Iraq: the Struggle for Oil
By James A. Paul
Executive Director, Global Policy Forum
August, 2002
Iraq possesses the world’s second largest proven oil reserves, currently estimated at 112.5 billion barrels, about 11% of the world total and its gas fields are
immense as well. Many experts believe that Iraq has additional undiscovered oil reserves, which might double the total when serious prospecting resumes,
putting Iraq nearly on a par with Saudi Arabia. Iraq’s oil is of high quality and it is very inexpensive to produce, making it one of the world’s most profitable
oil sources. Oil companies hope to gain production rights over these rich fields of Iraqi oil, worth hundreds of billions of dollars. In the view of an industry
source it is “a boom waiting to happen.”(1) As rising world demand depletes reserves in most world regions over the next 10-15 years, Iraq’s oil will gain
increasing importance in global energy supplies. According to the industry expert: “There is not an oil company in the world that doesn’t have its eye on
Iraq.” (2) Geopolitical rivalry among major nations throughout the past century has often turned on control of such key oil resources.(3)
Five companies dominate the world oil industry, two US-based, two primarily UK-based, and one primarily based in France.(4) US-based Exxon Mobil
looms largest among the world’s oil companies and by some yardsticks measures as the world’s biggest company. The United States consequently ranks
first in the corporate oil sector, with the UK second and France trailing as a distant third. Considering that the US and the UK act almost alone as
sanctions advocates and enforcers, and that they are the headquarters of the world’s four largest oil companies, we cannot ignore the possible relationship
of sanctions policy with this powerful corporate interest.
US and UK companies long held a three-quarter share in Iraq’s oil production, but they lost their position with the 1972 nationalization of the Iraq
Petroleum Company.(5) The nationalization, following ten years of increasingly rancorous relations between the companies and the government, rocked the
international oil industry, as Iraq sought to gain greater control of its oil resources. After the nationalization, Iraq turned to French companies and the
Russian (Soviet) government for funds and partnerships.(6) Today, the US and UK companies are very keen to regain their former position, which they
see as critical to their future leading role in the world oil industry. The US and the UK governments also see control over Iraqi and Gulf oil as essential to
their broader military, geo-strategic and economic interests. At the same time, though, other states and oil companies hope to gain a large or even dominant
position in Iraq. As de-nationalization sweeps through the oil sector, international companies see Iraq as an extremely attractive potential field of expansion.
France and Russia, the longstanding insiders, pose the biggest challenge to future Anglo-American domination, but serious competitors from China,
Germany and Japan also play in the Iraq sweepstakes.(7)
During the 1990s, Russia’s Lukoil, China National Petroleum Corporation and France’s TotalFinaElf held contract talks with the government of Iraq over
plans to develop Iraqi fields as soon as sanctions are lifted. Lukoil reached an agreement in 1997 to develop Iraq’s West Qurna field, while China National
signed an agreement for the North Rumailah field in the same year (China’s oil import needs from the Persian Gulf will grow from 0.5 million barrels per
day in 1997 to 5.5 million barrels per day in 2020, making China one of the region’s most important customers).(8) France’s Total at the same time held
talks for future development of the fabulous Majnun field.
US and UK companies have been very concerned that their rivals might gain a major long-term advantage in the global oil business. “Iraq possesses huge
reserves of oil and gas – reserves I’d love Chevron to have access to,” enthused Chevron CEO Kenneth T. Derr in a 1998 speech at the Commonwealth
Club of San Francisco, in which he pronounced his strong support for sanctions.(9) Sanctions have kept the rivals at bay, a clear advantage. US-UK
companies hope that the regime will eventually collapse, giving them a strong edge over their competitors with a post-Saddam government. As the embargo
weakens and Saddam holds on to power, however, stakes in the rivalry rise, for US-UK companies might eventually be shouldered aside. Direct military
intervention by the US-UK offers a tempting but dangerous gamble that might put Exxon, Shell, BP and Chevron in immediate control of the Iraqi oil boom,
but at the risk of backlash from a regional political explosion.
In testimony to Congress in 1999, General Anthony C.Zinni, commander in chief of the US Central Command, testified that the Gulf Region, with its huge
oil reserves, is a “vital interest” of “long standing” for the United States and that the US “must have free access to the region’s resources.”(10) “Free
access,” it seems, means both military and economic control of these resources. This has been a major goal of US strategic doctrine ever since the end of
World War II. Prior to 1971, Britain (the former colonial power) policed the region and its oil riches. Since then, the United States has deployed ever-larger
military forces to assure “free access” through overwhelming armed might.(11)
A looming US war against Iraq is only comprehensible in this light. For all the talk about terrorism, weapons of mass destruction and human rights
violations by Saddam Hussein, these are not the core issues driving US policy. Rather, it is “free access” to Iraqi oil and the ultimate control over that oil by
US and UK companies that raises the stakes high enough to set US forces on the move and risk the stakes of global empire.
(1) Conversation with the authors, June 5, 2002.
(2) Ibid.
(3) See, for example, Daniel Yergin, The Prize: the epic quest for oil, money and power (New York, 1991).
(4) In order of size these firms are: Exxon Mobil, Royal Dutch-Shell, British Petroleum-Amoco, Chevron-Texaco, and TotalFinaElf. Royal Dutch Shell is
often described as a British-Dutch company, while TotalElfFina is sometimes described as a French-Italian company.
(5) Major shareholders in IPC were: Shell, BP, Esso (later Exxon), Mobil, and CFP, the French national company.
(6) For an account of this period, see Joe Stork, Middle East Oil and the Energy Crisis (New York, 1975), 188-194. Since 1918, France had considered
Iraq to be its main source of international oil reserves and its main means to gain parity with the Anglo-American companies (see Yergin, op. cit.,
188-191).
(7) See Michael Tanzer, “Oil and Military Power in the Middle East and the Crimean Sea Region, The Black World Today (web site), two parts, February
28 and Mar 6, 2002.
(8)From US Department of Energy, International Energy Outlook, Table 13.
(9) Text as posted at www.chevrontexaco.com/news/archive/chevron_speech/1998/98-11-05.asp At the time, Condoleeza Rice, currently US National
Security Advisor, was a board member of Chevron and one of the company’s supertankers was named after her. Though it is tempting to insist on the
many oil and energy industry connections of the Bush administration, including the President and Vice President Cheney, oil issues have consistently had a
heavy influence on US foreign policy, regardless of party or personalities.
(10) Testimony to the Senate Armed Services Committee, April 13, 1999.
(11) See Michael T. Klare, Resource Wars: the new landscape of global conflict (New York, 2001), esp. ch. 3, “Oil Conflict in the Persian Gulf.” |
