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Slick connections: US influence on Iraqi Oil
This has a really good chronological account of
different events in which the US influenced the
development of Iraq's oil industry.
Cheers, Ken Hanly
Slick Connections: U.S. Influence on Iraqi Oil
Erik Leaver and Greg Muttitt | July 17, 2007
Editor: FPIF
Foreign Policy In Focus www.fpif.org
"The oil belongs to the Iraqi people. It's their
asset," declared President George W. Bush in a press
conference on the White House lawn in June 2006. He
had just returned from a surprise visit to Baghdad, in
which oil had been one of the main subjects of
discussion.
"We talked about how to advise the government to best
use that money for the benefit of the people," he
clarified.
But by January 2007, the euphemism of "advice" had
been dropped, as passage of an oil law became a
"benchmark," an instruction to the Iraqi government.
Violating the very notions of freedom and democracy
Bush invokes in nearly every speech on Iraq, the U.S.
government has actively intervened in the
restructuring of Iraq's oil industry since at least
2002. At different times, the Iraqi government has
been threatened that passing the oil law was a
pre-condition for partial reduction of Saddam
Hussein's debts, for the provision of reconstruction
funds, and even for the continued survival (through
U.S. military support) of the al-Maliki government
itself.
The issues could hardly be more important for Iraq.
Oil accounts for more than 90% of government revenue,
and is the main driver of Iraq's economy. And
decisions made in the coming months will not be
reversible—once contracts are signed, they will have a
major bearing on Iraq's economy and politics for
decades to come.
No wonder polls have shown that roughly 75% of Iraqis
think one of the main reasons why the United States
invaded Iraq was "to control Iraqi oil."1
Attempting to reverse this perception and change U.S.
policy, lawmakers passed legislation stating that the
United States should not exert "control over any oil
resource of Iraq." But contradicting this sentiment,
the Congress also passed a law that required reporting
on a set of U.S. imposed benchmarks, which included
language for the Iraqi parliament to pass "
legislation to ensure the equitable distribution of
hydrocarbon resources." The administration has used
this benchmark to push a law that has almost nothing
to do with revenue distribution among Iraq's sectarian
groups, and everything to do with creating highly
profitable opportunities for multinational oil
corporations.2
Under pressure from the U.S. government, the Iraqi
cabinet has endorsed the controversial oil law, which
now awaits approval in the Parliament. Yet among
Iraqis, the law faces extensive opposition, including
from two of the law's three original authors—as well
as more than 100 of Iraq's most senior oil experts,
the powerful oil unions, and other religious and
secular civil society organizations.
Ironically, the law deemed to be needed to bring the
country together, instead has the potential to
violently rip it apart.
Oil Pressure: A History of U.S. Involvement in Iraq's
Oil Development
Feb.-March 2001: White House Energy Taskforce produces
a list of "Foreign Suitors for Iraqi Oilfield
Contracts."3
December 2002-April 2003: U.S. State Department Oil
and Energy Working Group brought together influential
Iraqi exiles, U.S. government officials, and
international consultants. The result of the project's
work was a "draft framework for Iraq's oil policy"
that would form the foundation for the energy policy
now being considered by the Iraqi Parliament. The
final report noted that Iraq "should be opened to
international oil companies as quickly as possible
after the war.4 Later, several Iraqi members of the
group became part of the Iraqi government. The Group
included future Iraqi Oil Minister, Bahr al-Uloum.
January 2003: The Wall Street Journal reported that
representatives from Exxon Mobil Corp., ChevronTexaco
Corp., ConocoPhillips, and Halliburton, among others,
were meeting with Vice President Cheney's staff to
plan the post-war revival of Iraq's oil industry.5
January 2003: Phillip Carroll, a former chief
executive with Royal Dutch-Shell, and a 15-member
"board of advisers" were appointed to oversee Iraq's
oil industry during the transition period. According
to the Guardian, the group's chief executive would
represent Iraq at meetings of the Organization of the
Petroleum Exporting Countries (OPEC).6 Carroll had
been working with the Pentagon for months before the
invasion—even while the administration was still
insisting that it sought a peaceful resolution to the
Iraq crisis—"developing contingency plans for Iraq's
oil sector in the event of war."
