How the Bush Administration’s Iraqi Oil Grab Went Awry

Here is the sentence in The Age of Turbulence, the 531-page memoir of former Federal Reserve chief Alan Greenspan, that caused so much turbulence in Washington last week: “I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil.” Honest and accurate, it had the resonance of the Bill Clinton’s election campaign mantra, “It’s the economy, stupid.” But, finding himself the target of a White House attack — an administration spokesman labeled his comment, “Georgetown cocktail party analysis” — Greenspan backtracked under cover of verbose elaboration. None of this, however, made an iota of difference to the facts on the ground.

Here is a prosecutor’s brief for the position that “the Iraq War is largely about oil”:

The primary evidence indicating that the Bush administration coveted Iraqi oil from the start comes from two diverse but impeccably reliable sources: Paul O’Neill, the Treasury Secretary (2001-2003) under President George W. Bush; and Falah Al Jibury, a well-connected Iraqi-American oil consultant, who had acted as President Ronald Reagan’s “back channel” to Iraqi President Saddam Hussein during the Iraq-Iran War of 1980-88. The secondary evidence is from the material that can be found in such publications as the New York Times and the Wall Street Journal.

According to O’Neill’s memoirs, The Price of Loyalty: George W. Bush, the White House, and the Education of Paul O’Neill, written by journalist Ron Suskind and published in 2004, the top item on the agenda of the National Security Council’s first meeting after Bush entered the Oval Office was Iraq. That was January 30, 2001, more than seven months before the 9/11 attacks. The next National Security Council (NSC) meeting on February 1st was devoted exclusively to Iraq.

Advocating “going after Saddam” during the January 30 meeting, Defense Secretary Donald Rumsfeld said, according to O’Neill, “Imagine what the region would look like without Saddam and with a regime that’s aligned with U.S. interests. It would change everything in the region and beyond. It would demonstrate what U.S. policy is all about.” He then discussed post-Saddam Iraq — the Kurds in the north, the oil fields, and the reconstruction of the country’s economy. (Suskind, p. 85)

Among the relevant documents later sent to NSC members, including O’Neill, was one prepared by the Defense Intelligence Agency (DIA). It had already mapped Iraq’s oil fields and exploration areas, and listed American corporations likely to be interested in participating in Iraq’s petroleum industry.

Another DIA document in the package, entitled “Foreign Suitors for Iraqi Oilfield Contracts,” listed companies from 30 countries — France, Germany, Russia, and Britain, among others — their specialties and bidding histories. The attached maps pinpointed “super-giant oil field,” “other oil field,” and “earmarked for production sharing,” and divided the basically undeveloped but oil-rich southwest of Iraq into nine blocks, indicating promising areas for future exploration. (Suskind., p. 96)

According to high flying, oil insider Falah Al Jibury, the Bush administration began making plans for Iraq’s oil industry “within weeks” of Bush taking office in January 2001. In an interview with the BBC’s Newsnight program, which aired on March 17, 2005, he referred to his participation in secret meetings in California, Washington, and the Middle East, where, among other things, he interviewed possible successors to Saddam Hussein.

By January 2003, a plan for Iraqi oil crafted by the State Department and oil majors emerged under the guidance of Amy Myers Jaffe of the James A. Baker III Institute for Public Policy at Rice University. It recommended maintaining the state-owned Iraq National Oil Company, whose origins dated back to 1961 — but open it up to foreign investment after an initial period in which U.S.-approved Iraqi managers would supervise the rehabilitation of the war-damaged oil infrastructure. The existence of this group would come to light in a report by the Wall Street Journal on March 3, 2003.

Unknown to the architects of this scheme, according to the same BBC Newsnight report, the Pentagon’s planners, apparently influenced by powerful neocons in and out of the administration, had devised their own super-secret plan. It involved the sale of all Iraqi oil fields to private companies with a view to increasing output well above the quota set by the Organization of the Petroleum Exporting Countries (OPEC) for Iraq in order to weaken, and then destroy, OPEC.

