U.S. Attempt to Control Iraq's Oil and Economy Continues Behind the Scenes

As violence rises again in Iraq, negotiations to institutionalize US economic dominance continue unabated.

While the battle of Basra raged last week, a series of talks between the Bush administration and the US-backed Maliki government rolled forward. These negotiations may have at least as many implications for Iraq's future as the violence on the ground.

The discussions, ongoing since November, stem from a "Declaration of Principles" agreement signed by the two leaders, aimed at establishing a long-term "friendship" between their countries.

While the portion of the Declaration that suggests a permanent US military presence in Iraq has garnered much attention, the agreement also proposes another goal: to solidify "economic ties" between the two countries and grant the US preferential treatment in trading with Iraq.

As brought to light by last week's oil price surge during the assault on Basra, economic concerns are inextricably linked to the occupation. When it comes to oil, the coming months may be crucial in determining what kind of "friends" the US and Iraq are going to be over the long haul.

A Framework for Occupation

In a House Foreign Affairs Committee hearing last month, State Department Iraq Coordinator David Satterfield revealed the Declaration of Principles proposals have now been divided into a binding Status of Forces Agreement (on military involvement) and a nonbinding Strategic Framework Agreement (on economic and diplomatic relations). Neither would be submitted for the consent of Congress. Though Satterfield emphasized that, being nonbinding, the Strategic Framework would not "tie the hands" of future administrations, it could solidify changes the US has already made to Iraq's economic landscape - and pave the way for increased US control over Iraq's oil in years to come, according to Antonia Juhasz, a fellow at Oil Change International.

"A lot of frameworks for foreign investment were set up under [former Director of Iraq Reconstruction L. Paul] Bremer, and are already in place," Juhasz told Truthout. "A bilateral agreement would lock all that in and also place pressure on the government to pass the domestic oil law, to settle access for foreign companies to Iraq's oil underground."

The "all that" encompasses a host of sweeping reforms: Thanks to Bremer's alterations of Iraqi law during the first year of the US occupation, American companies are now allowed to buy out 100 percent of Iraqi businesses, instead of partnering with them. Bremer's orders also eliminated Iraq's high taxes on corporations, exchanging them for a 15 percent "flat tax." They abolished the practice of giving preference to Iraqi companies - in contracting out reconstruction work, for example - and erased a requirement to hire Iraqi workers.

Previously, Iraqi banks were closed to foreign ownership. Now, not only can foreign banks operate in Iraq, they can take over private Iraqi banks as well.

Bremer reworked Iraq's trademark and copyright laws, eliminated trade barriers and afforded foreign businesses the option of circumventing Iraq's legal system and taking any disputes to international tribunals.

A bilateral agreement like the Strategic Framework could serve as the perfect next step for the administration, making Bremer's "emergency" economic changes look like standard policy, according to Juhasz. Even if it remains a nonbinding pact, it would exert significant pressure on the Iraqi government to leave Bremer's legacy alone.

Where the Oil Flows

The November version of the Bush-Maliki agreement suggested a commitment to "facilitating and encouraging the flow of foreign investments to Iraq, especially American investments, to contribute to the reconstruction and rebuilding of Iraq."

According to James A. Paul, executive director of the Global Policy Forum, the "flow of foreign investments to Iraq" wouldn't manifest as generously as it sounds: The deal would primarily translate into "US/UK oil company control."