oil and the war vs Iraq

From: michael a. lebowitz (mlebowit@SFU.CA)
Date: Sat Sep 25 2004 - 16:58:49 EDT

>Crude dudes
>By Linda McQuaig
>Toronto Star
>September 20, 2004
> >From his corner office in the heart of New York's financial district, Fadel
>Gheit keeps close tabs on what goes on inside the boardrooms of the big oil
>companies. An oil analyst at the prestigious Wall Street firm Oppenheimer &
>Co., the fit, distinguished-looking Gheit has been watching the oil industry
>closely for more than 25 years.
>Selling the modern world's most indispensable commodity has never been a bad
>business to be in  particularly for the small group of companies that
>straddle the top of this privileged world. But never more so than now.
>"Profit-wise, things could not have been better," says Gheit, "In the last
>three years, they died and went to heaven .... They are all sitting on the
>largest piles of cash in their history."
>But to stay rich they have to keep finding new reserves, and that's getting
>tougher. Increasingly it means cutting through permafrost or drilling deep
>underwater, at tremendous cost. "The cheap oil has already been found and
>developed and produced and consumed," says Gheit. "The low-hanging fruit has
>already been picked."
>Well, not all the low-hanging fruit has been picked.
>Nestled into the heart of the area of heaviest oil concentration in the
>world is Iraq, overflowing with low-hanging fruit. No permafrost, no deep
>water. Just giant pools of oil, right beneath the warm ground. This is fruit
>sagging so low, as it were, that it practically touches the ground under the
>weight of its ripeness.
>Not only does Iraq have vast quantities of easily accessible oil, but its
>oil is almost untouched. "Think of Iraq as virgin territory .... This is
>bigger than anything Exxon is involved in currently .... It is the superstar
>of the future," says Gheit, "That's why Iraq becomes the most sought-after
>real estate on the face of the earth."
>Gheit just smiles at the notion that oil wasn't a factor in the U.S.
>invasion of Iraq. He compares Iraq to Russia, which also has large
>undeveloped oil reserves. But Russia has nuclear weapons. "We can't just go
>over and ... occupy (Russian) oil fields," says Gheit. "It's a different
>ballgame." Iraq, however, was defenceless, utterly lacking, ironically, in
>weapons of mass destruction. And its location, nestled in between Saudi
>Arabia and Iran, made it an ideal place for an ongoing military presence,
>from which the U.S. would be able to control the entire Gulf region. Gheit
>smiles again: "Think of Iraq as a military base with a very large oil
>reserve underneath .... You can't ask for better than that."
>There's something almost obscene about a map that was studied by senior Bush
>administration officials and a select group of oil company executives
>meeting in secret in the spring of 2001. It doesn't show the kind of detail
>normally shown on maps  cities, towns, regions. Rather its detail is all
>about Iraq's oil.
>The southwest is neatly divided, for instance, into nine "Exploration
>Blocks." Stripped of political trappings, this map shows a naked Iraq, with
>only its ample natural assets in view. It's like a supermarket meat chart,
>which identifies the various parts of a slab of beef so customers can see
>the most desirable cuts .... Block 1 might be the striploin, Block 2 and
>Block 3 are perhaps some juicy tenderloin, but Block 8  ahh, that could be
>the filet mignon.
>The map might seem crass, but it was never meant for public consumption. It
>was one of the documents studied by the ultra-secretive task force on
>energy, headed by U.S. Vice-President Dick Cheney, and it was only released
>under court order after a long legal battle waged by the public interest
>group Judicial Watch.
>Another interesting task force document, also released under court order
>over the opposition of the Bush administration, was a two-page chart titled
>"Foreign Suitors for Iraqi Oilfields." It identifies 63 oil companies from
>30 countries and specifies which Iraqi oil fields each company is interested
>in and the status of the company's negotiations with Saddam Hussein's
>regime. Among the companies are Royal Dutch/Shell of the Netherlands,
>Russia's Lukoil and France's Total Elf Aquitaine, which was identified as
>being interested in the fabulous, 25-billion-barrrel Majnoon oil field.
>Baghdad had "agreed in principle" to the French company's plans to develop
>this succulent slab of Iraq. There goes the filet mignon into the mouths of
>the French!