Carroll, in addition to running Shell Oil in the
United States, was a former CEO of the Fluor
Corporation, a well-connected oil services firm with
extensive projects in Saudi Arabia and Kuwait and at
least $1.6 billion in contracts for Iraq's
reconstruction.
One month after the invasion, Carroll took control of
Iraq's oil production for the U.S. Government. He was
joined by Gary Vogler, a former executive with
ExxonMobil, in Iraq's Office of Reconstruction and
Humanitarian Assistance.
Mr. Carroll made it clear to Paul Bremer, the U.S.
occupation chief who arrived in Iraq in May 2003,
that, "There was to be no privatization of Iraqi oil
resources or facilities while he was involved."7
Carroll leaves his job seven months later.
March 2003: Iraqi Oil Ministry was one of the few
structures the invading forces protected from looters
in the first days of the war.
April 2003: During the initial assault on Baghdad,
soldiers set up forward bases named Camp Shell and
Camp Exxon.8
April 2003: President Bush called for UN sanctions
against Iraq to be dropped. The request sounds
innocuous enough, but it masks an urgent U.S. desire
for a free hand to start pumping Iraqi crude once
again to raise funds for rebuilding the country.9
April 2003: USAID Solicits Bid to Draft Economic
Reorganization Plan for Iraq. The U.S. Agency for
International Development asks BearingPoint, Inc to
bid on a sole-sourced contract for "economic
governance" work in Iraq. The contract document was
written by Treasury Department officials and reviewed
by financial consultants. The confidential 100-page
request, titled "Moving The Iraqi Economy From
Recovery to Sustainable Growth," states that the
contractor will help support "private sector
involvement in strategic sectors, including
privatization, asset sales, concessions, leases, and
management contracts, especially in the oil and
supporting industries."10
May 22, 2003: UN Security Council passed a resolution
ending sanctions on Iraq. Significantly, the
resolution gave the United States decision making
power over how the oil funds would be used with regard
to relief, reconstruction, disarmament, and "other
purposes benefiting the people of Iraq."11
May 22, 2003: President Bush signed Executive Order
13303 providing full legal immunity to all U.S. oil
companies doing business in Iraq in order to
facilitate the country's "orderly reconstruction."
June 22, 2003: Iraq ships crude oil for the first time
since the start of the war. Head of the Coalition
Provisional Authority, Paul Bremer, broached the
politically sensitive issue of how oil revenue should
be spent, proposing that some of the money be shared
with Iraqis through a system of dividend payments or a
national trust fund to finance public pensions.
"Iraq's resources cannot be restricted to a lucky or
powerful few," Bremer said. "Iraq's natural resources
should be shared by all Iraqis."12
July 2003: Bremer appoints the members of the Iraqi
Government Council. Ibrahim Bahr al-Uloum, a member of
the State Department's energy working group, is tapped
as Iraq's oil minister. Al-Uloum soon proposed a
privatization program, and endorsed production sharing
agreements as the route to that goal.13
October 2003: Carroll was replaced by Robert McKee, a
former ConocoPhillips executive. According to the
Houston Chronicle, "His selection as the Bush
administration's energy czar in Iraq" drew fire from
Congressional Democrats "because of his ties to the
prime contractor in the Iraqi oil fields,
Houston-based Halliburton Co. He's the chairman of a
venture partitioned by the ... firm."14
The administration selected ChevronTexaco Vice
President Norm Szydlowski to serve as a liaison
between the Coalition Provisional Authority and the
Iraqi Oil Ministry. Now the CEO of the appropriately
named Colonial Pipeline Company, Szydlowski continued
to work with the Iraq Energy Roundtable, a project of
the U.S. Trade and Development Agency, which sponsored
meetings to "bring together oil and gas sector leaders
in the United States with key decision makers from the
Iraq Ministry of Oil."15 Terry Adams and Bob Morgan of
BP, and Mike Stinson of ConocoPhillips would also