Secondary Evidence

On October 11, 2002 the New York Times reported that the Pentagon already had plans to occupy and control Iraq’s oilfields. The next day the Economist described how Americans in the know had dubbed the waterway demarcating the southern borders of Iraq and Iran “Klondike on the Shatt al Arab,” while Ahmed Chalabi, head of the U.S.-funded Iraqi National Congress and a neocon favorite, had already delivered this message: “American companies will have a big shot at Iraqi oil — if he gets to run the show.”

On October 30, Oil and Gas International revealed that the Bush administration wanted a working group of 12 to 20 people to (a) recommend ways to rehabilitate the Iraqi oil industry “in order to increase oil exports to partially pay for a possible U.S. military occupation government,” (b) consider Iraq’s continued membership of OPEC, and (c) consider whether to honor contracts Saddam Hussein had granted to non-American oil companies.

By late October 2002, columnist Maureen Dowd of the New York Times would later reveal, Halliburton, the energy services company previously headed by Vice President Dick Cheney, had prepared a confidential 500-page document on how to handle Iraq’s oil industry after an invasion and occupation of Iraq. This was, commented Dowd, “a plan [Halliburton] wrote several months before the invasion of Iraq, and before it got a no-bid contract to implement the plan (and overbill the U.S.).” She also pointed out that a Times‘ request for a copy of the plan evinced a distinct lack of response from the Pentagon.

In public, of course, the Bush administration built its case for an invasion of Iraq without referring to that country’s oil or the fact that it had the third largest reserves of petroleum in the world. But what happened out of sight was another matter. At a secret NSC briefing for the President on February 24, 2003, entitled, “Planning for the Iraqi Petroleum Infrastructure,” a State Department economist, Pamela Quanrud, told Bush that it would cost $7-8 billion to rebuild the oil infrastructure, if Saddam decided to blow up his country’s oil wells, according to Washington Post reporter Bob Woodward in his 2004 book, Plan of Attack (pp. 322-323). Quanrud was evidently a member of the State Department group chaired by Amy Myers Jaffe.

When the Anglo-American troops invaded on March 20, 2003, they expected to see oil wells ablaze. Saddam Hussein proved them wrong. Being a staunch nationalist, he evidently did not want to go down in history as the man who damaged Iraq’s most precious natural resource.

On entering Baghdad on April 9th, the American troops stood by as looters burned and ransacked public buildings, including government ministries — except for the Oil Ministry, which they guarded diligently. Within the next few days, at a secret meeting in London, the Pentagon’s scheme of the sale of all Iraqi oil fields got a go-ahead in principle.

The Bush administration’s assertions that oil was not a prime reason for invading Iraq did not fool Iraqis though. A July 2003 poll of Baghdad residents — who represented a quarter of the Iraqi national population — by the London Spectator showed that while 23% believed the reason for the Anglo-American war on Iraq was “to liberate us from dictatorship,” twice as many responded, “to get oil”. (Cited in Dilip Hiro, Secrets and Lies: Operation “Iraqi Freedom” and After, p. 398.)

As Iraq’s principal occupier, the Bush White House made no secret of its plans to quickly dismantle that country’s strong public sector. When the first American proconsul, retired General Jay Garner, focused on holding local elections rather than privatizing the country’s economic structure, he was promptly sacked.

Hurdles to Oil Privatization Prove Impassable

Garner’s successor, L. Paul Bremer III, found himself dealing with Philip Carroll — former Chief Executive Officer of the American operations of (Anglo-Dutch) Royal Dutch Shell in Houston — appointed by Washington as the Iraqi oil industry’s supreme boss. Carroll decided not to tinker with the industry’s ownership and told Bremer so. “There was to be no privatization of Iraqi oil resources or facilities while I was involved,” Carroll said in an interview with the BBC’s Newsnight program on March 17, 2005.

This was, however, but a partial explanation for why Bremer excluded the oil industry when issuing Order 39 in September 2003 privatizing nearly 200 Iraqi public sector companies and opening them up to 100% foreign ownership. The Bush White House had also realized by then that denationalizing the oil industry would be a blatant violation of the Geneva Conventions which bar an occupying power from altering the fundamental structure of the occupied territory’s economy.

