The coming war for Iraqi oil

In a leading article in the Washington Post on 15 September, staff writers Dan Morgan and David Ottaway wrote extensively about Western oil interests in Iraq, observing that whilst senior Bush administration officials say they have not begun to focus on the issues involving oil and Iraq, “American and foreign oil companies have already begun manoeuvring for a stake in the country’s huge proven reserves of 112 billion barrels of crude oil, the largest in the world outside Saudi Arabia.”

An Observer investigation, published on 6 October, began: “Oil is emerging as the key factor in US attempts to secure the support of Russia and France for military action against Iraq . . . The Bush administration, intimately entwined with the global oil industry, is keen to pounce on Iraq’s massive untapped reserves, the second biggest in the world after Saudi Arabia’s.”

US energy needs
However revealing this may appear, more damning evidence of US intentions in the Middle East actually emerged some time ago. In April 2001, some five months before “September 11th”, a little heard of report was submitted to vice-president Dick Cheney, originally commissioned by James Baker who had been the US Secretary of State under George Bush Senior. It is entitled Strategic Energy Policy Challenges For The 21st Century and describes how the US is confronting the biggest energy crisis in its history. The report specifically targets Saddam as an obstacle to US interests because of his control of Iraqi oilfields and suggests the use of “military intervention” as a way to access and control Iraqi oilfields and help the US out of its energy crisis.

One passage reads:

“Iraq remains a destabilising influence to . . . the flow of oil to international markets from the Middle East. Saddam Hussein has also demonstrated a willingness to threaten to use the oil weapon and to use his own export programme to manipulate oil markets . . . This would display his personal power, enhance his image as a pan-Arab leader . . . and pressure others for a lifting of economic sanctions against his regime. The United States should conduct an immediate policy review toward Iraq including military, energy, economic and political/diplomatic assessments. The United States should then develop an integrated strategy with key allies in Europe and Asia, and with key countries in the Middle East, to restate goals with respect to Iraqi policy and to restore a cohesive coalition of key allies.”

According to the report’s compilers, the main cause of any coming crisis will be “Middle East tension”, which means the “chances are greater than at any point in the last two decades of an oil supply disruption”. It admits that the US will never be “energy independent” and is becoming too dependent on foreign powers supplying it with oil and gas. The answer is to put oil at the centre of the administration – “a reassessment of the role of energy in American foreign policy”.

The report initially contemplates an arms-control programme in Iraq and suggests this may lead to a relaxation of oil sanctions which might make for better trading on world oil markets. However, it then acknowledges that such an arms-control policy would prove over-costly as it would “encourage Saddam Hussein to boast of his ‘victory’ against the United States, fuel his ambition and potentially strengthen his regime”. It continues: “Once so encouraged, and if his access to oil revenues was to be increased by adjustments in oil sanctions, Saddam Hussein could be a greater security threat to US allies in the region . . .”

With US oil reserves estimated to last no more than 20 years and the with the US the biggest consumer and the biggest net importer of oil (11 million barrels a day, which is a seventh of global production), there is a growing reliance on Middle Eastern oil. Twenty years ago the US imported just over 30 percent of its oil from the Middle East. That figure now stands at 52 percent. And in a world where the US has economic rivals, with their own growing demand for oil (i.e. China’s demands are increasing by 3.5 percent per year), a war to secure control of the “greatest prize” makes sound sense to the Bush administration.

Additionally, in the post 9/11 world, where anti-American feeling runs high in traditional militant Islamic societies, the US also realises it can no longer remain dependent on Saudi oil supplies. As the US needs an oil supply totalling 20 million barrels of crude oil a day, it now seeks a supplier that can perhaps meet half of these needs – Iraq! With the present high global prices of oil sucking the US into a recession it is important also that the US breaks the Saudi stranglehold on the oil cartel Opec.

And what of the Bush administration and its own personal oil interests? Well make no mistake about it, the president, the vice-president, the defence secretary and the deputy defence secretary, the chairman of the NSC and the head of the CIA all have oil connections. The most hawkish US regime ever assembled has its own private reason for a war with Iraq.

Four years ago, Halliburton, the US oil equipment company of which Dick Cheney was chief executive, sold parts to Iraq to help with the rebuilding of an infrastructure that had been devastated during the 1991 Gulf war. Halliburton did £15 million of business with Saddam – a man Cheney now compares to Adolf Hitler. Moreover, Halliburton is one of the US companies thought by experts to be queuing up for the profits resulting from any clean-up operation in the wake of another US-led attack on Iraq.

In the past few years, and increasingly since Bush came to power and most evidently since 9/11, the US has spread its military tentacles – establishing bases in twelve new countries in the past year alone. US forces now surround over 80 percent of the world’s oil reserves. They have encompassed the Caspian region which has an estimated 70-200 billion barrels of oil and 11 trillion cubic feet of known gas deposits. And still with gas, Iran, neighbouring Iraq, and part of Bush’s dreaded “Axis of Evil” controls 80 percent of the world’s gas reserves. And with gas estimated to account for 30 percent of world energy production by 2020, the US game plan becomes increasingly difficult to dismiss as nonsense.

Russian and French interests
Moreover, the five permanent members of the UN Security Council – the US, Britain, France, Russia and China – have international oil companies with major stakes for and against a “regime change” in Baghdad. And since the Gulf War of 1991, companies from more than a dozen nations, inclusive of France, Russia, China, India, Italy, Vietnam and Algeria, have either negotiated contracts or sought to reach agreements in principle to develop Iraqi oil fields, to revamp extant facilities there or explore undeveloped fields. Most of the deals, however, are in abeyance until the lifting of U.N. sanctions.