serve as advisers during the transition.16
November 2003: McKee quietly ordered a new plan for
Iraq's oil. The drafting would be overseen by a
"senior adviser," Amy Jaffe, who had worked for Morse
when he was the Chairman of the Council on Foreign
Relations. Jaffe now works for James Baker, the former
Secretary of State, whose law firm serves as counsel
to both ExxonMobil and the defense minister of Saudi
Arabia. The plan, written by State Department
contractor BearingPoint, was guided, says Jaffe, by a
handful of oil -industry consultants and executives.17
December 19, 2003: BearingPoint releases "Options for
Developing a Long Term Sustainable Iraqi Oil
Industry," a report on the Iraqi oil industry favoring
foreign participation as the most efficient way of
developing the sector.18
March 2004: CPA names new Iraq Oil Advisers: Mike
Stinson of ConocoPhillips and Bob Morgan of BP.19
March 2004: Iraq's interim constitution, the
Transitional Administrative Law (TAL) passed in March
2004 by Iraq's Governing Council, sets forth that CPA
laws, regulations, and orders are to remain in force
after the transfer of sovereignty unless a duly
enacted piece of legislation rescinds or amends
them.20
June 2004: U.S. handover to the Iraq Interim
Government. Mike Stinson becomes an adviser to the
U.S. Embassy in Baghdad.21 Thamir al-Ghadban is named
as Iraqi Oil Minister.
November 2004: International oil companies launched
voluntary efforts to train Iraq's oil workers and
provide technical assistance, hoping to generate
goodwill and eventually get access to the country's
huge oil reserves. Companies from the United States,
Britain, and Russia—including ChevronTexaco Corp., BP,
Royal Dutch/Shell Group, and Lukoil—are paying to send
Iraqi oil workers out of the country to teach them the
latest techniques in developing and managing oil
fields.22
December 22, 2004: Iraqi Finance Minister Mahdi, in a
joint press conference with U.S. Undersecretary of
State Alan Larson at the National Press Club,
announced Iraq's plans for a new petroleum law to open
the oil sector to foreign private investment. Mahdi
explained, "So I think this is very promising to the
American investors and to American enterprise,
certainly to oil companies."23
Early 2005: New Government, old oil minister, al-Uloum
reappointed to position of Minister for Oil. Ahmed
Chalabi, head of the U.S.-backed Iraqi National
Congress, was appointed chair of the Energy Council.
In 2002, Chalabi said, "U.S. companies will have a big
shot at Iraqi oil."24
May 2005: Approximately 30 international oil companies
signed Memoranda of Understanding with Iraq, generally
for the training of Iraqi staff, consulting work, and
studies.25
August 30, 2005: Bush says U.S. troops would continue
fighting in Iraq in order to protect the country's
vast oil fields, which he said would otherwise fall
under the control of terrorist extremists.26
October 15 2005: The national referendum for the Iraqi
constitution passes, containing an outline for oil
revenue sharing and development.
December 2005: Iraq enters into agreement with the
International Monetary Fund committing Iraq to draft a
new petroleum law by the end of 2006 to allow foreign
investment in the country's oil industry. The
arrangement was signed before the new Iraqi government
had been appointed and one week after the December
2005 elections thus denying Iraqi voters a chance to
react through the ballot box.
February 2006-June 2006: USAID contracts with
BearingPoint to draft Iraq's oil law to provide "legal
and regulatory advice in drafting the framework of
petroleum and other energy-related legislation,
including foreign investment."27
March 15, 2006: Gen. John Abizaid, the Army general
overseeing U.S. military operations in Iraq, said the
United States may want to keep a long-term military
presence in Iraq to bolster moderates against
extremists in the region and protect the flow of
oil.28
May 2006: Iraq's new oil minister, Hussein
al-Sharistani, began drafting legislation to govern
Iraq's oil sector. Following his appointment,
Shahristani announced that one of his top priorities
would be to pass a law allowing privatization through
parliament by the end of 2006.
