The Truth about Oil and Iraq: Part 2 / The $17 Trillion Rip-off

May 29th, 2007 - by admin

Hon. Dennis J. Kucknich / US House of Representatives – 2007-05-29 22:59:29

Next, on March 13, 2007, Antonia Juhasz, an oil industry analyst, in an op-ed contribution, asks: “Whose Oil Is It, Anyway?” Here is what Antonia Juhasz writes:

“Today more than three-quarters of the world’s oil is owned and controlled by governments. It wasn’t always this way. Until about 35 years ago, the world’s oil was largely in the hands of seven corporations based in the United States and Europe. Those seven have since merged into four: ExxonMobil, Chevron, Shell, and BP. They are among the world’s largest and most powerful financial empires.

“But ever since they lost their exclusive control of the oil to the governments, the companies have been trying to get it back. Iraq’s oil reserves, thought to be the second largest in the world, have always been high on the corporate wish list. In 1998 Kenneth Derr, then chief executive of Chevron, told a San Francisco audience, ‘Iraq possesses huge reserves of oil and gas, reserves I’d love Chevron to have access to.’

“A new oil law set to go before the Iraqi Parliament this month would, if passed, go a long way toward helping the oil companies achieve their goal. The Iraq hydrocarbon law would take the majority of Iraq’s oil out of the exclusive hands of the Iraqi Government and open it to international oil companies for a generation or more.

“In March, 2001,” continuing to quote from this article, “the National Energy Policy Development Group, better known as Vice President Dick Cheney’s Energy Task Force — which included executives of America’s largest energy companies — recommended that the United States Government support initiatives by Middle Eastern countries ‘to open up areas of their energy sectors to foreign investment.’

One invasion and a great deal of political engineering… later, this is exactly what the Iraq oil law would achieve. It does so to the benefit of oil companies but to the great detriment of Iraq’s economy, democracy, and sovereignty.

“Since the invasion of Iraq, the administration has been aggressive in shepherding the oil law toward passage. It is one of the administration’s benchmarks for the government of Prime Minister Nuri Kamal al-Maliki, a fact that” the administration officials “are publicly emphasizing with increasing urgency.” And, that is that these are the benchmarks of the administration.

“The administration has highlighted the law’s revenue sharing plan, under which the central government would distribute oil revenues throughout the nation on a per capita basis. But the benefits of this excellent proposal are radically undercut by the law’s many other provisions. These allow much, if not most, of Iraq’s oil revenues to flow out of the country and into the pockets of international oil companies.”

Continuing quoting from the article:

“The law would transform Iraq’s oil industry from a nationalized model closed to American oil companies, except for limited although highly lucrative marketing contracts, into a commercial industry.”

So, again, the nationalized model is now closed to American companies except for limited marketing contracts. It would transform that into a commercial industry, all but privatized, that is fully open to international companies.

“The Iraq National Oil Company would have exclusive control of 17 of Iraq’s 80 known oil fields, leaving two-thirds of known and as of yet undiscovered oil fields open to foreign control.

“The foreign companies would not have to invest their earnings in the Iraqi economy, partner with Iraqi companies, hire Iraqi workers, or share new technologies. They could even ride out Iraq’s current ‘instability’ by signing contracts now, while the Iraqi Government is at its weakest, and then wait at least 2 years before even setting foot in the country. The vast majority of Iraq’s oil would then be left underground for at least 2 years rather than being used for the country’s economic development.

“The international oil companies could also be offered some of the most corporate-friendly contracts in the world, including what are called production-sharing agreements. These agreements are the oil industry’s preferred model but are roundly rejected by all the top oil-producing countries in the Middle East because they grant long-term contracts — 20 to 35 years in the case of Iraq’s draft law — and greater control, ownership, and profits to the companies than other models. In fact, [this kind of contract is] used for only approximately 12 percent of the world’s oil.

“Iraq’s neighbors — Iran, Kuwait, and Saudi Arabia — maintain nationalized oil systems and have outlawed foreign control over oil development. They all hire international oil companies as contractors to provide specific services, as needed, for a limited duration and without giving the foreign company any direct interest in the oil produced.

