Benchmark Boogie: A Guide to the Struggle Over Iraq's Oil

What does a war for oil look like? American troops going into battle with tanks waving "Exxon Mobil" and "Chevron" flags right behind? Are the flags then planted squarely in the ground and the oil beneath officially declared war bounty? Well, some members of the Bush administration and U.S. oil companies may have favored such an approach. But the device ultimately chosen to win this war for oil is only slightly more subtle: a law, to be passed by the Iraqis themselves, which would turn Iraq's oil over to foreign oil companies.

The president's benchmark

The U.S. State Department Iraq Study Group began laying the foundations for the new law prior to the invasion of Iraq. Its recommendations, released only after the invasion, were quickly enshrined in a draft oil law introduced to the interim Iraqi government by the U.S.-appointed interim prime minister of Iraq, Ayad Allawi (a former CIA operative).

The Bush administration has spent four years trying to force successive Iraqi governments to pass the law, referred to as either the "hydrocarbons" or "oil" law. While it has gone through several permutations, the basics have remained the same and have followed the original prescriptions set out by the State Department.

The law would change Iraq's oil system from a nationalized model -- all but closed to U.S. oil companies -- to a privatized model open to foreign corporate control. At least two-thirds of Iraq's oil would be open to foreign oil companies under terms that they usually only dream about, including 30-year-long contracts. (For details of the law, see my March 2007 New York Times Op-Ed, "Whose Oil Is It, Anyway?")

In January, after four years of trying to get the law passed in Iraq, President Bush went public with this demand when he made his "speech to the nation" announcing the "surge" of 20,000 additional American troops to Iraq.

The president explained that the surge would be successful where other U.S. efforts had failed in Iraq because the Iraqi government would be held to a set of specific "benchmarks." Those benchmarks were laid out in a White House Fact Sheet released the same day that explained that the Iraq government had committed to several economic and political measures, including to "enact [a] hydrocarbons law to promote investment, national unity, and reconciliation."

After the speech, the administration increased public pressure on the Iraqi government to pass the law. However, that speech was just about the only time that the president or anyone in the administration would use the word "investment" to describe the law. Instead, the adminstration would refer generally to the law's capacity to bring "national unity and reconciliation" by establishing a mechanism to evenly distribute Iraq's oil revenues among Iraqis on a per capita basis.

With few exceptions, the American press has adopted the adminstration's language and continually and virtually exclusively refers to the oil law as a revenue sharing measure -- ignoring completely the fact that Iraqis would only be able to share the revenues left over after the foreign oil companies received their very sizeable cut.

The pressure worked. In February, the oil law passed what seemed to be the most important hurdle, Iraq's cabinet. The cabinet signed off on the law and agreed to send it to the parliament. However, resistance in the parliament was too great, and the law was not introduced.

The Kurdistan Regional Government posted the February draft of the oil law on its website (PDF). The law has almost nothing to say about oil revenues. In fact, just three sentences of the law addressed this issue, stating that an additional law -- the "federal revenue law" -- would be required to ensure a "fair distribution" of oil revenues.