The Truth about Oil and Iraq: Part 3 / War for Oil: From the Record

May 29th, 2007 - by admin

Hon. Dennis J. Kucknich / US House of Representatives – 2007-05-29 23:00:37

Now, I have stated many times on this floor that I believe that the war against Iraq was about oil. Now let me provide you with some quotes that may reflect on my thinking on this.

Mr. Dick Cheney, CEO of Halliburton, in a speech at the Institute of Petroleum in 1999, said:

“By 2010, we will need on the order of an additional 50 million barrels a day. So where is the oil going to come from? Governments and national oil companies are obviously controlling about 90 percent of the assets. Oil remains fundamentally a government business. While many regions of the world offer great oil opportunities, the Middle East, with two-thirds of the world’s oil and lowest cost, is still where the prize ultimately lies. Even though companies are anxious for greater access there, progress continues to be slow.”

In an article from Platform, November 2005, called “Crude Designs: The Rip-Off of Iraq’s Oil Wealth.” Chapter 4, “Planning Iraq’s Oil Future. Pre-invasion Planning.” And when you listen to this, it’s pretty astonishing to see how all these facts have been available for people to be able to gain, and perhaps only now, people are reflecting on the real meaning of this.

This is what Greg Muttitt writes:

“Prior to the 2003 invasion, the principal vehicle for planning the new postwar Iraq was the US State Department’s Future of Iraq project. This initiative, commencing as early as April 2002, involved meetings in Washington and London of 17 working groups, each composed of 10 to 20 Iraqi exiles and international experts selected by the State Department.

“The ‘Oil and Energy’ working group met four times between December 2002 and April 2003. Although full membership of the group has never been revealed, it is known that Ibrahim Bahr al-Uloum, the current Iraqi Oil Minister, was a member. The 15-strong oil working group concluded that Iraq ‘should be opened to international oil companies as quickly as possible after the war,’ and that, ‘the country should establish a conducive business environment to attract investment of oil and gas resources.’

“The subgroup went on to recommend production-sharing agreements as their favorite model for attracting foreign investment. Comments by the handpicked participants revealed that ‘many of the group favored production-sharing agreements with oil companies.’ Another representative commented, ‘Everybody keeps coming back to production-sharing agreements.’

“The reasons for this choice were explained in the formal policy recommendations of the working group, published in April 2003.”

And I quote from this article from Platform:

“Key attractions of production-sharing agreements to private oil companies are that, although the reserves are owned by the state, accounting procedures permit the companies to book the reserves in their accounts; but, other things being equal, the important feature from the perspective of private oil companies is that the government intake is defined in terms of the production-sharing agreement, and the oil companies are therefore protected under a production-sharing agreement from future adverse legislation,” which means it would be very tough to be able to have a government, once it gives up its oil wealth, to be able to get it back.

“The group also made it clear that in order to maximize investments, the specific terms of the production-sharing agreements should be favorable to foreign investors: ‘PSAs can induce many billions of dollars of direct foreign investment in Iraq, but only with the right terms, conditions, regulatory framework laws, oil industry structure, and perceived attitude toward foreign participation.’

“Recognizing the importance of this announcement, The Financial Times noted: ‘Production-sharing deals allow oil companies a favorable profit margin and, unlike royalty schemes, insulates them from losses incurred when the oil price drops. For years, big oil companies have been fighting for such agreements, without success, in countries such as Kuwait and Saudi Arabia.’

“The article concluded that: ‘The move could spell a windfall for big oil companies such as ExxonMobil, Royal Dutch/Shell, BP, and TotalFinaElf.'”

Now, this article goes on to talk about what has been done to try to shape the new Iraq with respect to oil.

“The US and the UK have worked hard to ensure that the future path for oil development chosen by the first elected Iraqi Government will closely match their interests. So far, it appears they have been highly successful. Production-sharing agreements, which were first proposed by the US State Department group, have emerged as the model of oil development favored by the post-invasion phases of Iraqi Government.

“Phase one: Coalition Provisional Authority and Iraqi Governing Council. During the first 14 months following the invasion, occupation forces had direct control of Iraq through the Coalition Provisional Authority. Stopping short of privatizing oil itself, this Coalition Provisional Authority began setting up a framework for a longer-term oil policy.

“The Coalition Provisional Authority appointed former senior executives from oil companies to begin this process. The first advisers were appointed in January 2003, before the invasion even started, and they were stationed in Kuwait, ready to move in. First, there were Phillip Carroll, formerly of Shell, and Gary Vogler of ExxonMobil, backed up by three employees of the US Department of Energy and one of the Australian Government.

“Carroll described his role as not only to address short-term fuel needs and the initial repair of production facilities, but also, ‘begin planning for the restructuring of the Ministry of Oil to improve its efficiency and effectiveness.’ Another point: ‘Begin thinking through Iraq’s strategy options for significantly increasing its production capacity.’

“In October 2003, Carroll and Vogler were replaced by Rob McKee of ConocoPhillips and Terry Adams of BP, and finally in 2004, by Mike Stinson of ConocoPhillips and Bob Morgan of BP. The £147,000 cost of two British advisers, Adams and Morgan, was met by the UK Government. Following the handover to the Iraq Interim Government in June 2004, Stinson became an adviser to the US Embassy in Baghdad.”

