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Compromise on Oil Law in Iraq Seems to Be Collapsing

James Glanz, New York Times
A carefully constructed compromise on a draft law governing Iraq’s rich oil fields, agreed to in February after months of arduous talks among Iraqi political groups, appears to have collapsed. The apparent breakdown comes just as Congress and the White House are struggling to find evidence that there is progress toward reconciliation and a functioning government here.

Senior Iraqi negotiators met in Baghdad on Wednesday in an attempt to salvage the original compromise, two participants said. But the meeting came against the backdrop of a public series of increasingly strident disagreements over the draft law that had broken out in recent days between Hussain al-Shahristani, the Iraqi oil minister, and officials of the provincial government in the Kurdish north, where some of the nation’s largest fields are located.
(12 September 2007)

Why failure is the new face of success

Naomi Klein, Guardian
It may have been the military that invaded but, with Iraq completely dismantled, the reconstruction was to be the preserve of US corporations … Thus was born ‘disaster capitalism’, where oil companies profit from a broken country and private security firms grow rich on political chaos, says Naomi Klein in this final extract from her new book

Meanwhile, in the midst of the wave of neo-Keynesian epiphanies, Iraq was hit with the boldest attempt at crisis exploitation yet. In December 2006, the bipartisan Iraq Study Group fronted by James Baker issued its long-awaited report. It called for the US to “assist Iraqi leaders to reorganise 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.”

Most of the Iraq Study Group’s recommendations were ignored by the White House, but not this one: the Bush administration immediately pushed ahead by helping to draft a radical new oil law for Iraq, which would allow companies such as Shell and BP to sign 30-year contracts in which they could keep a large share of Iraq’s oil profits, amounting to tens or even hundreds of billions of dollars – unheard of in countries with as much easily accessible oil as Iraq, and a sentence to perpetual poverty in a country where 95% of government revenues come from oil. This was a proposal so wildly unpopular that even Bremer had not dared make it in the first year of occupation. Yet it was coming up now, thanks to deepening chaos. Explaining why it was justified for such a large percentage of the profits to leave Iraq, the oil companies cited the security risks. In other words, it was the disaster that made the proposed radical law possible.

Washington’s timing was extremely revealing. At the point when the law was pushed forward, Iraq was facing its most profound crisis to date:… . Iraq in this period was far too volatile for the oil giants to make major investments, so there was no pressing need for a new law – except to use the chaos to bypass a public debate on the most contentious issue facing the country. Many elected Iraqi legislators said they had no idea that a new law was even being drafted, and had certainly not been included in shaping its outcome. Greg Muttitt, a researcher with the oil-watch group Platform, reported: “I was recently at a meeting of Iraqi MPs and asked them how many of them had seen the law. Out of 20, only one MP had seen it.” According to Muttitt, if the law was passed, Iraqis “would lose out massively because they don’t have the capacity at the moment to strike a good deal”.

Iraq’s main labour unions declared that “the privatisation of oil is a red line that may not be crossed” and, in a joint statement, condemned the law as an attempt to seize Iraq’s “energy resources at a time when the Iraqi people are seeking to determine their own future while still under conditions of occupation”. The law that was finally adopted by Iraq’s cabinet in February 2007 was even worse than anticipated: it placed no limits on the amount of profits that foreign companies can take from the country and placed no specific requirements about how much or little foreign investors would partner with Iraqi companies or hire Iraqis to work in the oil fields.

Most brazenly, it excluded Iraq’s elected parliamentarians from having any say in the terms for future oil contracts. Instead, it created a new body, the Federal Oil and Gas Council, which, according to the New York Times, would be advised by “a panel of oil experts from inside and outside Iraq”. This unelected body, advised by unspecified foreigners, would have ultimate decision-making power on all oil matters, with the full authority to decide which contracts Iraq did and did not sign. In effect, the law called for Iraq’s publicly owned oil reserves, the country’s main source of revenues, to be exempted from democratic control and run instead by a powerful, wealthy oil dictatorship, which would exist alongside Iraq’s broken and ineffective government.

It is hard to overstate the disgrace of this attempted resource grab. Iraq’s oil profits are the country’s only hope of financing its own reconstruction when some semblance of peace returns.
(12 September 2007)
UPDATE (Sept 15)
More about Naomi Klein’s new book:
The Shock Doctrine by Jane Smiley in the Huffington Post
Shock Wave Troopers in the Georgia Straight (thanks to reader ML)

Michael Klare on the Internal War For Control of Iraq’s Oil
(Audio and transcript)
Amy Goodman, Democracy Now
We speak with Michael Klare, author of “Blood and Oil: The Dangers and Consequences of America’s Growing Dependency on Imported Petroleum.” Klare says, “There’s a second war underway in Iraq that’s a war for the control of the oil wealth. That’s a war that is pitting Kurds against the Arabs of the country, Shiites against Sunnis, and Shiite against Shiite. Because eventually the Americans are going to leave and the people of Iraq know this.”

