Loading ...
Sorry, an error occurred while loading the content.

The spoils of war

Expand Messages
  • World View
    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
    Message 1 of 1 , Feb 5, 2007
      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
      Iraq abates.

      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."



      To subscribe to this group, send an email to:

    Your message has been successfully submitted and would be delivered to recipients shortly.