March 17, 2008

Iraq and Oil - the media begins to take up the issue

A Crude Case for War?

By Steven Mufson
Sunday, March 16, 2008; Page B01

It's hard to miss the point of the "Blood for Oil" Web site. It features one poster of an American flag with "Blood for oil?" in white block letters where the stars should be and two dripping red handprints across the stripes. Another shows a photo of President Bush with a thin black line on his upper lip. "Got oil?" the headline asks wryly.

This Story

Five years after the United States invaded Iraq, plenty of people believe that the war was waged chiefly to secure U.S. petroleum supplies and to make Iraq safe -- and lucrative -- for the U.S. oil industry.

We may not know the real motivations behind the Iraq war for years, but it remains difficult to distill oil from all the possibilities. That's because our society and economy have been nursed on cheap oil, and the idea that oil security is a right as well as a necessity has become part of our foreign policy DNA, handed down from Franklin D. Roosevelt to Jimmy Carter to George H.W. Bush. And the war and its untidy aftermath have, in fact, swelled the coffers of the world's biggest oil companies.

But it hasn't happened in the way anyone might have imagined.

Instead of making Iraq an open economy fueled by a thriving oil sector, the war has failed to boost the flow of oil from Iraq's giant well-mapped reservoirs, which oil experts say could rival Saudi Arabia's and produce 6 million barrels a day, if not more. Thanks to insurgents' sabotage of pipelines and pumping stations, and foreign companies' fears about safety and contract risks in Iraq, the country is still struggling in vain to raise oil output to its prewar levels of about 2.5 million barrels a day.

As it turns out, that has kept oil off the international market at just the moment when the world desperately needs a cushion of supplies to keep prices down. Demand from China is booming, and political strife has limited oil production in Nigeria and Venezuela.

In the absence of Iraqi supplies, prices have soared three-and-a-half-fold since the U.S. invasion on March 20, 2003. (Last week, they shattered all previous records, even after adjusting for inflation.) The profits of the five biggest Western oil companies have jumped from $40 billion to $121 billion over the same period. While the United States has rid itself of Saddam Hussein and whatever threat he might have posed, oil revenues have filled the treasuries of petro-autocrats in Iran, Venezuela and Russia, emboldening those regimes and complicating U.S. diplomacy in new ways.

American consumers are paying for this turmoil at the pump. If the overthrow of Hussein was supposed to be a silver bullet for the American consumer, it turned out to be one that ricocheted and tore a hole through his wallet.

"If we went to war for oil, we did it as clumsily as anyone could do. And we spent more on the war than we could ever conceivably have gotten out of Iraq's oil fields even if we had particular control over them," says Anthony Cordesman, an expert on U.S. strategy at the Center for Strategic and International Studies who rejects the idea that the war was designed on behalf of oil companies.

But that doesn't mean that oil had nothing to do with the invasion. Says Cordesman: "To say that we would have taken the same steps against a dictator in Africa or Burma as we took in Iraq is to ignore the strategic realities that drove American behavior."

There is no single conspiracy theory about why the Bush administration allegedly waged this "war for oil." Here are two.

Version one: Bush, former Texas oilman, and Vice President Cheney, former chief executive of the contracting and oil-services firm Halliburton, wanted to help their friends in the oil world. They sought to install a pro-Western government that would invite the major oil companies back into Iraq. "Exxon was in the kitchen with Dick Cheney when the Iraq war was being cooked up," says the Web site of a group called Consumers for Peace.

Version two: As laid out in an April 2003 article in Le Monde Diplomatique, "The war against Saddam is about guaranteeing American hegemony rather than about increasing the profits of Exxon." Yahya Sadowski, an associate professor at the American University of Beirut, argues that "the neo-conservative cabal" had a "grand plan" to ramp up Iraqi production, "flood the world market with Iraqi oil" and drive the price down to $15 a barrel. That would stimulate the U.S. economy, "finally destroy" OPEC, wreck the economies of "rogue states" such as Iran and Venezuela, and "create more opportunities for 'regime change.' "

There are historical roots for all this suspicion. After World War I, the Western powers carved up oil-producing interests in the Middle East. In Iraq, the French were given about a quarter of the national consortium, and the U.S. government pressured its allies to turn over an equal share to a handful of American companies.

Even now, the fate of Iraq's concessions is laden with politics. Russia's Lukoil hopes to regain access to a giant field. China is seeking new fields. The big U.S. firms are angling to return to fields they ran before sanctions barred them during the 1990s. Smaller U.S., Turkish, European and Korean firms are gambling on new exploration deals with the autonomous Kurdish regional authority despite threats from Baghdad.

"One can imagine Iraq's oil fields as a pimple waiting to be pricked," says Antonia Juhasz, author of "The Bush Agenda: Invading the World, One Economy at a Time." She notes that the Bush administration put former oil executives on the reconstruction team, hired the Virginia consulting firm BearingPoint to write a framework for Iraq's oil industry, picked the Iraqis who took key oil ministry posts and has pressured Iraq to adopt a petroleum law favorable to international companies.

