[Peace-discuss] Iraq's oil: the spoils of war

[Paul Patton]

 * Iraq's Oil: The Spoils of War *
  *by Philip Thornton*

Iraqis face the dire prospect of losing up to $200bn (£116bn) of the wealth
of their country if an American-inspired plan to hand over development of
its oil reserves to US and British multinationals comes into force next
year. A report produced by American and British pressure groups warns Iraq
will be caught in an "old colonial trap" if it allows foreign companies to
take a share of its vast energy reserves. The report is certain to reawaken
fears that the real purpose of the 2003 war on Iraq was to ensure its oil
came under Western control.


 Over the last century, Britain and the US left a global trail of conflict,
social upheaval and environmental damage as they sought to capture and
control a disproportionate share of the world's oil reserves. Now it seems
they are determined to increase their ecological debts at Iraq's expense.
Instead of a new beginning, Iraq is caught in a very old colonial trap.

  *Andrew Simms, New Economics Foundation *
  The Iraqi government has announced plans to seek foreign investment to
exploit its oil reserves after the general election, which will be held next
month. Iraq has 115 billion barrels of proved oil reserves, the third
largest in the world.

According to the report, from groups including War on Want and the New
Economics Foundation (NEF), the new Iraqi constitution opened the way for
greater foreign investment. Negotiations with oil companies are already
under way ahead of next month's election and before legislation is passed,
it said.

The groups said they had amassed details of high-level pressure from the US
and UK governments on Iraq to look to foreign companies to rebuild its oil
industry. It said a Foreign Office code of practice issued in summer last
year said at least $4bn would be needed to restore production to the levels
before the 1990-91 Gulf War. "Given Iraq's needs it is not realistic to cut
government spending in other areas and Iraq would need to engage with the
international oil companies to provide appropriate levels of foreign direct
investment to do this," it said.

Yesterday's report said the use of production sharing agreements (PSAs) was
proposed by the US State Department before the invasion and adopted by the
Coalition Provisional Authority. "The current government is fast-tracking
the process. It is already negotiating contracts with oil companies in
parallel with the constitutional process, elections and passage of a
Petroleum Law," the report, Crude Designs, said.

Earlier this year a BBC Newsnight report claimed to have uncovered documents
showing the Bush administration made plans to secure Iraqi oil even before
the 9/11 terrorist attacks on the US. Based on its analysis of PSAs in seven
countries, it said multinationals would seek rates of return on their
investment from 42 to 162 per cent, far in excess of typical 12 per cent
rates.

Taking an assumption of $40 a barrel, below the current price of almost $60,
and a likely contract term of 25 to 40 years, it said that Iraq stood to
lose between £74bn and $194bn. Andrew Simms, the NEF's policy director,
said: "Over the last century, Britain and the US left a global trail of
conflict, social upheaval and environmental damage as they sought to capture
and control a disproportionate share of the world's oil reserves. Now it
seems they are determined to increase their ecological debts at Iraq's
expense. Instead of a new beginning, Iraq is caught in a very old colonial
trap."

Louise Richards, chief executive of War on Want, said: "People have
increasingly come to realise the Iraq war was about oil, profits and
plunder. Despite claims from politicians that this is a conspiracy theory,
our report gives detailed evidence to show Iraq's oil profits are well
within the sights of the oil multinationals."

The current Iraqi government has indicated that it wants to treble
production from two million barrels a day this year to six million. The US
Energy Information Administration said such an increase would ease "market
tensions" that have kept the price high. But governments and oil companies
in the West said the report was purely hypothetical and that the issue was a
matter for the Iraqi people. They also pointed out that Iraq needed money to
rebuild in the sector.

A spokesman for the Foreign Office said the country's oil industry was in
desperate need of investment after years of under-investment, UN sanctions,
vandalism by Saddam Hussein and more recent sabotage by insurgents and
general looting. "The Iraqi government has made it clear that the decision
is a matter for its authorities but they understand that it would require a
lot of investment," he said. He said it was not surprising that Iraq should
look to outside experts to help rebuild an industry that was the key source
of revenue to help rebuild the country.

"We work closely with other departments such as the Treasury to give
assistance and advice," he said, adding that the Foreign Office had not been
involved in specific lobbying.

Gregg Muttitt, of Platform, a campaign group that co-authored the report,
said Iraq had an existing - albeit damaged - network of oil expertise and
could use current revenues or new borrowings to fund investment. The report
named several companies, including the Anglo-Dutch Shell group, as jockeying
for position before a new government is elected. In 2003, Walter van de
Vijver, then head of exploration and production, said investors would need
"some assurance of future income and a supportive contractual arrangement".
The groupsaidyesterday that the involvement of foreign oil companies would
be determined by the new Iraqi administration. "We aspire to establish a
long-term presence in Iraq and a long-term relationship with the Iraqis,
including the newly elected government."

No multinationals are operating in Iraq now because of the poor security
situation.

(c) 2005 Independent News & Media (UK) Ltd.
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