The Complete Victory of Big Oil

June 25, 2008

In the Spring of 2001, Vice President Dick Cheney convened an Energy Policy Task Force the minutes of which he still refuses to disclose. It is known, however, that one document before the group was a map of oil reserves in Iraq. This was provided by the Interior Department together with a complete list of oil companies or countries that at that time had contracts with the Hussein government. No American company was on that list.

We don’t know, and the Vice President refuses to tell, what plans were laid in those secret meetings in 2001, but two years later, after a constant build-up of inflated attacks on Saddam Hussein, the US invaded Iraq and settled permanent military bases in the locations of those oil reserves. During the invasion, while the world watched on television the massive looting of the world’s oldest museums, American troops were sent to guard—not the museums—but the Iraqi oil ministry.

Under the careful eye of Paul Bremer, the Iraqis then installed Cheney’s friend and primary advocate of the war, Ahmad Chalabi, as Iraq’s Interim Oil Minister. Later, when the Iraqi parliament came into existence, the Bush team began urging them to pass an “Oil law” under the terms of which American companies would receive major long-term drilling concessions.

Unfortunately for this effort, until now the Iraqi parliament has stubbornly resisted long-term oil licenses to anyone. As negotiations have bled through 2007 into 2008, these concessions have also been increasingly endangered by the possibility of political change in the U.S. A president Obama might not be willing to spend 12 billion dollars a month to support and protect the oil industry. In the worst of all possible cases, a democratic president might simply pull out and the occupation could come to an end without erasing that list of foreign oil concessions that had come under scrutiny by the Cheney Task Force in 2001.

Time has therefore seemed to be running out for the oil companies but now comes word of an agreement to break the stalemate and finally achieve at least one major purpose of the Iraqi invasion. The agreement is between Iraq’s oil ministry and four western oil companies, including Exxon Mobile and Chevron. It effectively displaces the 30 countries to which Saddam Hussein had given concessions.

The agreement does not, it is true, give to the companies the long-coveted permanent concessions, or “licenses.” Instead, it creates ‘”service agreements.” These sound benign but the very interesting twist is that the companies may be paid, not in money, but in oil. The agreement therefore looks like a contract; but pays off like a concession. Further, these contracts can be signed by the Oil Ministry and the companies and need not be approved by the still reluctant Iraqi parliament. Finally, if these can be signed in the summer of 2008, they can be in place and effectively tie the hands of any new American president. Once Exxon and Chevron start pumping oil, it is unlikely anyone could ever stop them.

This is “victory in Iraq;” it is victory for big oil. They have edged out their competitors, those who were once ahead of them in Saddam’s oil queue, including China, India and Russia. They have achieved concessions under the name of service contracts, and they will pump oil that they can re-sell, all the while acting as if they were simply being paid for technical assistance.

Nor is this all. The Bush administration has also been negotiating a Status of Forces Agreement with Iraq that will provide for 58 permanent military bases. This too, will be a contract, not a treaty, and Congress will not have to approve. If Mr. Bush can get this signed by the end of summer, a new president will be almost powerless to either head off the oil deals or the permanent occupation.

On June 30 when the new oil contracts are announced the oil giants will have taken the first step toward gaining long-term control of Iraq’s enormous reserves. Mr. Bush will not ever again need to claim to be after Osama bin Laden or weapons of mass destruction. Nor will it matter that the apparent reason for the war will be transparent. No democratic president or Congress will be in position to undo these agreements. Two simple contracts, one for military bases and one for “technical assistance” will have secured to a narrow American interest group an economic reason to keep our troops stationed in Iraq for generations to come.