>The documents have attracted surprisingly little attention, despite their
>possible relevance to the question of Washington's motives for its invasion
>of Iraq  in many ways the defining event of the post-9/11 world but one
>whose purpose remains shrouded in mystery. Even after the supposed motives
>for the invasion  weapons of mass destruction and links to Al Qaeda  have
>been thoroughly discredited, talk of oil as a motive is still greeted with
>derision. Certainly any suggestion that private oil interests were in any
>way involved is hooted down with charges of conspiracy theory.
>Yet the documents suggest that those who took part in the Cheney task
>force  including senior oil company executives  were very interested in
>Iraq's oil and specifically in the danger of it falling into the hands of
>eager foreign oil companies, rather than into the rightful hands of eager
>U.S. oil companies.
>As the documents show, prior to the U.S. invasion, foreign oil companies
>were nicely positioned for future involvement in Iraq, while the major U.S.
>oil companies, after years of U.S.-Iraqi hostilities, were largely out of
>the picture. Indeed, the U.S. majors would have been the big losers if U.N.
>sanctions against Iraq had simply been lifted. "The U.S. majors stand to
>lose if Saddam makes a deal with the U.N. (on lifting sanctions)," noted a
>report by Germany's Deutsche Bank in October 2002.
>The disadvantaged position of U.S. oil companies in Saddam Hussein's Iraq
>would have presumably been on the minds of senior oil company executives
>when they met secretly with Cheney and his task force in early 2001. The
>administration refuses to divulge exactly who met with the task force, and
>continues to fight legal challenges to force disclosure. However a 2003
>report by the General Accounting Office, the investigative arm of Congress,
>concluded that the task force relied on advice from the oil industry, whose
>close ties to the Bush administration are legendary. (George W. Bush
>received more money from the oil and gas industry in 1999 and 2000 than any
>other U.S. federal candidate received over the previous decade.)
>The Cheney task force has been widely criticized for recommending bigger
>subsidies for the energy industry, but there's been little focus on its
>possible role as a venue for consultations between Big Oil and the
>administration about Iraq. One intriguing piece of evidence pointing in this
>direction was a National Security Council directive, dated February 2001,
>instructing NSC staff to co-operate fully with the task force. The NSC
>document, reported in The New Yorker magazine, noted that the task force
>would be considering the "melding" of two policy areas: "the review of
>operational policies towards rogue states" and "actions regarding the
>capture of new and existing oil and gas fields." This certainly implies that
>the Cheney task force was considering geopolitical questions about actions
>related to the capture of oil and gas reserves in "rogue" states, including
>presumably Iraq.
>It seems likely then that Big Oil, through the Cheney task force, was
>involved in discussions with the administration about getting control of oil
>in Iraq. Since Big Oil has sought to distance itself from the
>administration's decision to invade Iraq, this apparent involvement helps
>explain the otherwise baffling level of secrecy surrounding the task force.
>It's interesting to note that the Cheney task force deliberations took place
>in the first few months after the Bush administration came to office  the
>same time period during which the new administration was secretly
>formulating plans for toppling Saddam. Those early plans were not publicly
>disclosed, but we know about them now due to the publication of several
>insider accounts, including that of former Treasury secretary Paul O'Neill.
>So, months before the attacks of 9/11, the Bush White House was already
>considering toppling Saddam, and at the same time it was also keenly
>studying Iraq's oil fields and assessing how far along foreign companies
>were in their negotiations with Saddam for a piece of Iraq's oil.
>It's also noteworthy that one person  Dick Cheney  was pivotal both in
>advancing the administration's plans for regime change in Iraq and in
>formulating U.S. energy policy.
>As CEO of oil services giant Halliburton Company, Cheney had been alert to
>the problem of securing new sources of oil. Speaking to the London Petroleum
>Institute in 1999, while still heading Halliburton, Cheney had focused on
>the difficulty of finding the 50 million extra barrels of oil per day that
>he said the world would need by 2010. "Where is it going to come from?" he
>asked, and then noted that "the Middle East with two-thirds of the world's
>oil and the lowest cost, is still where the prize ultimately lies."
