Oil and War in Iraq

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Oil and War in Iraq have been inextricably intertwined, it seems, in the war plans of both the Pentagon and the oil industry--otherwise known as "Big Oil"--long before the recent war in Iraq.

Greg Palast, writing March 17, 2005, for BBC News' Newsnight, reports that insiders at the U.S. Department of State relate that there were two conflicting plans "setting off a hidden policy war between neo-conservatives at the Pentagon, on one side, versus a combination of 'Big Oil' executives and US State Department 'pragmatists'" on the other. "'Big Oil' appears to have won." [1]

Palast writes that, "The latest plan, obtained by Newsnight from the US State Department was ... drafted with the help of American oil industry consultants." In fact, insiders told Palast, "planning began 'within weeks' of Bush's first taking office in 2001, long before the September 11th attack on the US."

According to Falah Aljibury, an "Iraqi-born oil industry consultant," Aljibury not only "took part in the secret meetings in California, Washington and the Middle East" but also "interviewed potential successors to Saddam Hussein on behalf of the Bush administration." Additionally, Aljibury "described a State Department plan for a forced coup d'etat."

Conflict arose as the "industry-favoured plan was pushed aside by a secret plan, drafted just before the invasion in 2003, which called for the sell-off of all of Iraq's oil fields. The new plan was crafted by neo-conservatives intent on using Iraq's oil to destroy the OPEC cartel through massive increases in production above Opec quotas."

Robert Ebel, a "former Energy and CIA oil analyst, now a fellow at the Center for Strategic and International Studies," told Palast that the "sell-off was given the green light in a secret meeting in London headed by Ahmed Chalabi shortly after the US entered Baghdad." Ebel said that "he flew to the London meeting at the request of the State Department."

Aljibury, Palast writes, "claims that plans to sell off Iraq's oil [was] pushed by the US-installed Iraqi Governing Council in 2003, [which, in turn,] helped instigate the insurgency and attacks on US and British occupying forces."

According to Aljibury, "Insurgents used this, saying, 'Look, you're losing your country, you're losing your resources to a bunch of wealthy billionaires who want to take you over and make your life miserable'." This could be seen in "an increase in the bombing of oil facilities, pipelines, built on the premise that privatisation is coming," he said.

Palast learned from Philip Carroll, former CEO of Shell Oil USA "who took control of Iraq's oil production for the US Government a month after the invasion," that he had "stalled the sell-off scheme." Carroll said that "he made it clear to Paul Bremer, the US occupation chief who arrived in Iraq in May 2003, that: 'There was to be no privatisation of Iraqi oil resources or facilities" while he was involved.

However, Ariel Cohen of the Heritage Foundation told Palast that an "opportunity had been missed to privatise Iraq's oil fields," as he advocated the plan "as a means to help the US defeat Opec."

The new plans, which Newsnight and Harper's Magazine obtained from the State Department under the Freedom of Information Act, "called for creation of a state-owned oil company favoured by the US oil industry. It was completed in January 2004 under the guidance of Amy Jaffe of the James Baker Institute in Texas." Former US Secretary of State Baker is "now an attorney representing ExxonMobil and the Saudi Arabian government."

Jaffe told Newsnight that the oil industry "prefers state control of Iraq's oil over a sell-off because it fears a repeat of Russia's energy privatisation. In the wake of the collapse of the Soviet Union, US oil companies were barred from bidding for the reserves."

Jaffe also said that "US oil companies are not warm to any plan that would undermine Opec and the current high oil price." "I'm not sure," she said, "that if I'm the chair of an American company, and you put me on a lie detector test, I would say high oil prices are bad for me or my company." Philip Carroll agreed, telling Newsnight "Many neo conservatives are people who have certain ideological beliefs about markets, about democracy, about this, that and the other. International oil companies, without exception, are very pragmatic commercial organizations. They don't have a theology."

Segments of the plans can be viewed at gregpalast.com. Link to Palast's "US Plans for Iraq's Oil" on page.

Iraq's Oil to "drive Iraq's economic revival"

  • In the December 13, 2002, briefing, deputy secretary of defense Paul Wolfowitz said that the "'the cost of the occupation, the cost for the military administration and providing for a provisional [civilian] administration, all of that would come out of Iraqi oil.'" [3]
  • In April 2003, on the day that Baghdad fell, Vice President Dick Cheney said that "Iraq's oil production could hit 3 million barrels a day by the end of the year, even though the task force had determined that Iraq was generating less than 2.4 million barrels a day before the war." [4]
  • Iraq's oil was described June 10, 2003, as "the repository of hope for the United States-led alliance and the Iraqi people themselves. Money from oil, the George Walker Bush administration has said repeatedly, will drive Iraq's economic revival, which in turn will foster the country's political stability." [5]
  • However, the June 10, 2003, issue of The New York Times featured an article by Neela Banerjee proclaiming that "Looting, sabotage and the continued lack of security at oil facilities, ... are the most recent problems the industry and its American overseers must address in order to get petroleum flowing again, especially for export."[6]
At the time, neither interim oil minister Thamir Ghadhban nor American advisers in Iraq had "proposed a new structure for the industry, which might make it easier to argue that new people are needed" and the oil industry was still "working the old state-run model under which the ministry oversees the two companies -- Northern Oil and South Oil -- and other agencies in charge of exploration, pipelines and other equipment and exports," Banerjee wrote. [7]
  • A report produced by a Pentagon task force "secretly established" Fall 2003 "as part of the planning for the war" to study Iraq's oil industry "described the Iraqi oil industry as so badly damaged by a decade of trade embargoes that its production capacity had fallen by more than 25 percent." Contrary to the task force's findings, deputy secretary of state Paul Wolfowitz "told Congress during the war that we are dealing with a country that can really finance its own reconstruction, and relatively soon.'" [8]

Competition for Iraq's Oil

"Iraq has the world’s second largest proven oil reserves. According to oil industry experts, new exploration will probably raise Iraq’s reserves to 2-300 billion barrels of high-grade crude, extraordinarily cheap to produce, leading to a gold-rush of profits for international oil firms in the post-Saddam era. The four giant firms located in the US and the UK have been keen to get back into Iraq, from which they were excluded with the nationalization of 1972. They face companies from France, Russia, China, Japan and elsewhere, who already have major concessions. But in the post-war setting, with Washington running the show, the US-UK companies expect eventually to overcome their rivals and gain the most lucrative oil deals that will be worth hundreds of billions, even trillions of dollars in profits in the coming decades." Global Policy Forum.

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