A war for oil #2: Iraq's new deals make case for invasion
Planning for the Iraq invasion started much before the real attack, as soon as Iraq signed oil contracts with Russia, China and France. The US leaders and US oil companies started feeding false information to media about Saddam Hussain's WMD. Even how to share the spoils of the war in post-Saddam Iraq was elaborately discussed.
Two tectonic shifts in the oil business had been happening in the Middle East – with the Islamic revolution in Iran in 1979, its oil fields slipped out of the US oil companies, and in 1997 Iraq signed oil contracts with French, Russian and Chinese firms.
Now that was a big shock for the US and the UK because Iraq holds the world's second largest oil reserve outside Saudi Arabia. And so the US government and the oil interest tied up to make a case for invading Iraq.
Washington's war machinery started rolling. As soon as the contracts were signed, the American forces started limited military skirmishes against Iraq under the names of Operation Phoenix Scorpion and Operation Desert Thunder.
And in 1998, the US and the UK jointly launched Operation Desert Fox to bomb Iraq for four day on the alibi that Iraq was not obeying the UN in inspection of its so-called WMD.
The CIA started feeding fake news to the media and the Congress about Saddam's possession of Weapons of Mass Destruction (WMD). A weapon of mass destruction is a nuclear, radiological, chemical, biological or other weapon that can kill and bring significant harm to a large number of humans or cause great damage to human-made structures (e.g. buildings), natural structures (e.g., mountains), or the biosphere.
As specters of massive damage to life and property loomed over the world's collective minds, the US president asked the Pentagon to plan a variety of military options, ranging from limited strikes to full-scale war.
As George Bush entered the Oval Office in January 2001, his vice president Dick Cheney chaired a hastily-organized National Energy Policy Development Group to study the challenge posed by French, Russian and other companies to show how Iraqi oil had gone out of US hands.
In a concerted effort, influential oil industry publications like Platts and Oil and Gas Journal and various highly leveraged think-tanks started voicing the urgency for action to make sure US oil company interests would be safeguarded in post Saddam Iraq.
Meanwhile, the Bush administration, the oil executives and the Iraqi dissidents continued to meet to discuss over post-war oil in Washington, London, Houston and elsewhere.
As all preparations were complete, the invasion began on March 20, 2003. Baghdad shuddered in the shock and awe of the Anglo-American assault. On 9 April, Baghdad fell, ending Saddam's 24-year rule.
President Bush immediately appointed Phil Carroll, a former high-ranking US oil executive, to take control of Iraq's oil industry and on May 22, Bush issued an executive order, giving immunity to oil companies for all activities in Iraq. On the same day, the US and the UK pressed the UN Security Council into lifting its sanctions on Iraq so that Anglo-American companies could now sell oil and the proceeds used for "reconstruction".
The reconstruction is another story whereby hordes of private companies flocked into Baghdad and bagged billions of dollars of deals. Lord Chilcot, in his most revealing report on the Iraq war, has written that in the first year of the Coalition Provisional Authority (CPA), a transitional government established in Iraq after the ouster of Saddam, alone, more than 60 UK companies had bagged contracts worth $2.6 billion.
The Guardian has reported that during the six years that British troops remained in Iraq, the UK's policy regarding oil was to transfer oil from public ownership to multinational companies and to ensure BP and Shell got a large share of it.
FREE FOR ALL
The big five oil majors that control most of the world's supply have all along denied their collusion with the US and UK governments in the war. But documentary evidences say otherwise.
Greg Muttitt, a senior advisor to Oil Change International and an author of his book Fuel on the Fire: Oil and Politics in Occupied Iraq has obtained over a thousand documents under Freedom of Information law that show how civil servants, ministers and BP and Shell officials held several meetings prior to the invasion to discuss the future of Iraq's oil. The companies were eager to get a slice of Iraq's oil which was nationalized in 1972 thus depriving the companies from unbridled profiteering.
Following a meeting with BP officials, a UK foreign office memorandum on November 13, 2002 said, "Iraq is the big oil prospect. BP are desperate to get in there and anxious that political deals should not deny them the opportunity to compete. The long term potential is enormous."
