Before the invasion of Iraq in March 2003, discussion
of Iraqi oil was largely taboo in the American mainstream, while the "No Blood
for Oil" signs that dotted antiwar demonstrations were generally derisively
dismissed as too simpleminded for serious debate. American officials rarely
even mentioned the word "oil" in the same sentence with "Iraq." When President
Bush referred to Iraqi oil, he spoke only of preserving that country's "patrimony"
for its people, a sentiment he and Great Britain's Prime Minister Tony Blair
emphasized in a
statement they issued that lacked either the words "oil" or "energy" just
as Baghdad fell: "We reaffirm our commitment to protect Iraq's natural resources,
as the patrimony of the people of Iraq, which should be used only for their
That May, not long after the president declared "major combat" at an end in
Iraq, Deputy Secretary of Defense Paul Wolfowitz did point
out the obvious that Iraq was a country that "floats on a sea of oil."
He also told
a congressional panel: "The oil revenue of that country could bring between
50 and 100 billion dollars over the course of the next two or three years. We're
dealing with a country that could really finance its own reconstruction, and
But his relatively obscure comments, as well as his oil-based miscalculations,
passed largely unnoticed in the mainstream. Had Iraq then produced a significant
percentage of the globe's toys rather than possessing the planet's third largest
oil reserves, the prewar media would undoubtedly have been chock-a-block full
of worried discussions about our children and the coming video drought; on the
other hand, that there might have been any significant connections between the
motivations of top administration officials planning an invasion and global
oil flows or the garrisoning of the oil heartlands of the planet was clearly
a laughable thought. It didn't matter that our vice president, when the CEO
of a major energy firm, had worried quite publicly about global
energy supplies, that our president had failed in the oil business, and
that our national security adviser had once had a Chevron double-hulled oil
tanker, the Condoleezza Rice, named
in her honor. Now, it turns out that, among the simpleminded was former
Federal Reserve head Alan Greenspan.
Middle Eastern expert Dilip Hiro, whose newest book Blood
of the Earth: The Battle for the World's Vanishing Oil Resources, focuses
on oil and blood as well as recent the geopolitics of Iraqi oil (pp. 137-148),
considers Greenspan's recent oil statement in the context of the historical
How the Bush Administration's Iraqi Oil Grab Went Awry
by Dilip Hiro
Here is the sentence in The
Age of Turbulence, the 531-page memoir of former Federal Reserve chief
Alan Greenspan, that caused so much turbulence in Washington last week: "I am
saddened that it is politically inconvenient to acknowledge what everyone knows:
the Iraq war is largely about oil." Honest and accurate, it had the resonance
of the Bill Clinton's election campaign mantra, "It's the economy, stupid."
But, finding himself the target of a White House attack an administration
his comment, "Georgetown cocktail party analysis" Greenspan backtracked under
cover of verbose
elaboration. None of this, however, made an iota of difference to the facts
on the ground.
Here is a prosecutor's brief for the position that "the Iraq War is largely
The primary evidence indicating that the Bush administration coveted Iraqi
oil from the start comes from two diverse but impeccably reliable sources: Paul
O'Neill, the Treasury Secretary (2001-2003) under President George W. Bush;
and Falah Al Jibury, a well-connected Iraqi-American oil consultant, who had
acted as President Ronald Reagan's "back channel" to Iraqi President Saddam
Hussein during the Iraq-Iran War of 1980-88. The secondary evidence is from
the material that can be found in such publications as the New York Times
and the Wall Street Journal.
According to O'Neill's memoirs, The
Price of Loyalty: George W. Bush, the White House, and the Education of Paul
O'Neill, written by journalist Ron Suskind and published in 2004, the
top item on the agenda of the National Security Council's first meeting after
Bush entered the Oval Office was Iraq. That was Jan. 30, 2001, more than seven
months before the 9/11 attacks. The next National Security Council (NSC) meeting
on Feb. 1 was devoted exclusively to Iraq.
