Page 2 of 2 Iraq on track to its true destiny
By Michael T Klare
Kurdish-controlled areas, which are thought to hold substantial reserves of
untapped petroleum.
In June, the Oil Ministry conducted its first auction of rights to operate
existing fields in the country's major producing areas. This represented a
major - even staggering - shift in policy, opening the door for the first time
in three decades to the participation of major international oil companies in
the operation, if not the ownership, of the country's nationalized oil fields.
Although opposed by many key groups in Iraq, ranging from the oil workers'
union to significant factions in parliament, the move was taken to secure
outside expertise in modernizing and upgrading the country's crumbling oil
infrastructure, thereby boosting output in a country that still relies on oil
for more than
75% of its gross domestic product and about 95% of its revenues.
In fact, many foreign companies chose not to bid in the auction's opening
round, finding the returns being offered insufficiently attractive.
Nevertheless, one Western firm, BP, won the right (in partnership with CNPC) to
operate the giant Rumaila field, Iraq's largest. The oil ministry has since
indicated that it will conduct additional auctions, including one for the right
to explore for oil, on terms as yet unrevealed, in the country's undeveloped
south and west - possibly laying the groundwork for significantly more
intrusive participation by foreign firms.
Taken together, these steps, aimed at securing the necessary external financing
and expertise to achieve a significant boost in production, represent a genuine
sea change in the way the oil ministry has been overseeing the country's
hydrocarbons industry. If all goes as planned, it intends to increase output by
1.5 million barrels per day, and another four to five million barrels by 2017.
These efforts, if successful (and given recent history, that remains a big
"if"), would place Iraq among the world's top four or five oil producers, along
with Saudi Arabia, Russia, and the United States.
A new petro-state servicing the global economy?
No one should underestimate the potential obstacles in the way of this
objective. Any number of factors - a rise in opposition to giving away any part
of the national "patrimony" to foreigners, a significant increase in insurgent
violence, heightened factional fighting in Baghdad, a sharpening of tension
between Baghdad and the Kurds, an increase in corruption - could prevent the
realization of these ambitious goals. Moreover, pending the passage of a
national oil and gas law (a goal pursued by US officials for years), the major
foreign oil companies will remain reluctant to sink too much money into Iraq,
fearful that their assets will not be protected.
Nevertheless, it appears that, for the first time since the outbreak of the
Iran-Iraq War in 1980, the stars in the energy firmament are aligning in ways
that may favor Iraq's reemergence as a major oil producer. Whereas the major
powers once competed among themselves for influence in Iraq or backed one or
another of Iraq's local rivals in efforts to weaken or contain that country,
all now seem inclined to invest in, and benefit from, the reconstruction of its
energy infrastructure. The George W Bush administration, which looked with
alarm at Saddam's growing ties to Russia and China, invaded the country in part
to reassert American dominance in the Persian Gulf region and diminish the role
played by Moscow and Beijing. Today, Washington appears to welcome the growing
role of Chinese and Russian firms in the rehabilitation of Iraq's dilapidated
energy infrastructure.
It's a reasonable assumption that behind this unprecedented shift lies an
acknowledgement of the inescapable reality of peak oil. As things stand now,
the world will soon reach a maximum level of sustainable daily oil output,
followed by an inevitable contraction in available supplies. Many experts
believe that the peak in conventional (liquid) oil output is likely to occur in
the very near future, perhaps in the 2010-2015 timeframe, with global output
topping out about 5 to 10 million barrels per day higher than today's 85
million barrels.
Hitting the peak moment in that timeframe, and at that level, would prove
devastating to the world economy, as global energy demand is expected to climb
far higher, thanks to rising consumption patterns in China, India, and other
dynamos of the developing world. It's not hard, then, to do the math.
An addition of perhaps six million supplemental barrels per day from Iraq would
make a striking difference in the energy equation. In fact, it might prove the
difference between squeaking by and a catastrophic worldwide shortage. Under
such circumstances, it is understandable that, no matter what their governments
felt about the Bush administration's invasion and occupation of Iraq, the major
powers now share a common interest in facilitating that country's recovery as a
major oil exporter.
For devastated Iraq, of course, these last years were a disaster and real
reconstruction of the country still remains a long way off. For the United
States, gone are expectations of converting Iraq into a model Middle Eastern
democracy, or of inserting a Western-trained, pro-US regime in Baghdad. Nor is
there any expectation that the state-owned Iraq National Oil Company will be
completely privatized - once the dream of Bush-era neo-cons. Nonetheless, the
(re)emergence of a functioning Iraqi petro-state working closely with foreign
energy firms to boost global oil supplies (with American troops, whether based
in Iraq or neighboring countries, providing ultimate security) would be an
outcome that could be sold to Congress and, presumably, a majority of the
American public.
Within Iraq itself, conditions may favor such an outcome. Although various
Iraqi factions have enormous differences, all recognize that their future
prosperity rests on the successful development of the nation's hydrocarbon
reserves. While Shiites, Sunnis, and Kurds may each hope to benefit
disproportionately from this great treasure, they all realize that some degree
of cooperation, for example in the construction and maintenance of export
facilities, is essential to their ambitions, however disparate. While the
bargaining over the terms of cooperation may seem endless, and violence may
sometimes accompany these negotiations, it is likely that some sort of
collaborative structure will, in the end, emerge. A gradual drawdown, if not
total departure, of American forces will, in all likelihood, only accelerate
this process.
So it has finally come to this dismal possible end point: after all the blood
and tears, all the death and destruction, almost all interested parties seem to
be returning to the only vision of the country, however depressing, that has
demonstrated any viability. In the future, Iraq is likely to be an oil-fueled
petro-state with no function other than to service global markets and enrich
local elites as well as the technocrats that assist them. This may be not be an
inspiring vision, especially for Iraqis who have suffered so much, but it might
possibly be the only reality available that will circumvent the horrific
bloodletting of the past 30 years.
Michael T Klare is a professor of peace and world security studies at
Hampshire College in Amherst, Massachusetts. He is the author, most recently,
of Rising Powers, Shrinking Planet: The New Geopolitics of Energy (Henry
Holt). A documentary movie of his previous book, Blood and Oil, is
available at bloodandoilmovie.com.
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