Iraq and Big Oil

Written By: - Date published: 11:37 am, September 2nd, 2012 - 32 comments
Categories: energy, iraq, war - Tags: ,

An article by Greg Muttitt (author of Fuel on the Fire: Oil and Politics in Occupied Iraq) has been doing the rounds. Here are some extracts from the version on Al Jazeera  (reordered somewhat choronologically):

Mission accomplished for Big Oil?

… In the period before and around the invasion, the Bush administration barely mentioned Iraqi oil, describing it reverently only as that country’s “patrimony”. As for the reasons for war, the administration insisted that it had barely noticed Iraq had one-tenth of the world’s oil reserves. But my new book reveals documents I received, marked SECRET/NOFORN, that laid out for the first time pre-war oil plans hatched in the Pentagon by arch-neoconservative Douglas Feith’s Energy Infrastructure Planning Group (EIPG).

In November 2002, four months before the invasion, that planning group came up with a novel idea: it proposed that any American occupation authority not repair war damage to the country’s oil infrastructure, as doing so “could discourage private sector involvement”. In other words, it suggested that the landscape should be cleared of Iraq’s homegrown oil industry to make room for Big Oil. …

In July 2003, the US occupation established the Iraqi Governing Council, a quasi-governmental body led by friendly Iraqi exiles who had been out of the country for the previous few decades. They would be housed in an area of Baghdad isolated from the Iraqi population by concrete blast walls and machine gun towers, and dubbed the Green Zone.  There, the politicians would feast, oblivious to and unconcerned with the suffering of the rest of the population.

The first post-invasion Oil Minister was Ibrahim Bahr al-Uloum, a man who held the country’s homegrown oil expertise in open contempt. He quickly set about sacking the technicians and managers who had built the industry following nationalisation in the 1970s and had kept it running through wars and sanctions. He replaced them with friends and fellow party members. One typical replacement was a former pizza chef.

The resulting damage to the oil industry exceeded anything caused by missiles and tanks. As a result the country found itself – as Washington had hoped – dependent on the expertise of foreign companies. … The first permanent government was formed under Prime Minister Maliki in May 2006. In the preceding months, the American and British governments made sure the candidates for prime minister knew what their first priority had to be: to pass a law legalising the return of the foreign multinationals – tossed out of the country in the 1970s – to run the oil sector.

Here, as a start, is a little scorecard of what’s gone on in Iraq since Big Oil arrived two and a half years ago: corruption’s skyrocketed; two Western oil companies are being investigated for either giving or receiving bribes; the Iraqi government is paying oil companies a per-barrel fee according to wildly unrealistic production targets they’ve set, whether or not they deliver that number of barrels; contractors are heavily over-charging for drilling wells, which the companies don’t mind since the Iraqi government picks up the tab.

Meanwhile, to protect the oil giants from dissent and protest, trade union offices have been raided, computers seized and equipment smashed, leaders arrested and prosecuted. And that’s just in the oil-rich southern part of the country. …

Keep in mind that the incapacity of the Iraqi government is hardly limited to the oil business: stagnation hangs over its every institution. Iraqis still have an average of just five hours of electricity a day, which in 130-degree heat causes tempers to boil over regularly. The country’s two great rivers, the Tigris and Euphrates, which watered the cradle of civilisation 5,000 years ago, are drying up. This is largely due to the inability of the government to engage in effective regional diplomacy that would control upstream dam-building by Turkey. Oil companies differ as to which of these two Iraqs they prefer to operate in. BP and Shell have opted to rush for black gold in the super-giant oilfields of southern Iraq. Exxon has hedged its bets by investing in both options. This summer,Chevron and the French oil company Total voted for the Kurdish approach, trading smaller oil fields for better terms and a bit more stability.

How temporary the victory of Big Oil?

Things changed again in 2009 when the Maliki government, eager for oil revenues, began awarding contracts to them even without an oil law in place. As a result, however, the victory of Big Oil is likely to be a temporary one: the present contracts are illegal, and so they will last only as long as there’s a government in Baghdad that supports them.

This helps explain why the government’s repression of trade unions increased once the contracts were signed.  Now, Iraq is showing signs of a more general return to authoritarianism (as well as internecine violence and possibly renewed sectarian conflict). …

Now, without its troops and bases, much of Washington’s political heft has vanished. Whether Iraq heads in the direction of dictatorship, sectarianism or democracy remains to be seen, but if Iraqis again start to build a more democratic future, the US will no longer be there to obstruct it. Meanwhile, if a new politics does emerge, Big Oil may discover that, in the end, it was mission unaccomplished.

America’s wars in Iraq and Afghanistan have been the defining features of the international “geopolitical” landscape for the last decade. They also serve as an indication of likely developments over the next few decades, as the competition for energy grows ever more intense. So it’s important to understand what has been happening in Iraq, and Muttitt’s book and article are a very useful contribution.