Advocating "going after Saddam" during the Jan. 30 meeting, Defense Secretary
Donald Rumsfeld said, according to O'Neill, "Imagine what the region would look
like without Saddam and with a regime that's aligned with U.S. interests. It
would change everything in the region and beyond. It would demonstrate what
U.S. policy is all about." He then discussed post-Saddam Iraq the Kurds in
the north, the oil fields, and the reconstruction of the country's economy.
(Suskind, p. 85)
Among the relevant documents later sent to NSC members, including O'Neill,
was one prepared by the Defense Intelligence Agency (DIA). It had already mapped
Iraq's oil fields and exploration areas, and listed American corporations likely
to be interested in participating in Iraq's petroleum industry.
Another DIA document in the package, entitled "Foreign Suitors for Iraqi Oilfield
Contracts," listed companies from 30 countries France, Germany, Russia, and
Britain, among others their specialties and bidding histories. The attached
maps pinpointed "super-giant oil field," "other oil field," and "earmarked for
production sharing," and divided the basically undeveloped but oil-rich southwest
of Iraq into nine blocks, indicating promising areas for future exploration.
(Suskind, p. 96)
According to high-flying oil insider Falah Al Jibury, the Bush administration
began making plans for Iraq's oil industry "within weeks" of Bush taking office
in January 2001. In an interview with the BBC's Newsnight program, which
on March 17, 2005, he referred to his participation in secret meetings in California,
Washington, and the Middle East, where, among other things, he interviewed possible
successors to Saddam Hussein.
By January 2003, a plan for Iraqi oil crafted by the State Department and oil
majors emerged under the guidance of Amy Myers Jaffe of the James A. Baker III
Institute for Public Policy at Rice University. It recommended maintaining the
state-owned Iraq National Oil Company, whose origins dated back to 1961 but
open it up to foreign investment after an initial period in which U.S.-approved
Iraqi managers would supervise the rehabilitation of the war-damaged oil infrastructure.
The existence of this group would come to light in a report by the Wall Street
Journal on March 3, 2003.
Unknown to the architects of this scheme, according to the same
BBC Newsnight report, the Pentagon's planners, apparently influenced
by powerful neocons in and out of the administration, had devised their own
super-secret plan. It involved the sale of all Iraqi oil fields to private companies
with a view to increasing output well above the quota set by the Organization
of the Petroleum Exporting Countries (OPEC) for Iraq in order to weaken, and
then destroy, OPEC.
On Oct. 11, 2002 the New York Times reported that the Pentagon already
had plans to occupy and control Iraq's oilfields. The next day the Economist
how Americans in the know had dubbed the waterway demarcating the southern borders
of Iraq and Iran "Klondike on the Shatt al-Arab," while Ahmed Chalabi, head
of the U.S.-funded Iraqi National Congress and a neocon favorite, had already
delivered this message: "American companies will have a big shot at Iraqi oil
if he gets to run the show."
On Oct. 30, Oil and Gas International revealed that the Bush administration
wanted a working group of 12 to 20 people to (a) recommend ways to rehabilitate
the Iraqi oil industry "in order to increase oil exports to partially pay for
a possible U.S. military occupation government," (b) consider Iraq's continued
membership of OPEC, and (c) consider whether to honor contracts Saddam Hussein
had granted to non-American oil companies.
By late October 2002, columnist Maureen Dowd of the New York Times would
reveal, Halliburton, the energy services company previously headed by Vice
President Dick Cheney, had prepared a confidential 500-page document on how
to handle Iraq's oil industry after an invasion and occupation of Iraq. This
was, commented Dowd, "a plan [Halliburton] wrote several months before the invasion
of Iraq, and before it got a no-bid contract to implement the plan (and overbill
the U.S.)." She also pointed out that a Times' request for a copy of
the plan evinced a distinct lack of response from the Pentagon.
