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Wake Up and Smell the Oil

The Grass-Roots Struggle Against the Oil Plunder in Iraq

Eddie J. Girdner is author of USA and the New Middle East (Gyan Publishers, 2008). He lives near Izmir, Turkey.
Greg Muttitt, Fuel on the Fire: Oil and Politics in Occupied Iraq (New York: New Press, 2012), 398 pages, $28.95, hardback.

Greg Muttitt quotes an Iraqi friend who pointed out that there would be two phases to the war in Iraq: first the U.S. invasion and occupation, and second the struggle over the gas and oil. Ten years after tanks rolled across the border from Kuwait, the second phase continues. To a considerable extent, the United States has gained control over the vast petrochemical reserves. In that respect, the war was a success for the Bush neoconservatives. But as this book makes clear, they did not get everything they wanted. There is still no oil law, which the United States has pushed hard to get passed since 2007 and the Iraqi Parliament has no desire to pass soon. This means that the oil rush by the multinational oil companies goes on in a legal vacuum. While the international press blames sectarian strife for holding up the law, it is, in fact, due to a broad people’s struggle for sovereignty. This is the side of the story which the corporate press ignores as ordinary Iraqis struggle for sovereignty over their vast natural resources.

The lack of an oil law opens the question of the legality of the contracts awarded to foreign companies, which have not yet been approved by Parliament. It opens the possibility of greater struggle against the foreign scramble for oil and gas.

Secret documents obtained by Muttitt show that big oil companies like BP, Shell, and ExxonMobil were desperate to get their hands on Iraqi oil from the beginning, even while U.S. President George W. Bush and British Prime Minister Tony Blair denied it. As the occupation took over in March 2003, the Americans encouraged looting, with government ministries burned and records destroyed. Only the Ministry of Oil was secured by U.S. troops and protected from this vandalism. Muttitt shows that Iraq was not short of skilled oil professionals and technicians in the state oil companies, as the U.S. government claimed. Like much of the rest of the Iraqi economy, the United States set out to destroy indigenous capacity and bring in Iraqis who had lived abroad. State management of oil and gas would be replaced by the multinational companies. State control was seen by the United States as old-fashioned socialist ideology, a relic of the Baathist days.

The war was certainly about oil and the vast profits to be made, but more broadly it was about the larger global capitalist economy, the price of oil, and the weakening of OPEC. Iraq is the only place in the world where oil production could be vastly increased to moderate the price and get around OPEC quotas. So the question of oil went to the heart of global transnational corporate profits. Ironically, the resulting chaos only increased the price of oil. The rush to double or triple oil production in Iraq will contribute greatly to global warming over the next twenty years of the new contracts.

Iraqis are not nearly as sectarian as the Western press has portrayed them. Except for the Kurds, they were largely united around the desire for the state to control and manage oil. The U.S. attack exacerbated sectarianism between Sunni and Shia and then divide-and-rule tactics were used. Iraqis say this sectarianism largely came with the Americans. The United States continued to warn Iraqis of the consequences of not having an oil law. But as the draft of the legislation leaked out, political resistance increased across broad sections of society, driven by Iraqi oil experts, trade unions, and even religious groups. It became politically impossible to get the oil law passed. While the Kurds in the Kurdistan Regional Government in the north rushed forward to sign contracts with oil companies without Baghdad’s approval, this policy ran into difficulty and they had problems getting the oil out.

The new officials approved by the U.S. occupying authorities, who took over the Oil Ministry, put the project of auctioning the oil fields with vast reserves on fast track to sell them off before more political resistance could develop. They would not wait for the oil law. But the emerging struggle over oil actually united people and led to greater political solidarity among the middle class. This threatened U.S. efforts to get the multinational oil companies into the country. While they wanted more profitable production sharing agreements (PSAs), the struggle scuttled this except for in the Kurdish Regional Government area. Instead the contracts were offered on a technical service basis, which is more risky and less profitable for the companies.

The United States intended to keep ten to twenty thousand troops in the country to oversee and guarantee the oil operations, but this plan had to be abandoned as the Iraqis refused to grant the soldiers immunity in a status of forces agreement. The United States was forced to remove the troops. The bid auctions for the gas fields beginning in June 2009 involved much political window dressing to protect the oil ministry officials from political criticism. The international press reported that the companies were not getting very much, given the terms of the contracts. But this was largely window dressing. The oil multinationals were able to secretly renegotiate the deals with the Iraqi Government after the auctions to get a sweeter deal. This charade goes on.

So the lingering question is: Will the oil deals hold? The United States and other multinationals are clearly nervous about the absence of an oil law and the lack of approval of the contracts by parliament, which is still required by law. But the U.S. troops are waiting just across the border. One can see shades of the old British model. The Iraqi government is somewhat of an Arab façade with the Americans ruling behind the scenes. But today the grassroots are more mobilized than in the past. The troops were not met with flowers. Instead, the flowers came out and dancing in the streets began on the day the last U.S. troops left. This opens the possibility of future struggle over Iraq’s sovereignty over its petrochemical wealth.

