Big Oil in Iraq: "World Class Racketeering"

By Charlie Cray, Huffington Post. Posted September 5, 2007.

It was clear from the start that the Iraqis would not meet the "benchmarks" that Congress and Bush have imposed on it.

But anyone who expected them to is deluded. Not simply because the timelines are unreasonable, but because those who want to hold Iraqis "accountable" (as if they are in a position to make such demands) fail to understand what the benchmarks are about to begin with.

Congress might have learned a great deal about one of those benchmarks had it paid attention to a hearing held by the House Committee on Foreign Affairs back on July 18.

As experts who have followed Iraq's oil sector explained at the hearing, one benchmark Iraq is being pressured to pass involves not one but a series of hydrocarbon laws (i.e. not just a revenue law that divvies up Iraq's oil revenues between the federal government and the different regions, but also three other interrelated laws that would also establish the oil sector legal framework, the Ministry of Oil and the new Iraqi National Oil Company).

The confusion over what Iraq is being asked to do may be a failure that critics can lay at the media's feet, but the more important issue as far as I can tell is the manner in which these laws are being pushed so aggressively -- which, as Rep. Mike Pence (R-IN) put it, has the potential to "jeopardize [Iraq's] entire constitutional order."

GAO's Joseph Christoff, a key witness at the hearing, explained that Iraq is being pressured to pass the hydrocarbon laws at a time when we don't even know, for example, what regions will even exist that might lay claim to a portion of the oil revenues.

The committee responsible for drafting changes to the country's constitution has not even been formed. Thus, the role of the regions and whether or not new regions will be formed, such as a Shi'a region in the South, has not yet been determined, and defining the regions will have some bearing on how the oil revenues would be divided.

Other issues that Christoff says should first be resolved include the disposition of Kirkuk and what census would be used to define the populations for purposes of revenue percentages.

"I just can't understand the logic in terms of the sequence here," Rep. Bill Delahunt (D-MA) gasped in astonishment after hearing all this. "It makes little sense to pass a hydrocarbon law in all of its aspects without having the work of the constitutional committees accomplished as a prerequisite."

It's not like there's any need to rush to pass the law for Iraq to produce oil. Iraq has 115 billion barrels of proven reserves in 80 fields (20 of which are currently in production). If it were to build up to a capacity of 10 bbd production, it wouldn't have to discover any new reserves for at least ten years.

Yet for some reason the Iraqis are under a lot of pressure to pass a law allowing for the exploration of additional oil. The reason, of course, is because the multinational oil companies, whose own proven oil reserves have been in steep decline, see Iraq's untapped reserves as the bigger prize.

And as Tariq Shafiq, one of the three-member team charged with drafting the petroleum law for the Iraq Ministry of Oil suggested at the hearing, because Iraq itself doesn't need to develop those untapped reserves for another decade, pressure to immediately implement any provision that would open them up for exploration and development "fuels the argument" that the Americans and British "are there for the oil."

There are many indications that the Iraqi people see the game pretty clearly. A Univ. of Michigan poll cited at the beginning of the hearing found that even before the framework draft was introduced, 76 percent of Iraqis believe the U.S. invaded Iraq to control its oil.

And opposition to the law has grown precipitously, as word about the specific terms of the law spreads.

By pressuring Iraq to pass the benchmark, Bush and Congress risk the perception that they have tried to locked in U.S. control of Iraqi oil before the Iraqi people learn how they were swindled.

"There's a belief that this framework draft would benefit international oil companies to the long-term detriment of Iraq and the Iraqi people…If the passage of this framework draft is interpreted to be an exploitation of Iraq's most coveted natural resource, then our reputation and prestige could very well suffer even further, and a claim that we fought to free Iraq will be rejected out of had, and our national interest will suffer in the long term," Delahunt added.

There has been a lot of obfuscation around these matters, and the oil sector shenanigans are not the only way the Americans can be blamed for fueling the violence and chaos..

But as Rep. Ackerman put it, there is so much corruption in the oil sector that "it's surprising the Iraqi people are not bringing -- are not demanding that we bring the old crooks back."

So where are Ackerman and Delahunt's colleagues on all this?

E.g. where's Minnesota Senator Norm Coleman, who pushed his colleagues to hold numerous hearings on rampant corruption in the oil sector when it was managed by Saddam and the UN?

Why isn't Senator Coleman asking the administration what the 20 "paid American consultants" are doing who currently oversee the ministry of oil -- where corruption is reported to be "pervasive"?

In June, DoD reported that as much as 70 percent of the fuel processed at Iraq's key refinery was sold on the black market. Although neither the Iraqis or Americans know precisely how much oil is being produced, some 100-300,000 barrels of oil per day go unaccounted for.

So where's Norm and the rest of the Congress who raised such a ruckus before about illicit payments and black market sales of Iraqi oil?

"This is world-class racketeering that we're in charge of advising," Rep. Ackerman aptly observed.

But you don't see too many of Ackerman and Delahunt's colleagues making much noise about it.

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Charlie Cray is director of the Center for Corporate Policy in Washington, DC.

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