Iraq: it's about the oil, stupid (the Iraq Study Group says so)

1. It's Still about Oil in Iraq
A centerpiece of the Iraq Study Group's report is its advocacy for securing foreign companies' long-term access to Iraqi oil fields.
By Antonia Juhasz

While the Bush administration, the media and nearly all the Democrats still refuse to explain the war in Iraq in terms of oil, the ever-pragmatic members of the Iraq Study Group share no such reticence.

Page 1, Chapter 1 of the Iraq Study Group report lays out Iraq's importance to its region, the U.S. and the world with this reminder: "It has the world's second-largest known oil reserves." The group then proceeds to give very specific and radical recommendations as to what the United States should do to secure those reserves. If the proposals are followed, Iraq's national oil industry will be commercialized and opened to foreign firms.

The report makes visible to everyone the elephant in the room: that we are fighting, killing and dying in a war for oil. It states in plain language that the U.S. government should use every tool at its disposal to ensure that American oil interests and those of its corporations are met.

It's spelled out in Recommendation No. 63, which calls on the U.S. to "assist Iraqi leaders to reorganize the national oil industry as a commercial enterprise" and to "encourage investment in Iraq's oil sector by the international community and by international energy companies." This recommendation would turn Iraq's nationalized oil industry into a commercial entity that could be partly or fully privatized by foreign firms.

This is an echo of calls made before and immediately after the invasion of Iraq.

The U.S. State Department's Oil and Energy Working Group, meeting between December 2002 and April 2003, also said that Iraq "should be opened to international oil companies as quickly as possible after the war." Its preferred method of privatization was a form of oil contract called a production-sharing agreement. These agreements are preferred by the oil industry but rejected by all the top oil producers in the Middle East because they grant greater control and more profits to the companies than the governments. The Heritage Foundation also released a report in March 2003 calling for the full privatization of Iraq's oil sector. One representative of the foundation, Edwin Meese III, is a member of the Iraq Study Group. Another, James J. Carafano, assisted in the study group's work.

For any degree of oil privatization to take place, and for it to apply to all the country's oil fields, Iraq has to amend its constitution and pass a new national oil law. The constitution is ambiguous as to whether control over future revenues from as-yet-undeveloped oil fields should be shared among its provinces or held and distributed by the central government.

This is a crucial issue, with trillions of dollars at stake, because only 17 of Iraq's 80 known oil fields have been developed. Recommendation No. 26 of the Iraq Study Group calls for a review of the constitution to be "pursued on an urgent basis." Recommendation No. 28 calls for putting control of Iraq's oil revenues in the hands of the central government. Recommendation No. 63 also calls on the U.S. government to "provide technical assistance to the Iraqi government to prepare a draft oil law."

This last step is already underway. The Bush administration hired the consultancy firm BearingPoint more than a year ago to advise the Iraqi Oil Ministry on drafting and passing a new national oil law.

Plans for this new law were first made public at a news conference in late 2004 in Washington. Flanked by State Department officials, Iraqi Finance Minister Adel Abdul Mahdi (who is now vice president) explained how this law would open Iraq's oil industry to private foreign investment. This, in turn, would be "very promising to the American investors and to American enterprise, certainly to oil companies." The law would implement production-sharing agreements.

Much to the deep frustration of the U.S. government and American oil companies, that law has still not been passed.

In July, U.S. Energy Secretary Samuel Bodman announced in Baghdad that oil executives told him that their companies would not enter Iraq without passage of the new oil law. Petroleum Economist magazine later reported that U.S. oil companies considered passage of the new oil law more important than increased security when deciding whether to go into business in Iraq.

The Iraq Study Group report states that continuing military, political and economic support is contingent upon Iraq's government meeting certain undefined "milestones." It's apparent that these milestones are embedded in the report itself.

Further, the Iraq Study Group would commit U.S. troops to Iraq for several more years to, among other duties, provide security for Iraq's oil infrastructure. Finally, the report unequivocally declares that the 79 total recommendations "are comprehensive and need to be implemented in a coordinated fashion. They should not be separated or carried out in isolation."

