Are U.S. Oil Companies Going to "Win" the Iraq War?

Contrary to the Bush administration's claims, Iraq does not need foreign oil corporations in order reap the benefits of its oil.
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"The U.S. invasion of Iraq was not preemption; it was ... an avaricious,
premeditated, unprovoked war against a foe who posed no immediate
threat but whose defeat did offer economic advantages." - Michael
Scheuer, the CIA's senior expert on al-Qaeda until he quit in disgust
with the Bush administration, in Imperial Hubris.

Remember oil? That resource we didn't go to war for in Iraq? Well,
you'll have a tough time convincing anyone in Iraq of this particular
claim if a new oil law set to go before the Iraqi Parliament within
weeks (or even days) becomes the law of the land.

On Monday, the Bush administration and U.S. oil companies came one
step closer to "winning" the war in Iraq when the Iraqi Cabinet passed
this new national oil law.

The brainchild of the Bush administration and its corporate allies,
the law is the smoking gun exposing Bush's war for oil.

The Oil Law

If passed, the law would transform Iraq's oil system from a
nationalized model all-but-closed to U.S. oil companies, to a
commercialized model, all-but-fully privatized and opened to U.S.
corporate control.

Before the U.S. invasion of Iraq, U.S. oil companies were shut out of
Iraq's oil industry with the exception of limited marketing contracts.

As a result of the invasion, if the oil law passes, U.S. oil companies
will emerge as the corporate front-runners in line for contracts
giving them control over the vast majority of Iraq's oil under some of
the most corporate-friendly terms in the world for twenty to
thirty-five years.

The law grants the Iraq National Oil Company oversight only over
"existing" fields, which is about one-third of Iraq's oil. Exploration
and production contracts for the remaining two-thirds of Iraq's oil
will be opened to private foreign investment. Neither Iraqi public
nor private oil companies will receive any preference in contracting

The contracts allow for foreign companies to take ownership of Iraq's
oil fields without actually having to get to work for as long as seven
years. Thus, the companies can take advantage of the incredibly weak
negotiating position of the Iraqi government at a time of foreign
occupation and civil war, while simultaneously being able to "ride
out" the current "instability" in Iraq.

Foreign companies do not have to reinvest any of their earnings in the
Iraqi economy, hire or train Iraqi workers, transfer useful
technology, or partner with Iraqi companies.

The exact contract model is yet to be determined, but it appears that
Production Sharing Agreements (PSAs) are yet again on the table.
These are the contract-darlings of international oil companies that
grant foreign companies greater control, profits, and longer contract
terms than the contracts preferred by the majority of the world's oil
countries. In fact, PSAs are only used in about 12 percent of the
world's oil.

If the new law passed, Iraq's oil system would be utterly unique in
the Middle East and in virtually any oil rich nation. For example,
Kuwait, Iran and Saudi Arabia all maintain nationalized oil systems
and have outlawed foreign control over oil development. They all hire
foreign oil companies as contractors to provide specific services, as
needed, for a limited duration, without giving the foreign company any
direct interest in the oil produced. Iraq, freed from the pressure of
a foreign occupation, would likely do the same.

The Propaganda

Contrary to the Bush administration's claims, Iraq does not need
foreign oil corporations in order reap the benefits of its oil. Prior
to the U.S. invasion, Iraq produced an average of 2.5 million barrels
of oil a day. Since the invasion, the Iraqis have averaged
approximately 2.2 million barrels of oil a day. This amount has
dropped recently due to the surge in violence to about 1.7 million
barrels a day. Because Iraq's oil is the cheapest in the world to
produce, only about sixty cents a barrel, and oil is selling today at
$61 per barrel - the return on any investment is enormous. At its
current low rate of production, Iraq is expected to generate more than
$30 billion from its oil this year alone - more than enough to keep
the industry running and the economy stable.

The administration has been selling the law as a way to bring
increased equality and stability to Iraq. It is correct on one point.
The law does introduce a very equitable distribution of Iraq's oil
revenues from the central government based on population. However,
the benefits of this new provision are dramatically reduced if the
majority of Iraq's revenues are going overseas.

The law is likely to bring far more instability to Iraq. In fact, many
Iraqi oil experts are already referring to the draft law as the "Split
Iraq Fund," arguing that it facilitates plans for splitting Iraq into
three ethnic/religious regions. The experts believe the law undermines
the central government and shifts important decision-making and
responsibilities to the regional entities. This shift could serve as
the foundation for establishing three new independent states, which is
the goal of a number of separatist leaders.