“Iraqis may very well choose to use the expertise and experience of international oil companies. They are most likely to do so in a manner that best serves their needs if they are freed from the tremendous external pressure being exercised by the administration, the oil corporations, and the presence of 140,000 members of the American military.

“Iraq’s five trade union federations, representing hundreds of thousands of workers, released a statement opposing the law and rejecting ‘the handing of control over oil to foreign companies, which would undermine the sovereignty of the state and the dignity of the Iraqi people.’ They ask for more time, less pressure, and a chance at the democracy they have been promised.”

Some Basic Facts about Iraq’s Oil
Let me share with this House some basic facts about Iraqi oil because, over the past several months, we have had many different news agencies citing diverse reports about how much oil Iraq has.

• [T]he Petroleum Economist Magazine… estimate[s] that Iraq has 200 billion barrels of oil.
• The Federation of American Scientists’ estimate is 215 billion barrels of oil.
• The Council on Foreign Relations estimates Iraq has 220 billion barrels of oil.
• And the Center for Global Energy Studies estimates 300 billion barrels of oil.

These figures, by the way, [come] from a report from the Brookings Institution dated May 12, 2003.

Now, for the sake of discussion, let’s take this figure of 300 billion barrels of oil so we can see how much money we are talking about here.

As I mentioned earlier, the price of oil, somewhere around $65 a barrel right now and moving up quickly, as American consumers are finding out. It is not unusual to predict at this moment that the price of oil could go to $70 a barrel. Now, if it does go to $70 a barrel, we are looking here at a potential value of Iraqi oil at being about $21 trillion.

Now, if the foreign oil companies have control over 80 percent or more, you start to get an idea of the kind of money [$16.8 trillion] that is at stake here and why there is such pressure being put on the Iraqi Government to privatize their oil.

Now, I would like to turn to a quote further talking about the Iraq oil, a basic fact. This, from the Global Policy Forum called “Oil in Iraq: the Heart of the Crisis,” December 2002:

“According to the Oil and Gas Journal, Western oil companies estimate that they can produce a barrel of Iraqi oil for less than a $1.50 and possibly as little as $1, including all exploration, oil field development and production costs and including a 15 percent return.

This is similar to production costs in Saudi Arabia, and lower than virtually any country. So again, the desirability of a private corporation having Iraq’s oil is that their production costs would be very low.

Iraqi Unions Protest a Return to Exploitation
A word about the history of oil exploitation in Iraq. Following World War I, the British assumed control of Iraq from the Ottoman Empire. In 1925, a 75-year concession contract was granted to American, French, and British oil companies. By 1930, the consortium was in complete control of all Iraqi oil. The oil companies controlled the oil fields and reaped almost all the profits.

It was not until the overthrow of the British-installed monarchy in 1958 that the foreign control of oil was challenged. In 1961, the consortium’s rights were limited to current production. And beginning in 1972, Iraq oil resources were nationalized, a process that was finalized in 1975.

Now, here is a statement issued by the Iraqi Labor Union Leadership at a seminar held in December of 2006 to discuss this draft Iraqi oil law:

“Iraq is rich in national wealth, foremost among which is its oil wealth, the essence of the economic life for Iraq and the world, which has been a focus of attention of the large, industrialized countries, in particular.

“The British and American oil companies were the first to obtain concessions to extract and invest in Iraqi oil nearly 80 years ago. After Iraq got rid of this octopus network, these foreign oil companies had again attempted to dominate this important oil wealth under numerous pretexts and invalid excuses.”

Indeed, Iraqi oil unions have objected to the Hydrocarbon Act. In an open letter to the US Congress dated May 13, 2007, just a little more than a week ago, here are some excerpts:

“Peace be unto you and greetings to all.

“We wish to clarify certain matters relating to events in Iraq for our friends among the Members of the US Congress. It is common knowledge that the occupation spared neither the young nor the old, and that Iraq is passing through the most difficult of times because all and sundry are hounding it and covet a share of its riches. We see no good reason for linking the passing of the feeble Iraq oil law to the withdrawal of the occupation troops from Iraq.