In public, of course, the Bush administration built its case for an invasion
of Iraq without referring to that country's oil or the fact that it had the
third largest reserves of petroleum in the world. But what happened out of sight
was another matter. At a secret NSC briefing for the president on February 24,
2003, entitled, "Planning for the Iraqi Petroleum Infrastructure," a State Department
economist, Pamela Quanrud, told Bush that it would cost $7-8 billion to rebuild
the oil infrastructure, if Saddam decided to blow up his country's oil wells,
according to Washington Post reporter Bob Woodward in his 2004 book,
of Attack (pp. 322-323). Quanrud was evidently a member of the State
Department group chaired by Amy Myers Jaffe.
When the Anglo-American troops invaded on March 20, 2003, they expected to
see oil wells ablaze. Saddam Hussein proved them wrong. Being a staunch nationalist,
he evidently did not want to go down in history as the man who damaged Iraq's
most precious natural resource.
On entering Baghdad on April 9, the American troops stood by as looters burned
and ransacked public buildings, including government ministries except for
the Oil Ministry, which they guarded diligently. Within the next few days, at
a secret meeting in London, the Pentagon's scheme of the sale of all Iraqi oil
fields got a go-ahead in principle.
The Bush administration's assertions that oil was not a prime reason for invading
Iraq did not fool Iraqis though. A July 2003 poll of Baghdad residents who
represented a quarter of the Iraqi national population by the London Spectator
showed that while 23 percent believed the reason for the Anglo-American war
on Iraq was "to liberate us from dictatorship," twice as many responded, "to
get oil." (Cited in Dilip Hiro, Secrets
and Lies: Operation "Iraqi Freedom" and After, p. 398.)
As Iraq's principal occupier, the Bush White House made no secret of its plans
to quickly dismantle that country's strong public sector. When the first American
proconsul, retired Gen. Jay Garner, focused on holding local elections rather
than privatizing the country's economic structure, he was promptly sacked.
Hurdles to Oil Privatization Prove Impassable
Garner's successor, L. Paul Bremer III, found himself dealing with Philip Carroll
former chief executive officer of the American operations of (Anglo-Dutch)
Royal Dutch Shell in Houston appointed by Washington as the Iraqi oil industry's
supreme boss. Carroll decided not to tinker with the industry's ownership and
told Bremer so. "There was to be no privatization of Iraqi oil resources or
facilities while I was involved," Carroll said in an interview with the BBC's
Newsnight program on March 17, 2005.
This was, however, but a partial explanation for why Bremer excluded the oil
industry when issuing Order 39 in September 2003 privatizing nearly 200 Iraqi
public sector companies and opening them up to 100 percent foreign ownership.
The Bush White House had also realized by then that denationalizing the oil
industry would be a blatant violation of the Geneva Conventions which bar an
occupying power from altering the fundamental structure of the occupied territory's
There was, as well, the vexatious problem of sorting out the 30 major oil development
contracts Saddam's regime had signed with companies based in Canada, China,
France, India, Italy, Russia, Spain, and Vietnam. The key unresolved issue was
whether these firms had signed contracts with the government of Saddam Hussein,
which no longer existed, or with the Republic of Iraq which remained intact.
Perhaps more important was the stand taken by Grand Ayatollah Ali Sistani,
the senior Shi'ite cleric in the country and a figure whom the occupying Americans
were keen not to alienate. He made no secret of his disapproval of the wholesale
privatization of Iraq's major companies. As for the minerals oil being the
most precious Sistani declared that they belonged to the "community," meaning
the state. As a religious decree issued by a grand ayatollah, his statement
carried immense weight.
Even more effective was the violent reaction of the industry's employees to
the rumors of privatization. In his Newsnight interview Jibury said,
"We saw an increase in the bombing of oil facilities and pipelines built on
the premise that privatization is coming."
In the immediate aftermath of the invasion, much equipment was looted from
pipelines, pumping stations, and other oil facilities. By August 2003, four
months after American troops entered Baghdad, oil output had only inched up
to 1.2 million barrels per day, about two-fifths of the pre-invasion level.
The forecasts (or dreams) of American planners' that oil production would jump
to 6 million barrels per day by 2010 and easily fund the occupation and reconstruction
of the country, were now seen for what they were part of the hype disseminated
privately by American neocons to sell the idea of invading Iraq to the public.
