The Truth about Oil and Iraq: Part 1

May 29th, 2007 - by admin

Hon. Dennis J. Kucknich / US House of Representatives – 2007-05-29 23:00:58

I would like to believe that this war has not been about oil. I would like to believe that there was some kind of a righteous cause connected to what we did; but I know better, and the proof is in this Hydrocarbon Act.

• Watch Dennis Kucinich on C-Span

On May 23, Congressman Dennis J. Kucinich (D-IL) Kucinich invoked a rarely used House rule of “personal privilege” to gain one hour of time in Congress for the purpose of detailing the underreported efforts of the White House and members of Congress to privatize the oil of Iraq.

“Oil was the primary reason for the invasion of Iraq,” Kucinich declared. “Iraq may have as much as 300 billion barrels of oil untapped. With oil headed toward $70 a barrel, the oil wealth of Iraq could be worth as much as $21 trillion. Nearly 3,400 sons and daughters of America have been sacrificed. As many as 1,000,000 innocent Iraqi civilians have been killed in the course of the US occupation. The taxpayers of the United States will pay between one and two trillion dollars for this war, which is based on lies.”

Kucinich has consistently challenged the rationale and conduct of Bush’s war and has “challenged my own party about its commitment to peace.” Kucinich, who is also a presidential candidate has criticized his fellow Democratic candidates for not “walking the talk” when it comes to the Occupation of Iraq. “They say they are for peace, but they vote for legislation which will privatize the oil of Iraq, thus insuring that there will be no peace. Why? Because the privatization of Iraqi oil will be rightly seen as one of the greatest acts of thievery of one nation against another.”

This special edition of EAW reposts Rep. Kucinich’s entire hour-long speech in a four-part series.

The Truth about Oil and Iraq
From the Floor of the House / Congressional Record

WASHINGTON (May 23, 2007) — Mr. Speaker, there is an issue of critical importance facing this Congress, and that issue relates to whether or not this Congress should pass legislation to continue to fund the war in Iraq.

The legislation contains a particular provision that would lead to the privatization of Iraq’s oil, a provision that I’m quite concerned about, because I think that if we take that position, it will make it very difficult for us to ever be able to end the war.

So today I’m going to lay out the case as to why this provision that’s in the bill would advance privatization and as to what the options are for this Congress.

As many know, the administration has set forth several benchmarks for the Iraqi Government, including the passage of a Hydrocarbon Law by the Iraqi Parliament. The administration has emphasized only a small part of this law, what they call the “fair distribution” (that’s in quotes) of oil revenues.

I want this House to consider the fact that this Iraqi Hydrocarbon Law contains a mere three sentences that generally discusses the so-called fair distribution of oil. Except for three scant lines, the entire 33-page Hydrocarbon Law is about creating a complex legal structure to facilitate the privatization of Iraqi oil.

As such, it is imperative that Members of Congress read the Iraqi Parliament’s bill, because passage of any legislation that includes insisting that the Iraq Government push the passage of a hydrocarbon act puts this Congress on record to promote privatizing Iraq’s oil.

Now, I have maintained from the beginning that the war has been about oil. We must not be a party to any attempt to set the stage for multinational oil companies to take over Iraq’s oil resources.

There have been several benchmarks set by the administration for the Iraqi Government, including passage of a so-called Hydrocarbon Law by the Iraqi Parliament. Many inside the Beltway are contemplating linking funding for the war in Iraq to the completion of these benchmarks, including passage of the Hydrocarbon Law by the Parliament.

This administration has led Congress into thinking that this bill is about fair distribution of oil revenues. In fact, as I mentioned earlier, except for three scant lines, the entire 33-page Hydrocarbon Law creates a structure to facilitate the privatization of Iraq oil.

Now, the war in Iraq is a stain on American history. Let us not further besmirch our Nation by participating in an outrageous exploitation of a nation [that] is in shambles due to the US intervention.

Let me provide this House with an analysis of the underlying bill in the Iraqi Legislature, which this administration is trying to get Congress to pass to pressure the Iraqi Government to accept privatization. And this analysis that I’m offering at this moment is a version that passed the Iraqi Cabinet and was referred to the Iraqi Parliament.

The legislation contains only three sentences in regards to the fair distribution of oil, but does not resolve any of the issues facing this challenge. The legislation simply requires that future legislation be submitted for approval; thus, this legislation does not even meet the benchmark of the administration.

The legislation ensures that “chief executives of important related petroleum companies,” follow that now, “chief executives of important related petroleum companies” are represented on a Federal Oil and Gas Council, which approves oil and gas contracts. This is akin to foreign oil companies approving their own contracts.

This legislation ensures that the Iraqi National Oil Company, which is the oil company of the people of Iraq, has no exclusive rights for the exploration, development, production, transportation, and marketing. The Iraq National Oil Company must compete against foreign oil companies with rules that benefit the foreign oil companies. This is for their own oil.

The legislation gives the Iraqi National Oil Company some control of developed oil fields and rights to participate in undeveloped oil fields in the Annex I and II of the legislation, but these annexes have never been made public, so we don’t know for sure.

The legislation gives the Iraq National Oil Company temporary control of the oil pipelines and export terminals, but then it directs the Federal Oil and Gas Council, which is run by chief executives of oil companies, it directs them to turn these assets over to any entity with no further instructions. The opportunity for a foreign oil company to have control over the Iraqi oil pipeline and export terminals would give that company enormous control of the Iraqi oil market.

