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PSAs and Iraqi oil
Editors, Monthly Review
…The truth, however, is that plans have been underway for some time, beginning even before the invasion, to ensure U.S. and British domination of Iraqi oil. When neoconservatives in the early days of the occupation proposed the privatization of oil resources what they were referring to was legal ownership of the oil reserves in the ground, prior to extraction of the oil. It was this form of privatization that Washington adamantly rejected. But private ownership of oil in this sense exists in no country of the world except the United States and was never a genuine option. The real issues of privatization are not who owns the oil in the ground, but who gets the revenue from the oil once it is extracted and who controls its development and exploitation.
Classical oil imperialism in the early decades of the twentieth century took the form of long-term concessions that the colonial countries and their giant oil companies imposed on the oil-producing countries in the periphery. The corporations of the colonial powers took charge of the development and exploitation of oil fields and got the revenue from the sale of the oil, paying royalties and taxes to the governments of the subject states.
…With the old imperial concessions model increasingly no longer feasible, Western oil companies and their governments concocted a new model called the “production sharing agreement” (PSA). PSAs provide political camouflage while embodying the material equivalent of the old concessions regime. The oil states appear to retain control, but both the revenue stream and decisions on the development of oil fields are under the control of the giant oil corporations, which are in a position to reap enormous profits from the extraction and sale of the oil in accord with these agreements. The future actions of oil states are severely constrained under such agreements, since provisions in the PSAs make them immune to the passage of any subsequent legislation that might alter the basic rules. PSAs grant to corporations exclusive rights to exploit oil reserves for decades. Moreover, they allow them to “book” these reserves as assets, increasing the total asset value of their companies.
Although PSAs are not uncommon for small oil producing countries with high extraction costs, often involving offshore fields, they are non-existent among major Middle East producers, and only cover about 12 percent of oil reserves worldwide. Of the seven biggest oil exporting countries (including Iraq) only Russia, as a result of the Western-dominated shock therapy regime after the collapse of the Soviet Union, has PSAs, but these are extremely controversial, costing the state billions of dollars, and additional ones are unlikely to be signed (Greg Muttitt, Crude Designs: The Rip-Off of Iraq’s Oil Wealth [PLATFORM, 2005] www.carbonweb.org).
The Iraqi government is required to complete its final oil law by the end of this month in accord with an agreement concluded with the IMF a year ago. The new draft oil law was written mainly by Washington and London and by the representatives of the giant oil corporations. As leading British oil industry analyst and critic Greg Muttitt observed in Foreign Policy in Focus (www.fpif.org, August 28, 2006): “Last month, the administration and major oil companies reviewed and commented on a new law governing Iraq’s crucial oil sector, before it has even been seen by the Iraqi parliament” (emphasis added). Although written behind closed doors, it is clear that the new draft legislation strongly promotes PSAs. While the actual details of the draft legislation are not yet public, in an earlier stage of negotiations over the Iraqi oil industry it appeared that foreign companies would be given control of all currently undeveloped Iraqi oil fields, potentially allocating to global oil corporations control over 80 percent or more of Iraq’s known oil reserves. For the first time in more than three decades, since Iraqi oil was nationalized in 1975 under Saddam Hussein, foreign firms would gain control of Iraq’s oil, booking it under their own assets. Given the present occupation, U.S. and British firms would obviously be well positioned to obtain the lion’s share of such contracts.
(Dec 2006)
The Iraq Study Group Report — Has the Empire Really Failed?
John Bellamy Fosterm, MRzine
…at a time when even the new Secretary of Defense, Robert Gates, has stated that the United States is “not winning” the war in Iraq, it is important to recognize that there is also a sense in which the empire may not have entirely failed — at least not yet. The war is almost universally viewed as a political and military disaster for the U.S. empire. Nevertheless, Washington is still hoping amidst the devastation to hold on to some of its long-term economic and strategic goals in Iraq. Realization of these will have made the war “worth it” from the standpoint of the U.S. ruling class, irrespective of the cost in lives and treasure.
There is no doubt what these spoils are: (1) control of Iraqi oil reserves (the second largest in the world), (2) “geopolitical gains” (or greater domination of the vital Middle East oil region), and (3) strengthening of U.S. global hegemony as a result of this new oil imperium. Crucial to the realization of these spoils, the United States has not only been forcibly occupying Iraq, but has also been looking to the future by building long-term (usually referred to as “permanent”) military bases in Iraq where it plans to continue to locate substantial military forces and capabilities even after it has ostensibly “withdrawn” its troops. Such bases have but one undisguised purpose: the projection of U.S. imperial power over Iraq, the Persian Gulf, and the surrounding regions as part of the larger global projection of U.S power.
(12 Dec 2006)
The Baker Boys: Stay Half the Course
Greg Palast, gregpalast.com
What is painted by Baker’s Iraq Study Group as an ancient local clash between Shia and Sunni over the Kingdom of God, is, in fact, a remote control war between Iran and Saudi Arabia over the Kingdom of Oil.
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…Saudi Arabia is the elephant in the room (camel in the tent?) that can’t be acknowledged — and the reason Baker is so desperately anxious to sell America on keeping half our soldiers in harm’s way.
James III wants to seduce or bully Iran into stopping their funding of the murderous Shia militias. But the Shias only shifted into mass killing mode in response to the murder spree by Sunni “insurgents.”
Where do the Sunnis get their money for mayhem? According to a seething memo by the National Security Agency (November 8, 2006), the Saudis control the, “public or private funding provided to the insurgents or death squads.” Nice.
Baker wants us to bribe or blackmail Iran into stopping one side in Iraq’s uncivil war, the Shia. Yet we close our eyes to the Saudis acting as a piggy bank for the other side, the Sunni berserkers.
…The King wants US forces to stay to baby-sit the Shias in Iraq’s army. The Saudis have made it clear that, if the US pulls out our troops, Saudi Arabians will crank up payments to their brothers, the Sunni warlords in Iraq, and Baghdad, or the entire region, will run with blood.
The outcome was foregone: King Abdullah’s wish is Cheney’s command — and Baker’s too. And so 70,000 of our soldiers will stay.
(8 Dec 2006)
Related: Saudis Reportedly Funding Iraqi Sunnis
