Another BushCo Fraud Brewing

Washington Dispatch: A reform law put together with lots of help from U.S. consultants could finally open Iraq’s massive reserves to ExxonMobil & Co.

The biggest story out of Iraq so far this year may not be the surge, or the latest mass bombing, or the escalating sectarian violence; it might, instead, be a decision that further complicates all of the above. Over the next few weeks, a law to reform Iraq’s oil industry — essentially the only source of income the country has aside from U.S. subsidies — is expected to move toward implementation, and the consequences could be enormous.

Coverage of the proposal has focused on the fact that it doesn’t break up the country’s oil resources, as some had suggested, to various ethnic groups — a piece for the Kurds, a piece for the Shiites, etc. But the real story may be that once the proposal is put into place, international oil companies will have a far better shot at Iraq reserves than ever before.

Iraq has the planet’s largest oil reserves, roughly 10 percent of the world total; it’s also thought to have the largest unexplored potential, primarily in its western desert. “On top of its 115 billion barrels of proven reserves, Iraq is estimated to have between 100 and 200 billion barrels of further possible (as yet undiscovered) reserves,” according to the British public interest group Platform.

Three decades of war and sanctions have left much of Iraq’s oil industry decrepit and outmoded. Under Saddam, the industry was state-controlled; the Bush administration made it clear even before the war that it intended to open Iraqi oil up to more private involvement, and ever since 2003 representatives of various major oil companies have been closely involved in guiding Iraqi oil policy. The State Department’s Future of Iraq Project, which prior to the invasion drew up a reconstruction blueprint, had a special oil and energy working group whose report recommended using “production sharing agreements” to encourage foreign investment in Iraq’s oil industry. Production sharing agreements are contracts between governments and businesses that nominally leave control in the hands of the government, but de facto turn resources over to the private sector.

A few months after U.S. troops rolled into Baghdad, in July 2003, Coalition Provisional Authority head Paul Bremer appointed Ibrahim Bahr al-Uloum, a member of the State Department’s energy working group, as Iraq’s oil minister. Al-Uloum soon proposed a privatization program, and endorsed production sharing agreements as the route to that goal. Ever since then, the issue of how to open Iraq oil to bidding by international oil firms has been a major topic for Iraqi and American officials.