July 2006: U.S. Government and oil companies get a
copy of the draft oil law.29
September 2006: International Monetary Fund and World
Bank receive a copy of draft oil law.30
October 17, 2006: President Bush signs the 2007
Defense Authorization Act (PL No: 109-364) which
states in SEC. 1519,"No funds ... in this Act may be
obligated or expended ... to exercise United States
economic control of the oil resources of Iraq.
February 2007: U.S. Ambassador to Iraq, Zalmay
Khalilzad, "has been in intense talks with Kurdish
leaders in the north to overcome their objections to
the draft. Iraqi officials say Mr. Khalilzad's
negotiations were crucial to winning unanimous cabinet
approval."31
February 18, 2007: "Draft Hydrocarbon Law" was
submitted to the Iraqi Cabinet (Council of
Ministers).32
February 26, 2007: "Draft Hydrocarbon Law" was passed
by the Iraqi Cabinet and was submitted to the Iraqi
Parliament (Council of Representatives).33
April 19, 2007: Defense Secretary Robert Gates travels
to Baghdad to push political benchmarks and
specifically the oil law.34
May 9 2007: U.S. Vice President Dick Cheney travels to
Baghdad to push political benchmarks and specifically
the oil law.35
June 12, 2007: U.S. Admiral Fallon, head of the
Central Command, warned Iraq's Prime Minister Nouri
al-Maliki in a closed-door conversation to pass the
oil law by July.36
July 3, 2007: Iraq cabinet approves amended oil law
draft and resubmits to the Iraqi Parliament.37
July 12, 2007: The White House released its Initial
Benchmark Assessment Report. Benchmark #3, "Enacting
and implementing legislation to ensure the equitable
distribution of hydrocarbon resources" is found to be
not met. The report notes, "The effect of limited
progress toward this benchmark has been to reduce the
perceived confidence in, and effectiveness of, the
Iraqi Government. This does not, however, necessitate
a revision to our current plan and strategy, under
which we have assigned a high priority to this
subject, and the process overall has continued to move
forward."38
End Notes
University of Michigan, 14 June 2006, "Iraq attitudes:
Survey Documents Big Changes," available at
www.umich.edu/news/index.html?Releases/2006/Jun06/r061406a.
In the law pushed by the U.S. administration, just one
out of 43 articles mentions revenues: and that simply
establishes two bank accounts, and states that the
distribution will be determined by a separate law.
This separate law was put together as an afterthought
in summer 2007—attracting almost no interest from the
administration; whilst as the timeline shows, the law
providing for long-term contracts with multinational
companies was consistently pushed by U.S. officials.
Documents from the Cheney-led National Energy Policy
Development Group, available at:
www.judicialwatch.org; Larry Everest, "Cheney, Energy,
and Iraq Invasion: Supreme Court to Rule on Secrecy,"
San Francisco Chronicle, March 21, 2004; Michael
Schwartz, "The Struggle Over Iraqi Oil," TomDispatch
May 8, 2007. Available at:
http://www.globalpolicy.org/security/oil/2007/0508struggleiraqioil.htm.
Greg Muttitt, "Crude Designs: The Rip-Off of Iraq's
Oil Wealth," Platform, November 2005. Available at:
http://www.crudedesigns.org/.
Charley Cray, "About Halliburton," Halliburton Watch,
n.d. Available online at:
http://www.halliburtonwatch.org/about_hal/energytf.html.
David Teather, "American to Oversee Iraqi Oil
Industry," The Guardian/UK, April 26, 2003.
Greg Palast, "U.S. Secret Plans For Iraq's Oil," BBC
News World Edition, March 17, 2005.
Paul Farhi, "The Soothing Sound of Fighting Words,"
The Washington Post, March 26, 2003.
Mark Rice, "For Iraq's Oil Wealth, Tangled Pipes," The
Christian Science Monitor, April 21, 2003.
Neil King Jr., "Bush Officials Draft Broad Plan for
Free-Market Economy in Iraq," Wall Street Journal, May
1, 2003.
Colum Lynch, "United States to Propose Broader Control
of Iraqi Oil, Funds," The Washington Post, May 9,
2003.
Rajiv Chandrasekaran, "Bremer Broaches Plans for
Iraq's Oil Revenue," The Washington Post, June 23,
2003.