Many of the US civil and military leaders including vice president Dick Cheney were quite forthcoming in admitting that the war was about oil and that Iraq oil mattered a lot.
Cheney kind of kicked off the whole war fever in a speech to the Veterans of Foreign Wars in which he said Saddam's weapons of mass destruction threatened the flow of oil from the region.
CNN quoted Gen. John Abizaid, former head of US Central Command and Military Operations in Iraq, in 2007 as saying: "Of course it's about oil; we can't really deny that."
Former Federal Reserve Chairman Alan Greenspan in his memoir wrote: "I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil."
CNN quoted then Defense Secretary Chuck Hagel saying in 2007: "People say we're not fighting for oil. Of course we are."
In 1998, Kenneth Derr said, "Iraq possesses huge reserves of oil and gas-reserves I'd love Chevron to have access to." Today it does.
The plan for capturing Iraq's oil began much earlier than the actual invasion started. Within a week of Bush's first term, the National National Energy Policy Development Group, chaired by Dick Cheney, was formed to plan America's energy future. Iraq's oil fields, which were then off-limits to American oil giants, were of special focus in the discussion.
This followed the planning for an invasion. Bush's first Treasury secretary Paul O'Neill said in 2004: "Already by February (2001), the talk was mostly about logistics. Not the why (to invade Iraq), but the how and how quickly."
The State Department's Future of Iraq Project's Oil and Energy Working Group met from February 2002 to April 2003 and agreed that Iraq "should be opened to international oil companies as quickly as possible after the war."
As soon as the war ended, Iraq quietly passed a law the draft of which very few within the Iraqi government had seen. It opened up the nationalised oil sector and gave unprecedented advantage to the oil companies. In radical contrast with norms, production sharing contracts were signed with oil majors such as BP, Shell, Exxon and Chevron that gave them 30 years – an unusually long period of agreement -- to extract Iraq's oil.
Usama al-Nujeyfi, a member of the parliamentary energy committee, even quit in protest over the law, saying it would cede too much control to global companies and "ruin the country's future."
Iraq's oil production has increased by more than 40% in the past five years to 3 million barrels a day (still below the 1979 high of 3.5 million set by Iraq's state-owned companies), but a full 80% of this is being exported out of the country while Iraqis struggle to meet basic energy consumption needs.
US and UK leaders as well as the oil company bosses have all along denied that oil was a major cause for the invasion although their actions contradicted their statements. It was clear from the beginning that they had planned to use Iraq's oil revenues for what they called as "reconstruction of Iraq" once the war was over. It was then not surprising that the American and the British firms bagged the "reconstruction" contracts.
Tony Blair, then prime minister of the UK, on March 18, 2003, told the House of Commons that, "...the oil revenues, which people falsely claim that we want to seize, should be put in a trust fund for the Iraqi people administered through the UN. The United Kingdom should seek a new Security Council resolution that would affirm the use of all oil revenues for the benefit of the Iraqi people."
However, as the war ended, Britain co-sponsored a resolution in the UN which gave the US and UK control over Iraq's oil revenue. Part of the revenue was to be deducted to continuously pay compensation for the invasion of Kuwait in 1990.
The law puts no restrictions on the foreign companies taking their profits out of the country without paying any tax. The companies will get a 12.5 percent royalty tax. Not only that, the most liberal arrangement also stipulates that once the companies have recouped their costs of production, they are allowed to retain 20 percent of the profits, a term that the Centre for Global Energy Studies has termed as a large amount as compared with the standard 10 percent practice.
Long contract periods are allowed to oil companies working in difficult terrains such as the Amazon and North Sea and cannot be applicable for Iraq where oil is easily available and where recovery rates are as high as 60 percent.
James Paul of Global Policy Forum, an advocacy group, has said about Iraq: "...there are supergiant fields that are completely mapped, there is absolutely no exploration cost and no risk." And so the high concession for the oil companies cannot be justified.
Before the invasion, one of the major tasks set for the US troops was to secure the oil facilities. Following the fall of Saddam, while the whole country sank into chaos and looting, only the oil ministry was heavily guarded by American troops.