MICHAEL KLARE: Well, Amy, good to talk with you. There are really two wars now underway, I think, in Iraq, maybe more than two. There’s the US effort to retain, as what President Bush said last night, an enduring presence in Iraq. And I believe that’s connected to our, that is America’s, long-lasting geopolitical imperative of being the dominant power in the Persian Gulf. And, of course, he also refers a lot to Iran, now the next threat perceived on the horizon to American dominance. So one part of the war in Iraq, I believe, have always believed, is part of this long-standing US effort to dominate the region geopolitically and control the oil spigot from the Gulf, where two-thirds of the world’s oil is located.

But there’s a second war underway, and that’s a war for the control of Iraq’s oil wealth. And that’s a war that is pitting Kurds against the Arabs of the country and Shiites against Sunnis, and Shiite against Shiite, because eventually the Americans are going to leave, and the people of Iraq know this, and they are now fighting amongst themselves for who’s going to control that territory. And I believe a lot of the violence in Iraq today is really about that struggle for control of Iraq’s oil wealth. And American soldiers are caught in the middle of this.

And I think, frankly, that American military leaders have come to understand that the prospect of an Iraq, of a national Iraq, has been lost. That war has been lost. What’s left is the fighting over the remains, the carcass of Iraq.

JUAN GONZALEZ: Michael, on the issue of Iran, especially with all the saber rattling, and even among many of the Democratic candidates for president you find some of the same saber rattling toward Iran. Iran is a huge nation. It is not only oil rich, but considerably developed, with a huge population. What kind of — your analysis of the sense among military people about even talking about any kind of military action or extension of what’s happened in Iraq into Iran?

MICHAEL KLARE: Well, we tend to forget that the US military is not a monolithic organization. I’m sure if you ask the ground forces, the Army and the Marine Corps who are baring the brunt of the fighting in Iraq, they’ll say, you know, “Not over my dead body do we want to go to war with Iran.” They are stretched to the limit. They couldn’t take on another single mission anywhere in the world. So they’re saying, “Please don’t start any trouble in Iran.”

But if you ask the Air Force or the Navy, they feel differently. They’re not overstretched in Iraq. They might feel very differently about it. They might be looking for missions And I think, in fact, that the military is divided on this, as is the administration.

It’s clear that Condoleezza Rice, I believe, and others of a more realistic nature, I suppose you’d say, think that attacking Iran would be a tremendous mistake. But there are clearly ideologues, neoconservatives, led by the Vice President, who are strongly committed to attacking Iran. And I fear that they’re prevailing in this debate and that before the administration leaves office that we will see an attack on Iran.
(14 September 2007)

Iraq: New U.S. Base – Wasit

Sarah Meyer, Index Research


Reuters (10 September 1007) had a headline: US to build military base on Iraq-Iran border.

“The base, which the military describes as a “life support area”, will be set up near the headquarters of the Department of Border Enforcement in Badrah, in the central province of Wasit.”

“The province, currently the theatre of a massive US-led military crackdown targeting Shiite militiamen allegedly involved in weapons smuggling, shares a 200 kilometre (125 mile) border with Iran.”


Hassan Jumaa Awad, Iraqi union leader, was recently travelling to raise awareness of the US attempts to grab Iraq’s oil. Among the interesting points that he raised: “There is a newly discovered field in Wasit province in central Iraq with the potential to fill millions of barrels of oil. Under the law this new field will be given over to multinationals.”

Iraq revenue watch (pdf file) notes: “This field lies in the two provinces of Baghdad and Salaheddin, and probably extends southward within the province of Wasit.1 Hence, it should be jointly managed by the provinces of both Baghdad and Salaheddin, and perhaps that of Wasit too. … initial production has averaged 20,000 barrels per day from its Baghdad section compared with a potential production of about 120,000 barrels daily.”


Problem? Perhaps. In 2006, the Iraqi Oil Ministry announced, it will revise a contract signed with a Chinese company to develop an oil well in Wasit province. In June ’07, according to the Middle East Times, the Iraqi leaders were “beginning a weeklong China visit” and were “hinting at reigniting a Saddam-era oil deal, though such a move is clouded by Iraq’s stalled oil law.” The US and Britain are exerting maximum pressure on the Iraqi government to pass such a law.
(11 September 2007)
Contributor Sarah Meyer writes:
Well, of course, we cannot expect the U.S. to build a new base without a connection to oil, can we? So nevermind the bogeyman, Iran. IT’S ABOUT OIL. See:

US Bases in Iraq: Part I: Baghdad (updated 13/08/07)
US/UK Bases in Iraq, Part II. The South (updated 11/09/07)