>Cheney's focus on the Middle East and its oil continued after he became
>Bush's powerful vice-president. Within weeks of the new administration
>taking office, Cheney was pushing forward plans for regime change in Iraq
>and also devising a new energy policy which included getting control of oil
>reserves in rogue states. His central role in these two apparently urgent
>initiatives is certainly suggestive of a possible connection between the
>U.S. invasion of Iraq and a desire for the country's ample oil reserves 
>the very thing that is vehemently denied.
>One reason that regime change in Iraq was seen as offering significant
>benefits for Big Oil was that it promised to open up a treasure chest which
>had long been sealed  private ownership of Middle Eastern oil. A small
>group of major international oil companies once privately owned the oil
>industries of the Middle East. But that changed in the 1970s when most
>Middle Eastern countries (and some elsewhere) nationalized their oil
>industries. Today, state-owned companies control the vast majority of the
>world's oil resources. The major international oil companies control a mere
>4 per cent.
>The majors have clearly prospered in the new era, as developers rather than
>owners, but there's little doubt that they'd prefer to regain ownership of
>the oil world's Garden of Eden. "(O)ne of the goals of the oil companies and
>the Western powers is to weaken and/or privatize the world's state oil
>companies," observes New York-based economist Michael Tanzer, who advises
>Third World governments on energy issues.
>The possibility of Iraq's oil being reopened to private ownership  with the
>promise of astonishing profits  attracted considerable interest in the
>run-up to the U.S. invasion. In February 2003, as U.S. Secretary of State
>Colin Powell held the world's attention with his dramatic efforts to make
>the case that Saddam posed an imminent threat to international peace, other
>parts of the U.S. government were secretly developing plans to privatize
>Iraq's oil (among other assets). A confidential 100-page contracting
>document, drawn up by the U.S. Agency for International Development and the
>U.S. Treasury Department, laid out a wide-ranging plan for a "Mass
>Privatization Program ... especially in the oil and supporting industries."
>The Pentagon was also working on plans to open up Iraq's oil sector. In the
>fall of 2002, months before the invasion, the Pentagon retained Philip
>Carroll, a former CEO of Shell Oil Co. in Texas, to draft a strategy for
>developing Iraqi oil. Carroll's plans apparently became the basis of a
>proposed scheme, which became public shortly after the war, to redesign
>Iraq's oil industry along the lines of a U.S. corporation, with a chairman,
>chief executive and a 15-member board of international advisers. Carroll was
>chosen by Washington to serve as chairman, but the plans were shelved after
>they encountered stiff opposition inside Iraq.
>Still, the prospect of privatizing Iraq's oil remained of great interest to
>U.S. oil companies, according to Robert Ebel, from the influential
>Washington-based Center for Strategic and International Studies (CSIS).
>Ebel, former vice-president of a Dallas-based oil exploration company,
>retains close ties to the industry. In an interview in his Washington
>office, Ebel said it was up to Iraq to make its own decisions, but he made
>clear that U.S. oil companies would prefer Iraq abandon its nationalization.
>"We'd rather not work with national oil companies," Ebel said bluntly,
>noting that the major oil companies are prepared to invest the $35 to $40
>billion to develop Iraq's reserves in the coming years. "We're looking for
>places to invest around the world. You know, along comes Iraq, and I think a
>lot of oil companies would be disappointed if Iraq were to say `we're going
>to do it ourselves' "
>Along comes Iraq?
>How fortuitous. U.S. oil companies just happened to have billions of dollars
>that they wanted to invest in undeveloped oil reserves when Iraq presented
>itself, ready for invasion.
>Along comes Iraq, indeed.
>In the past 14 decades, we've used up roughly half of all the oil that the
>planet has to offer. No, we're not about to run out of oil. But long before
>the oil runs out, it reaches its production peak. After that, extracting the
>remaining oil becomes considerably more difficult and expensive.