Sources in Russia have expressed serious concerns about a US attack on Iraq and any “regime change” this may result in, fearing that a post-Saddam, pro-US, government might just not honour the extraction contracts that Baghdad has already signed with Moscow and that all such contracts would be declared null and void. Many in Russia now fear that the US has already brokered deals with the Iraq opposition and despite recent dialogue between Moscow and Washington remain unconvinced of Washington’s claim that Russian contracts would be respected.

One Russian UN Official reportedly told the Observer (6 October): “The concern of my government is that concessions agreed between Baghdad and numerous enterprises will be reneged upon, and that US companies will enter to take the greatest share of those existing contracts.”

Such fears are perhaps not unfounded. Ahmed Chalabi, leader of the Iraqi National Congress (an umbrella organisation of Iraqi opposition groups backed by the US), recently announced that he preferred the creation of a US-led consortium to develop Iraq’s oil fields, which have deteriorated in the ten years of UN sanctions, saying “American companies will have a big shot at Iraqi oil” (Washington Post).

Back in 1997, Russia’s biggest oil company, Lukoil, signed a $20bn contract to tap into the West Qurna oilfield. In October of last year, the Russian oil services company Slavneft purportedly signed a $52 million service contract to drill at the Tuba field, also in southern Iraq. A proposed $40bn Iraqi-Russian economic agreement also reportedly includes opportunities for Russian companies to explore for oil in Iraq’s western desert.

French company Total Fina Elf had negotiated for rights to develop the huge Majnoon field, near the Iranian border, which could contain up to 30 billion barrels of oil. But in July 2001, Iraq announced it would cease giving French firms preference in the award of such contracts because of its decision to abide by UN sanctions, and then gave a $90bn contract to Russian oil company Zarubezhneft to drill the bin Umar oilfield.

During the first two days of October, at the first US-Russia Commercial Energy Summit in Houston, Texas, emphasis was placed on Russia increasing its oil exports to the US, which is desperate to reduce its reliance on the Middle East. Off stage, talks were in progress about a series of contracts held by Russian oil companies. According to Vaget Alekperov, Lukoil chairman, in an interview with the Financial Times on 3 October, the Russian government secured an agreement that if, or when, the Baghdad regime is toppled, “the [Iraqi] law is the law, the state is still there”.

Mikhail Margelov, of the international affairs committee of the Russian federation council (the upper house of parliament), afterwards told Reuters that Moscow expected “equal, fruitful, cooperation” with the US “especially in the privatisation of the Iraqi oil sector”.

Following the Houston summit, Russian Energy Minister Igor Yusufov and economy minister German Greg travelled with US commerce secretary Donald Evans and Energy Secretary Spenser Abraham for talks with Bush’s vice-president Dick Cheney and national security advisor Condoleeza Rice, undoubtedly in order for the latter to reassure the former that a Russia supportive of an attack upon Iraq would indeed get its share of the spoils once Saddam is ousted.

Apparently, plans to safeguard Russia’s interests in Iraq have been under discussion for months in Washington. Prior to the Bush-Putin summit in May, Ariel Cohen, an analyst with the Heritage Foundation suggested an offer to “support the Russian companies’ contractual rights”, arguing that Lukoil could sway Russian foreign policy, and that a deal could be brokered to Washington’s and Moscow’s mutual advantage.

Mikhail Khodorkovsky, chief of Russia’s second biggest oil company, Yukos, later said in a Washington Post interview that “if there were sufficient political will”, one possibility was to create a Russian-American oil consortium to exploit Iraqi oil resources

Clearly, like the capitalist state it has always been, Russia wants to make sure that, whatsoever deals the US agrees upon with anti-Saddam Iraqi politicians or Kurdish nationalists, their existing contracts remain valid. And this, more than the repayment of Iraq’s $7bn Soviet-era debt, is the decisive factor in deciding how Russia casts its vote on the UN Security Council.

R. James Woolsey, former CIA director and a leading protagonist in the US anti-Iraq campaign, is one of many all too aware of Russian and French qualms regarding the whole affair. Cognisant of the need to secure French and Russian support he commented: “It’s pretty straightforward, France and Russia have oil companies and interests in Iraq. They should be told that if they are of assistance in moving Iraq toward decent government, we’ll do the best we can to ensure that the new government and American companies work closely with them.” In other words, scratch our backs and we’ll scratch yours.

France is listening and, like Russia, is wondering whether once Saddam is ousted, its companies will lose out to US oil interests. Not only is it now thought to be negotiating a slice of the coming action – a bigger role than the US afforded it in the 1991 Gulf War – but the state-owned Total Fina Elf oil company has also been in talks in the US about the distribution of the spoils of war.

As Washington’s crusade against Iraq offers huge opportunities for international oil corporations, it also exposes serious risks and worries for the global oil market should there indeed be “regime change” in Iraq. As the Washington Post (15 September) reported: “Access to Iraqi oil and profits will depend on the nature and intentions of a new government. Whether Iraq remains a member of the Organization of Petroleum Exporting Countries, for example, or seeks an independent role, free of the OPEC cartel’s quotas, will have an impact on oil prices and the flow of investments to competitors such as Russia, Venezuela and Angola.”