The law opens the possibility of the regions taking control of Iraq's
oil, but it also maintains the possibility of the central government
retaining control. In fact, the law was written in a vague manner to
help ensure passage, a ploy reminiscent of the passage of the Iraqi
constitution. There is a significant conflict between the Bush
administration and others in Iraq who would like ultimate authority
for Iraq's oil to rest with the central government and those who would
like to see the nation split in three. Both groups are powerful in
Iraq. Both groups have been mollified, for now, to ensure the law's

But two very different outcomes are possible. If the central
government remains the ultimate decision-making authority in Iraq,
then the newly established Iraq Federal Oil and Gas Council will
exercise power over the regions. And if the regions emerge as the
strongest power in Iraq, then the Council could simply become a silent
rubber stamp, enforcing the will of the regions. The same lack of
clarity exists in Iraq's constitution.

What is clear, however, is that the foreign oil corporations do have
their rights clearly established. They have the right to explore,
produce, control, and have guaranteed revenue from the second largest
oil reserves in the world.

Of course, we would expect very little in increased stability to
follow from a U.S. corporate oil-grab of Iraq. The American who will
pay the heaviest price are likely to be U.S. troops on the ground in

Pre-War Planning

We all know that the Bush administration began planning for the Iraq
war well before the September 11 terrorist attacks. In fact, former
Treasury Secretary Paul O'Neil has explained that by February 2001,
the administration was well passed debating whether or not to attack
Iraq, but rather discussing the logistics of how to invade.

Few people know that just month later, in March 2001; Cheney's Energy
Task Force was working on a series of maps and lists outlining Iraq's
entire oil productive capacity and the foreign companies lined-up to

The task force included representatives from all of the major U.S. oil
and energy service companies, including Halliburton, Chevron, and
ConocoPhillips. In addition to maps, they compiled two lists entitled
"Foreign Suitors for Iraqi Oilfield Contracts as of 5 March 2001" that
listed all the companies - none of them American - that were in
negotiations with, or had already signed, oil contracts with Saddam

Because of the sanctions against Iraq, however, none of the contracts
were actually in force. But the writing was on the wall. Global
public opinion had turned against the sanctions. If the sanctions
were removed while Saddam Hussein was in power, oil companies from
China, Russia, France, and elsewhere would get their hands on Iraq's
oil, while U.S. companies would be left out.

The U.S. State Department's Oil and Energy Working Group began meeting
in December 2002. By April 2003, the group recommended that Iraq
"should be opened to international oil companies as quickly as
possible after the war," using PSAs.

Since then, the Bush administration has invaded Iraq, ousted Saddam
Hussein, put the pre-existing oil contracts on hold, and has nearly
succeeded in a four-year long venture to restructure the Iraqi oil
industry for itself and its corporate allies.

Iraqis Shut-Out

Most Iraqis, including, until very recently Iraqi Parliamentarians,
have remained in the dark about the new oil law. Iraq's oil workers
had to travel to Jordan to learn details of the law from the
London-based research organization Platform. As a result, in September
2006, the nation's five trade union federations--between them
representing hundreds of thousands of workers--released a public
statement rejecting "the handing of control over oil to foreign
companies, whose aim is to make big profits at the expense of the
Iraqi people, and to rob the national wealth, according to long-term,
unfair contracts, that undermine the sovereignty of the state and the
dignity of the Iraqi people." They demanded a delay in consideration
of any law until all Iraqis could be included in the discussion.

It's simple: the Bush administration and Big Oil are trying to get the
best deal and the most oil possible out of a war-ravaged and desperate
people. They are holding 25 million Iraqis - and 150,000 American
troops -- hostage to their oil agenda.

There is time, if we shine enough sunlight, to expose the oil agenda
driving the war and support Iraqis who believe that now is not the
time for their government to rush into contracts that will lock in the
fate of their most valuable resource for a generation.

Oil Change International, Global Exchange, and others organizations
and communities across the United States and around the world are
coming together in protest events on March 17-19, to mark the 4-year
anniversary of the Iraq war.

They are urging environmentalists, climate justice, and peace
activists to join together in protests at the headquarters and gas
stations of the oil companies leading the charge in Iraq: Chevron,
ExxonMobil, Marathon, ConocoPhillips, Shell and BP. Learn more at

In the Bay Area, activists are planning a Rally, Protest, and
Nonviolent Direct Action at Chevron's World Headquarters on March 19
from 7:00-11:00am in San Ramon. Visit for details.

An international network of groups is organizing protests under the
heading "Hands Off Iraq's Oil!" Visit their website

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