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Big Oil poised to make triumphant return

Friday 11 July 2008, by Linda McQuaig

When Big Oil excutives and U.S. Vice-President Dick Cheney met for secret energy talks in the spring of 2001, one subject that weighed on all their minds was the potential loss of Iraq’s bountiful oil reserves.

After more than a decade of hostile U.S.-Iraqi relations, Iraqi dictator Saddam Hussein had negotiated deals with oil companies from a range of countries, including Russia, China and India, to develop Iraq’s largely undeveloped reserves.

That meant U.S. oil companies were to be denied a stake in developing one of the last oil bonanzas left on Earth. It also meant that the U.S. risked being denied access to this vast new source of petroleum - the commodity it considers essential to its continued status as an economic and military superpower.

So it wasn’t surprising that Cheney’s energy task force - set up with urgency within weeks of the Bush administration taking office - took great interest in a document called "Foreign Suitors for Iraqi Oilfield Contracts." The document (eventually made public after a lengthy court battle with the Bush administration) included a detailed breakdown of Iraq’s 97 oil fields, listing in each case the foreign company that was negotiating a development contract with Saddam, and the status of those negotiations.

But, according to the narrative presented by the White House and rarely challenged by the media, none of this mattered to Washington’s strategic planners: the fact that Iraq’s vast oil reserves were about to slip into the hands of America’s rivals and Big Oil’s competitors allegedly played no role in the administration’s decision to overthrow Saddam two years later.

Of course, outside the narrow confines of the political and media establishment, most ordinary people have had little difficulty seeing through the official reasons offered up by the Bush administration to explain its insistence on invading and occupying a country that, apart from oil, consists mostly of sand.

Now there’s some fresh fodder for that debate, with the announcement last week by the Iraqi government that it is signing no-bid contracts with five of the biggest multinational oil companies - the same corporate crowd that met with Cheney back in 2001 and fretted over Saddam’s oil deals with "foreign suitors."

Those "foreign suitors" - including state-owned companies from oil-hungry China and India - have now been pushed aside. In their place, ExxonMobil, Shell, BP, Chevron and Total have been selected for the first stage of developing six of Iraq’s largest oil fields.

So, for instance, Iraq’s magnificent Rumaila oil field, which had been slated to go to the Russian oil company Lukoil back in 2001, will now go to British oil giant BP.

Although these new contracts are relatively small service contracts, they are considered a crucial foot in the door for getting what the companies are really after - major development deals known as Production Sharing Agreements (PSAs), where the companies invest in a project, control it and receive the lion’s share of the profits.

PSAs resemble the kinds of arrangements that used to prevail in the Middle East when a handful of U.S. and British oil companies controlled the world’s oil through their cartel known as the Seven Sisters.

That situation changed dramatically in the early 1970s when a wave of oil nationalism swept through the Middle East. National governments in the region took control of their own oil industries and (along with Venezuela) became dominant players on the world oil scene through their cartel OPEC.

Overturning these nationalistic policies has long been the dream of Big Oil, and the U.S. occupation of Iraq seems to have made that possibility more likely.

In the last two years, Washington has been pressuring Iraq intensely to pass a "petroleum law," which was drawn up with the help of American advisers operating under contract to U.S. consulting giant BearingPoint Inc.

The North American media describe this as an "oil-revenue-sharing" law (for dividing revenues between Sunnis, Shiites and Kurds), but the law would also create a legal framework for re-establishing foreign investment in Iraq’s oil sector.

There’s been fierce resistance to the law inside Iraq, and the Iraqi Parliament has repeatedly refused to pass it. Even direct pressure from Cheney, whose May 2007 visit to Baghdad focused almost entirely on the urgent need to pass the oil law, failed to mobilize sufficient parliamentary support.

The service contracts are seen as a way around that legislative opposition.

Ironically, four of the companies returning to Iraq - ExxonMobil, BP, Shell and Total - were the original partners in a consortium called the Iraq Petroleum Company that for decades held the exclusive rights to develop oil in Iraq. They were kicked out in 1972 when Saddam nationalized the country’s oil industry.

That move proved extremely popular in Iraq. Indeed, oil nationalism and resistance to foreign control of oil has become part of the Zeitgeist of the Middle East.

The return of Big Oil to Iraq has some profound implications. If it leads, as expected, to the signing of full development contracts, hundreds of billions of dollars will be diverted outside the country into the already overflowing coffers of the multinational oil industry.

U.S. Congressman Dennis Kucinich, a candidate for the 2008 Democratic nomination, has said that would amount to "one of the biggest heists in the history of the world."

Certainly anyone who thinks the invasion of Iraq accomplished nothing probably isn’t sitting inside the boardrooms of some of the most powerful companies on Earth.

Linda McQuaig is author of It’s the Crude, Dude: War, Big Oil and the Fight for the Planet.