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War and Cheap Oil: A Second Look
Matthew L. Wald, NY Times
For years, many conservationists argued that the government was subsidizing gasoline by spending billions of tax dollars to keep ships in the Persian Gulf and troops on the ground to assure the flow of oil.
But some oil experts say the picture may be more complicated now that war is raging in the Middle East: these days, they say, the military commitment doesn’t just hide the real price of oil, but also has become a factor in pushing the price up.
(7 Jan 2007)
The New Middle East
Richard N. Haass, MSNBC
As the Iraq war helps bring the American era to a close, a new order will begin to emerge in the region.
It is early 2008.
The new U.S. strategy for Iraq, outlined by President George W. Bush in January 2007, in the wake of the Iraq Study Group report, has come and gone with no discernible effect.
With 100,000 soldiers still on the ground, despite congressional calls for major withdrawals, “force protection” is the new catchphrase, given domestic intolerance of American casualties. No one debates any longer whether Iraq is experiencing a civil war; it’s in fact part failed state, part civil war and part regional war. Insurgents, militias and terrorists are more active than ever; Iraqi casualties and deaths are higher than ever. Output of oil and electricity remains stuck at or below prewar levels….
Iran, snubbing the U.N. Security Council, presses ahead with its nuclear program. Israel is reported to be readying a preventive attack. Rumors abound that the U.S. president and his senior national-security team are divided, with some pushing to join the Israelis (using stealth aircraft and cruise missiles to attack Iranian nuclear sites) and others opposed, arguing that Iran would retaliate, that several friendly governments could fall and that the price of oil would rise above $150 a barrel. The overall impression is of a Middle East spinning out of control and the United States unable to do much about it.
Is this the future? With luck, not all of this will come to pass. On the other hand, it’s easy to imagine things turning out even worse. Either way, one thing is certain: the American era in the Middle East is over. More than anything else, it was the Iraq war-the enormous military, economic and diplomatic costs, the shifting internal balances in the region-that brought it to an end. Other factors contributed: the demise of the “peace process,” the rise of Hamas and Hizbullah, the Israeli embrace of unilateralism and the disinclination of George W. Bush and his administration to undertake active diplomacy.
The failure of traditional Arab regimes to combat the appeal of radical Islam also figures here, as does globalization. It has never been easier for individuals and groups to find money and weapons, or to spread their ideas-including violent anti-Americanism. But let’s be clear: the wounds America has suffered in the region are chiefly self-inflicted.
Haass is president of the Council on Foreign Relations.
(8 Jan 2007)
Long essay. Seems to be based on a previous essay that appeared in the Nov/Dec issue of the journal Foreign Affairs: “The New Middle East”. Here is a bio of author Haass .
Future of Iraq: The spoils of war
Danny Fortson, Andrew Murray-Watson and Tim Webb, Independent
Iraq’s massive oil reserves, the third-largest in the world, are about to be thrown open for large-scale exploitation by Western oil companies under a controversial law which is expected to come before the Iraqi parliament within days.
The US government has been involved in drawing up the law, a draft of which has been seen by The Independent on Sunday. It would give big oil companies such as BP, Shell and Exxon 30-year contracts to extract Iraqi crude and allow the first large-scale operation of foreign oil interests in the country since the industry was nationalised in 1972.
The huge potential prizes for Western firms will give ammunition to critics who say the Iraq war was fought for oil. They point to statements such as one from Vice-President Dick Cheney, who said in 1999, while he was still chief executive of the oil services company Halliburton, that the world would need an additional 50 million barrels of oil a day by 2010. “So where is the oil going to come from?… The Middle East, with two-thirds of the world’s oil and the lowest cost, is still where the prize ultimately lies,” he said.
Oil industry executives and analysts say the law, which would permit Western companies to pocket up to three-quarters of profits in the early years, is the only way to get Iraq’s oil industry back on its feet after years of sanctions, war and loss of expertise. But it will operate through “production-sharing agreements” (or PSAs) which are highly unusual in the Middle East, where the oil industry in Saudi Arabia and Iran, the world’s two largest producers, is state controlled.
Opponents say Iraq, where oil accounts for 95 per cent of the economy, is being forced to surrender an unacceptable degree of sovereignty.