“Everyone knows that the oil law does not serve the Iraqi people, and that it serves the administration, its supporters, and the foreign oil companies at the expense of the Iraqi people, who have been wronged and deprived of their right to their oil, despite enduring all difficulties.

“We ask our friends not to link withdrawal with the oil law, especially since the USA claimed that it came to Iraq as a liberator and not in order to control Iraq’s resources.

“The general public in Iraq is totally convinced that the administration wants to rush the promulgation of the oil law so as to be leaving Iraq with a victory of sorts.

“We wish to see you take a true stance for the children of Iraq. And we always say that history will remember those who advance peace over war.

“With my regards,
Hassan Jum’a Awwad,
Head of the Iraqi Federation of Oil Unions.”

This now from the Oil union leader’s speech on oil law. This is a speech of the head of the Federation of Oil Unions in Basra on Tuesday, February 6, 2007:

“Recently, the Constitution of Iraq, on which the Iraq people voted in the most dire and difficult of conditions, notes in clause 111 that oil and gas are the property of the Iraqi people. But, alas, this clause in the Constitution will remain but ink on paper if the oil law and oil investment law being presented to the Parliament are ratified, laws which permit production-sharing agreements, laws without parallel in many oil producers, especially the neighboring countries.

“Why should Iraqis want to introduce such contracts in Iraq, given that applying such laws will rob the Iraqi Government of the most important thing it owns?”

“We send a message to all of the members of the Iraqi Parliament, when debating the oil and investment law, to bear the Iraqis in mind, to protect the national wealth, and to look at the neighboring countries. Have they introduced such laws even when their relations with foreign companies are closer than in Iraq?”

Now, there is a question that’s being raised. Are these oil companies just trying to help Iraq gain its wealth? What if Iraq doesn’t have the ability or the money to be able to get its own oil industry on its feet? Does Iraq have to privatize in order to tap its oil wealth? Well, the fact of the matter is that Iraq has options beyond privatization to develop its own oil capacity.

According to the Middle East Economic Survey, volume 49, number 2, dated March 19, 2007, entitled “Iraq Open Letter from Iraqi Oil Experts to Parliament”:

“We anticipate that the motive behind the issuance of this law is based on the increase of production capacity through the attraction of foreign investments. In this regard, we feel and recommend to plan the increase of the capacity gradually, starting with the rehabilitation of currently producing fields by national effort, Iraqi National Oil Company, followed by the development of the giant discovered, but not developed or partially developed, fields, and to schedule the priority of their development according to their capacities and development costs, irrespective of their geographical locations.”

And it goes on to say that there ought to be an avoidance of long-term contracts with foreign companies at the present time.

This is a statement issued by the Iraqi Union Leadership in a seminar. And another statement in a seminar in December 2006 in Amman, Jordan:

“Whereas oil and gas are greatly important for the Iraqi economy and whereas the building of the state and its institutions are dependent on it as the main source of national income, it is therefore the right of the Iraqi people to read the draft oil law under consideration. The Iraqi people refuse to allow the future of their oil to be decided behind closed doors.”

[From] an article by Michael Schwartz called “The Prize of Iraqi Oil”:

“None of these conditions apply in Iraq. Huge reservoirs of easily accessible oil are already proven to exist, with more, equally accessible fields likely to be discovered at little expense. That’s why none of Iraq’s neighbors emphasize production-sharing agreements. Saudi Arabia, Kuwait, Iran, and the United Arab Emirates all pay the multinationals a fixed rate to explore and develop their fields, and all the profits become state revenues.”

[From the] Christian Science Monitor, May 18, 2007, “How Will Iraq Share the Oil?”:

“In New York, oil industry analyst, Fidel Geit of Oppenheimer Company, Incorporated, has reviewed both the official Arabic version of the draft law and the unofficial English translation and say they are ambiguous and seem to be written in haste.” Quote, “Why shouldn’t Iraq use Iraqi nationals to decide how contracts will be awarded? They have oil engineers. Use the best brains in the country and hopefully they will do what is in the best interest of the country,” he says, “otherwise there is an impression that American companies are telling Iraqis what to do.”

Continue to Part 3…>/a?>