All told, the Iraq Study Group has simply made the case for extending the war until foreign oil companies — presumably American ones — have guaranteed legal access to all of Iraq's oil fields and until they are assured the best legal and financial terms possible.

We can thank the Iraq Study Group for making its case publicly. It is now our turn to decide if we wish to spill more blood for oil.

(Antonia Juhasz is a visiting scholar at the Institute for Policy Studies and author of "The Bush Agenda: Invading the World, One Economy at a Time.")


2. Oil for Sale: Iraq Study Group Recommends Privatization
The Iraq Study Group may not have a solution for how to end the war, but it does have a way for its corporate friends to make money.
By Antonia Juhasz/AlterNet.org

In its heavily anticipated report released on Wednesday, the Iraq Study Group made at least four truly radical proposals.

The report calls for the United States to assist in privatizing Iraq's national oil industry, opening Iraq to private foreign oil and energy companies, providing direct technical assistance for the "drafting" of a new national oil law for Iraq, and assuring that all of Iraq's oil revenues accrue to the central government.

President Bush hired an employee from the U.S. consultancy firm Bearing Point Inc. over a year ago to advise the Iraq Oil Ministry on the drafting and passage of a new national oil law. As previously drafted, the law opens Iraq's nationalized oil sector to private foreign corporate investment, but stops short of full privatization. The ISG report, however, goes further, stating that "the United States should assist Iraqi leaders to reorganize the national oil industry as a commercial enterprise." In addition, the current Constitution of Iraq is ambiguous as to whether control over Iraq's oil should be shared among its regional provinces or held under the central government. The report specifically recommends the latter: "Oil revenues should accrue to the central government and be shared on the basis of population." If these proposals are followed, Iraq's national oil industry will be privatized and opened to foreign firms, and in control of all of Iraq's oil wealth.

The proposals should come as little surprise given that two authors of the report, James A. Baker III and Lawrence Eagleburger, have each spent much of their political and corporate careers in pursuit of greater access to Iraq's oil and wealth.

"Pragmatist" is the word most often used to describe Iraq Study Group co-chair James A. Baker III. It is equally appropriate for Lawrence Eagleburger. The term applies particularly well to each man's efforts to expand U.S. economic engagement with Saddam Hussein throughout the 1980s and early 1990s. Not only did their efforts enrich Hussein and U.S. corporations, particularly oil companies, it also served the interests of their own private firms.

On April 21,1990, a U.S. delegation was sent to Iraq to placate Saddam Hussein as his anti-American rhetoric and threats of a Kuwaiti invasion intensified. James A. Baker III, then President George H.W. Bush's secretary of state, personally sent a cable to the US embassy in Baghdad instructing the U.S. ambassador to meet with Hussein and to make clear that, "as concerned as we are about Iraq's chemical, nuclear, and missile programs, we are not in any sense preparing the way for preemptive military unilateral effort to eliminate these programs."*

Instead, Baker's interest was focused on trade, which he described as the "central factor in the US-Iraq relationship." From 1982, when Reagan removed Iraq from the list of countries supporting terrorism, until August 1990, when Iraq invaded Kuwait, Baker and Eagleburger worked with others in the Reagan and Bush administrations to aggressively and successfully expand this trade.

The efficacy of such a move may best be described in a memo written in 1988 by the Bush transition team arguing that the United States would have "to decide whether to treat Iraq as a distasteful dictatorship to be shunned where possible, or to recognize Iraq's present and potential power in the region and accord it relatively high priority. We strongly urge the latter view." Two reasons offered were Iraq's "vast oil reserves," which promised "a lucrative market for U.S. goods," and the fact that U.S. oil imports from Iraq were skyrocketing. Bush and Baker took the transition team's advice and ran with it.

In fact, from 1983 to 1989, annual trade between the United States and Iraq grew nearly sevenfold and was expected to double in 1990, before Iraq invaded Kuwait. In 1989, Iraq became the United States' second-largest trading partner in the Middle East: Iraq purchased $5.2 billion in U.S. exports, while the U.S. bought $5.5 billion in Iraqi petroleum. From 1987 to July 1990, U.S. imports of Iraqi oil increased from 80,000 to 1.1 million barrels per day.

