The immediate cause and benefits of the war in Iraq lies in the geopolitical
significance of under-utilised Iraqi reserves in the context of peak oil. This
is scarcely revelatory. It is necessary to read the 2001 report of the National
Energy Policy Development Group (chaired by Dick Cheney) to appreciate where the
Bush administration’s thinking was on the prospects of the United States
long-term energy security and in relation to it’s decision to invade, occupy and
appropriate for urgent renewal the Iraqi oil infrastructure.
“On our
present course” the report says, “America 20 years from now will import nearly
two of every three barrels of oil - a condition of increased dependency on
foreign powers that do not always have America’s interest at
heart”.
Recent (2010) data from BP and the US Energy Information
Administration shows that this crucial dependency barrier has already occurred -
in half the time the report predicted. Back in 2001 the US had already begun
tapping into every minor oil field it had and in defending the strategy outlined
in the National Energy Policy, Spencer Abraham, then Secretary of Energy said in
July 2001;
“Our plan confronts our increasing dependency on foreign
sources of energy by calling for - yes, it’s true, I admit it - increased
domestic production of energy”.
In the final chapter of the NEP report,
‘Strengthening Global Alliances’ a strategy is outlined which it is hoped will
make good the deficit between shrinking domestic production and growing
consumption - a deficit which requires the US (according to their own figures)
to have an increase in oil imports by 2020 of between 11 and 18.5 million
barrels a day. In a similar vein, the US Dept. of Energy in 2003 estimated that
the Persian Gulf suppliers - Iran, Iraq, Kuwait, Saudi Arabia and the United
Arab Emirates - would have to double their current output to meet projected US
and international demands for oil in the year 2025. When you combine the
irrefutable need represented by these figures with the logic of PNAC and the
mood of post 9/11 it can be seen clearly why Saddams' reign had such a short
expiry date. According to the US Dept. of Energy "Annual Energy Review" (2000)
the share of America's oil supply that is accounted for by imports was 30% in
1973, 40% in 1976 and hit 50% twelve years ago in 1998. It now lies at over
65%.
Conversely, figures from BP's "Statistical Review of World Energy",
shows US oil production has declined from 9 million barrels a day (mbd) in 1998
to 6.7 mbd in 2008. Over that ten year period US consumption has steadily risen
averaging about 20 mbd today. Now, by BP's estimates, if the US continues to tap
its reserves and continues to consume its oil supply at the same rate as it is
at present it will have exhausted its domestic supplies in precisely one decade.
This is known as the reserves to production ratio (R/P) and can be located on
the far right margin of the consumption tables supplied by BP on their website.
Other significant oil consumers with low R/P ratios are Mexico (8.3 yrs) - a key
US supplier, the United Kingdom (4 yrs) and China (9.1 yrs). As the data refers
to the state of things as they were two years ago I have adjusted the figures
accordingly.
Oil | Statistical Review 2010 | BP
These
are the same figures that would have confronted Cheney's Energy Task Force in
2000 along with all the Maps and Charts of Iraqi Oil Fields | Judicial
Watch that showed them which (non-American) companies stood to gain had
sanctions been lifted. These figures describe an inexorable pincer movement on
America's energy security; as time elapses the US, like China and the United
Kingdom will have no option but to source an increasing supply of their
petroleum from outside their own borders. Unless there are significant finds in
the very near future these countries will have all exhausted their domestic
supplies within a decade. This is, incidentally, why we have the likes of the BP
oil spill; governments allow companies in their attempt to forestall the
inevitable to look in the most dangerous, inaccessible and technically
challenging areas.
Now, I don't object to the invasion and occupation as
such; Saddam was a butcher before, during and after the time the US sponsored
him. So, even if the occupation proceeded under false pretences - exploiting
post 9/11 thirst for revenge; simplistic assertions that Saddam was sponsoring
terrorism; the nonsense over WMD, the camouflage of lies to the UN, making a
fool of Colin Powell and so on - all of this is (kind of) forgivable when it is
considered that the productivity data from the major oil producers shows clearly
the need to boost global oil production in line with future demand. Iraq was
providing only 2 mbd (since the Iran-Iraq war) into a global economy whose
consumption rates have risen from 73 mbd in 1998 to almost 85 mbd today. Iraq,
in all probability, has the world's largest oil reserves and with the proper
management can easily boost production in line with the Saudis 11mbd. This extra
little bit of black gulch injected into the market will be indispensable in
keeping prices down as global economies react to peak oil.
