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Was Iraq invaded to boost oil prices?

Value of Exxon reserves rose by $666bn

By Sherwood Ross
Middle East Times

06/01/07 "MET" --- - CHARLOTTESVILLE, VA, USA -- Iraq was invaded in order to limit its oil production and thus keep world oil prices artificially high, a noted investigative journalist reports.

"Iraq's output in 2003, 2004, and 2005 was less than produced under the restrictive oil-for-food program," writes Greg Palast in his new book Armed Madhouse (Plume). Oil-for-food allowed Iraq to sell 2 million barrels per day during the 1995 to 2003 period.

"Whether by design or happenstance, this decline in [Iraqi] output has resulted in tripling the profits of the five US oil majors to $89 billion for a single year, 2005, compared to pre-invasion 2002," Palast writes.

"When OPEC raises the price of crude, Big Oil makes out big time," says Palast, who has contributed to BBC Television and the Guardian newspapers.

He points out the oil majors are not simply passive resellers of the Organization for Petroleum Exporting Countries (OPEC) production but have reserves of their own which rise in tandem with oil prices.

"The rise in the price of oil after the first three years of the [Iraq] war boosted the value of the reserves of ExxonMobil Oil alone by just over $666 billion," Palast wrote. What's more, Chevron Oil, "where [Secretary of State] Condoleezza Rice had served as a director, gained a quarter trillion dollars in value."

Another big winner in the Iraq war is Saudi Arabia. The war-stoked jump in oil prices, Palast writes, put $120 billion in Saudi Arabia's treasury in 2004, triple its normal take.

Among the big losers have been American motorists, now paying about $3.30 for a gallon (3.8 liters) of gas. The oil price spike has also punished US industry, costing America an estimated 1.2 million jobs. "Higher borrowing costs for business since the beginning of the Iraq war are bleeding manufacturing investment," Palast adds.

Rising oil prices are an anomaly. The world's petroleum reserves have doubled from 648 billion to 1.2 trillion barrels in the past 25 years, Palast reports. According to free market laws of supply and demand, discovery of these immense new pools should cause prices to drop.

Big Oil's interest is in "suppressing production," Palast writes, stating "An international industry policy of suppressing Iraqi oil production has been in place since 1927." Former Iraqi president Saddam Hussein was described as threatening price stability by unilaterally increasing and decreasing production.

Iraq has 74 known oil fields but only 15 are in production and 526 known pools of oil of which only 125 have been drilled. Again, only 15,000 rigs in Iraq are pumping up black gold, compared, for example, to 1 million rigs in Texas.

In 2005, Iraq exported only 1.4 million barrels of oil daily, less than under Saddam, less than half its old OPEC quota, and less than a fourth of its ultimate capacity, Palast reports.

"Though technically owned by the Iraqis through their state oil company, we can expect the [Iraqi] crude to be gathered and controlled downstream by the same old hands, British Petroleum, Chevron, and other IOC's [international oil companies] that first drew that nation's borders, politely fulfilling Iraq's quota assigned by the Saudis, no more, maybe less," Palast writes.

In addition to clapping a lid on Iraqi production, Palast charges the US "promoted sabotage of oil piping, loading, and refining systems in Venezuela" to limit that country's production.

Palast reminds that Venezuela, once the top exporter to the US, broke the back of the 1973 Arab oil embargo by replacing the oil withdrawn by Saudi Arabia. "[Venezuelan President Hugo] Chavez, despised by [US President George W.] Bush, was not likely to save Bush's bacon by busting another embargo. Therefore, Chavez had to go immediately," Palast writes.

Palast says OPEC is a front for the international oil companies. "If oil companies had created this cartel to fix prices, that would have made it a criminal conspiracy - cartels are illegal. But when governments conspire for the same purpose, the illegal conspiracy turns into a legitimate "alliance" of sovereign states. OPEC's government cover makes the price fixing perfectly legal, and Big Oil reaps the rewards."

Palast said Saudi Arabia and other OPEC nations take Americans' money at the pump, and in their heating and electric bills, and use it to buy up US government notes. In 2005, $243 billion in petro-dollars was collected from Americans by OPEC. Foreigners then bought up $311 billion in US government debts, he said.

"All the goodies, from nuclear subs to tax cuts to war in Mesopotamia appear to be 'free' to the taxpayer," Palast writes. "It's all just put on the tab, the national debt, including the interest on it. The actual cash needed to pay for these budget busters is first collected from US consumers via the hidden oil tax for which Mr. Bush takes no blame."

Sherwood Ross is an American reporter who covers political and military subjects. Reach him at sherwoodr1 @ yahoo.com