32 comments on “Iraq and Big Oil”

  1. BernyD 1

    One less player in the “Open Market”.
    Using twisted ideals of “Civilisation” to scare the world.
    And when good men act to help civilians, the evil agendas behind them sky rocket.
    It’s a problem the whole world faces regardless of political ideologies.
    People will be people. The evil ones just watch and wait for a chance.

    • seeker 1.1

      “People will be people. The evil ones just watch and wait for a chance.”

      Wise observation BernyD. The trick is to be able to discern who the ‘evil ones’ are and to try and prempt them acting out. Too few people seem to have mastered, or even thought about the necessity of mastering, this ‘trick’. For, as you say, “It’s a problem the whole world faces….”

      • BernyD 1.1.1

        In a civilised world good will always take the first hit, you don’t have a choice.
        Every hit after that is your own choice
        Defend yourself or walk away, and remember the evils’ context for future defence

  2. captain hook 2

    thinking is the best way to travel.
    hippy manifesto.

  3. Colonial Viper 3

    Who won in Iraq, as Saddam’s Sunni/Secular leadership was deposed and majority Sh’ia influences took hold?

    Oh yeah, Iran. Whoops.

  4. Jenny 4

    Fueled in large measure by the Arab Spring, the times are certainly changing in the Middle East, with the flow of history moving ever more strongly against Washington and its client state Israel.

    At the 120-country Non-Aligned Movement summit in Tehran, Egyptian president Mohamed Morsi said in his opening speech that the world had an “ethical duty” to support Syria‘s rebels.

    Morsi proposed that Iran be part of a four-nation contact group including Egypt, Turkey and Saudi Arabia that would mediate in the Syrian crisis.

    Morsi’s proposal points to a future four-way regional power sharing arrangement that displaces a US imperium in decline from the oil-rich and geographically pivotal area between Iran and Turkey.

    • Colonial Viper 4.1

      Actually, Morsi antagonised his Iranian hosts, and took the position that Syria must fall, exactly like the US intended.

      • fnjckg 4.1.1

        yep. proxies

        • Colonial Viper

          Given that Morsi’s grip on power requires American military and financial support more than ever, I’m not sure how Jenny managed to construe that the “Arab Spring” in Egypt changed a single thing. Except for the fact that fundmental Islamists hold more sway in the new Egypt than under Mubarak, of course.

          • fnjckg

            i just skip happily by the idealogues (cept when broadband slows) very frustrating for a speed reader
            nothing like seeking confirmatory OR NOT (Kuhn) evidence
            sure are some woolie thinkers around these here parts
            i am as post-modern as the next man but puh-lease…

      • Bill 4.1.2

        Okay, that’s one interpretation, CV.

        Or you could say he antagonised the Syrian foreign minister who did, afterall, walk out on his speech. And you could say he’s antagonising the hell out of the US. He cancelled a state visit with them to bugger off to some red carpet treatment in China instead, before attending another meeting the US would rather had never happened.

        What if, as some predict, he revisits the ‘Camp David’ accords? What if, as seems likely, he is intent on re-establishing Egypts position in the region and dumping the US relationship in favour of a Chinese one?

        • Colonial Viper

          What if, as seems likely, he is intent on re-establishing Egypts position in the region and dumping the US relationship in favour of a Chinese one?

          Never say never…but China is reasonably pro-Assad so supporting the FSA doesn’t seem the obvious route to winning favours.

          Additionally, swinging over to China would cause major difficulties for the Egyptian military. Withdrawal of US technical support for the 200+ F16’s and 1,100+ M1A1 Abrams operated by the Egyptians would provide a singular headache.

          What I wouldn’t be surprised about is if this turns out to be more about rapidly cooling relations with Israel than anything directly to do with the US.

          • ghostwhowalksnz

            The Chinese could support the F16s and Abrams tanks in a heartbeat ! They all ready are, as US finds counterfeit chips in military grade electronics. The more prosaic parts such as gearboxes and afterburners would be a starter job for a Chinese copy shop

  5. captain hook 5

    smee fetch the whisky.
    tick tock….

  6. Ianmac from Vietnam 6

    An awful indictment on the integrity of USA leadership. Who wants to buddy with the bullies?
    Rise and Fall of a once mighty country. Very depressing.

  7. Draco T Bastard 7

    …as the competition for energy grows ever more intense.

    That’s incorrect. If it was just competition for energy then what we’d see is wind and solar farms going up. No, it’s competition for oili that’s the driving force here. Without oil then all those mobile armed forces are, quite literally, dead in water and without those the ability to project force and thus maintain empire and the wealth pump that comes with it is very, very limited.

    • OneTrack 7.1

      There are other weapons in existence that project some power and that dont rely on oil.

      • Colonial Viper 7.1.1

        Flintlocks, revolvers, repeating guns, samurai swords, ballista, cavalry, to name a few

        However a lack of oil instantly means warfare based on armoured divisions, mechanised infantry and mechanised artillery ends. The majority of airforce operations would also end.

        • lprent

          Not really. It is just more costly and uses different fuels.

