Is It Game Over for U.S. Control of Iraqi Oil?

By Jack Miles, Tomdispatch.com. Posted October 25, 2007.

The oil game in Iraq may be almost up. On September 29th, like a landlord serving notice, the government of Iraq announced that the next annual renewal of the United Nations Security Council mandate for a multinational force in Iraq -- the only legal basis for a continuation of the American occupation -- will be the last. That was, it seems, the first shoe to fall. The second may be an announcement terminating the little-noticed, but crucial companion Security Council mandate governing the disposition of Iraq's oil revenues.

By December 31, 2008, according to Foreign Minister Hoshyar Zebari, the government of Iraq intends to have replaced the existing mandate for a multinational security force with a conventional bilateral security agreement with the United States, an agreement of the sort that Washington has with Kuwait, Saudi Arabia, and several other countries in the Middle East. The Security Council has always paired the annual renewal of its mandate for the multinational force with the renewal of a second mandate for the management of Iraqi oil revenues. This happens through the "Development Fund for Iraq," a kind of escrow account set up by the occupying powers after the overthrow of the Saddam Hussein regime and recognized in 2003 by U.N. Security Council Resolution 1483. The oil game will be up if and when Iraq announces that this mandate, too, will be terminated at a date certain in favor of resource-development agreements that -- like the envisioned security agreement -- match those of other states in the region.

The game will be up because, as Antonia Juhasz pointed out last March in a New York Times op-ed, "Whose Oil Is It, Anyway?":

"Iraq's neighbors Iran, Kuwait and Saudi Arabia.... have outlawed foreign control over oil development. They all hire international oil companies as contractors to provide specific services as needed, for a limited duration, and without giving the foreign company any direct interest in the oil produced."

By contrast, the oil legislation now pending in the Iraqi parliament awards foreign oil companies coveted, long-term, 20-35 year contracts of just the sort that neighboring oil-producers have rejected for decades. It also places the Iraqi oil industry under the control of an appointed body that would include representatives of international oil companies as full voting members.

The news that the duly elected government of Iraq is exercising its limited sovereignty to set a date for termination of the American occupation radically undercuts all discussion in Congress or by American presidential candidates of how soon the U.S. occupation of Iraq may "safely" end. Yet if, by the same route, Iraq were to resume full and independent control over the world's third-largest proven oil reserves -- 200 to 300 million barrels of light crude worth as much as $30 trillion at today's prices -- a politically incorrect question might break rudely out of the Internet universe and into the mainstream media world, into, that is, the open: Has the Iraq war been an oil war from the outset?

Former Federal Reserve Chairman Alan Greenspan evidently thought so or so he indicated in a single sentence in his recent memoir: "I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil." When asked, Gen. John Abizaid, former CENTCOM commander who oversaw three and a half years of the American occupation of Iraq, agreed. "Of course it's about oil, we can't really deny that," he said during a roundtable discussion at Stanford University. These confessions validated the suspicions of foreign observers too numerous to count. Veteran security analyst Thomas Powers observed in the New York Review of Books recently:

What it was only feared the Russians might do [by invading Afghanistan in the 1980s] the Americans have actually done -- they have planted themselves squarely astride the world's largest pool of oil, in a position potentially to control its movement and to coerce all the governments who depend on that oil. Americans naturally do not suspect their own motives but others do. The reaction of the Russians, the Germans, and the French in the months leading up to the war suggests that none of them wished to give Americans the power which [former National Security Adviser Zbigniew] Brzezinski had feared was the goal of the Soviets.

Apologists for the war point out lamely that the United States imports only a small fraction of its oil from Iraq, but what matters, rather obviously, is not Iraq's current exports but its reserves.

Before the invasion of Iraq in March 2003, media mogul Rupert Murdoch said, "The greatest thing to come out of this for the world economy, if you could put it that way, would be $20 a barrel for oil." In the twenty-first century's version of the "Great Game" of nineteenth century imperialism, the Bush administration made a colossal gamble that Iraq could become a kind of West Germany or South Korea on the Persian Gulf -- a federal republic with a robust, oil-exporting economy, a rising standard of living, and a set of U.S. bases that would guarantee lasting American domination of the most resource-strategic region on the planet. The political half of that gamble has already been lost, but the Bush administration has proven adamantly unwilling to accept the loss of the economic half, the oil half, without a desperate fight. Perhaps the five super-bases that the U.S. has been constructing in Iraq for as many as 20,000 troops each, plus the ill-built super-embassy (the largest on the planet) it has been constructing inside the Green Zone, will suffice to maintain American control over the oil reserves, even in defiance of international law and the officially stated wishes of the Iraqi people -- but perhaps not.

