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To: i-node who wrote (154516)	11/6/2002 1:01:42 PM
From: Alighieri	Read Replies (2) \| Respond to of 1578882

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.”

To: i-node who wrote (154516)	11/6/2002 2:02:56 PM
From: Alighieri	Read Replies (1) \| Respond to of 1578882

The world's petrol station: Iraq's past is steeped in oil ... and blood Since black gold was struck in 1927, the West has guarded its supply by keeping Baghdad in check. By Trevor Royle The British government's position was unequivocal: there had to be regime change in Iraq. An official government paper argued that 'Iraq will never be safe and stable, while she has an army, until a real public pinion develops sufficiently strong to convince un scrupulous politicians that any of them who use the army to seize power will be politically outlawed.' The words are not Tony Blair's. The paper was written in 1941, when Britain was engaged in the war against Nazi Germany. A precursor to Saddam, a nationalist called Rashid Ali, was elected prime minister and began taking an anti-British and pro- German line. His claims became more extravagant and he used oil as a weapon: if Britain wanted to continue to benefit from Iraqi supplies it would have to promote the interests of the Arab population in Palestine. In a short and sharp campaign Rashid Ali was unseated and fled into exile. The use of British air power demoralised his supporters and British and Indian land forces made short work of securing the country and its vital oil stocks in the Mosul region. From the beginning of the current crisis earlier this year a similar emphasis on the need for a regime change has been played up by President George W Bush and his security and foreign affairs advisers, who have used it as a mantra to underscore their determination to punish president Saddam Hussein and to destroy his capacity for manufacturing weapons of mass destruction. However, with Saddam deposed the way will be open to create a friendly government in Baghdad, a client state that will be dependent on US support and give Washington a new sphere of influence in the Middle East. Quite apart from the rich pickings to be gained from Iraq's oil wealth, which the US Department of Energy puts at '112 billion barrels of proven reserves along with 220 billion barrels of probable and possible resources' regime change could help to realign Washington's strategic partnerships, not least with neighbouring Saudi Arabia, increasingly seen as a loose cannon. 'In the longer term the US might be wise to extricate itself from its historic links with Saudi Arabia,' says a US diplomatic source. 'Let's look at the matters as pragmatically as we can. The Saudis have not been helpful to US interests in the war against terrorism, they will not offer support in any attack on Iraq and it was Saudi money which helped to bankroll al-Qaeda. They're not the friends they once were.' American interest in Saudi Arabia dates back to the 1930s, when US oil companies began exploiting the country's rich supplies. The arrangement laid the foundation for the post-war settlement by five US companies -- Standard Oil (30%), Texaco (30%), Socal (30%) and Socony-Vacuum (10%) -- to control production through the American Arabian Oil Company (Aramco). In a further carve-up Socal and Texaco controlled oil production in Bahrain while Kuwait's supplies were divided between the US company Gulf and the British Anglo-Iran company, which also managed production in Iran. At the same time Iraq was divided three ways amongst Anglo Iran (British), Standard Oil and Socony-Vacuum (US) and Compagnie Francaise des Petroles (France). For everyone concerned it was a neat arrangement. The Western oil companies flourished, the Arab countries' ruling families grew phenomenally rich from the royalties and the governments of Britain, France and the US enjoyed the possession of vital spheres of influence in the Middle East. There were blips, such as the overthrow of Iraq's Hashemite Royal family in 1958 and the religious revolution that swept away the Shah of Persia from Iran in January 1979, but for the bulk of their existence -- Iraq and Saudi Arabia are less than a century old -- control of oil has meant control of power in the Middle East. Central to that has been the relationship between the US and Saudi Arabia, an agreement which gives the one access to the country's oil wealth and the other the protection of the world's only super-power. To a great extent the ruling House of Saud depends on US promises to keep it safe from internal and external threats but it comes at a price. There is a sizable military garrison in the country and US warplanes are familiar sights at Saudi air force bases. These are already a focus for growing discontent amongst younger Arabs, many of them Wahhabi fundamentalists, who regard the American presence as an unpleasant infection. The disquiet is not confined to Riyadh. In Washington's security community Saudi's links with terrorism are an uncomfortable reminder that their closest Arab ally in the Middle East could be a potential threat. While US military commanders would prefer to be able to use Saudi sites for an attack on Iraq, especially the giant Prince Sultan air base with its state-of-the-art command-and-control centre, the Bush administration has resigned itself to being denied access to them. Not only would Saudi compliance encourage political instability but it could inspire further acts of Saudi-backed terrorism. That intransigence alone gives the US a spur to find new friends in the region. 