Oil for Sale: Iraq Study Group Recommends Privatization

In its heavily anticipated report released on Wednesday, the Iraq Study Group made at least four truly radical proposals.

The report calls for the United States to assist in privatizing Iraq's national oil industry, opening Iraq to private foreign oil and energy companies, providing direct technical assistance for the "drafting" of a new national oil law for Iraq, and assuring that all of Iraq's oil revenues accrue to the central government.

President Bush hired an employee from the U.S. consultancy firm Bearing Point Inc. over a year ago to advise the Iraq Oil Ministry on the drafting and passage of a new national oil law. As previously drafted, the law opens Iraq's nationalized oil sector to private foreign corporate investment, but stops short of full privatization. The ISG report, however, goes further, stating that "the United States should assist Iraqi leaders to reorganize the national oil industry as a commercial enterprise." In addition, the current Constitution of Iraq is ambiguous as to whether control over Iraq's oil should be shared among its regional provinces or held under the central government. The report specifically recommends the latter: "Oil revenues should accrue to the central government and be shared on the basis of population." If these proposals are followed, Iraq's national oil industry will be privatized and opened to foreign firms, and in control of all of Iraq's oil wealth.

The proposals should come as little surprise given that two authors of the report, James A. Baker III and Lawrence Eagleburger, have each spent much of their political and corporate careers in pursuit of greater access to Iraq's oil and wealth.

"Pragmatist" is the word most often used to describe Iraq Study Group co-chair James A. Baker III. It is equally appropriate for Lawrence Eagleburger. The term applies particularly well to each man's efforts to expand U.S. economic engagement with Saddam Hussein throughout the 1980s and early 1990s. Not only did their efforts enrich Hussein and U.S. corporations, particularly oil companies, it also served the interests of their own private firms.

On April 21,1990, a U.S. delegation was sent to Iraq to placate Saddam Hussein as his anti-American rhetoric and threats of a Kuwaiti invasion intensified. James A. Baker III, then President George H.W. Bush's secretary of state, personally sent a cable to the U.S embassy in Baghdad instructing the U.S. ambassador to meet with Hussein and to make clear that, "as concerned as we are about Iraq's chemical, nuclear, and missile programs, we are not in any sense preparing the way for preemptive military unilateral effort to eliminate these programs."*

Instead, Baker's interest was focused on trade, which he described as the "central factor in the U.S-Iraq relationship." From 1982, when Reagan removed Iraq from the list of countries supporting terrorism, until August 1990, when Iraq invaded Kuwait, Baker and Eagleburger worked with others in the Reagan and Bush administrations to aggressively and successfully expand this trade.

The efficacy of such a move may best be described in a memo written in 1988 by the Bush transition team arguing that the United States would have "to decide whether to treat Iraq as a distasteful dictatorship to be shunned where possible, or to recognize Iraq's present and potential power in the region and accord it relatively high priority. We strongly urge the latter view." Two reasons offered were Iraq's "vast oil reserves," which promised "a lucrative market for U.S. goods," and the fact that U.S. oil imports from Iraq were skyrocketing. Bush and Baker took the transition team's advice and ran with it.

In fact, from 1983 to 1989, annual trade between the United States and Iraq grew nearly sevenfold and was expected to double in 1990, before Iraq invaded Kuwait. In 1989, Iraq became the United States' second-largest trading partner in the Middle East: Iraq purchased $5.2 billion in U.S. exports, while the U.S. bought $5.5 billion in Iraqi petroleum. From 1987 to July 1990, U.S. imports of Iraqi oil increased from 80,000 to 1.1 million barrels per day.