The spoils of war
- Future of Iraq: The spoils of war
How the West will make a killing on Iraqi oil riches
By Danny Fortson, Andrew Murray-Watson and Tim Webb
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.
Proposing the parliamentary motion for war in 2003, Tony Blair denied
the "false claim" that "we want to seize" Iraq's oil revenues. He said
the money should be put into a trust fund, run by the UN, for the
Iraqis, but the idea came to nothing. The same year Colin Powell, then
Secretary of State, said: "It cost a great deal of money to prosecute
this war. But the oil of the Iraqi people belongs to the Iraqi people;
it is their wealth, it will be used for their benefit. So we did not
do it for oil."
Supporters say the provision allowing oil companies to take up to 75
per cent of the profits will last until they have recouped initial
drilling costs. After that, they would collect about 20 per cent of
all profits, according to industry sources in Iraq. But that is twice
the industry average for such deals.
Greg Muttitt, a researcher for Platform, a human rights and
environmental group which monitors the oil industry, said Iraq was
being asked to pay an enormous price over the next 30 years for its
present instability. "They would lose out massively," he said,
"because they don't have the capacity at the moment to strike a good
Iraq's Deputy Prime Minister, Barham Salih, who chairs the country's
oil committee, is expected to unveil the legislation as early as
today. "It is a redrawing of the whole Iraqi oil industry [to] a
modern standard," said Khaled Salih, spokesman for the Kurdish
Regional Government, a party to the negotiations. The Iraqi government
hopes to have the law on the books by March.
Several major oil companies are said to have sent teams into the
country in recent months to lobby for deals ahead of the law, though
the big names are considered unlikely to invest until the violence in
James Paul, executive director at the Global Policy Forum, the
international government watchdog, said: "It is not an exaggeration to
say that the overwhelming majority of the population would be opposed
to this. To do it anyway, with minimal discussion within the [Iraqi]
parliament is really just pouring more oil on the fire."
Vince Cable, the Liberal Democrat Treasury spokesman and a former
chief economist at Shell, said it was crucial that any deal would
guarantee funds for rebuilding Iraq. "It is absolutely vital that the
revenue from the oil industry goes into Iraqi development and is seen
to do so," he said. "Although it does make sense to collaborate with
foreign investors, it is very important the terms are seen to be fair."
WORLD VIEW NEWS SERVICE
To subscribe to this group, send an email to:
NEWS ARCHIVE IS OPEN TO PUBLIC VIEW