Iraq: not a war for oil
Milan (AsiaNews) – A bill is before Iraq’s National Assembly to determine who will develop the country’s oil fields and how oil revenues will be shared. Charges have been levelled at the Americans that they want to use the proposed ‘Oil and Gas Law’ to take the lion share of Iraqi oil profits, charges this writer considers unfounded.
“Blood and oil: How the West will profit from Iraq's most precious commodity,” was the title of a January 7 article published in British newspaper The Independent. A subhead went further and spoke of a “bn bonanza for US companies piecing a broken Iraq together”.
The article suggests that for the first time, “production-sharing agreements" or PSAs will be negotiated with a major Mideast oil-producing nation.
In the next sentence if one does not carefully read the lines one would think that Saudi Arabia and Iran do not offer such deals.
But in quoting The Independent article, TV networks like CBS, working under tight time constraints, ended up distorting the facts and announcing that Iraq would be signing production sharing agreements that would give Western oil companies 70 per cent and leave it with 30.
All this with the usual rehashed stories about US Vice President Dick Cheney and the contracts Halliburton, the oil company he ran before taking office, got in Iraq.
A few lies
It is worth pointing out that AsiaNews has not been deputised to act on behalf of the US government, nor is it a White Guard to protect the American Empire from anti-globalisation Neo-Bolsheviks.
AsiaNews is just Catholic missionary news agency that stands for the truth. In this particular case, the truth referred to here is not the one put on the air in a rush by the CBS or distorted by The Independent. In fact under Iraq’s proposed ‘Oil and Gas Law’ oil companies would be allowed to keep 20 per cent of the profits, with the rest going to the government to be shared by Iraqi regions on the basis of population, including oil-poor Sunni areas.
The 20/80 ratio applies after a 12.5 per cent royalty tax is paid and companies have recouped their costs from developing oil fields. Companies can recoup 70 per cent of production costs as deductible. This is perhaps what the liberal CBS TV news department referred to when it talked about 70 per cent.
As for the duration of PSAs, the draft bill does not lock in the parties for 30 years as The Independent claims—instead it grants 10-year production-concessions rights. Once these expire, the companies can negotiate to produce the oil for another 25 years. Adding the two periods we get 35 years but there is no certainty that such deals will be renewed. It is therefore arbitrary to write that the resources of future Iraqi generations are being given away.
It is also not true that other major oil producers do not offer PSAs. The opposite is actually true. Almost all OPEC members as well as those mentioned in The Independent article, offer PSAs, in particular Saudi Arabia. The Saudis in fact provide particularly advantageous conditions to those companies that are ready to explore in new, relatively high risk areas.
Moreover, the Independent could have just looked in his own backyard. In Great Britain, Her Majesty’s government does not demand royalties, allows companies 100 per cent deductible on actual production costs, including immaterial costs, and applies only its average 30 per cent corporate tax.
It is true that North Sea oil production costs are theoretically higher than those of Iraq, if you don’t factor in security costs. How many companies are willing to send their expensive drilling equipment to Iraq just to see it blown up in an attack? Even The Independent admits that in practice no Western company, or Russian, or Chinese, is willing to accept to run Iraq’s risks.
And yet during Saddam Hussein’s regime the Chinese, Russia’s Lukoil and other companies, including France’s Total did good business in Iraq. Without paying a cent—but providing weapons whose profit margin is rarely under 30 per cent and more often is much higher—these companies got exploration and development rights in safe areas with proven oil reserves worth a pretty penny.
For these companies exploration deals signed with the old regime remain in effect even if they were achieved in less than clean ways.
Environmentalists and warmongers
Who is behind this well-orchestrated disinformation campaign? One clue is found in The Independent article, when Greg Muttitt is cited and presented as activist with Platform, a human rights and environmental group that gravitates around the Global Policy Forum. The latter’s website carries an analysis similar to that of The Independent titled “Crude Designs: The Rip-Off of Iraq’s Oil Wealth”. Global Policy Forum is, in other words, a group fighting US imperialism.
However, let us point out the inconsistencies in this argument. How idiotic are US imperialists to spend US$ 1,000 billion (mistakenly perhaps The Independent puts the costs to the US for the Iraq War at US$ 2,000 billion) to get a few companies to share just 50 billions?
British colonial governors once had to send annual reports to the Colonial Office detailing expenses (for administration and soldiers’ and colonial bureaucrats’ salaries) and revenues (customs fees, taxes and other proceeds), etc. When the business of running colonies became too expensive, as it did in the 1960s in places like Africa, they packed up and left, graciously granting independence.
The fact of the matter is that these anti-imperialist standard bearers are really environmentalists, or rather conservationists, neo-Malthusian groups gravitating around the Global Policy Forum. Similar groups exist on the fringes of the United Nations.
For them the earth has reached its limits of sustainability. The human population has to be reduced whether through abortion, contraception or, generally speaking, population control. And perhaps some are also thinking that a world war might not be out of the question.
There are enough resources
Putting aside these groups, it is worth pointing out that there are enough resources to go around and Iraq is a case in point. In its own article The Independent said that Iraq could deliver up to 6 million barrels a day compared to its current production of just under 2 million. At full throttle, this could quench Asia’s thirst for energy.
But in fact these are conservative estimates. Iraq’s oil fields have an even greater potential. The Independent, correctly this time, reports that Iraq has 115 billion barrels of known oil reserves based on current technical estimates. But according to AsiaNews sources, Iraq’s reserves could exceed 200 billion barrels if there were enough security and investments. And such reserves could easily satisfy rising demands for oil in Asia and around the world.
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