[A-List] Future of Iraq: The spoils of war

[Bill Totten <shimogamo@xxxxxxxxxxxxx>]

How the West will make a killing on Iraqi oil riches

by Danny Fortson, Andrew Murray-Watson and Tim Webb

The Independent (January 07 2006)


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 thirty-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
fifty 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
controlled.

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 twenty 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 thirty 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 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".

http://news.independent.co.uk/world/middle_east/article2132569.ece


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