We were told that the war in Iraq was waged for many reasons: Saddam Hussein had weapons of mass destruction, supported terrorism and nourished links with al Qaeda. Demonstrators holding up banners reading “No Blood for Oil” were dismissed as ignorant and naive.
All wars start way before the first bullet is fired, and the Iraqi war was no exception. A possible starting date might be January 26, 1998, when 18 members of the Project for a New American Century (PNAC), wrote to then-US President Bill Clinton, urging him to use military action to overthrow Saddam. If not, they warned, he would be jeopardizing a sizeable chunk of the world’s oil supply. PNAC’s clout was significant. Ten of its 28 founding members—including such neocon luminaries as Dick Cheney, Donald Rumsfeld, Paul Wolfowitz and Zalmay Khalizad—would go on to serve in the Bush administration
Clinton did not act. He of course did not have the oil background of his successor, George Bush, who within two weeks of his inauguration in January 2001 appointed Cheney head of the Energy Task Force. The former Halliburton CEO went on to hold regular meetings with oil industry representatives and lobbyists and later declared that, “by any estimation, Middle East oil producers will remain central to world security. The Gulf will be a primary focus of US international energy policy.”
The activities of “Team Cheney” were not isolated. As Jane Mayer revealed in The New Yorker, a secret National Security Council memo directed its staff “to cooperate fully” with Cheney’s task force and, specifically, to join “the review of operational policies towards rogue states such as Iraq and actions regarding the capture of new and existing oil and gas fields.”
The US State Department too joined the party, launching the Future of Iraq Project (FIP) 18 months before the war began, a period during which the US administration denied it had any specific war plans for Iraq. Within the FIP, however, experts from Iraq and the US produced 2,000 pages on how to deal with post-war Iraq, stating that the country should be, “opened to international oil companies as quickly as possible after the war.”
Which it was—almost overnight, the US-lead Coalition Provisional Authority turned Iraq into one of the most privatized nations on earth. State-owned enterprises were put up for sale, corporate taxes slashed and foreign firms could enter the market and repatriate profits tax-free. According to the Center for Public Integrity, 15 American companies were awarded contracts worth $50 billion—but not to oil companies.
That might have made things too obvious. It would also have been a violation of the Iraqi constitution. So a new law was needed, a work in progress ever since. To the immense frustration of the Americans, the main Iraqi power brokers have so far been unable to agree on a framework. The Kurds want regional authorities to have the main say, the Sunnis want a strong national authority, and Shi’ites want something in between.
All parties, including the Americans, agree on one thing: the Iraqi oil sector will be open to foreign investors. Fair enough. The shattered Iraqi oil industry is in dire need of a cash injection, some $25 billion over the next five years. The trouble is that any new oil law appears to be heading towards Production Sharing Agreements or PSAs.
In exchange for investments in exploration and production, a PSA allows oil companies to keep revenues until its initial investments are covered. Fair enough … or is it? British oil watchdog Platform has warned how PSAs allow for extremely high profit margins, up to 13 times a company’s minimum target.
Currently just 12% of the world’s oil is governed by PSAs, as they are only used in countries with small or difficult to reach oilfields, or in case of high-risk exploration. In Iraq, however, most fields have been very well documented, oil lies close to the surface and is cheap to extract.
When current Iraqi Vice-President Adel Mahdi first announced the liberalization of the Iraqi oil sector in Washington in 2004, he proclaimed it “very promising to American investors and American enterprise, certainly to oil companies.”
And yet, just days before the first tanks rolled over the Iraqi border, British Prime Minister Tony Blair assured a baying British public that, “Iraqi oil revenues, which people falsely claim we want to seize, should be put in a trust fund for the Iraqi people.” Who was being ignorant and naive?