Bush mentions oil
Thursday, June 15th, 2006We’ve heard about oil trust for the Iraqi people before. It was a lie then and it is a lie now.
War council has oil plans
Back in January 2003, Colin Powell sought to quell rampant speculation about America’s plans for Iraqi oil. He said that Iraq’s oil, “will be held for and used for the people of Iraq. It will not be exploited for the United States’ own purpose,” and he assured us that, “it will be held in trust for the Iraqi people, to benefit the Iraqi people.”
For the first years of the US occupation of Iraq, these statements by Colin Powell turned out to be totally false. Iraq’s oil revenue simply vanished under the auspices of the Coalition Provisional Authority. In one of the best articles on the subject, CIA veteran Philip Giraldi wrote in the October 24, 2005 issue of The American Conservative:
The American-dominated Coalition Provisional Authority [CPA] could well prove to be the most corrupt administration in history, almost certainly surpassing the widespread fraud of the much-maligned UN Oil for Food Program. At least $20 billion that belonged to the Iraqi people has been wasted, together with hundreds of millions of U.S. taxpayer dollars. Exactly how many billions of additional dollars were squandered, stolen, given away, or simply lost will never be known because the deliberate decision by the CPA not to meter oil exports means that no one will ever know how much revenue was generated during 2003 and 2004.
Now, news coming out of the White House war council and the president’s stealth visit to Iraq sounds vaguely similar to those falsehoods Powell spoke in 2003. On Monday, the New York Times published a story by David Sanger quoting President Bush’s remarks that, “Iraq ought to think about having a tangible fund for the people so the people have faith in the central government.”
About this remark, Sanger makes totally apropos observations, suggesting that Bush is talking about Iraq’s oil as if the last 39 months never happened.
Mr. Bush did not elaborate, and he said nothing about the insurgent attacks on pipelines and pumping plants that have kept production to levels below what Iraq produced under Mr. Hussein’s rule, and the rampant corruption that has diverted oil revenues from the Iraqi government.This is not the first time that Mr. Bush and his aides have suggested that oil could be a solution to many of Iraq’s problems: Before the war, Paul D. Wolfowitz, then the deputy secretary of defense, suggested that oil revenues could pay for Iraqi reconstruction. So far, that has not happened.
Usually President Bush speaks about Iraq as if oil does not even exist there. But on Monday during his war council at Camp David, he issued a slightly expanded statement, containing more information about oil in Iraq than the oilman had ever given before.
PRESIDENT BUSH: We spent a lot of time in talking about energy and oil. The oil belongs to the Iraqi people. It’s their asset. It is one of the — the capacity to generate wealth from the ground distinguishes Iraq from Afghanistan, for example. It’s something that I view as a very positive part of Iraqi future. And we talked about how to advise the government to best use that money for the benefit of the people.
Secondly, obviously, we spent time figuring out how to help strategize with the new ministries as to how to get oil production up. And recently, they’ve had oil production as high as a little over 2 million barrels a day, which is extremely positive. The oil sector is very much like the rest of the infrastructure of Iraq. Saddam Hussein let it deteriorate. There wasn’t much reinvestment, or not much modernization. After all, he was using the money for his own personal gain and he wasn’t spending the people’s money on enhancing the infrastructure. And the oil infrastructure collapsed and deteriorated. And as a result, there’s a lot of work that needs to be done on, for example, work-overs — that is to help oil wells become revitalized, just a standard maintenance procedure. So there’s a maintenance program on to help the Iraqi people get their production up.
There’s some unbelievably interesting exploration opportunities. And the new government is going to have to figure out how best to lease the people’s lands in a fair way. My own view is, is that the government ought to use the oil as a way to unite the country and ought to think about having a tangible fund for the people, so the people have faith in central government.
The stuff about Saddam stealing from and ruining Iraq’s oil industry contains truth, but Bush fails to mention that the scale of theft during the period his own CPA was in charge. There is a sense of salivation in this statement, as Bush certainly understands the riches available. And let’s just assume that the crap about “the people’s lands” and “tangible fund for the people” is nonsense recitation required for the consumption of Iraqis well aware of the history of the CPA theft, and window dressing for the American media.
Tuesday, Bush dropped into the central palace of his energy colony. I could speculate that one of the messages he brought with this show of body was that he was very, very serious about getting the right result out of the new government’s early deliberations on the hydrocarbon law.