I have two
major difficulties however. The first is the Iraq Hydrocarbons Bill which
steered the contractual tussle over the future management of Iraq's large fields
towards American and British companies - and on preferential terms which
minimised the level of oil receipts that would be used for the benefit of the
Iraqi exchequer. Representatives of British and American companies - BP, Shell,
Conoco Phillips - had written the actual Hydrocarbons Bill which was due to be
ratified by the Iraqi parliament until scrutiny of this document by campaigners
and Iraqi legal experts in 2007 confirmed it was heavily weighted in favour of
the oil companies; it offered low fixed royalties to the Iraqi exchequer in
addition to making compulsory the adoption of long-term contracts with high
profit-sharing components for the companies concerned.
These contracts,
known as Profit Sharing Agreements (PSA's), are the wet dream of oilmen
everywhere and are usually only rewarded in extremely difficult environments
such as found in deep sea drilling - no other country in the Middle East awards
these type of contracts as the oil there is generally very easy to extract and
PSA's give a very low return to the host country. There is strong evidence that
the companies who drafted this oil law were simultaneously maneouvring
themselves to take advantage of its benefits once the thing had been ratified by
the Iraqi parliament. However, once its contents became known (in 2007) key
Iraqi cabinet ministers and members of parliament threatened to resign and the
Iraqi Federation of Oilworkers Union joined with other unions throughout the
country threatening to initiate strikes and boycotts. The country would have
been brought to a standstill. The standoff lasted for the best part of a year
and in the end the oil bill remained unratified despite enormous pressure from
the Bush administration.
This is why the Russian, French and Chinese oil
companies have been allowed back into the bidding. Their original contracts with
Saddam had been scrapped by Bremer in 2003 but on account of highly successful
campaigning by Western NGO's in alliance with Iraqi trade unions the ground has
been levelled once again and the Iraqi oil ministry and parliament have regained
autonomy over their country's resource.
Those who assert that the varied
nationality of the oil companies who are taking part in the open bidding to
develop the Iraqi fields proves that it is was not America's "thirst for oil"
which prompted the invasion are generally unaware of the history of the rocky
passage and underhand origins of the Iraq Hydrocarbon Bill. Had this Bill been
passed in the fashion in which it was intended we would today be seeing a much
different composition in the companies bidding for contract. There was a
world-wide campaign to arrest this process including letters of protest issued
by several Nobel Peace laureates to ensure that the bidding for the Iraqi fields
would be by open contract, would eschew PSA's, and would be in the best
interests of the Iraqis themselves.
Nobel Women Speak Out Against Iraqi Oil Law | The
Price of Oil
This campaign has largely succeeeded but there is still
a great deal of scrutiny on the nature of the contracts been awarded. The
CNOOC/BP partnership to exploit Iraq's largest field has become a model of sorts
for future contracts but the Iraqi parliament are still being pressured into
adding sweeteners to other companies to invest whose position is inevitably
weakening the more talk there is of an American troop withdrawal. The overall
policy is not a disaster however as the open contract bids for the undeveloped
fields are now being offered to those companies who can guarantee a certain
minimal level of output - some Iraqi ministers talk of the country producing 12
mbd by 2020. This would be an enormous boost to the total global supply (an
extra 15% or so more oil on the market) which will help stabilise prices and
drastically reduce costs for major oil importing countries; crude being the
single largest item in the US trade deficit. Put simply, the incoming oil on the
market boosts supply and lowers prices. By invading, democratising and allowing
the revamping of shoddy infrastructure via contracts with any of the oil majors
a tangible benefit is incrued by net oil importing countries; ie the majority of
the OECD. The previous sanctions regime did not allow for this
development.
My second difficulty concerning the invasion relates to the
highjacking of the Iraqi economy via the forcible imposition of Friedmanite
policies. In Latin America this was achieved through coup sponsorship and the
installation of military juntas prepared to do all the dirty work; sell off
state assets, crackdown on trade unionism, deregulate investment, eliminate the
minimum wage and radically pare down social programmes whilst drafting in
Friedman’s Chicago boys to finetune the details - exactly what happened in Iraq.