Blackwater and the Sovereignty Showdown

In any case, a kind of slow-motion showdown may lie not so far ahead; and, during the past weeks, we may have been given a clue as to how it could unfold. Recall that after the gunning down of at least 17 Iraqis in a Baghdad square, Prime Minister al-Maliki demanded that the State Department dismiss and punish the trigger-happy private security firm, Blackwater USA, which was responsible for the safety of American diplomatic personnel in Iraq. He further demanded that the immunity former occupation head L. Paul Bremer III had granted, in 2004, to all such private security firms be revoked.

Startled, the Bush administration briefly grounded its diplomatic operations, then defiantly resumed them -- with security still provided by Blackwater. Within days, though, Bush found himself face-to-face in New York with al-Maliki for discussions whose topic National Security Advisor Stephen Hadley revealingly named as "Iraqi sovereignty." Who would blink first?

We're still waiting to see, but in the wake of an Iraqi investigation ended with a demand for $8 million compensation for each of the 17 murdered Baghdadis, Blackwater is reportedly "on its way out" of security responsibility in Iraq, probably by the six-month deadline that al-Maliki has demanded. Despite its disgrace, the well-connected private security company continues to win lucrative State Department security contracts. Blackwater expert Jeremy Scahill told Bill Moyers that losing the Iraq gig would only slightly affect Blackwater's bottom line, but could grievously inconvenience U.S. diplomatic operations in Iraq. In forcing such a crisis on the State Department, the al-Maliki government, whose powerlessness has been an assumption unchallenged from left or right (in or out of Iraq), suddenly looks a good deal stronger.

But oil matters more to Washington than Blackwater does. In September, when the effort to enact U.S.-favored oil legislation -- a much-announced "benchmark" of both the White House and Congress -- collapsed in Iraq's legislature, the coup de grace seemed to be delivered by a wildcat agreement between the Kurdistan Regional Government and Hunt Oil of Dallas, Texas, headed by Ray L. Hunt, a longtime Bush ally and a member of the President's Foreign Intelligence Advisory Board. This agreement, undertaken against the stated wishes of the central government, provides for the separate development of Kurdistan's oil resources and puts the Kurds in blatant, preemptive violation of the pending legislation. It makes, in fact, such a mockery of that legislation that the prospect of its passage before the Development Fund mandate expires is now vanishingly small.

Endgame for Iraqi Oil?

If the mandate expires and the law is not passed, then what? Then others in Iraq may well seek to follow the Kurdish example and cut comparable deals with whomever they wish. The central government, even if it has lost effective control of the Kurdish north and the Sunni west, could well ratify resource-separatism by contracting for the development of the oil resources in the territory generally remaining under its control. Thus, a new, Iran-allied, oil-rich, nine-province Shiite Iraq could match Kurdistan's deal with one of its own, perhaps even with ready-and-willing China. Will any combination of American military and diplomatic pressure suffice to stop such an untoward outcome?

Clearly, some in Washington still think so. Shortly before the collapse of the Iraqi oil legislation effort, Bush's Commerce Department began quietly advertising for an Arabic-speaking legal advisor to help it in "providing technical assistance to Iraq to create a legal and tax environment conducive to domestic and foreign investment in Iraq's key economic sectors, starting with the mineral resources sector." (Read: starting with oil.)

As it happens, the job description overlaps heavily with that of the Development Fund for Iraq's existing International Advisory and Monitoring Board, whose responsibility, according to U.N. Security Council Resolution 1483, has been to see to it "that all export sales of petroleum, petroleum products, and natural gas from Iraq.... shall be made consistent with prevailing international marketing best practices." Is the Commerce Department already planning for the demise of this board? Like the super-embassy and the super-bases, this bit of Commerce Department staffing-up bespeaks the urge to continue an invasive American presence in Iraq, including Iraq's energy sector, long after December 31, 2008.

