Iraq's Oil: The Spoils Of War

by-Philip Thornton,
Economics Correspondent
Published: 22 November 2005
the Independent

Iraqi's face the dire prospect of losing up to $200bn of the wealth of their country if an American-Inspired plan to hand over development of its Oil reserves to US and British
Multinationals comes into force next year.

A report produced by American and British Pressure Groups warns Iraq will be caught in an "Old Colonial Trap" if it allows foreign companies to take a share of its vast energy reserves.

The report is certain to reawaken fears that the real purpose of the 2003 War on Iraq was to Ensure its Oil Came Under Western Control.

The Iraqi government has announced plans to seek foreign investment to exploit its Oil reserves after the general election, which will be held next month. Iraq has 115 billion barrels of proved Oil reserves, the third largest in the World.

According to the report, from groups including War On Want and the New Economic Foundation (NEF), the new Iraqi Constitution opened the way for greater foreign investment.

Negotiations with Oil Companies are already under way ahead of next month's election and before legislation is passed, it said.

The groups said they had amassed details of high-level pressure from the US and UK governments on Iraq to look to foreign companies to rebuild its Oil Industry. It said a foreign office code of practice issued in summer last year said at least $ 4 bn would be needed to restore production to the levels before the 1990-1991 Gulf War.

"Given Iraq's needs it is not realistic to cut government spending in other areas and Iraq would need to engage with the International Oil Companies to provide appropriate levels of foreign direct investment to do this," it said.

Yesterday's report said the use of production sharing agreements (PSAs) was proposed by the US State Department before the Invasion and adopted by the Coalition Provisional Authority.

"The current government is fast-tracking the process. It is already negotiating contracts with Oil Companies in parallel with the constitutional process, elections and the passage of a petroleum law," in the report , Crude Designs, said.

Earlier this year a BBC Newsnight report claimed to have uncovered documents showing the Bush administration made plans to secure Iraqi Oil even before the 9/11 terrorist attacks on the US.

Based on its analysis of PSAs in seven countries, it said multinationals would seek rates of return on their investment from 42 to 162 per cent, far in excess of typical 12 per cent rates.

Taking an assumption of $40 a barrel, below the current price of almost $60, and a likely contract term of 25 to 40 years, it said that Iraq stood to lose between $74 bn and $194 bn.

Andrew Simms, the NEF's policy director, said: "over the last Century, Britain and the US left a global trail of conflict, social upheaval and environmental damage as they sought to capture and control a disproportionate share of the world's oil reserves. Now it seems they are determined to increase their ecological debts at Iraq's expense. Instead of a new beginning, Iraq is caught in a very old colonial trap."

Louis Richards, chief executive of War On Want, said: "people have increasingly come to realise the Iraq War was about oil, profits and plunder. Despite claims from politicians that this is a conspiracy theory, our report gives detailed evidence to show Iraq's Oil Profits are well within the sights of the Oil Multinationals."

The current Iraqi government has indicated that it wants to triple production from two million barrels a day this year to six million.

The report named several companies, including the Anglo-Dutch Shell Group, as Jockeying for Position before a new government is elected.

In 2003, Walter van der Vijver, then head of exploration and production, said Investors would need "some assurance of future Income and a supportive contractual agreement."

The group said yesterday, "we aspire to establish a long-term presence in Iraq and a long-term relationship with the Iraqi's, including the newly elected government."

http://news.independent.co.uk/world/middle_east/article328526.ece