          For instance most of the US these days uses a ethanol/petrol (gasohol) mixture of between a few percent (for anti-knock) and 15%.. Looking it up.

          The United States became the world’s largest producer of ethanol fuel in 2005. The U.S. produced 13.2 billion U.S. liquid gallons (49.2 billion liters) of ethanol fuel in 2010,[1] and together with Brazil, accounted for 88% of that year’s global production.[1][2] In the U.S, ethanol fuel is mainly used as an oxygenate in gasoline in the form of low-level blends up to 10 percent, and to an increasing extent, as E85 fuel for flex-fuel vehicles.[3] In 2009, 99% was consumed in gasohol.[4] Most is produced using corn as feedstock.[3]

          The ethanol market share in the U.S. gasoline supply grew by volume from just over 1 percent in 2000 to more than 3 percent in 2006 to 10 percent in 2011.[5][6][7] Domestic production capacity increased fifteen times after 1990, from 900 million US gallons to 1.63 billion US gal in 2000, to 13.5 billion US gallons in 2010.[6][8]

          This would give reduced power compared to modern jet kerosene. But there is still a lot of energy in the bonds. ~80% of 91 octane fuel from memory. More than sufficient to run everything apart from the highest performance jets. 13.5 billon gallons would run a hell of a war.

          • Draco T Bastard

            Military Spending on Biofuels Draws Fire

            The House, controlled by Republicans, has already approved measures that would all but kill Pentagon spending on purchasing or investing in biofuels.

            Of course, if the oil disappeared I’m sure that they’d rapidly shift to using bio-fuels but I doubt if they’d be able to maintain the same level of military that they do now.

            • lprent

              The level and mix would change, but as CV says, it’d be the civilian economy that would drive it more. However the civilian economy has a lot more room to adapt to changes in fuel than the military. And we are likely to have decades of steadily rising prices to force the shifts to more efficient modes of transportation and heating

          • Colonial Viper

            More than sufficient to run everything apart from the highest performance jets. 13.5 billon gallons would run a hell of a war.

            I agree, the US military will continue to have access to prime fossil fuel reserves for a long time after the rest of us do. Fuel supply will be prioritised, at the highest levels, to the military.

            Of course, energy starvation in other sectors of the economy will make it very financially difficult to keep that war machine running. Its a tough life 🙂

            This would give reduced power compared to modern jet kerosene. But there is still a lot of energy in the bonds. ~80% of 91 octane fuel from memory.

            Good memory! Figures on the net seem to vary but these seem applicable:

            Ethanol energy density = 24MJ/kg (i.e. 26% less than…)
            Aviation kerosene energy density = 33MJ/kg

      • Draco T Bastard 7.1.2

        Yes there are but you still have to get troops on the ground and wars carried out half way around the world using sailing ships tend not to work out to well for the empire sending them.

        • lostiusuburbia

          yep, hence why the Pentagon view peak oil as one of the global trends to be aware of for future military planning. Same for the German military.

  8. fnjckg 8

    NATO proxies?

  9. Bill 9

    Meanwhile….Desmond Tutu reiterates the call for Blair and Bush to be tried as war criminals over the invasion of Iraq. Blair’s response and the comments alone make the read worthwhile.

    • Ianmac from Vietnam 9.1

      Blair is a liar Bill. The only time that I have seen Blair discomfitted by an interviewer was by John Campbell. Blair was very cross that mere NZer should challenge Blair on his fragile assertions.

      Putting your link against Rob’s post at the top of the page shows the Bush/Blair hypocrisy.

  10. infused 10

    You have to be shitting me…

    Eat it up guys…

  11. Bored 11

    The Empire lost the war in Vietnam, they are losing in Afghanistan, next failure Iraq. people power versus gasoline power. And the gas is running out. Oh for the glory that was Rome.

  12. Fortran 12

    Biofuel is taking food from millions of people’s mouths – those who cannot help themselves.

    What is more important Biofuel for vehicles or food for the starving ?

  13. xtasy 13

    NZ could be amongst the most favoured and advanced, energy independent nations or countries on the planet, but lo and behold, it is sucking up to energy corps, especially oil and fossil fuel explorers in a big way. So Key and co know it all, I presume, while the rest of the globe move into alternative fuels.

    Economies slowing all over, but we are told, the milk powder miracle will sustain NZ lifestyles. Ask that the tourists, as an article in Auckland’s Central Leader rightfully raised today.

    I have commented on this hundreds of times, the last remnants of desperate or hopeful Kiwis still try to put a positive spin on things, the truth is, this country is fucked! Pay more than double for groceries than in Europe or Melbourne (Sunday program last night), pay exorbitant rents and housing costs in Auckland and Christchurch, nobody in US or Europe would pay, and youearn bloody half of wht people there do!

    so for fucks sake, when is the revolt taking place, or are you all so pleasantly, peacefully consenting to being ripped off right left and centre? NZers must be insane or idiots in the making!

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