But if the occupation is shut down legally after that date and if Iraqi control over Iraqi oil reverts -- legally, at least -- to something close to pre-war status, that Commerce Department expert may find him or herself playing a less-than-major role in Baghdad. Instead, expect a new role for Iraq's hitherto excluded pool of domestic expertise. The Iraq National Oil Company began operations back in 1961; its legacy includes a skilled work force of trained oil workers. Notable, in fact, among those opposed to the failed oil legislation is the Iraqi Federation of Oil Unions. Its members object to provisions in the legislation that permit the hiring of foreign oil workers rather than Iraqis and -- in classic Bush Administration fashion -- exclude the union from any participation in contract negotiations. The Federation's protests have attracted a letter of support signed by six Nobel Peace Prize laureates.

Even with Iraqi expertise duly factored in, oil remains a complicated business, and foreign expertise and capital will remain indispensable in Iraq. Still, for the Shiite-dominated central government, the most trusted foreign supplier of supplementary expertise, manpower, and even capital would seem to be Iran. For now, the United States is paying many of the salaries in Baghdad; but Iran's president, predicting an American withdrawal, has lately declared his readiness to "fill the [regional power] gap, with the help of neighbors and regional friends like Saudi Arabia, and with the help of the Iraqi nation."

This invitation to regional collaboration will surely strike the less populous, militarily more vulnerable Saudis as disingenuous in the extreme, but Iran may be hard to stop. As former ambassador Peter Galbraith has explained: "Since 2005, Iraq's Shiite-led government has concluded numerous economic, political, and military agreements with Iran. The most important would link the two countries' strategic oil reserves by building a pipeline from southern Iraq to Iran, while another commits Iran to providing extensive military assistance to the Iraq government." On Oct. 17, the al-Maliki regime flexed its supposedly non-existent muscle yet again by awarding $1.1 billion in contracts to Iran and China to build enormous power plants in Baghdad's Shiite Sadr City and between the two Shiite holy cities of Najaf and Karbala.

The prospect that, in the endgame for Iraqi oil, the victor might be Shiite Iran (and indirectly Communist China) may help explain recent American calls for the replacement of the devoutly Shiite Prime Minister al-Maliki. Yet, even if American pressure leads to al-Maliki's ouster, the Iraqi parliament cannot be ousted with him. The prime minister's announcement that the next renewal of the multi-force mandate would be the last came, in fact, in response to a binding resolution in parliament that the next renewal, unlike previous ones, may not be at the request of the prime minister alone, but only with the advice and consent of parliament. It has voted once already, in a non-binding resolution, to require the United States to set a timetable for withdrawal.

Fragile as it is, the government of Iraq enjoys international legal recognition, and the underestimated al-Maliki is evidently not without resources when it comes to asserting Iraqi sovereignty over American autonomy within Iraq's borders. In "Blackwatergate," he found a remarkable pressure point, declaring that no new law would be passed in Iraq until the Blackwater matter was resolved to his satisfaction. Nor was al-Maliki necessarily whistling in the dark when he warned his American critics, "We can find friends elsewhere."

The expiration date that Iraq has now set for the operation of a multinational force on its territory coincides almost exactly with the end of the Bush administration. As that date nears, the endgame question may become: How far can the administration go in repudiating its own erstwhile agenda and returning Iraq to its pre-war status -- that is, to U.S.-backed Sunni domination of Iraqi domestic politics. That would, of course, result in armed Iraqi hostility to the administration's enemy of enemies in the region, Iran, and a resigned return to collaboration with the Saudi-dominated Organization of the Petroleum Exporting Countries (OPEC) in the management of the world oil market, all under a largely offshore U.S. military umbrella. Will the fallback dream now be the one the President's father entertained after Gulf War I -- the creation in Baghdad of a kinder, gentler Saddam Hussein with whom, to use the classic phrase, the U.S. can "do business"?

Time will tell, but not too much time. The eerie silence of the Bush administration about oil grows all the more deafening as the price of crude climbs toward $100 a barrel. Blood for oil may never have been a good deal, but so much blood for no oil at all may seem a far worse one.

              

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Jack Miles is senior fellow for religious affairs with the Pacific Council on International Policy and professor of English and religious studies at the University of California, Irvine. He is the author of the Pulitzer Prize-winning God: A Biography, among other works.

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