Councils
and Unions of Iraq toured 25 US cities, educating their union
counterparts on the real costs of the occupation. Member unions
were hoping to pressure the AFL-CIO into adopting a stance
against the occupation. In October, they were successful. For
the first time in 50 years, the AFL-CIO spoke against US
military action. It called on the US government to bring the
troops home "rapidly" and demanded Iraqi "workers be granted
internationally recognized labor rights to organize free of
interference from government and employers, and to bargain
Failing economy used to pressure for globalisation
In December though, Iraq’s interim government claimed its debt
too great to rebuild the country and accepted a loan from the
International Monetary Fund (IMF). Questions remain. Why would
Iraq be forced to rebuild its own country after a foreign
invasion and where have all those billions earmarked for
To summarize—since the issue is far too complex address here—the
Coalition Provisional Authority (CPA) has squandered billions of
US tax-payer dollars intended to reconstruct destroyed Iraq and
given in no-bid contracts to companies like Halliburton and
Bechtel. The companies, under no obligation to account for spent
funds, have been caught overcharging and wasting millions.
Meanwhile, $6 billion of Iraq’s money leftover from the United
Nations Oil for Food Programme and about $10 billion from frozen
assets and resumed oil exports were transferred into the Federal
Reserve Bank in New York, to be spent by the CPA "in a
transparent manner…for the benefit of the Iraqi people."
Of that $16 billion, $8.8 disappeared while Paul Bremer was
still in charge and to this day remains unaccounted for. Other
funds intended for reconstruction have been diverted to pay for
security; contracted by the US government, Blackwater and other
private "security" companies are in reality
mercenaries-for-hire. Earning up to $5,000/day, they constitute
the second-largest force in the so-called Coalition of the
Some of the story has emerged only because Senator Henry Waxman
has been dogging the Bush administration with ongoing internal
audits. Ed Harriman, in an article in July’s London Review of
Books, follows the audit trail of missing, stolen, squandered
and unaccounted for money that has left Iraq’s financial
situation a shambles. Well-documented, Harriman provides ample
evidence that as Iraq is expected to pay for its own
reconstruction, the country is simultaneously being driven into
impoverishment by the corruption of US officials and their
US-installed Iraqi counterparts.
Following suit, corruption is also rampant in the
American-backed Iraqi government. For example, on 5 February
Iraq’s Public Integrity Commission filed criminal charges
against a member of its parliament for allegedly embezzling
millions of dollars intended to improve security of a key
True to IMF policy, the $685 million loan came with a price;
Iraq was to end oil subsidies and open its economy to private
investment. In response, just after December elections the
outgoing government increased fuel prices nine-fold. The move
stunned Iraqis. Widespread demonstrations followed across the
country; police fired upon a crowd of 3,000 protesters in
Nassiryeh and killed four during riots in Kirkuk.
Iraqis are long used to both food and fuel subsidies and, one
can argue, with 70-80 percent unemployment, are surviving in
part because of them. As Iraqis come to realise how IMF policies
further squeeze their lives this can only spell additional
disaster. As The LA Times notes "Over the summer, gas was
selling for about five cents a gallon. Now it’s about 65 cents,
and at the end of the price increases, gasoline will cost
about…$1 per gallon."
"This is classic," says Paul, of the Global Policy Institute.
"The IMF always insists on the issue of ending subsidizes, even
bread which is a more basic need. It almost always happens that
riots ensue, governments even fall as a result of these
The US administration, of course, has a different view. US
Treasury Secretary John Snow, quoted in The Progressive, stated
"This arrangement will underpin economic stability and help lay
the foundation for an open and prosperous economy in Iraq."
Though Iraq’s Oil minister, Ibrahim Bahr al-Uloum, quit in
protest, he was back within days and the seemingly immortal
friend of the US, out-going Deputy Primer Minister, convicted
embezzler and falsified-intelligence informant, Ahmad Chalabi is
guaranteed a significant role.
"There has been a tremendous amount of maneuvering. Al-Uloum was
not opposed to PSAs. He participated in the [US] State
Department group that recommended them," Paul reveals. "Chalabi
is asking large sums for himself to do deals with the oil
Ironically, says Paul, "one of Iraq’s biggest crises is being
brought about by shortages in the oil sector when it has the
worlds second or third largest oil reserves."
"Iraq’s debt will [likely] be used to force the government to
sign production-sharing agreements with the multi-nationals,"
Platform’s Greg Muttitt believes.
As Iraq’s standard of living continues to plunge, what remains
for the Bush administration and its friends is sealing the deal.
Yet, Iraqi’s themselves are loathe to this idea and the strength
of their resistance speaks for itself. While the term resistance
is used almost exclusively to describe the fighters, Iraqi
resistance also includes non-violent protests, boycotts, and, of
course, the successful strikes organized by Iraqi labor unions.
Many Iraqis I’ve spoken with are quick to point out Iraq’s long
commitment to taking care of the social sector. Even under a
brutal dictatorship, nationalized oil revenues built hospitals,
universities and factories that were some of the best in the
Middle East. This, prior to the 1980s when Iraq went to war with
Iran and the US-led embargo that defined the 1990s. A return to
those prior days is what many Iraqis are working toward.
As James Paul sums it up "Oil workers are opposed [to
privatization] and are very powerful in these situations; they
are very clear that oil should remain in national hands. They
can’t just kill them all or fire them all. It’s widely known
that these [multinational] companies controlled everything
before. The main theme of their history is related to oil. You
don’t have to be a wide-eyed radical to understand this; every
Iraqi knows that oil is at the center of the war."
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