The Great Game: Oil and Iraq

The Great Game

Conn Hallinan

2/10/2003

When the Bush Administration makes its his case for a preemptive attack against Iraq, there is one subject it is careful to avoid: oil. There is much talk of weapons of mass destruction, al-Qaeda, and Iraqi duplicity. But 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.” (1) 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. (2) 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.” (3) 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. (4) Oil or natural gas generates some 62 percent of U.S. energy. (5) The U.S. is also interested in developing oil fields in the Caspian Sea. Although this area is 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), its oil reserves play an important regional role. While the world focuses on the upcoming war with Iraq, there is a quiet struggle going on in Central Asia, a 21st century version of the imperial “Great Game.” This century’s warriors are oil companies, their weapons, huge pipelines and the target, the Caspian Sea’s 30 billion barrels of oil and the vast natural gas fields of Turkmenistan. Whoever can shape the way that pipeline map looks will shape the future of a huge part of the world,” says Frederick Starr, chair of the Central Asia Caucasus Institute of John Hopkins University. (6) The Bush Administration has long made the region a priority. In 2001, Vice-President Dick Cheney’s National Energy Policy Development Group argued that the U.S. must “ensure the rising Caspian oil production is effectively integrated into the world oil trade.” (7) A number of U.S. oil companies are already there. Unocal Oil is planning to invest up to $2.7 billion in a 1,000-mile pipeline to ship natural gas from Turkmenistan to Pakistan via Afghanistan. Cheney’s old company, Halliburton Oil, is active in Azerbaijan, while ChevronTexaco and ExxonMobil are developing Kazakhstan’s Tengiz oil field. (8) Currently, major pipelines run from the Caspian to Novorossiysk, Russia, and then to Western Europe via Belarus, with the Russians skimming much of the profits. But the Turkmenistan-Pakistan pipeline will cut into that monopoly, as will the massive $3 billion BTC pipeline to be completed in 2006. A consortium of 11 oil companies, in which British and U.S. oil companies are prominent, owns the 1,094-mile BTC pipeline. Rather than shipping the oil north through Russia, the pipeline will start in Azerbaijan, run through Georgia, and end at Ceyhan, Turkey, on the Black Sea. (9) BTC is represented by the firm of Baker & Botts, headed by former Secretary of State James Baker, and a Bush spokesperson during the Florida vote snafu. Enron, along with Bechtel Corporation and General Electric, conducted the feasibility study for the pipeline. (10) While the Bush Administration’s main obsession is the Middle East, Central Asian reserves exert important influence on a region that borders China, Iran, Turkey, Pakistan, India, Russia, and several former Soviet republics. Russia is particularly nervous about the possible loss of oil revenues. Its 13 percent economic growth over the past two years is largely a result of its status as the second largest exporter of oil after Saudi Arabia. (11) The Russians have cause for unease. In his June 2002 West Point speech, President Bush said that the U.S. intends to prevent the emergence of any “peer competitors” in the world. (12) While the pipeline offensive is clearly aimed at maximizing profits for U.S. oil companies, might it also be aimed at destabilizing potential rivals, specifically Russia and China? A “game” is afoot in Central Asia, but the real gold still lies in the Gulf, especially if Western oil companies manage to insert themselves back into the area. Back in the 1970s, when the Organization of Petroleum Exporting Countries (OPEC) was formed, most western oil companies lost control of Middle East oil reserves. The “big five”—Exxon-Mobil, Chevron-Texaco, Royal Dutch Shell, British Petroleum, and TotalFinaELF—only control 4 percent of world’s total reserves. That’s about 12 years of supply. (14) 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. (17) 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. (18) 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. (19) 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. 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 $35+ now—“our budget will collapse.” (21) Iran and Saudi Arabia, with their exploding populations and falling living standards, will also find themselves in trouble. (22) Cheap gas for Americans and huge profits for western oil companies may derail international finance and measurably increasing instability in the Middle East, Central Asia and Russia. The dominoes are endless.

  1. Independent (London), 1/18/03
  2. Ibid
  3. Michael Klare, The Progressive, 6/02
  4. New York Times, 11/10/02
  5. Financial Times, 12/4/02
  6. New York Times, 3/17/02
  7. The Progressive, 6/02
  8. Ibid
  9. Village Voice, 2/12-18/02
  10. Chicago Tribune, 3/18/02
  11. New York Times, 1/18/02
  12. Nicholas Lemann, New Yorker Magazine, 10/16/02

13) Los Angeles Times; 1/6/02

  1. Michale Renner, World Watch Institute, 1/03
  2. Sunday Herald (Scotland), 10/22/02
  3. Wall Street Journal, 1/29/03
  4. MSNBC, 11/11/02
  5. New York Times, 12/17/02
  6. Michale Renner, World Watch Institute, 6/03

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