Oil Iraq

Foreign Policy In Focus

2002

Oil Iraq


When Secretary of State Colin Powell made his case to the UN for a preemptive attack against Iraq, there was one subject he was careful to avoid: oil. There was much talk of weapons of mass destruction, al-Qaeda, and Iraqi duplicity. But what most Americans don’t know is that the decision to invade Iraq was made long before 9/11 and that the coming war has little to do with terrorism and a great deal to do with oil reserves.

The planning for this war even pre-dates this administration. Back in 1997, former Defense Secretary Donald Rumsfeld and former White House Chief of Staff Dick Cheney cooked up the Project for a New American Century and lobbied the Clinton Administration for a “regime change” in Iraq to “protect our vital interests in the Gulf.”

The members of the Project read like a “who’s who” in the Bush Administration: Under Secretaries of State John Bolton and Richard Armitage; Paul Wolfowitz, Assistant Secretary of Defense; Richard Perle, Chair of the influential Science Board; Elliot Abrams, National Security Council; and Zalmay Khalilzad, Special Envoy to Iraq and former Unocal Oil Company employee.

Clinton took a pass but these guys and the energy companies they represent don’t give up.

Four months after Bush took the oath of office, Cheney’s National Energy Policy Development Group recommended that the President “make energy security a priority of our trade and foreign policy,” arguing that control of the Middle East was the key.

When you crunch the numbers, it’s hard to argue with the logic. Oil production in the U.S., Mexico, and the North Sea is declining, while U.S. consumption will increase by one-third in the next 20 years. By 2020, two-thirds of our oil will be imported, and since 65 percent of the world’s remaining reserves are in the Middle East, that is where it will come from.

Some 62 percent of U.S. energy is generated by oil or natural gas.

While the U.S. is also interested in developing oil fields in the Caspian Sea, Africa and Latin America, these areas are dwarfed by the proven reserves of Saudi Arabia (264 billion barrels); Iraq (112 billion barrels); United Arab Emirates (97.8 billion barrels); and Kuwait (96.5 billion barrels).

The U.S. is pouring money (and troops) into the Caspian Sea area, and either building or planning pipelines from Turkey to Pakistan. But Caspian Sea reserves are at most 22 billion barrels, roughly the same as North Sea or Prudhoe Bay, Alaska. The real gold lies in the Gulf, and that is why we are headed there.

Back in the 1970s, when the Organization of Petroleum Exporting Countries (OPEC) was formed, most of the big western oil companies lost control of Middle East oil reserves. While the “big five”—Exxon-Mobil, Chevron-Texaco, Royal Dutch Shell, British Petroleum, and TotalFinaELF—continue to drill, pump and sell 29 million barrels a day, they only control 4 percent of world’s total reserves. That’s about 12 years of supply.

But if a “friendly” regime is inserted in Iraq, the door will swing open, particularly for American and British oil companies. Ahmed Chalabi of the Iraq National Congress, and Rumsfeld’s candidate to take over post-Hussein Iraq, says “American companies will have a big shot at Iraq oil” and companies from nations who don’t support the war—read Russia, France and China—may be sidelined.

According to a recent article in the Wall Street Journal, the Pentagon and the State Department are debating how to control the oil, and the U.S. Energy Department’s “oil and natural gas working group” has already met with the Iraqi opposition.

Most people in the industry think it’s pretty straight-forward.” If you turn up and it’s your tanks that dislodged the regime…then you’re going to get the best deals. That’s the way it works,” says Credit Suisse First Boston analyst Mark Flannery.

Indeed, if there is anything that will eventually drag a reluctant Russia, France and China along, it will be the fear of being frozen out of the oil. Russia’s LUKOIL has been developing Iraq’s West Qurna oil field, China’s National Petroleum Company has a 50 percent stake in the al-Ahdab field, and France’s TotalFinaELF has its eyes on the huge Majnoon field.

The Russians are particularly concerned. “Do Americans need us in Iraq?” asks Nikolai Tokarev, general director of Zarubezhneft, a state-owned oil company, ”Of course not. Russian companies will lose the oil forever if the Americans come.”

Oil analysts say that Iraq could eventually pump up to 8 million barrels a day, plummeting oil prices worldwide. That would be good for us, but not for countries that rely on oil as a major source of income. Aleksei Arbatov, deputy chair of the Russian Defense Committee, says if the price of oil falls below $24 a barrel—it is $30 now—“our budget will collapse.”

Iran and Saudi Arabia, with their exploding populations and falling living standards, will also find themselves in trouble.

Cheap gas for Americans and huge profits for western oil companies may end up destabilizing international finance and measurably increasing instability in the Middle East, Central Asia and Russia.

The dominoes are endless.

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