The petroleum law has become a rallying point for critics who say that the war was about oil. It would allow long-term production-sharing agreements, which Juhasz says are only used in 12 percent of the world "and only where the country needs to entice the companies to come." Defenders of the law, including exiled Iraqi oil experts, say that it provides for different types of contracts; how generous they are will depend on how well they are negotiated, but the law sets minimum conditions.

Greg Muttitt, another widely quoted war critic, who works for Platform London, a group of British environmentalists, human rights campaigners, artists and activists, says that an occupied country can't negotiate freely. What ended up in the proposed petroleum law, he says, was "pretty close" to what was in papers drafted by the State Department before the invasion. "Perhaps not surprising," he adds, given lobbying by U.S. officials and the role of former oil company executives in the reconstruction hierarchy.

That's the theory. The problem is: The petroleum law has not been adopted.

* * *

The idea that the Bush administration was in the tank for the oil industry glosses over a story of conflicting views before the U.S. invasion and the bungled execution of plans afterwards. There were two rival interagency policy groups before the war, one led by the Pentagon and one by the State Department. Some key differences were never resolved. Some Pentagon planners wanted Iraq to maximize oil output, while State worried that a flood of Iraqi oil could threaten Saudi interests and market share.

The notion of an oil war also conjures up an image of a swashbuckling, string-pulling oil industry that no longer reflects a business that in many ways has become cautious and fearful of political turmoil. Western oil interests did encourage the overthrow of Iranian leader Mohammed Mossadegh in the early 1950s and the war in Suez in 1956. But generally oil companies are content to forge alliances of convenience with leaders as diverse as Saudi kings, Angolan communists and Indonesia's late, long-time autocrat Suharto as long as they're predictable. On those leaders' politics, human rights record, ethnicity or religion, oil giants are agnostic.

"Companies don't like and won't make investments where there's uncertainty, and war is the biggest uncertainty of all," said Rob McKee, the former number two executive at ConocoPhillips and a former top U.S. official overseeing Iraq's oil sector. "On the other hand, companies were hoping that Iraq would open up, and as long as Saddam was there, Iraq couldn't. . . . From that point of view, maybe they were happy that there would be a change."

Still, the big firms had trepidations. In a conversation with a consultant shortly before the invasion, the chief executive of one of the five major oil companies described what he would say if asked to invest billions of dollars in Iraq after the war: Tell me about the contract system, arbitration, physical security and social cohesion, then I'll decide.

Five years later, he still hasn't decided, and physical security is so tenuous that the oil giants are still declining Iraqi invitations to send their employees to inspect existing fields.

This wasn't what Bush administration planners had expected.

Leading administration officials expected a postwar Iraq to reclaim its former position among oil exporters. "We are dealing with a country that can really finance its own reconstruction and relatively soon," then-Deputy Defense Secretary Paul Wolfowitz told Congress just after the invasion, predicting that oil would generate $50 billion to $100 billion in revenues within two to three years. Ironically, Iraq might approach that figure this year because of high prices, not higher production.

Prewar planning settled who would oversee Iraq's oil sector. The Pentagon picked Phil Carroll, a well-respected former top executive at Royal Dutch Shell, who was succeeded by McKee. War critics point to such industry ties as evidence of nefarious influence, but former administration members say the choices were made on the basis of expertise. "If you wanted to get someone to help run an oil industry, who would you choose?" asked one person involved in selecting Carroll. "A broker on an exchange? An environmental expert? Or the head of an oil company?"

* * *

The controversial details were all part of the larger strategic picture. "When we first decided on the war, I don't remember oil playing an important part," says Brent Scowcroft, national security adviser under the elder Bush and a critic of the current president's decision to invade.

But that's because concern about oil supplies is part of the architecture of U.S. foreign policy. Scowcroft notes that oil can't be disregarded because Iraq and its neighbors sit on two-thirds of the world's oil reserves. But oil needn't be mentioned either because it's self-evident. War critics might call that the perfect conspiracy.

In a sense, though, all Americans are part of that conspiracy. We have built a society that is profligate with its energy and relies on petroleum that happens to be pooled under some unstable or unfriendly regimes. We have frittered away energy resources with little regard for the strategic consequences. And now it's hard and expensive to change our ways.

Zaab Sethna, a business consultant and former official of the Iraqi National Congress, says that he attended many Pentagon and State Department meetings and never heard postwar oil policy discussed.

But, he says, "Let's not kid ourselves. Iraq is sitting on a very large portion of oil itself and is in a key region of the world. And that makes it important for U.S. security interests. . . . The Iraqi opposition . . . realized that Rwanda wouldn't be getting the attention of the superpower."

Until Rwanda discovers oil.

Steven Mufson covers energy for The Post.

Investigate Big Dick

By Stephen Pizzo, News for Real. Posted May 3, 2006.

Did Cheney and oil company execs lick their chops over Iraqi oil less than two years before we invaded Iraq? Shouldn't someone find out?

If the US Senate really wants to earn our respect, I have a suggestion for them: Hold bipartisan hearings into Dick Cheney's 2001 Energy Task Force.

If not now, when?