The legislation demands that contracts, and this is a quote, “must guarantee the best level of coordination” with the Oil Ministry, Iraqi National Oil Company, the regions and oil companies. The legislation mandates that undeveloped oil fields be developed quickly, and oil companies are given explicit authority to collaborate.

The legislation does not require contracts to be published for public review for up to 2 months after approval. The legislation provides for up to 35 years of exclusive control over oil fields for foreign oil companies. The legislation provides for a preference to Iraqis for jobs and services, but only if these benefits do not place extra costs or inconveniences on the foreign oil companies.

The legislation states that disputes between the State of Iraq and any foreign investors shall be submitted for arbitration to an international court and will not be decided upon by an Iraqi court.

The Secret Annexes
This legislation has four appendices whose contents remain secret. Annex I, which is secret, regards to present producing fields allocated to the Iraqi National Oil Company; Annex II, discovered or undeveloped fields allocated to the National Iraqi Oil Company; Annex III, discovered undeveloped fields outside the operations of the Iraqi National Oil Company; and Annex IV, exploration areas. These appendices will effectively make clear which old fields will be controlled by the Iraq National Oil Company and which are open to foreign control of oil companies.

And I might add that when you look at this, out of about 98 oil fields…, the foreign oil companies will have control of about 80, 81 of those oil fields, or over 80 percent of Iraqi oil under this agreement will be controlled by foreign oil interests. This is an analysis that I’m offering based on facts that are ascertainable.

Now, what are others saying about this draft Iraqi oil law and what it will do? Here’s a quote from the Christian Science Monitor of May 18, 2007, in an article entitled “How Will Iraq Share the Oil?” In the US, the demand that Iraq pass an oil law is a benchmark that is becoming a flash point. Here’s the quote.

“The actual law has nothing to do with sharing oil revenue,” says former Iraqi Oil Minister Issam Al Chalabi, in a phone interview from Amman, Jordan. The law aims to set a framework for investment by outside oil companies, including favorable production-sharing agreements that are typically used to reward companies for taking on risk, he says.

“We know the oil is there. Geological studies have been made for decades on these oil fields; so why would we let them [that is, the international oil companies] have a share of the oil?” he adds. “Iraqis will say this is solid proof that Americans have staged the war … because of this law.”

The next quote comes from the Dow Jones Newswires of March 4, 2007, the headline: “Iraq Oil Law Details Untouched Fields, Blocks — Document.” And the text says:

“Iraq’s draft Hydrocarbon Law, the centerpiece in the development of the country’s shaky oil industry, details dozens of untouched oil fields loaded with proven reserves and scores of exploration blocks that may prove a magnet to international oil companies, according to a document seen by Dow Jones Newswires.”

In an article from the Dow Jones Newswires again, on March 10, 2007, the headline: “Some Iraqi Politicians Urge Rejection of Draft Oil Law.” Here’s the text:

“The law, if passed, is expected to open the country’s billions of barrels of proven oil reserves, the world’s third largest, to foreign investors.”

From an article from the American Lawyer, April 25, 2007, “Our Man in Iraq.” Here is the text:

“Under the new law, the Iraq National Oil Company would have exclusive control of only about 17 of Iraq’s approximately 80 known oil fields.” [So that number, then, is 17 of Iraq’s approximately 80 known oil fields.] “The law would also allow the government to negotiate different kinds of exploration and production contracts with foreign oil companies, including production-sharing agreements, or PSAs.

Energy lawyers favor these because they allow oil companies to secure long-term deals and book oil reserves as assets on their company balance sheets. Under the proposed law, foreign companies would not have to invest their earnings in Iraq, hire Iraqi workers, or partner with Iraqi companies.”

Next, from the US Morning Star Online, January 28, 2007, headlined “Iraqi Officials Insist Oil Law Won’t Favor US”

“The proposal would provide for production-sharing agreements that would give international firms 70 percent of the oil revenues to recover their initial investments and subsequently allow 20 percent of the profits without any tax or restrictions on transferring the funds abroad.”

This from, April 18, 2007, entitled “Time to Do the Math in Iraq”:

“The most notable feature of the law is a revival of exploitive type of contact widely used prior to the rise of Arab nationalism in the 1960s, known as a production sharing agreement. Although the Oil Law uses an alternative term, ‘exploration and production contract,’ the effect is identical.

“The new arrangement would allow the bulk of Iraq’s reserves to be controlled by outside oil companies, privatizing what until now has been a nationalized resource under the auspices of the Iraq National Oil Company. It specifies the royalty that will be paid to Iraq: ‘12.5 percent of gross production, measured at the entry flange to the main pipeline.’

“And as if the rest of the law were not already explicit enough, article 35(A) reiterates: ‘Holders of exploration and production rights may transfer any net profits from petroleum operations to outside Iraq after paying taxes and fees owed.'”

This, from a publication called PLATFORM in 2005, entitled “Crude Designs: The Rip-Off of Iraq’s Oil Wealth,” by Greg Muttitt:

“At an oil price of $40 per barrel,” and keep in mind that the price of oil is about $65 a barrel right now, heading towards $70 a barrel, but at a “price of $40 a barrel, Iraq stands to lose between $74 billion and $194 billion over the lifetime of the proposed contracts.

“Under the likely terms of the contracts, oil company rates of returns from investing in Iraq would range from 42 to 162 percent, far in excess of the usual industry minimum target of around 12 percent return on investments.”

Continue to Part 2….