Iraq: Coalition of the Drilling (2)

(republished on Oct. 31, because of site problem)

Continued from Iraq: Coalition of the Drilling (1)

Joshua Holland on Alternet:

During the 12-year sanction period, the Big Four [Oil Companies, HR] were forced to sit on the sidelines while the government of Saddam Hussein cut deals with the Chinese, French, Russians and others (despite the sanctions, the United States ultimately received 37 percent of Iraq's oil during that period, according to the independent committee that investigated the oil-for-food program, but almost all of it arrived through foreign firms).

The German weekly Der Spiegel published (October 7, 2004) that list of "profiteers" of the Oil-for-Food programme. It is a list, probably forged by the CPA, where the (biggest) American profiteers are left out or made anonymous, so as to incriminate exclusively other countries (like France) and, of course, the UN itself. Here it is:As you may see, even in this heavily "edited" document, by far the biggest player is a an American (made anonymous).

Cheney's energy Task Force (2001), where it all started...
Back to the oil companies and the year 2001:

In February of 2001, just weeks after Bush was sworn in, the same energy executives that had been lobbying for Saddam's ouster gathered at the White House to participate in Dick Cheney's now infamous Energy Task Force. Although Cheney would go all the way to the Supreme Court to keep what happened at those meetings a secret, we do know a few things, thanks to documents obtained by the conservative legal group JudicialWatch. As Mark Levine wrote in The Nation($$):

… a map of Iraq and an accompanying list of "Iraq oil foreign suitors" were the center of discussion. The map erased all features of the country save the location of its main oil deposits, divided into nine exploration blocks. The accompanying list of suitors revealed that dozens of companies from 30 countries -- but not the United States -- were either in discussions over or in direct negotiations for rights to some of the best remaining oilfields on earth.

Levine wrote, "It's not hard to surmise how the participants in these meetings felt about this situation."

I have indeed seen that map when it was published, in 2004. When I find it, I'll publish it here again.

Secret memo: Security = Oil
Joshua Holland digged up one of the few evidences, that there is really a strong link between the "energy strategy" and the national security strategy:

According to the New Yorker, at the same time, a top-secret National Security Council memo directed NSC staff to "cooperate fully with the Energy Task Force as it considered melding two seemingly unrelated areas of policy."
The administration's national security team was to join "the review of operational policies towards rogue states such as Iraq and actions regarding the capture of new and existing oil and gas fields."

The PSA's: Handing over sovereignty to the Big Four
New to us, but explaining, why the US invest so much into a long-term military occupation of the country, are the conditions of the new big contracts, that are secretly set up in Baghdad between the Big 4 and the American "advisers" who control the Iraq oil ministry:

But the execs from Big Oil didn't just want access to Iraq's oil; they wanted access on terms that would be inconceivable unless negotiated at the barrel of a gun. Specifically, they wanted an Iraqi government that would enter into production service agreements (PSAs) for the extraction of Iraq's oil.

What are PSAs?

PSAs, developed in the 1960s, are a tool of today's kinder, gentler neocolonialism; they allow countries to retain technical ownership over energy reserves but, in actuality, lock in multinationals' control and extremely high profit margins -- up to 13 times oil companies' minimum target, according to an analysis by the British-based oil watchdog Platform (PDF).

As Greg Muttit, an analyst with the group, notes:

Such contracts are often used in countries with small or difficult oilfields, or where high-risk exploration is required. They are not generally used in countries like Iraq, where there are large fields which are already known and which are cheap to extract. For example, they are not used in Iran, Kuwait or Saudi Arabia, all of which maintain state control of oil.

In fact, Muttit adds, of the seven leading oil producing countries, only Russia has entered into PSAs, and those were signed during its own economic "shock therapy" in the early 1990s. A number of Iraq's oil-rich neighbors have constitutions that specifically prohibit foreign control over their energy reserves.

And the Russians are struggling now, as in the case of Shell's exploitation of the Sakhalin Reserves, to get rid of them.

PSAs often have long terms -- up to 40 years -- and contain "stabilization clauses" that protect them from future legislative changes. As Muttit points out, future governments "could be constrained in their ability to pass new laws or policies." That means, for example, that if a future elected Iraqi government "wanted to pass a human rights law, or wanted to introduce a minimum wage [and it] affected the company's profits, either the law would not apply to the company's operations or the government would have to compensate the company for any reduction in profits." It's Sovereignty Lite.

If all this is true - why are Kurds, Shiites and Sunnis in Iraq struggling so hard against one another for their share of future oil revenues? There will not be much left to share. The more so, as the US insist that Iraq continues to pay enormous sums to Kowait out of its oil revenues to compensate for the 1991 occupation and (Gulf-) war costs. A big part of that money also flows (indirectly) to the USA. The competition between three different Iraqi partners, of course suits enormously the American oil negotiators, who may choose in the end as a preferred partner that one of the three, who offers them most concessions on Iraqi control and Iraqi profit from the oil extraction.
Confirmed by this little peep into the negotiations:

The [PSA-, hr] deals are so onerous that they govern only 12 percent of the world's oil reserves, according to the International Energy Agency. Nonetheless, PSAs would become the Future of Iraq Project's recommendation for the fledgling Iraqi government.
According to the Financial Times, "many in the group" fought for the contract structure; a Kurdish delegate told the FT, "everybody keeps coming back to PSAs."

The harsh way in which, recently, Iraqi PM Maliki is being treated by the US, may point to a deep disagreement between the US and his govenment in this issue. That would mean, that the now dominating mainstream-Shiite majority is causing difficulties for the contracts that are being negotiated.

But it is difficult, to see what alternatives there are in Iraq, that might offer better conditions on a permanent (stability) basis to the big oil companies.

Perhaps, the Kurds could negotiate the inclusion of Kikuk and the Northern oil fields into a semi-independent Kurdish state, as their price for submitting to American PSA's. To them, it would be a win-win situation, for they have no oil revenues at all, up to now.

But, if this happens against the opposition of Sunni and Shiite Iraqis, which is very likely, and aginst the Turkish interests, which is for sure, - how could that oil be exported, then, either to the south, or to the (North-) West?

Less probable is a great "renversement des alliances", that could occur, if moderated Sunnis would trade their submission to PSAs with the US for a restauration of their role of dominating elite in Iraq. Allawi (himself a "secular" Shiite) could be an ideal vehicle for such a scenario. But it would need some sort of "coup" against Iraqi "democracy", that would be difficult to sell to the American public.

So, finally, we think, that within some months, the definitive deal will be concluded with the Shiites. The actual bickering, over the heads of the suffering Iraqis, is used to "soften" Maliki and his parties.

In a third post on this subject, more about the conditions for the oil negotations in Iraq, as prepared by the US.