What the clue? Back in DC, Bush made a statement on this during the Wednesday press conference. Can’t be sure, but this very much sounds like code, a warning to Iraqi Prime Minister Maliki and the Parliament to tread very carefully where US oil interests are concerned:
I’ve directed the Secretary of Energy to travel to Iraq to meet with his counterpart and identify ways we can provide additional support. It’s up to the Iraqis to pass a hydrocarbon law, which they’re now debating. It’s up — for the Iraqi government to decide what to do with the people’s asset. Our advice is to be careful, and to develop it with the people’s interest in mind. [emphasis added]
So what might be the content of this “hydrocarbon law” the Iraqis are supposedly designing for the benefit of “the people’s interests”? I wrote about the move toward PSAs or Production Sharing Agreements for Iraq’s oil last December. The top-level reason the US will stay in Iraq indefinitely is US-centered international oil companies getting PSAs, amounting to concessions for new oil exploration and a significant stake in producing and marketing oil from the existing fields. Control of this incredibly important asset in Iraq will only grow in strategic importance as oil markets tighten over the next few years. The US has not had direct control of spare oil production capacity, or the ability to influence market prices, since the Texas Railroad Commission lost leverage after US peak oil in the early 1970s.
Citing a report called Crude Designs from PLATFORM/www.carbonweb.org, an organization related to the Institute for Policy Studies (IPS), I wrote:
“What the Bush `Victory’ outline forgets to mention is that currently there are highly secretive negotiations being pushed for oil production sharing agreements or PSAs. A stunning new report from a UK group associated with the Institute for Policy Studies explains in great detail how a massive theft of control of Iraq’s oil is being planned and executed as the touted `democratic’ elections are being used to legitimate US `gains’ from the process:
In October 2005, a new Constitution was accepted in a referendum of the Iraqi population. Like much of the Constitution, the oil policy section is open to some interpretation. Apparently referring to fields not currently in production, it states: “The federal government and the governments of the producing regions and provinces together will draw up the necessary strategic policies to develop oil and gas wealth to bring the greatest benefit for the Iraqi people, relying on the most modern techniques of market principles and encouraging investment”…
…The debate over oil “privatisation” in Iraq has often been misleading due to the technical nature of the term, which refers to legal ownership of oil reserves. This has allowed governments and companies to deny that “privatisation†is taking place. Meanwhile, important practical questions, of public versus private control over oil development and revenues, have not been addressed.
The development model being promoted in Iraq, and supported by key figures in the Oil Ministry, is based on contracts known as production sharing agreements (PSAs), which have existed in the oil industry since the late 1960s. Oil experts agree that their purpose is largely political: technically they keep legal ownership of oil reserves in state hands (3), while practically delivering oil companies the same results as the concession agreements they replaced.
Running to hundreds of pages of complex legal and financial language and generally subject to commercial confidentiality provisions, PSAs are effectively immune from public scrutiny and lock governments into economic terms that cannot be altered for decades.
In Iraq’s case, these contracts could be signed while the government is new and weak, the security situation dire, and the country still under military occupation. As such the terms are likely to be highly unfavourable, but could persist for up to 40 years.
Furthermore, PSAs generally exempt foreign oil companies from any new laws that might affect their profits. And the contracts often stipulate that disputes are heard not in the country’s own courts but in international investment tribunals, which make their decisions on commercial grounds and do not consider the national interest or other national laws. Iraq could be surrendering its democracy as soon as it achieves it.
“There should be no doubt about why the US faces an insurgency in Iraq.”
An article just posted at Dar al-Hayat covers some of this ground suggesting how the most consequential decisions Iraq will make for decades–if Bush is to be taken seriously about the “people’s asset”–should be considered. This document is quite difficult to sort out. But go there and try to read it carefully. It explains the serious rifts that are being created by the carve-up of existing fields and prospective fields, demanding changes to the Constitution rammed through last fall. Most important, it recommends that,
In order to have efficient development of the oil industry “ensuring highest benefit to the nation” it is necessary that a reference be made in the constitution to legislate a hydrocarbon law which endorses, among others, the allocation of the upstream and down operations and related commercial aspects, to a national oil company (INOC)
In other words, control of the oil industry should not be farmed out to international companies, but rather held by the national company.
It will be interesting to see how Bush and the Americans react if the Iraqis try to write law and set up their oil industry truly “to benefit the Iraqi people.” My bet is that Bush is lying. The US will tolerate nothing short of total behind-the-scenes control of Iraq’s oil.