(7 Jan 2007)
Leading article: The oil rush
Independent (UK)
“The oil can is mightier than the sword,” said the 19th-century US Senator Everett Dirksen. Nowhere does this seem more true than in contemporary Iraq where, despite widespread despair about the war’s costs in terms of blood and treasure, US corporations look set to be some of the conflict’s few winners. The announcement that the Iraqi government is planning to change its constitution to allow foreign extraction of oil will give Western companies access to the world’s third largest oil reserves. Production sharing agreements (PSAs), lasting for up to 30 years, will divert up to 75 per cent of Iraqi oil revenues to Western drilling companies until their initial investment costs have been recouped. The importance of this cannot be overstated for a shattered country still reliant on oil for 95 per cent of its income.
Of course, the Iraqi oil industry, starved through years of sanctions and now under constant insurgent attack, badly needs Western investment. Only a small proportion of Iraq’s known oil fields have been developed, and production still languishes below pre-invasion levels. The neo-conservative dream – indulged in by Paul Wolfowitz and Dick Cheney prior to the conflict – that the invasion and reconstruction would be self-financed through a twist of the oil taps, dissipated long ago.
In a country where unemployment has hit 70 per cent, a policy that will quicken the pace of economic reconstruction should be universally welcomed. At face value, the measure is not being imposed by the fiat of a US general: it will be voted on in the Iraqi parliament and, if passed, enacted by a democratically elected government. And objections that foreign companies will steal Iraq’s birthright seem faintly anachronistic in the global economy: specialist engineering is an international industry these days, and Iraq’s command economy, isolated from the rest of the world, urgently requires liberalisation.
(7 Jan 2007)
Blood and oil: How the West will profit from Iraq’s most precious commodity
Independent
The ‘IoS’ today reveals a draft for a new law that would give Western oil companies a massive share in the third largest reserves in the world. To the victors, the oil? That is how some experts view this unprecedented arrangement with a major Middle East oil producer that guarantees investors huge profits for the next 30 years
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So was this what the Iraq war was fought for, after all? As the number of US soldiers killed since the invasion rises past the 3,000 mark, and President George Bush gambles on sending in up to 30,000 more troops, The Independent on Sunday has learnt that the Iraqi government is about to push through a law giving Western oil companies the right to exploit the country’s massive oil reserves.
And Iraq’s oil reserves, the third largest in the world, with an estimated 115 billion barrels waiting to be extracted, are a prize worth having. As Vice-President Dick Cheney noted in 1999, when he was still running Halliburton, an oil services company, the Middle East is the key to preventing the world running out of oil.
Now, unnoticed by most amid the furore over civil war in Iraq and the hanging of Saddam Hussein, the new oil law has quietly been going through several drafts, and is now on the point of being presented to the cabinet and then the parliament in Baghdad. Its provisions are a radical departure from the norm for developing countries: under a system known as “production-sharing agreements”, or PSAs, oil majors such as BP and Shell in Britain, and Exxon and Chevron in the US, would be able to sign deals of up to 30 years to extract Iraq’s oil.
PSAs allow a country to retain legal ownership of its oil, but gives a share of profits to the international companies that invest in infrastructure and operation of the wells, pipelines and refineries. Their introduction would be a first for a major Middle Eastern oil producer. Saudi Arabia and Iran, the world’s number one and two oil exporters, both tightly control their industries through state-owned companies with no appreciable foreign collaboration, as do most members of the Organisation of Petroleum Exporting Countries, Opec.
Critics fear that given Iraq’s weak bargaining position, it could get locked in now to deals on bad terms for decades to come.
(7 Jan 2007)
Also posted at Common Dreams.
Iraqi possible oil contracts (PSAs): some facts
Jerome a Paris, Daily Kos
trifecta has a recommended diary up right now about the new oil law, which, as the Independent notes, will allow foreign companies to invest in the oil sector via PSAs (production sharing agreements).
These are presented as unfair contracts, which will give the majority of the profits to the Western oil majors, and highly unusual. This is all untrue, and it obfuscates the wider truth that no major Western company will invest in Iraq (under these contracts or under any other scheme) as long as American troops are there a,d that a civil war is under way.
I’ve written about this as comments in various diaries, but it’s time to have a full diary on this.
…So the only bit a significant news here is the fact that Iraq may be open to Western investment in the oil sector – a significant bit of news for oil companies that are shut out of an increasing number of countries and desperate to get their hands on projects, and a decision that might not be taken by a sovereign Iraq, but the fact that a soveriegn Iraq does not exist also means that this law is meaningless (see below). It also does not mean that the terms would necessarily be bad for Iraq.
… PSAs are actually one of the most common form of investment and production contracts around the world these days – for the simple reason that they are usually more favorable to host countries than other contract forms.
(7 Jan 2007)
Jerome’s post is also available at
European Tribune and The Oil Drum