Meanwhile, a number of the Bush administration neoconservatives are rushing for a stake in the spoils of the oil rush. Zalmay Khalilzad, the former U.S. Ambassador, has set up Khalilzad Associates, a consulting firm to help foreign companies in Iraq and Afghanistan. Meghan O’Sullivan, a U.S. adviser during the occupation, became an adviser to Hess Corporation. BP hired Sir Jeremy Greenstock, who was Tony Blair’s envoy in Iraq, as a “special adviser.” They have smelled the oil.

Fuel on the Fire is based upon hundreds of secret British and U.S. documents that show how the United States planned to reshape the oil industry and gain access to Iraqi oil. Muttitt also interviewed many participants, including trade unionists and Iraqi politicians.

In November 2002, U.S. Defense Secretary Donald Rumsfeld stated that the war had “literally nothing to do with oil.” But a government task force on energy, led by Vice President Dick Cheney, said “energy security” should be a priority of U.S. foreign policy (xxx). When he was CEO of Halliburton, Cheney had called Middle East oil “the prize” and said that “companies are anxious for greater access there” (4). In a strategy paper, British officials saw the goal as an “investment-friendly energy sector” in the Middle East which could be an example to other countries (xxx).

In October 2002, Edward Chaplin of the UK Foreign Office stated, “on the potential for oil and gas in Iraq, the short answer is that it is huge. Shell and BP could not afford not to have a stake in it for the sake of their long-term future” (3). The minutes of a meeting at the UK Foreign Office in November 2002 said “Iraq is the big oil prospect. BP are desperate to get in there.” Richard Paniguion of BP said that Iraq was “vitally important—more important than anything we’ve seen for a long time” (4). And it was pointed out that production costs there were the lowest in the world. BP officials told Minister of trade Baroness Symons that Iraq “would provide an immense strategic advantage to any company which emerged in a commanding position” (5). Certainly, British companies were concerned that they might lose out if Britain did not support the war.

However, BP told the BBC that the company had no specific talks on Iraq with the government. In a February 2003 interview, Tony Blair said “the oil conspiracy theory is honestly one of the most absurd when you analyze it” (6).

In November 2002, three U.S.-based multinationals met with the Iraqi National Congress (INC) and Ahmad Chalabi, who it was thought might become the prime minister after the overthrow of Saddam. Chevron officials met with James Woolsey, a member of the Defense Policy Board, the former CIA head, and a hawk. The Lukoil CEO, Vagit Alekperov, spoke to U.S. Energy Secretary Spencer Abraham in October 2002 trying to save the 1997 Russian contract with Saddam Hussein. The U.S. government suggested to the Russians that if they wanted future deals, they should help finance the INC—and some companies did.

All of this has a long imperial history of course, and can be understood only in that context. In 1914, the Anglo-Persian Oil company, the precursor of BP, was looking to expand into Mesopotamia. In 1915, the British invaded from the south into what was then the Ottoman Empire, near Basra. Commander General Stanley Maude made the famous statement: “Our armies do not come into your cities and lands as conquerors and or enemies, but as liberators” (8). The Iraq Petroleum Company , a consortium of British, French, and U.S. companies, ran the Iraq oil industry from the 1920s until the ‘70s, when it was nationalized. It became the Iraq National Oil Company (INOC). The Western multinationals were expelled.

In the next years, the state company was very successful and many benefits were distributed creating a broad middle class. Production increased from 1.5 million barrels per day to 3.5 million. Iraqis say that the nationalized industry was based upon the philosophy that the oil was to be used for the “common good,” embracing the idea of social justice (19).

In the 1990s, Zalmay Khalilzad and Paul Wolfowitz were leading the calls to remove Saddam Hussein from power in the neoconservative Project For a New American Century. The desire was to boost the global oil supply, in part because the U.S. military was the largest consumer of oil in the world. This could only be done in Iraq.

In 2002, after twelve years of sanctions, Iraq was ripe for occupation and would play the role of a swing state able to boost production rapidly if under the control of the major oil companies. It was an opportunity for Iraqi exiles such as Ahmad Chalabi, working with the State Department and funded by CIA money. Many in Iraq saw these figures as “out of touch” and thieves. The oil was seen by such groups as the International Energy Agency as belonging to the people of the world, not the Iraqi people.

When the United States invaded on March 20, 2003, the First Marine Expeditionary Force seized the Rumaila Oil Field near Basra within twenty-four hours. After Jay Garner, who took over as head of the Office of Reconstruction and Humanitarian Affairs was fired, Paul Bremer arrived to head the occupation, known as the Coalition Provisional Authority. His style was to give orders like a Viceroy and he saw the Iraqis as divided and self-interested. But the United States encountered a deep culture of resistance when it came to pushing forward with the privatization of the economy, particularly the oil sector. In the view of Iraqi oil technicians, the industry would be more “effective and efficient” if kept in the public sector (59). But the United States wanted a Western management model, and would engage in “shaping operations,” to groom Iraq as a neoliberal economy. Iraq would be a “beachhead” for further expansion in the Middle East (91–92). Such was the stuff of the neocon fantasy.

