Tuesday, February 27, 2007

Job half done, but other half is the key

February 27, 2007

Job half done, but other half is the key

'Inad Khairallah

THE US notched a key landmark in its goals in Iraq on Monday when the cabinet of Prime Minister Nouri Al Maliki endorsed the draft of new legislation on the country's energy reserves. Waiting in line to benefit from the draft bill, which is expected to be ratified by the Iraqi parliament in March, are international oil majors like ExxonMobil, ConocoPhillips, Chevron, BP and Shell, with the US companies staking a claim to the lion's share while the European firms would get a relatively smaller share of the pie. Russians and Chinese might get bits and pieces for good behaviour.
Indeed, it cost the US more than $360 billion and 3,200 American lives — not to mention the more than 25,000 crippled and maimed US service personnel or the hundreds of thousands of Iraqi lives — to arrive at this point. The US administration had expected the cost of war to be a few billion dollars, but it had no option but to continue to keep the war machine fuelled in the face of the unexpected intensity of the post-war insurgency. The result today is that the cost has now shot through the roof, making it all the more important for the US to "stay the course" in order not only to serve its strategic interests in the region but also to benefit US oil corporates with direct and indirect links with senior administration officials and the Republican camp.
That the original language of the draft law on oil is in English — and not Arabic, the national language of Iraq — shows that it was US-drafted and forced down on the Iraqi government, which was a willing recipient anyway.
According to some accounts, those involved in drafting the bill included
a American consultancy firm hired by Washington and representatives of oil giants, the International Monetary Fund, the World Bank which is headed by former US deputy defence secretary Paul Wolfowitz, and the US Agency for International Development.
It does not need more substantiation that control of Iraq's rich oil resources was one of the several key US objectives than a 1999 statement made in London by Dick Cheney, the now US vice-president and then chief executive of Halliburton:
"By 2010 we will need (an additional) 50 million barrels a day. The Middle East, with two-thirds of the oil and the lowest cost, is still where the prize lies."
The draft law calls for oil revenue throughout the country to be deposited in a central government account and redistributed to Iraq's 18 provinces, most likely on a per capita basis. A secondary bill will address in more detail the mechanisms of revenue distribution.
In the final form of distribution arrangements, both the Kurds and Shiites would have a strong say in negotiating production agreements and allocation of the oil proceeds. The Kurds, who have been aligned with the US since the 1991 war over Kuwait, have an edge over the Shiites in this matter. The Kurds could sign oil contracts with whatever companies they want while the Shi'ites enjoy limited privileges in this context, but they are rulers of the country anyway,
The Sunnis in central Iraq — which does not have much of hydrocarbon deposits — have to depend on the central government's oil ministry for any share of whatever oil cake is available.
Well, the arrangement appears the suit the geopolitical realities in Iraq.
However, there is a major catch: The Federal Oil and Gas Council — described as a panel made up of Iraqis and non-Iraqis — retains the final say in granting any oil concession to anyone.
Inevitably, the "non-Iraqi" members of the council will be top executives from the international oil giants who, along with other "US-friendly" Iraqi members, would ensure that only those who toe the US line would get to make money from Iraq's oil resources — 110 billion barrels proven, and unproven estimates running up to 280 billion barrels, more than world number one Saudi Arabia.
It follows then that the US and its proxies would have absolute control of Iraq's oil wealth granted to it by the government and legislative authority of the country.
The international oil giants would make money from Iraq's oil resources mainly through production-sharing agreements which industry experts say are outdated in principle and do not work to the benefit of the host country. But then, that argument is a non-starter because no foreign country is going to raise it and no one in Iraq has any clout to challenge any US-enforced decisions.
Independent experts say that it costs about @2 to produce a barrel of oil in the Kurdish areas of Iraq compared with $7 to $11 in the southern Shiite areas. With the oil price around $60 per barrel, no one is complaining, least of all the oil giants who could be expected to negotiate production sharing agreements based on the colonial-era parameters, including heavily inflated cost of production.
Well, the US has accomplished half the job in Iraq, but the other half — containing the insurgency, taking care of security and making sure the US-friendly credentials of any group that ever comes to power — has already turned out to be its undoing. Without successfully completing this half of the job, the first half would mean nothing.