How we (essentially) stole Iraq's oil

Posted by Joshua Holland at 1:57 AM on May 9, 2006.

Scott Adams, the father of Dilbert, has a question:

I don't understand the theory that we attacked Iraq for oil. Can one of you geniuses explain that to the rest of us?

I like a good conspiracy theory as much as the next person. And I certainly think governments are capable of doing bad things. But I don't understand the concept of attacking Iraq "because of oil." What does that even mean? [...]

Seriously. Can anyone explain what the plan was?

Sure, Dilbert's dad.

And let me just say that if I had a nickel for every time someone airily dismissed the anti-war crowd's chants of "no blood for oil" by pointing out that we could always buy the oil on the open market, or that Iraq's government still controls it I'd … well, I'd have quite a few nickels.

The first thing one needs to understand is the difference between the old-school paleo-colonialism so popular among Brits wearing pith helmets in the 19th century and the shiny new brand of neo-colonialism that we perfected in the 20th. The essence of the latter is this: of course we'll respect your sovereignty and abide by your domestic laws, as long as we can help write them.

That's the heart of it. In her book, The Bush Agenda, Antonia Juhasz detailed how, six months before the invasion, the administration brought in a group of oil executives to advise them on Iraqi oil policy (this, as Bush was swearing up and down that he had no intention of going to war). The State Department also set up a consulting group under the "Future of Iraq Project" called the "Oil and Energy Working Group." After some back and forth among the various consultants, a consensus was reached that Iraq's oil "should be opened to international oil companies as quickly as possible after the war." What a shocker!

But they couldn't just say that, or Dilbert's father wouldn't be able to scratch his head at those unruly anti-war types. The administration did a great job of deflecting the criticism; Bush called Iraq's oil wealth its "patrimony" and promised it would stay in the hands of the Iraqi people.

And when Paul Bremer was serving as the "dictator of Iraq" (in the words of UN envoy Lakhdar Brahimi) and instituted his infamous "100 rules" -- rules that privatized Iraq's state companies, threw open its economy to foreign investment, established a flat tax and instituted a dozen other measures on the Chamber of Commerce's wish-list -- oil was excluded.

And the war-hawks said: See?

But what Iraq ended up with was a law, written by our oil execs, that gave their companies a far greater cut of Iraq's oil wealth than they can get anywhere else in the Middle East.

I'll let Antonia Juhasz explain the deal:

Essentially the United States crafted a new oil law for Iraq that provides for production sharing agreements [PSAs], which are contractual terms between a government and a foreign corporation to explore for, produce and market oil. Production sharing agreements are not used by any country in the Middle East, or in fact by any country that's truly wealthy in oil. They're used to entice investors into an area where the oil is expensive to produce or there isn't a lot of oil.

But Iraq has potentially the largest oil reserves in the world and they're very easy and cheap to get to -- in Iraq, you essentially just stick a pipe in the ground and you get oil. There's absolutely no reason for Iraq to enter into PSAs, but there's every reason for Western oil companies to want them -- they provide the best terms short of full privatization of the oil.

Iraq has eighty known oil fields. Seventeen of them have been discovered. Under the new oil law -- written into the constitution -- those seventeen will be under the control of the Iraqi national oil company.

That's what Bush meant when he talked about preserving Iraq's "oil patrimony." But …

All undiscovered oil fields are now open to the PSAs. That means, depending on how much oil there is in Iraq, foreign companies will have control over at least 64 percent of Iraq's oil and as much as 84 percent.

PSAs are the worst possible deals for countries; last week economist Mark Weisbrot referred to one in Latin America that gave the government a healthy cut of one percent of its natural gas revenues.

That isn't just a law that can be dismissed down the road by Iraq's legislature with a simple vote; it was built into the country's Constitution, a document that Iraqis approved without having a firm grip on its details (read my interview with Juhasz for some insight into how that happened).

And it's not just about oil; combine the Oil Law with the rest of Bremer's orders. They not only slashed corporate taxes and allowed foreign investors to take 100 percent of their profits out of the country, they gave them -- by law -- the same status as Iraqi firms. That means that all the things countries like Iraq do to turn foreign investment into a little bit of development are off the table: foreign multinationals can't be asked to invest in the local economy or hire a certain number of Iraqi workers or build schools and health clinics or any of the other strategies that are common in poor but resource-rich countries. All of those rules worked their way into the Constitution as well.

None of this is a conspiracy theory; all of it is well-documented in the public record. There were endless position papers put out by industry groups urging the ouster of Saddam in order to open Iraq's economy, and they lobbied quite openly. Juhasz details all of it in her book. People like Dick Cheney, George Schultz and Henry Kissinger warned that American firms were being left out of the fun; while 36 prcent of Iraq's oil ended up in the U.S. during the sanctions years, it mostly came through foreign middle-men -- Saddam gave very few contracts to American firms. That wasn't acceptable and we took him out. It's not a conspiracy when the "conspirators" spent years writing Op-Eds in the Washington Post.

The best evidence that Iraq was an economic invasion, though, is the whole history of our relationship with his government. Saddam was supposed to be our boy in the Middle East after the Shah fell in Iran. He didn't become the Next Hitler™ when he gassed the Kurds. Although always a brutal tyrant, Saddam became a real monster, according to the U.S. government, six months before the first invasion, when, after a very prolonged negotiation with Bechtel, he put the kibosh on the Aqaba pipeline project, a project that both Reagan and Bush 41 wanted badly. That's when we decided we couldn't work with him and the rest, as they say, is … you know.

I hope that helps, Scott.

Joshua Holland is a staff writer at Alternet and a regular contributor to The Gadflyer.