>This notion that oil production has a "peak" was first conceived in 1956 by
>geophysicist M. King Hubbert. He predicted that U.S. oil production would
>peak about 1970  a notion that was scoffed at at the time. As it turned
>out, Hubbert was dead on; U.S. oil production peaked in 1970, and has been
>declining ever since. Hubbert's once-radical notion is now generally
>For the world as a whole, the peak is fast approaching. Colin Campbell, one
>of the world's leading geologists, estimates the world's peak will come as
>soon as 2005  next year. "There is only so much crude oil in the world,"
>Campbell said in a telephone interview from his home in Ireland, "and the
>industry has found about 90 per cent of it."
>All this would be less serious if the world's appetite for oil were
>declining in tandem. But even as the discovery of new oil fields slows down,
>the world's consumption speeds up  a dilemma Cheney highlighted in his
>speech to the London Petroleum Institute in 1999. For every new barrel of
>oil we find, we are consuming four already-discovered barrels, according to
>Campbell. The arithmetic is not on our side.
>Particularly worrisome is the arithmetic as it applies to the U.S. With its
>oil production already long past peak, and yet its oil consumption rising,
>the U.S. will inevitably become more reliant on foreign oil. This is
>significant not just for Americans, but for the world, since the U.S. has
>long characterized its access to energy as a matter of "national security."
>With its unrivalled military power, the U.S. will insist on meeting its own
>voracious energy needs  and it will be up to the rest of the world to
>co-operate with this quest. Period.
>Canada plays a greater role in this "keep-the-U.S.-energy-beast-fed"
>scenario than many Canadians may realize. A three-volume report prepared by
>a bipartisan Congressional team and CSIS, the Washington think tank,
>highlights how important Canada is in the U.S. energy picture of the future.
>The report, The Geopolitics of Energy into the 21st Century, notes that
>Canada is "the single largest provider of energy to the United States," and
>that "Canada is poised to expand sharply its exports of oil to the United
>States in the coming years."
>Fine  as long as Canada doesn't want to change its mind about this. Well,
>in fact, Canada can't change its mind about this  a point celebrated in the
>report. When Canada signed the North American Free Trade Agreement (NAFTA)
>in 1993, we gave up our right to cut back the amount of oil we export to the
>U.S. (unless we cut our own consumption the same amount). Interestingly,
>Mexico, also a party to NAFTA, refused to agree to this section, and was
>granted an exemption.
>The U.S. report points out that that, under NAFTA, Canada is not allowed to
>reduce its exports of oil (or other energy) to the U.S. in order to redirect
>them to Canadian consumers. Redirecting Canadian oil to Canadians isn't
>permitted  regardless of how great the Canadian need may be. Some outside
>observers, like Colin Campbell over in Ireland, find the situation striking.
>"You poor Canadians are going to be left freezing in the dark while they're
>running hair dryers in the U.S.," says Campbell. It's a situation that
>comforts the U.S. senators, congressmen and think-tank analysts who wrote
>the report. With obvious satisfaction, they conclude: "There can be no more
>secure supplier to the United States than Canada."
>Alas, for the U.S., not every part of the world is as pliant as Canada. Most
>of the world's oil is in the Middle East. And while different oil regions
>will reach their production peaks at different times, the Middle East will
>peak last, underlying Cheney's point that the region is where "the prize
>ultimately lies." Whoever controls the big oil reserves of the Middle East
>will then be positioned to, pretty much, control the world.
>But we're supposed to believe that, as the Bush administration assessed its
>options just before invading Iraq in the spring of 2003, the advantages of
>securing vast, untapped oil fields  in order to guarantee U.S. energy
>security in a world of dwindling reserves and to enable U.S. oil companies
>to reap untold riches  were far from mind. What really mattered to those in
>the White House, we're told, was liberating the people of Iraq.
>(Adapted from It's The Crude, Dude: War Big Oil, And The Fight For The
>Planet, by Linda McQuaig, 2004. Published by Doubleday Canada. Reproduced by
>arrangement with the Publisher. All rights reserved. Toronto-based political
>commentator Linda McQuaig is a past winner of a National Newspaper Award and
>an Atkinson Fellowship for journalism in public policy. Her column appears
>Sundays on the Star's op-ed page.)

Michael A. Lebowitz
Professor Emeritus
Economics Department
Simon Fraser University
Burnaby, B.C., Canada V5A 1S6
Office Fax:   (604) 291-5944
Home:   Phone (604) 689-9510

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