Eagleburger and Baker had much to do with that skyrocketing trade. In December 1983, then undersecretary of state Eagleburger wrote the U.S. Export-Import Bank to personally urge it to begin extending loans to Iraq to "signal our belief in the future viability of the Iraqi economy and secure a U.S. foothold in a potentially large export market." He noted that Iraq "has plans well advanced for an additional 50 percent increase in its oil exports by the end of 1984." Ultimately, billions of loans would be made or backed by the U.S. government to the Iraqi dictator, money used by Hussein to purchase U.S. goods.

In 1984, Baker became treasury secretary, Reagan opened full diplomatic relations with Iraq, and Eagleburger became president of Henry Kissinger's corporate consultancy firm, Kissinger Associates.

Kissinger Associates participated in the U.S.-Iraq Business Forum through managing director Alan Stoga. The Forum was a trade association representing some 60 American companies, including Bechtel, Lockheed, Texaco, Exxon, Mobil, and Hunt Oil. The Iraqi ambassador to the United States told a Washington, D.C., audience in 1985, "Our people in Baghdad will give priority - when there is a competition between two companies - to the one that is a member of the Forum." Stoga appeared regularly at Forum events and traveled to Iraq on a Forum-sponsored trip in 1989 during which he met directly with Hussein. Many Kissinger clients were also members of the Forum and became recipients of contracts with Hussein.

In 1989, Eagleburger returned to the state department now under Secretary Baker. That same year, President Bush signed National Security Directive 26 stating, "We should pursue, and seek to facilitate, opportunities for U.S. firms to participate in the reconstruction of the Iraqi economy, particularly in the energy area."

The president then began discussions of a $1 billion loan guarantee for Iraq one week before Secretary Baker met with Tariq Aziz at the state department to seal the deal.

But once Hussein invaded Kuwait, all bets were off. Baker made a public plea for support of military action against Hussein, arguing, "The economic lifeline of the industrial world runs from the Gulf and we cannot permit a dictator such as this to sit astride that economic lifeline."

Baker had much to gain from increased access to Iraq's oil. According to author Robert Bryce, Baker and his immediate family's personal investments in the oil industry at the time of the first Gulf War included investments in Amoco, Exxon and Texaco. The family law firm, Baker Botts, has represented Texaco, Exxon, Halliburton and Conoco Phillips, among other companies, in some cases since 1914 and in many cases for decades. (Eagleburger is also connected to Halliburton, having only recently departed the company's board of directors). Baker is a longtime associate and now senior partner of Baker Botts, which this year, for the second year running, was recipient of "The International Who's Who of Business Lawyers Oil & Gas Law Firm of the Year Award," while the Middle East remains a central focus of the firm.

This past July, U.S. Energy Secretary Bodman announced in Baghdad that senior U.S. oil company executives would not enter Iraq without passage of the new law. Petroleum Economist magazine later reported that U.S. oil companies put passage of the oil law before security concerns as the deciding factor over their entry into Iraq. Put simply, the oil companies are trying to get what they were denied before the war or at anytime in modern Iraqi history: access to Iraq's oil under the ground. They are also trying to get the best deal possible out of a war-ravaged and occupied nation. However, waiting for the law's passage and the need to guarantee security of U.S. firms once they get to work, may well be a key factor driving the one proposal by the Iraq Study Group that has received great media attention: extending the presence of U.S. troops in Iraq at least until 2008.

As the recommendations of the Iraq Study Group are more thoroughly considered, we should remain ever vigilant and wary of corporate war profiteers in pragmatist's clothing.

*All quotes are referenced in my book, The Bush Agenda.

(Antonia Juhasz is a visiting scholar at the Institute for Policy Studies, author of The Bush Agenda: Invading the World, One Economy at a Time, and a contributing author, with John Perkins and others, of A Game as Old as Empire: The Secret World of Economic Hit Men and the Web of Global Corruption. www.TheBushAgenda.net)