With the insurgency taking off, attacks on oil pipelines and pumping stations
averaged two a week during the second half of 2003. The pipeline connecting
a major northern oil field near Kirkuk with an export capacity of 550,000-700,000
barrels per day to the Turkish port of Ceyhan became inoperative. Soon, the
only oil being exported was from fields in the less disturbed, predominately
Shi'ite south of Iraq.
In September 2003, President Bush approached Congress for $2.1 billion to safeguard
and rehabilitate Iraq's oil facilities. The resulting Task Force Shield project
undertook to protect 340 key installations and 4,000 miles (6,400 km) of oil
pipeline. It was not until the spring of 2004 that output again reached the
prewar average of 2.5 million barrels per day and that did not hold. Soon
enough, production fell again. Iraqi refineries were, by now, producing only
two-fifths of the 24 million liters of gasoline needed by the country daily,
and so there were often days-long lines at service stations.
Addressing the 26th Oil and Money conference in London on Sept. 21, 2005, Issam
Chalabi, who had been an Iraqi oil minister in the late 1980s, referred
to the crippling lack of security and the lack of clear laws to manage the industry,
and doubted if Iraq could return to the 1979 peak of 3.5 million barrels per
day before 2009, if then.
Meanwhile, the Iraqi government found itself dependent on oil revenues for
90 percent of its income, a record at a time when corruption in its ministries
had become rampant. On Jan. 30, 2005, Stuart W. Bowen, the special inspector
general appointed by the U.S. occupation authority, reported
that almost $9 billion in Iraqi oil revenue, disbursed to the ministries, had
gone missing. A subsequent congressional inspection team reported
in May 2006 that Task Force Shield had failed to meet its goals due to "lack
of clear management structure and poor accountability," and added that
there were "indications of potential fraud" which were being reviewed by the
The endorsement of the new Iraqi constitution by referendum in October 2005
finally killed the prospect of full-scale oil privatization. Article 109 of
that document stated clearly that hydrocarbons were "national Iraqi property."
That is, oil and gas would remain in the public sector.
In March 2006, three years after the Anglo-American invasion of Iraq, the country's
petroleum exports were 30-40 percent below pre-invasion levels.
Bush Pushes for Iraq's Flawed Draft Hydrocarbon Law
In February 2007, in line with the constitution, the draft hydrocarbon law
the Iraqi government presented to parliament kept oil and gas in the state sector.
It also stipulated recreating a single Iraqi National Oil Company that would
be charged with doling out oil income to the provinces on a per-capita basis.
The Bush administration latched onto that provision to hype the 43-article Iraqi
bill as a key to reconciliation between Sunnis and Shi'ites since the Sunni
areas of Iraq lack hydrocarbons and so included it (as did Congress) in its
list of "benchmarks" the Iraqi government had to meet.
Overlooked by Washington was the way that particular article, after mentioning
revenue-sharing, stated that a separate Federal Revenue Law would be necessary
to settle the matter of distribution the first draft of which was only published
four months later in June.
Far more than revenue sharing and reconciliation, though, what really interested
the Bush White House were the mouthwatering incentives for foreign firms to
invest in Iraq's hydrocarbon industry contained in the draft law. They promised
to provide ample opportunities to America's Oil Majors to reap handsome profits
in an oil-rich Iraq whose vast western desert had yet to be explored fully for
hydrocarbons. So Bush pressured the Iraqi government to get the necessary law
passed before the parliament's vacation in August to no avail.
The Bush administration's failure to achieve its short-term objectives does
not detract from the overarching fact established by the copious evidence
marshaled in this article that gaining privileged access to Iraqi oil for
American companies was a primary objective of the Pentagon's invasion of Iraq.
Dilip Hiro is the author of Secrets
and Lies: Operation "Iraqi Freedom" and After, as well as, most recently,
of the Earth: The Battle for the World's Vanishing Oil Resources, both
published by Nation Books.
Copyright 2007 Dilip Hiro