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4 US eyes still on the
Iraqi prize By Michael Schwartz
as soon as its forces arrived in
Baghdad was hardly surprising. While US troops
simply stood by as unrestrained looting severely
damaged the dawn-of-civilization treasures in the
National Museum, compromised the ability of
hospitals to deliver health care, and destroyed
many government offices, large numbers of American
soldiers were deployed to protect the Oil Ministry
and its associated holdings. This effort was
certainly emblematic of
the
newly established occupation's priorities.
Not long after President George W Bush
declared "major combat operations in Iraq have
ended" under a "Mission Accomplished" banner on
the deck of the aircraft carrier USS Abraham
Lincoln, L Paul Bremer, the new head of the US
occupation, promulgated a series of laws designed,
among other things, to kick-start the development
of Iraqi oil. In addition to attempting to
transfer management of existing oil facilities
(wellheads, refineries, pipelines and shipping) to
multinational corporations, he also set about
creating an oil-policy framework, unique in the
region, that would allow the major companies to
develop the country's proven reserves and even to
begin drilling new wells.
All these plans
were, however, quickly frustrated, both by the
growing Sunni insurgency and by civil resistance.
Iraq's oil workers quickly unionized - even though
Bremer extended Saddam's prohibition on unions in
state-owned companies - and in effect resisted the
transfer of management duties to foreign
companies. In one noteworthy moment, the oil
workers actually refused to take orders from
Bechtel officials in the oil hub of Basra, thus
preserving their own jobs as well as the right of
the Iraqi state-owned Southern Oil Co to continue
to control the operation in that region. Bechtel's
management contract was subsequently voided.
At the same time, the growing insurgency,
acting on a general Iraqi understanding that a
major goal of the occupation was to "steal" Iraqi
oil, systematically began to attack the oil
pipelines that traveled through the Sunni areas of
the country. Within a few months, all oil exports
in the northern part of Iraq were interrupted -
and the northern export pipelines have remained
generally unusable ever since.
To
resistance of various sorts must be added the
"contribution" of the major US corporations
involved in "reconstructing" Iraq, notably
Halliburton and Bechtel. These crony corporations,
with close ties to the Bush administration,
accepted huge fees to rehabilitate dilapidated or
damaged oil facilities. Almost without fail, they
chose not to repair existing plants locally or to
employ the raft of skilled Iraqi technicians who
had used remarkable ingenuity in maintaining these
facilities during a dozen years of UN sanctions.
Working under cost-plus agreements that guaranteed
a fixed profit rate no matter how much an
operation ultimately cost, they preferred instead
to install expensive new proprietary equipment.
Then, in the absence of any outside oversight,
they ran up huge expenses and frequently failed to
complete their contracts, leaving the oil
facilities they were servicing in states of
disrepair or partial repair - and equipped with
technology that local technicians could not
service.
Meanwhile, the major oil
companies refused Bremer's invitation to invest
their own money in Iraqi projects, pointing out
the obvious - that the insurgency and the
spreading chaos made such investments unwise. In
addition, they were well aware that Bremer's
regime in Baghdad lacked clear authority to sign
contracts with them. This, in turn, meant that
their investments might be in jeopardy once a
legitimate government took power.
When
technical sovereignty was finally handed over to
an appointed Iraqi government headed by the
Central Intelligence Agency's favorite Iraqi
exile, Iyad Allawi, in June 2004, the new premier
embraced Bremer's policy, but to no avail. The
international oil companies were no more impressed
with his future than they had been with Bremer's.
Like Wolfowitz, they knew that Iraq "floats on a
sea of oil"; unlike him, they were no dreamers.
They weren't willing to risk their capital in the
dangerous and legally ambiguous circumstances then
prevailing.
As a result, the first two
years of Bush administration efforts to "access"
Iraqi oil failed - and dismally so at that.
Average production never exceeded the
bottom-of-the-barrel 2.5 million barrels Saddam's
regime managed to extract on its worst days. By
2006, production had slipped below 2 million
barrels per day.
Dealing with the Iraqi
government It is difficult to judge how
much Bremer's inability to implement the
pre-planned oil policy contributed to the Bush
administration decision to reverse its plans for
Iraqi "democracy" - which, as Juan Cole has
pointed out, involved council-based elections, an
electorate restricted to a small elite, and Bremer
as "a MacArthur in Baghdad for years" - and push
for an elected Iraqi government. It certainly is
true, however, that this change triggered a
campaign aimed at the "capture of new and existing
oil and gas fields".
As soon as the first
elections for a temporary Iraqi government were
completed in January 2005, American officials in
Iraq began lobbying forcefully for adoption of the
very policy that the State Department's
pre-invasion Future of Iraq project had drafted.
The State Department planners had concluded that
production sharing agreements (PSAs) - a method
that granted multinational oil companies effective
control of oilfields without transferring
permanent ownership to them - would be the basic
instrument through which a future "independent"
Iraq would develop new fields. Wary by now of
being seen as the chief advocate of this policy,
which it so desperately wanted in place, the Bush
administration concocted a strategy that would
enlist the international community in pressuring
Iraq to adopt its program.
This was done
by making the International Monetary Fund (IMF) a
key player in Iraqi oil policy. Through loans in
the 1980s and reparations imposed for his invasion
of Kuwait in 1990, Saddam had accumulated $120
billion in external debt, the largest per capita
debt in the world and a potentially insurmountable
obstacle to economic recovery, even in oil-rich
Iraq. One option available to the new government
was to declare this debt "odious", a technical
term in international law referring to debt
accumulated by authoritarian rulers for their own
personal or political aggrandizement.
Saddam's expansionist war against Iran,
his use of public funds to build ostentatious
monuments and palaces, his transfer of billions to
his personal accounts, and his failure to maintain
the infrastructure of the country all were
excellent evidence that the debt was indeed
odious; and the US claimed as much for almost $40
billion of it, held by 19 industrialized countries
known as the Paris Club.
Instead of
seeking to cancel this debt (and the remaining $80
billion) entirely, however, the Bush
administration sent James Baker, former secretary
of state under George H W Bush, to the Paris Club
to negotiate conditional forgiveness. The
resulting agreement immediately forgave $12
billion, but left $28 billion on the books. A
second $12 billion would be abrogated when the
Iraqi government signed on to "a standard
International Monetary Fund program", and a
further $8 billion three years later, after the
IMF confirmed Iraqi compliance. Even if
"successful", almost $8 billion would still be
outstanding to the Paris Club - together with $80
billion not covered by the agreement.
The
"standard International Monetary Fund program",
not surprisingly, included the now familiar US
policies regarding Iraqi oil, as well as the use
of PSAs and a host of other provisions that would
open the Iraqi economy as a whole, and the oil
sector in particular, to investment by
multinational corporations.
Among the most
punitive of the provisions was a demand for an end
to the economic breadbasket that guaranteed all
Iraqi families
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