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Whatever Happened to the Neocons’ Grand Schemes to Control Iraq’s Oil?

Dick Cheney thought the US occupation would see a quadrupling of Iraq's capacity to pump oil, and a privatization of its production. Not quite.

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Even before the attacks of September 11, 2001, the secretive energy task force Vice President Cheney headed was tentatively allocating various oil fields in a future pacified Iraq to key international oil companies. Before the March 2003 invasion, the State Department actually drafted prospective legislation for a post-Hussein government, which would have transferred the control of key oil fields to foreign oil giants. Those companies were then expected to invest the necessary billions in Iraq's rickety oil industry to boost production to maximum rates.

Not so long after U.S. troops entered Baghdad, the administration's proconsul, L. Paul Bremer III, enacted the State Department legislation by fiat (and in clear violation of international law, which prohibits occupying powers from changing fundamental legislation in the conquered country). Under the banner of de-Baathification -- the dismantling of Saddam Hussein's Sunni ruling party -- he also fired oil technicians, engineers, and administrators, leaving behind a skeleton crew of Iraqis to manage existing production (and await the arrival of the oil giants with all their expertise).

Within a short time, many of these pariah professionals had fled to other countries where their skills were valued, creating a brain drain that, for a time, nearly incapacitated the Iraqi oil industry. Bremer then appointed a group of international oil consultants and business executives to a newly created (and UN-sanctioned) Development Fund of Iraq (DFI), which was to oversee all of the country's oil revenues.

The remaining Iraqi administrators, technicians, and workers soon mounted a remarkably determined and effective multi-front resistance to Bremer's effort. They were aided in this by a growing insurgency.

In one dramatic episode, Bremer announced the pending transfer of the control of the southern port of Basra (which then handled 80% of the country's oil exports) from a state-run enterprise to KBR, then a subsidiary of Halliburton, the company Vice President Cheney had once headed. Anticipating that their own jobs would soon disappear in a sea of imported labor, the oil workers immediately struck. KBR quickly withdrew and Bremer abandoned the effort.

In other Bremer initiatives, foreign energy and construction firms did take charge of development, repair, and operations in Iraq's main oil fields. The results were rarely adequate and often destructive. Contracts for infrastructure repair or renewal were often botched or left incomplete, as international companies ripped out usable or repairable facilities that involved technology alien to them, only to install ultimately incompatible equipment. In one instance, a $5 million pipeline repair became an $80 million "modernization" project that foundered on intractable engineering issues and, three years later, was left incomplete. In more than a few instances, local communities sabotaged such projects, either because they employed foreign workers and technicians instead of Iraqis, or because they were designed to deprive the locals of what they considered their "fair share" of oil revenues.

In the first two years of the occupation, there were more than 200 attacks on oil and gas pipelines. By 2007, 600 acts of sabotage against pipelines and facilities had been recorded.

After an initial flurry of interest, international oil companies sized up the dangers and politely refused Bremer's invitation to risk billions of dollars on Iraqi energy investments.

After this initial failure, the Bush administration looked for a new strategy to forward its oil ambitions. In late 2004, with Bremer out of the picture, Washington brokered a deal between U.S.-sponsored Iraqi Prime Minister Iyad Allawi and the International Monetary Fund. European countries promised to forgive a quarter of the debts accumulated by Saddam Hussein, and the Iraqis promised to implement the U.S. oil plan. But this worked no better than Bremer's effort. Continued sabotage by insurgents, resistance by Iraqi technicians and workers, and the corrupt ineptitude of the contracting companies made progress impossible. The international oil companies continued to stay away.

 
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