Bearing Point was brought in and given a contract to design the privatization of the Iraqi economy. Selling off state companies by the occupying power was illegal under international law, but they would find a way to get the oil out of the public sector. Or at least most of it. The goal was “stabilization,” a euphemism for contracts which have the status of an international treaty and are immune to future legislation. The model was pipeline legislation, under which countries cannot pass laws regulating the companies. For example, the Baku-Tbilisi-Ceyhan pipeline contract, signed in Istanbul with Bill Clinton present, has the status of international law. Such contracts trump national laws in the pipeline countries.

By mid–2004, some thirty multinational companies had signed agreements for technical training in Iraq, which enabled them to learn the details of the oil fields. Ayad Allawi, working closely with the United States, became interim Prime Minister and began planning to award PSAs to companies for some fifty undeveloped fields, while the current producing fields remained in INOC. The new oil minister, Thamir al-Ghadhban, was working with the United States, and clashed with workers in the South Oil Company. The oil union was still officially illegal under Saddam’s 1987 law, which was reaffirmed by Bremer.

As opposition to the U.S. occupation increased among unionists, leaders traveled to the United States and met workers organized by U.S. Labor Against the War. Together they drafted a statement opposing the occupation and privatization. They were able to gain support for the resolution at the AFL-CIO convention. In summer 2007, a poll showed that two-thirds of Iraqis wanted state-owned companies to manage the oil, not foreign companies. There was considerable unity on this, with the exception of the Kurdish region. In contrast, the United States claimed that the oil law should be passed for the sake of the Iraqis.

Bearing Point and Ron Jonkers, an investment lawyer, worked with USAID to help write the oil law. The goal was stabilization, meaning contracts going above and around any future national laws. The profits would be locked in. The country would be rendered powerless to control the multinationals.

Hussain al-Shahristani was chosen as oil minister, to do the U.S. bidding. In July 2006, he met with representatives from Chevron, ExxonMobil, ConocoPhillips, BP, and Shell (plus four smaller companies) at the U.S. Department of Energy in Washington. Energy Secretary Samuel Bodman was in attendance. The companies told him what kind of oil law they wanted. They asked for PSAs, not technical service contracts. They wanted stabilization clauses like the ones used in some former Soviet states, to exempt them from future national legislation. The oil companies were calling the shots, while the Iraqi people were not even consulted on the new law.

Zalmay Khalilzad came to Baghdad as the new U.S. Ambassador. Barham Salih, the Iraqi Deputy Prime Minister, was America’s man and in fall 2006 rushed to get the oil law passed before others found out about it. Khalilzad launched the tactic of pushing for “benchmarks,” eighteen things which the Iraqis had to do . The oil law was number one (181).

But by this time, the draft of the law had leaked out and the trade unions and oil technicians launched a campaign against it. Sharistani attacked them as Baathists and Arab nationalists. But then some members of parliament too began to oppose the law. It became a political hot potato.

When Ryan Crocker arrived as U.S. ambassador in 2007, the oil law was the U.S. top priority. The U.S. president, George Bush, pushed Prime Minister Nuri al-Maliki and threatened withdrawal of support if the law was not passed. Then Vice President Dick Cheney showed up in Baghdad and warned the Iraqis again. But all of this just fanned the flames of oil nationalism driven by the Iraqi Federation of Oil Unionists. Many members of parliament came to believe that the law would destroy the future of the country. It became impossible to pass the law. The political cleavage had shifted from the Shia-Sunni-Kurd axis to a division between the nationalists who wanted Iraqi sovereignty over oil, versus pro-occupation federalists, allied with the Kurds in the Kurdistan Regional Government.

A broad group of the middle classes, including intellectuals, professionals, academics, doctors, writers, engineers, lawyers, economists, diplomats, journalists, and senior officials called for a national referendum on the law. Crocker reacted in a secret cable by calling it “ultranationalist hype about foreign exploitation” (228). Nevertheless the people had killed the law for the near future.

In June 2009, Oil Ministry head Shahristani moved to auction off contracts for the largest fields, some 40 percent of known reserves. It would be the largest offer to the oil giants, in history, by a factor of ten. Sadly, two-thirds of the top one hundred Iraqi oil managers were no longer in their jobs. Many had moved to Amman, Jordan. This put the Iraqi government in a weak position, reduced to being a mere financial partner to the oil multinationals.

While the oil experts in Iraq called for a wakeup alarm, to at least save the fields that were producing three million barrels per day, the bid auctions went forward. There have now been some four rounds. There was enough for all to get a share of the vast spoils.

The companies did not get everything they wanted, however. While the Iraqi resisters have not won, they have limited the windfall profits to the multinationals. At a conference in London in 2012, Jeremy Greenstock stated: “Iraq is ahead of the pack in the Arab Awakening.” He is not completely wrong.

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