James Ridgeway, "The Black Gold Rush: Divvying Up
Iraq's Oil," Mother Jones, January 29, 2007.
David Ivanovich, "Houston Exec Gets Top Iraq Energy
Post," Houston Chronicle, September 23, 2003.
U.S. Trade and Development Agency, conference agenda,
"Iraq Energy Roundtable: Emerging Opportunities in the
Iraq Oil and Gas Sector," June, 7, 2006. Available at:
http://www.export.gov/iraq/pdf/oilgas_roudtable_060706.pdf.
Joshua Holland, "The U.S. Takeover of Iraqi Oil"
AlterNet, October 17, 2006.
Greg Palast, "OPEC on the March: Why Iraq Still Sells
its Oil a la Cartel," Harper's Magazine, April 1,
2005.
Muttitt, Crude Designs. Op. cit.
Muttitt, Crude Designs. Op. cit.
CPA, "Law of Administration for the State of Iraq for
the Transitional Period, art. 26(c)," March 8, 2004.
Available at:
http://www.cpa-iraq.org/government/TAL.html (accessed
June 22, 2004).
Muttitt, Crude Designs. Op. cit.
Justin Blum, "Big Oil Companies Train Iraqi Workers
Free Global Companies Offer Services to Establish
Goodwill, Win Business," The Washington Post, November
6, 2004.
Transcript, NPC Afternoon Newsmaker News Conference;
see also, Antonia Juhasz, "Iraq's Oil Timeline," Left
Turn Magazine , May 1, 2006.
Dan Morgan and David B. Ottaway, "In Iraqi War
Scenario, Oil Is Key Issue," The Washington Post,
September 15, 2002.
"National Development Strategy 2005-2007," Republic of
Iraq, Iraqi Strategic Review Board, Ministry of
Planning and Development Cooperation, June 30, 2005.
Jennifer Loven, "Bush Gives New Reason for Iraq War,"
Associated Press, August 31, 2005.
Benoit Faucon, "USAID Provides Adviser to Iraq Govt on
Oil Law—Spokesman," Dow Jones Newswires, April 28,
2006; Greg Muttitt, "George's Oil Dubya-Speak: As
Decision-Time Approaches, the USA Pulls Levers on
Iraqi Oil Policy," Carbon Web, August 21, 2006.
Vicki Allen, "Abizaid Says United States May Want to
Keep Bases in Iraq," Reuters, March 15, 2006.
Raymond Whitaker, Danny Fortson, Andrew Murray-Watson,
Geoffrey Lean, and Tim Webb, "Blood and Oil; Special
Report: The Spoils of War," The Independent, January
7, 2007.
Raymond Whitaker, Danny Fortson, Andrew Murray-Watson,
Geoffrey Lean, and Tim Webb, "Blood and Oil; Special
Report: The Spoils of War," The Independent, January
7, 2007.
Edward Wong, "Iraqi Cabinet Approves Draft of Oil
Law," The New York Times, February 26, 2007.
Raed Jarrar, "The New Iraqi Oil: Leaked,"
raedinthemiddle.blogspot.com, February 18, 2007.
Raed Jarrar, "Council of Ministers' Resolution,"
raedinthemiddle.blogspot.com, March 1, 2007.
David Cloud, Alissa J. Rubin, and Edward Wong, "Gates
in Baghdad to Press Iraqis on Reconciliation,"
International Herald Tribune, April 19, 2007.
John F. Burns, "Cheney Visits Baghdad and Presses
Leaders on Political Progress," The New York Times,
May 10, 2007.
Michael R. Gordon, "United States Warns Iraq Progress
Needs to be Made," The New York Times, June 12, 2007.
"Iraq Cabinet Approves Oil Law Draft," Associated
Press, July 3, 2007.
"Initial Benchmark Assessment Report," The White
House, July 12, 2007. Available at:
http://www.whitehouse.gov/news/releases/2007/07/20070712.html.
Erik Leaver is a Carol and Ed Newman Fellow at the
Institute for Policy Studies, and Greg Muttitt is
Co-Director at the UK based NGO, Platform..
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