Will Bush's Oil Agenda Lock Obama Further Into War?
Today and tomorrow in Baghdad, the world's last great oil bonanza opens to the highest bidders. This auction will finalize an oil revolution in Iraq placing the majority of the nation's oil production in foreign hands for the first time in 30 years.
Some 44 international companies will bid on 11 groups of massive oil and gas fields, Iraq's "non-producing" and as of yet "undiscovered" fields. A prior round of bidding, for eight of Iraq's currently producing fields, completed in November.
Iraq has eighty known oil fields holding some 115 billion barrels of oil, just seventeen of which currently pump oil. There has been no meaningful oil exploration in Iraq for over twenty years and it is estimated that it's "undiscovered" fields could hold as much as an additional 285 billion barrels of oil - giving Iraq the largest oil reserves in the world.
Before the U.S. and British invasion, Iraq had a fully nationalized oil sector. But things were changing. Saddam Hussein was negotiating contracts with foreign oil companies. None of the contracts, however, could take effect while the UN sanctions remained in place. Three countries held the largest contracts: China, Russia, and France--all members of the UN Security Council and all in a position to advocate for the end of sanctions. Court proceedings revealed that lists of these contracts were reviewed by oil and energy company representatives as part of Vice President Cheney's National Energy Policy Development Group (better known as the Cheney Energy Task Force). None of their companies' names were on the lists. Were Hussein to remain in power and the sanctions to be removed, these contracts - none with any U.S. or major British companies - would take effect, and the U.S. and its closest ally would be shut out.
The Cheney Energy Task Force released its final report in May 2001, arguing that Middle Eastern countries should be urged, "to open up areas of their energy sectors to foreign investment." This has now been achieved in Iraq. The sanctions are gone, foreign investment can proceed, and the problem of U.S. and British exclusion is over.
It has taken the full six years since Saddam Hussein ouster for the oil companies to finalize contracts. The delay was caused by their attempts to get the most lucrative deals possible in the face of stiff Iraqi opposition. Their chosen vehicle was the Iraq Oil Law, alternatively called Iraq Hydrocarbons Law, which would all but fully privatize Iraq's oil industry using Production Sharing Agreements (PSAs).
The Bush administration pushed aggressively for passage of the Law and in February 2007, it passed Iraq's cabinet (a body appointed under what is viewed as a process highly influenced by the Bush administration and which includes the Oil Ministry), only to be rejected by an Iraqi Parliament elected by a public vehemently opposed to the occupation. In October 2009, the Parliament announced that it would not even consider the Oil Law until after the January 2010 elections. It is quite likely that a new government, more hostile to the interests of foreign (particularly U.S. and British) oil companies, could come to power at this time. By November, the oil companies were at the table signing deals.
Strange bedfellows have emerged as U.S. and British companies essentially squeeze into pre-existing negotiations. Completed contracts include partnerships between BP and the Chinese National Petroleum Company (CNPC), Exxon Mobil and Royal Dutch Shell, and Italy's Eni SpA with California's Occidental Petroleum and the Korea Gas Corp. Royal Dutch Shell, with partners CNPC and the Turkish Petroleum Corp. is in discussions for the giant Kirkuk oil field. France's Total and California's Chevron are teaming up for the super Giant Majnoon field in the December 11 bidding round.
The contracts are not all that the companies had hoped for, nor are they the worst they might have feared. Contracts signed prior to the 2003 invasion ran for 12years; today's run for 20 to 25 years. As recently as late 2008, the Iraqis offered foreign companies just a 50% ownership share. Today's contracts offer them 75%. But where PSAs would give the companies an equity stake, these contracts provide reimbursements and fixed fees per barrel produced. It remains unclear whether the foreign companies or the Iraqi government ultimately has production decision-making authority. The contracts were also specifically amended to allow oil companies to use private contractors for protection.
While members of the Cheney Energy Task Fore may be ready to rejoice, there is reason for concern. Oil nationalism runs deep in Iraq. As a confidential intelligence report on the Iraq Oil Law concludes, if "major foreign oil companies" were going to go to work in Iraq, they would need to be "heavily underwritten by the U.S. Government," implying the need for military protection. If this bidding round is not viewed as fair and its oil revolution not ultimately in the interests of Iraqis, the Obama administration may yet find itself mired in the Bush administration's war.
Antonia Juhasz is the author of The Tyranny of Oil: the World's Most Powerful Industry--And What We Must Do To Stop It, and a Director at Global Exchange, a San Francisco-based human rights organization. She is on TOUR right now for the new updated paperback release of her book & speaking at public events in DC, NYC, TX, and Los Angeles!