Again, from Platform, on the 13th of July, 2003:

“In the first move towards Iraqi self-government, the Coalition Provisional Authority’s Administrator Paul Bremer appointed the quasi-autonomous, but virtually powerless, Iraqi Governing Council. On the same day Mr. Bremer appointed Ibrahim Bahr al-Uloum, who had been a member of the US State Department oil working group, as Minister for Oil.”

Within months of his appointment, Bahr al-Uloum announced he was preparing plans for the privatization of Iraq’s oil sector, but that no decision would be taken until after the election scheduled for 2005. Speaking to the Financial Times, Bahr al-Uloum, a US-trained petroleum engineer, said the Iraqi oil sector needs privatization, but it is a cultural issue, noting the difficulty of persuading the Iraqi people of any such policy. He then proceeded to announce that he personally supported production-sharing agreements for upstream development, giving priority to US oil companies and European companies, probably.

The Role of the Coalition Provisional Authority
The second phase, the Iraq interim government. In June 2004, the Coalition Provisional Authority handed over Iraq’s sovereignty to an interim government headed by Prime Minister Allawi.

The position of Minister of Oil was handed to Thamir al-Ghadban, a UK-trained petroleum engineer and former senior adviser to Bahr al-Uloum. In an interview in Shell Oil Company’s in-house magazine, al-Ghadban announced that 2005 would be the “year of dialogue” with multinational oil companies.”

“About 3 months after taking power, Allawi issued a set of guidelines to the Supreme Council for Oil Policy from which the Council was to develop a full petroleum policy. Preempting both the Iraqi elections and drafting of a new constitution, Allawi’s guidelines specified that while Iraq’s currently producing fields should be developed by the Iraq National Oil Company, all other fields should be developed by private companies, through the contractual mechanism of production-sharing agreements.

“Iraq has about 80 known oil fields, only 17 of which are currently in production. Thus the Allawi guidelines would grant the other 63 to private oil companies.”

The third phase, the transitional government and writing the constitution: “The interim government was replaced in 2005 by the election of Iraq’s new National Assembly, which led to the formation of the new government with Ibrahim al-Ja’afari as Prime Minister. In a move which no doubt assisted policy continuity from the period of US control, Ibrihim Bahr al-Uloum was reappointed to the position of Minister for Oil.

“Meanwhile, Ahmad Chalabi, the Pentagon’s former favorite to run Iraq, was appointed chair of the Energy Council, which replaced the Supreme Council for Oil Policy as the key overseer of energy and oil policy. Back in 2002, Chalabi had famously promised that ‘US companies will have a big shot at Iraqi oil.’

“By June 2005, government sources reported that a Petroleum Law had been drafted, ready to be enacted after the December elections. According to sources, although some details are still being debated, the draft of the Law specifies that while Iraq’s currently producing fields should be developed by Iraqi National Oil Company, new fields should be developed by private companies.”

Now, this again comes from a Foreign Policy in Focus article [entitled] “When It Comes to Oil, the US Administration is Bypassing Democracy in Iraq.”

An article, “Oil Pressure,” by Greg Muttitt (August 28, 2006) goes on to say:

“Since the new Iraqi Government was formed in 2006, the US Government has dramatically scaled up its efforts to provide ‘advice.’ Last month, the administration and major oil companies reviewed and commented on the new law governing Iraq’s crucial oil sector before it had even been seen by the Iraqi Parliament.

“Violating the very notions of freedom and democracy” the administration invokes in nearly every speech, “the US Government has actively intervened in the restructuring of Iraq’s oil industry since at least 2002.

“In December 2002, the State Department established a working group on oil and energy as part of its ‘Future of Iraq’ project. The project brought together influential exiled Iraqis with US Government officials and international consultants. Later, some members of the group became part of the Iraqi Government. The result of the project’s work was a draft framework for Iraq’s oil policy.

“Despite Iraq being rich in oil and technical expertise, the group recommended a major role for foreign companies through long-term contracts, an approach that would set Iraq at odds with the rest of the Middle East where major oil producers keep their oil in the public sector.

“In March 2003, the wheels started to turn as the Coalition Provisional Authority appointed the former head of Shell USA as a senior oil adviser, in direct contact with the Iraq Ministry of Oil. He was joined by an executive from ExxonMobil, and after 6 months, the post was rotated to former managers of ConocoPhillips and BP.

“In December 2003, the framework was set out in more detail when USAID commissioned a report by the privatization specialists BearingPoint,” is the name of the company, entitled ‘Options for Developing a Sustainable Long-Term Iraqi Oil Industry.’ The report reinforced the ‘Future of Iraq’s’ report, recommending long-term contracts with foreign companies.

“Pointing to the success, as they call it, of this model, BearingPoint used Azerbaijan’s privatization model as an example. The report commented approvingly that Azerbaijan’s high corruption and lack of democracy had not impeded investment; the government had simply given away a higher share of revenues in order to attract companies. The implication was that Iraq, which has a nascent democracy and chronic corruption, might follow the same approach.

“After the handover to the interim government in June 2004, senior oil advisers, now based within the Iraq Reconstruction Management Office in the US Embassy worked closely with the Iraq Oil Ministry in shaping policy. Post holders included executives from ChevronTexaco and Unocal.

“In 2006, these efforts intensified….

Continue to Part 4….