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Whose Oil Is It, Anyway?
By Antonia Juhasz
The New York Times
Tuesday 13 March 2007
Today more than three-quarters of the world's oil is owned and controlled by
governments. It wasn't always this way.
Until about 35 years ago, the world's oil was largely in the hands of seven
corporations based in the United States and Europe. Those seven have since merged
into four: ExxonMobil, Chevron, Shell and BP. They are among the world's largest
and most powerful financial empires. But ever since they lost their exclusive
control of the oil to the governments, the companies have been trying to get
it back.
Iraq's oil reserves - thought to be the second largest in the world -
have always been high on the corporate wish list. In 1998, Kenneth Derr, then
chief executive of Chevron, told a San Francisco audience, "Iraq possesses
huge reserves of oil and gas - reserves I'd love Chevron to have access
to."
A new oil law set to go before the Iraqi Parliament this month would, if passed,
go a long way toward helping the oil companies achieve their goal. The Iraq
hydrocarbon law would take the majority of Iraq's oil out of the exclusive hands
of the Iraqi government and open it to international oil companies for a generation
or more.
In March 2001, the National Energy Policy Development Group (better known as
Vice President Dick Cheney's energy task force), which included executives of
America's largest energy companies, recommended that the United States government
support initiatives by Middle Eastern countries "to open up areas of their
energy sectors to foreign investment." One invasion and a great deal of
political engineering by the Bush administration later, this is exactly what
the proposed Iraq oil law would achieve. It does so to the benefit of the companies,
but to the great detriment of Iraq's economy, democracy and sovereignty.
Since the invasion of Iraq, the Bush administration has been aggressive in
shepherding the oil law toward passage. It is one of the president's benchmarks
for the government of Prime Minister Nuri Kamal al-Maliki, a fact that Mr. Bush,
Secretary of State Condoleezza Rice, Gen. William Casey, Ambassador Zalmay Khalilzad
and other administration officials are publicly emphasizing with increasing
urgency.
The administration has highlighted the law's revenue sharing plan, under which
the central government would distribute oil revenues throughout the nation on
a per capita basis. But the benefits of this excellent proposal are radically
undercut by the law's many other provisions - these allow much (if not
most) of Iraq's oil revenues to flow out of the country and into the pockets
of international oil companies.
The law would transform Iraq's oil industry from a nationalized model closed
to American oil companies except for limited (although highly lucrative) marketing
contracts, into a commercial industry, all-but-privatized, that is fully open
to all international oil companies.
The Iraq National Oil Company would have exclusive control of just 17 of Iraq's
80 known oil fields, leaving two-thirds of known - and all of its as yet
undiscovered - fields open to foreign control.
The foreign companies would not have to invest their earnings in the Iraqi
economy, partner with Iraqi companies, hire Iraqi workers or share new technologies.
They could even ride out Iraq's current "instability" by signing contracts
now, while the Iraqi government is at its weakest, and then wait at least two
years before even setting foot in the country. The vast majority of Iraq's oil
would then be left underground for at least two years rather than being used
for the country's economic development.
The international oil companies could also be offered some of the most corporate-friendly
contracts in the world, including what are called production sharing agreements.
These agreements are the oil industry's preferred model, but are roundly rejected
by all the top oil producing countries in the Middle East because they grant
long-term contracts (20 to 35 years in the case of Iraq's draft law) and greater
control, ownership and profits to the companies than other models. In fact,
they are used for only approximately 12 percent of the world's oil.
Iraq's neighbors Iran, Kuwait and Saudi Arabia maintain nationalized oil systems
and have outlawed foreign control over oil development. They all hire international
oil companies as contractors to provide specific services as needed, for a limited
duration, and without giving the foreign company any direct interest in the
oil produced.
Iraqis may very well choose to use the expertise and experience of international
oil companies. They are most likely to do so in a manner that best serves their
own needs if they are freed from the tremendous external pressure being exercised
by the Bush administration, the oil corporations - and the presence of
140,000 members of the American military.
Iraq's five trade union federations, representing hundreds of thousands of
workers, released a statement opposing the law and rejecting "the handing
of control over oil to foreign companies, which would undermine the sovereignty
of the state and the dignity of the Iraqi people." They ask for more time,
less pressure and a chance at the democracy they have been promised.
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Antonia Juhasz, an analyst with Oil Change International, a watchdog
group, is the author of The Bush Agenda: Invading the World, One Economy
at a Time.
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