Bush gives Iraq’s oil to his cronies


Richard Moore

Original source URL:

19 March 2007 06:19
Middle East

Future of Iraq: The spoils of war

How the West will make a killing on Iraqi oil riches
By Danny Fortson, Andrew Murray-Watson and Tim Webb
Published: 07 January 2007

Iraq's massive oil reserves, the third-largest in 
the world, are about to be thrown open for 
large-scale exploitation by Western oil companies 
under a controversial law which is expected to 
come before the Iraqi parliament within days.

The US government has been involved in drawing up 
the law, a draft of which has been seen by The 
Independent on Sunday. It would give big oil 
companies such as BP, Shell and Exxon 30-year 
contracts to extract Iraqi crude and allow the 
first large- scale operation of foreign oil 
interests in the country since the industry was 
nationalised in 1972.

The huge potential prizes for Western firms will 
give ammunition to critics who say the Iraq war 
was fought for oil. They point to statements such 
as one from Vice-President Dick Cheney, who said 
in 1999, while he was still chief executive of 
the oil services company Halliburton, that the 
world would need an additional 50 million barrels 
of oil a day by 2010. "So where is the oil going 
to come from?... The Middle East, with two-thirds 
of the world's oil and the lowest cost, is still 
where the prize ultimately lies," he said.

Oil industry executives and analysts say the law, 
which would permit Western companies to pocket up 
to three-quarters of profits in the early years, 
is the only way to get Iraq's oil industry back 
on its feet after years of sanctions, war and 
loss of expertise. But it will operate through 
"production-sharing agreements" (or PSAs) which 
are highly unusual in the Middle East, where the 
oil industry in Saudi Arabia and Iran, the 
world's two largest producers, is state 

Opponents say Iraq, where oil accounts for 95 per 
cent of the economy, is being forced to surrender 
an unacceptable degree of sovereignty.

Proposing the parliamentary motion for war in 
2003, Tony Blair denied the "false claim" that 
"we want to seize" Iraq's oil revenues. He said 
the money should be put into a trust fund, run by 
the UN, for the Iraqis, but the idea came to 
nothing. The same year Colin Powell, then 
Secretary of State, said: "It cost a great deal 
of money to prosecute this war. But the oil of 
the Iraqi people belongs to the Iraqi people; it 
is their wealth, it will be used for their 
benefit. So we did not do it for oil."

Supporters say the provision allowing oil 
companies to take up to 75 per cent of the 
profits will last until they have recouped 
initial drilling costs. After that, they would 
collect about 20 per cent of all profits, 
according to industry sources in Iraq. But that 
is twice the industry average for such deals.

Greg Muttitt, a researcher for Platform, a human 
rights and environmental group which monitors the 
oil industry, said Iraq was being asked to pay an 
enormous price over the next 30 years for its 
present instability. "They would lose out 
massively," he said, "because they don't have the 
capacity at the moment to strike a good deal."

Iraq's Deputy Prime Minister, Barham Salih, who 
chairs the country's oil committee, is expected 
to unveil the legislation as early 03/19/2007 
06:20 AMIndependent Online Edition > Middle East 
as today. "It is a redrawing of the whole Iraqi 
oil industry [to] a modern standard," said Khaled 
Salih, spokesman for the Kurdish Regional 
Government, a party to the negotiations. The 
Iraqi government hopes to have the law on the 
books by March.

Several major oil companies are said to have sent 
teams into the country in recent months to lobby 
for deals ahead of the law, though the big names 
are considered unlikely to invest until the 
violence in Iraq abates.

James Paul, executive director at the Global 
Policy Forum, the international government 
watchdog, said: "It is not an exaggeration to say 
that the overwhelming majority of the population 
would be opposed to this. To do it anyway, with 
minimal discussion within the [Iraqi] parliament 
is really just pouring more oil on the fire."

Vince Cable, the Liberal Democrat Treasury 
spokesman and a former chief economist at Shell, 
said it was crucial that any deal would guarantee 
funds for rebuilding Iraq. "It is absolutely 
vital that the revenue from the oil industry goes 
into Iraqi development and is seen to do so," he 
said. "Although it does make sense to collaborate 
with foreign investors, it is very important the 
terms are seen to be fair."

© 2007 Independent News and Media Limited

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