'A rehabilitated Iraq is the only sound long-term strategic alternative to Saudi Arabia,' argues the Sunday Herald's diplomatic source. 'It's not just a case of swopping horses in mid-stream, the impending US regime change in Baghdad is a strategic necessity.' At present the contracts to exploit Iraqi oil are controlled by two companies - France's TotalFinaElf, which has exclusive rights to develop the potentially rich Majnoon field that marches with the Iranian border, and Russia's LukOil, which recently entered into a $3.5 billion deal with Saddam's government. Under US law American oil firms are prevented from entering into contracts with Iraq but all that could change once there is a new regime in Baghdad. Opposition groups have agreed that contracts made with Saddam would have to be revised, if not torn up, and that the granting of new contracts could depend on the level of support given to the regime-change operation. The Iraqi National Congress has announced it will 'cancel all contracts that are not in the interests of the Iraqi people and will reopen bidding on them' while its leader Ahmed Chalabi has recommended the creation of a US-led consortium to exploit the country's untapped oil wealth. Anyone suggesting that this is not a spur should turn to the US State Department's assessment of Middle East oil in the post-second world war world: 'These resources constituted a stupendous source of strategic power, and one of the greatest material prizes in world history ... probably the richest economic prize in the world in the field of foreign investment.' It remains an enticing prospect. Second only to Saudi Arabia, Iraq contains the world's biggest oil reserves, but years of warfare and sanctions have badly degraded the capacity to extract the oil. Equipment is fast becoming obsolete, spare parts are impossible to find and according to intelligence gained by the US Department of Energy there is a risk of a major breakdown in the infrastructure. All this requires investment and expertise and there is little doubt US companies such as Chevron-Texaco would be well-placed to exploit that need. Small wonder that Iraq's response to President Bush's September statement to the UN General Assembly was a robust attack on what it sees as Washington's underlying motives: 'The US admin istration wants to destroy Iraq in order to control the Middle East oil, and consequently control the politics as well as the oil and economic policies of the whole world.' Reacting with equal vigour, Washington denied the allegation that an oil bonanza is around the corner but at the same time it is not being coy about the strategic benefits that a regime change in Baghdad would bring. In addition to creating a sphere of interest in the heart of the Middle East at the expense of Saudi Arabia, the knock-on effect will be felt in neighbouring countries. Jordan will be the chief beneficiary. A natural ally of Iraq, its economy depends on heavily discounted Iraqi oil and the ability to sell goods under the UN oil-for-food programme. Its Palestinian population supports Saddam as much out of conviction as from a dislike of US support for Israel and these factors have put King Abdullah in an uncomfortable position. According to Daniel Neep of the Royal United Services Institute the toppling of Saddam would help the Jordanian king by giving him more breathing space: 'There are of course concerns about domestic discontent and internal stability, but the choice between facing those uncertain spectres and the more chilling prospect of being bereft of the mantle of 'US ally' is perhaps easier to make than some might think.' Syria and Turkey would also benefit by being freed from the invidious position of having to make a choice between an Arab ruler, Saddam, and the US. Reopening Iraq's oil-lines will allow the wealth to trickle down to them at a time when their economies have been stagnant for several years. It would also bring under US influence a country that had been created in 1921 when Britain and France had combined before the first world war had come to an end to divide the area up into spheres of interest, which would essentially be run from London and Paris. At one stroke the old Mesopotamian provinces of the Ottoman Empire became Iraq in 1921, thereby putting a mixed population of Kurds, Sunni and Shi'ite Muslims, Jews and Christians under the control of a British puppet ruler, the Hashemite King Faisal. One reason for the creation was strategic -- the need to protect Britain's imperial interests in the Middle East -- but the second was oil. In 1927 oil was discovered in massive quantities at a wadi called Baba Gurgur near Kirkus and exploitation of the wells was given to the Iraq Petroleum Company, which was owned jointly by Royal Dutch Shell, Anglo- Persian and an American and French consortium. Its pipeline still carries Iraq's oil through Jordan to the Mediterranean and from the outset the Iraqi Petroleum Company's local managers acted as if they were colonial masters and not commercial agents, a situation resented by Iraqi Arabs who brought Rashid Ali to power. Half a century after the British forced Rashid out of Iraq and into exile, many Arabs see the same pattern repeating itself -- a Western desire to create a friendly client state in an inherently unstable region and, above all, the need to manage the region's vital oil supplies.