Low-wage working Americans can't afford to drive to their jobs? Already some folks have been forced to pawn personal items just to fill their tank for another week. How bad does it have to get before you guys up there start asking the questions you should have asked years ago -- and this time, demanding real answers.

So, Bill Frist, Harry Reid, pull together a bipartisan panel made up of your toughest, most skeptical prosecutional-minded members, hire a couple of junkyard dog lawyers to act as GOP and Dem counsels, and let the long overdue hearings begin.

Subpoena everyone who had anything to do with those meetings, including secretaries who transcribed the original minutes. Oh, and when you call oil industry execs back, put them under oath this time. Because they lied last time when they said they had no idea...

(Washington Post, May 2005) A White House document shows that executives from big oil companies met with Vice President Cheney's energy task force in 2001 -- something long suspected by environmentalists but denied as recently as last week by industry officials testifying before Congress ...The document, obtained this week by The Washington Post, shows that officials from Exxon Mobil Corp., Conoco (before its merger with Phillips), Shell Oil Co. and BP America Inc. met in the White House complex with the Cheney aides who were developing a national energy policy, parts of which became law and parts of which are still being debated.

I mean really guys -- if not now, when?

Almost everyone else except Congress has tried to get this information out of the administration. The non-partisan Government Accountability Office (GAO) filed suit in April 2002 seeking access to the records of Cheney's energy task force. But one of those "liberal activist federal judges" dismissed the suit. The Sierra Club carried its fight for those records all the way to the US Supreme Court, which in 2004 voted 7-2 to uphold "a paramount necessity of protecting the executive branch from vexatious litigation."

But just to make sure no one got lucky in court, the administration built a wide moat around all things it feels are none of our damn business; including whatever deals Cheney made in 2001 with energy company CEOs.

"WASHINGTON - As the Bush administration has dramatically accelerated the classification of information as 'top secret' or 'confidential,' one office is refusing to report on its annual activity in classifying documents: the office of Vice President Dick Cheney ... A standing executive order, strengthened by President Bush in 2003, requires all agencies and 'any other entity within the executive branch' to provide an annual accounting of their classification of documents. More than 80 agencies have collectively reported to the National Archives that they made 15.6 million decisions in 2004 to classify information, nearly double the number in 2001, but Cheney continues to insist he is exempt. (Full Story)

It's not as though we don't have good reason to suspect skullduggery was afoot at those meeting -- skullduggery that has now been allowed to manifest itself in the form of war, economic hardship for average Americans and record profits for the Big Energy folk who attended the meetings. Over the past four years we have learned little about what happened at those meetings, but what little we have learned startles even those of us who thought we had seen it all:

"Documents turned over in the summer of 2003 by the Commerce Department as a result of the Sierra Club's and Judicial Watch's Freedom of Information Act lawsuit, concerning the activities of the Cheney Energy Task Force, contain a map of Iraqi oilfields, pipelines, refineries and terminals, as well as two charts detailing Iraqi oil and gas projects, and 'Foreign Suitors for Iraqi Oilfield Contracts.' The documents, dated March 2001, also feature maps of Saudi Arabian and United Arab Emirates oilfields, pipelines, refineries and tanker terminals. There are supporting charts with details of the major oil and gas development projects in each country that provide information on the project's costs, capacity, oil company and status or completion date." (Full Text)

So, did Cheney and oil company executives lick their chops over Iraqi oil less than two years before we attacked over non-existent WMD? When the administration brushed off questions about Cheney's meetings by telling us they concerned "securing America's energy future," was this the plan they cooked up? To overthrow Saddam, set up a puppet government and pump, pump, pump? If so, that plan has gone terribly wrong.

So, shouldn't Congress find out? If not now, when?

Well, let me correct myself. Not everything went wrong for everyone; just 2,800 American kids who died and tens of thousands of Iraqis who died. Now American motorists are getting the shaft. But look who came out smelling like a rose. By disrupting oil supplies from Iraq, the world's third largest producer, and destabilizing the entire oil producing region, and now by threatening Iran, oil companies with oil assets in the Gulf, Alaska and other regions, have seen the price of their oil skyrocket. Clearly a seat at those energy task force meetings was a seat worth having -- worth billions.

"Last week, Exxon Mobil (the majority owner of Imperial Oil (AKA 'Esso') announced its first-quarter profits had risen 14 per cent to $8.4 billion over the same period last year. That followed similar announcements by Conoco/Phillips and Chevron, the next two largest U.S. integrated oil companies. Chevron's profits jumped 50 per cent to $4 billion while Conoco/Phillips saw its profits climb 13 per cent to $3.3 billion."

A citizen would think that such obscene profits, at the very time real wages of working Americans are falling, the cost of heating and cooling their homes rises every month and transportation costs soar, would provide Congress with some backbone.

Senators, this is where the proverbial rubber hits the road. Investigate. Not just Big Oil, but Big Dick as well. Inquiring minds want to know. We are waiting and we are watching. If not now, when?


Stephen Pizzo is the author of numerous books, including "Inside Job: The Looting of America's Savings and Loans," which was nominated for a Pulitzer.

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