(Bremer gave key positions in his economic team to ‘kids’ in their twenties
linked to the Heritage Foundation). The adoption of Friedman’s policies in Latin
America was as much a reaction to the success in the 60’s of the
developmentalist economics of Raul Prebisch whose work with the ECLA favoured
‘import substitution’ over the smokescreen of ‘comparative advantage’ which
dependency theorists had ably demonstrated lessened the terms of trade for third
world producers. First blood was drawn by the Dulles brothers and the United
Fruit Company in Guatemala in 1954 where Arbenz’s policy of land redistribution
drew the ire of Washington who not for the first time mistook progressive social
reform for the stirrings of communism.
And this was the big problem for the
dependency school; it’s programme of national economic independence promoted
strengthened government, the nationalisation of major resources (oil, gas,
mining) and greater investment in health/education coupled with land reform all
created powerful enemies - the feudal landowning classes, the US and European
multinational corporations whose assets were being stripped and the Cold
War-riors in Capitol Hill who saw in all of this the first shoots of the red
menace. So, in Latin America, Friedman’s policies were enforced via an elite
landowning class with strong ties to the military - by 1976 Uruguay, Chile,
Brazil and Argentina all had brutal military dictatorships stamping the
doctrines of the Chicago School on a beleagured populace - whereas in Iraq the
covert assistance of logistical, military and financial support is replaced by
invasion, occupation and compulsory privitisation.
In the "Shock
Doctrine" Naomi Klein devotes the central chapters of her book to all the
looting that took place in key sectors of the Iraqi economy and goes a step
further by attributing the upsurge in violence in the initial months after the
occupation to the economic policies adopted by Bremer’s Coalition Provisional
Authority - ‘straight out of the Friedman textbook’ as she described them. At
the stroke of a pen Bremer privitised two hundred state companies and allowed
foreign contractors to pick up their business. Corporate tax was lowered to 15%
(from 45%) and foreign companies could own 100% of Iraqi assets - the oil sector
alone was left untouched as Iraqi advisors counselled it would lead to immediate
war. (Though this advice did not prevent the surreptitious attempt to have the
Hydrocarbons Bill ratified by stealth.)
The $38 billion in
reconstruction funds raised by Congress and the $20 billion taken from proceeds
of Iraq’s oil sector was mostly divided between foreign contractors such as
Haliburton, Bechtel and Parsons who preferred to import foreign workers whilst
skilled Iraqis could only stand and watch. Even the task of building up “local
democracy” was outsourced to a Carolina firm; RTI, in a contract worth $466
million. Iraq had seventeen state owned cement companies none of which could aid
in reconstruction since Bremer explicitly forbade the Iraqi Central Bank to lend
to them; most of the cement wound up being imported from America.
“De-Baathification” axed 500,000 state workers (mostly soldiers) but also
teachers, nurses and doctors - a massive cull of the public sector ala Friedman
- the soldiers brought their guns home with them and restless and unemployed
many joined in the “insurgency”.
“It is a very capitalist disaster”,
Klein says. “A nightmare of unfettered greed unleashed in the wake of war. The
“fiasco” of Iraq is one created by a careful and faithful application of
unrestrained Chicago School ideology. … as of July 2006, according to the most
credible study, the war in Iraq had taken the lives of 655,000 Iraqis who would
not have died had there been no invasion or occupation”
Klein has a story
to tell concerning the (forcible) adoption of Chicago School economics and that
takes her from Latin America in the 70’s, Africa in the 80’s the Eastern
European countries of the Soviet Bloc, post-meltdown Russia and even China. To
do this she needs to find her connective thread and stick with her themes and as
such she doesn’t dwell too long on the ultimate causative factors which prompted
the Iraq war; the conventional wisdom she notes is “Oil, Israel and Haliburton”.
Energy issues are not her forte however; her ambit of concern embraces trade,
the WTO, IMF and World Bank lending in the context of a neoliberal-led
globalisation. I don’t dispute any of her findings for a moment or her critique
of Friedman but had she the opportunity to read the NEP or spared a glance at
BP’s latest figures on projected demand she may well have afforded greater
concentration on the issue of the United States increasingly compromised energy
security.
http://priceofoil.org/
http://tyrannyofoil.org/section.php?id=10
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