There was, as well, the vexatious problem of sorting out the 30 major oil development contracts Saddam’s regime had signed with companies based in Canada, China, France, India, Italy, Russia, Spain, and Vietnam. The key unresolved issue was whether these firms had signed contracts with the government of Saddam Hussein, which no longer existed, or with the Republic of Iraq which remained intact.

Perhaps more important was the stand taken by Grand Ayatollah Ali Sistani, the senior Shiite cleric in the country and a figure whom the occupying Americans were keen not to alienate. He made no secret of his disapproval of the wholesale privatization of Iraq’s major companies. As for the minerals — oil being the most precious — Sistani declared that they belonged to the “community,” meaning the state. As a religious decree issued by a grand ayatollah, his statement carried immense weight.

Even more effective was the violent reaction of the industry’s employees to the rumors of privatization. In his Newsnight interview Jibury said, “We saw an increase in the bombing of oil facilities and pipelines built on the premise that privatization is coming.”

In the immediate aftermath of the invasion, much equipment was looted from pipelines, pumping stations, and other oil facilities. By August 2003, four months after American troops entered Baghdad, oil output had only inched up to 1.2 million barrels per day, about two-fifths of the pre-invasion level. The forecasts (or dreams) of American planners’ that oil production would jump to 6 million barrels per day by 2010 and easily fund the occupation and reconstruction of the country, were now seen for what they were — part of the hype disseminated privately by American neocons to sell the idea of invading Iraq to the public.

With the insurgency taking off, attacks on oil pipelines and pumping stations averaged two a week during the second half of 2003. The pipeline connecting a major northern oil field near Kirkuk — with an export capacity of 550,000-700,000 barrels per day — to the Turkish port of Ceyhan became inoperative. Soon, the only oil being exported was from fields in the less disturbed, predominately Shiite south of Iraq.

In September 2003, President Bush approached Congress for $2.1 billion to safeguard and rehabilitate Iraq’s oil facilities. The resulting Task Force Shield project undertook to protect 340 key installations and 4,000 miles (6,400 km) of oil pipeline. It was not until the spring of 2004 that output again reached the pre-war average of 2.5 million barrels per day — and that did not hold. Soon enough, production fell again. Iraqi refineries were, by now, producing only two-fifths of the 24 million liters of gasoline needed by the country daily, and so there were often days-long lines at service stations.

Addressing the 26th Oil and Money conference in London on September 21, 2005, Issam Chalabi, who had been an Iraqi oil minister in the late 1980s, referred to the crippling lack of security and the lack of clear laws to manage the industry, and doubted if Iraq could return to the 1979 peak of 3.5 million barrels per day before 2009, if then.

Meanwhile, the Iraqi government found itself dependent on oil revenues for 90% of its income, a record at a time when corruption in its ministries had become rampant. On January 30, 2005, Stuart W. Bowen, the special inspector general appointed by the U.S. occupation authority, reported that almost $9 billion in Iraqi oil revenue, disbursed to the ministries, had gone missing. A subsequent Congressional inspection team reported in May 2006 that Task Force Shield had failed to meet its goals due to “lack of clear management structure and poor accountability”, and added that there were “indications of potential fraud” which were being reviewed by the Inspector General.

The endorsement of the new Iraqi constitution by referendum in October 2005 finally killed the prospect of full-scale oil privatization. Article 109 of that document stated clearly that hydrocarbons were “national Iraqi property”. That is, oil and gas would remain in the public sector.

In March 2006, three years after the Anglo-American invasion of Iraq, the country’s petroleum exports were 30% to 40% below pre-invasion levels.

Bush Pushes for Iraq’s Flawed Draft Hydrocarbon Law

In February 2007, in line with the constitution, the draft hydrocarbon law the Iraqi government presented to parliament kept oil and gas in the state sector. It also stipulated recreating a single Iraqi National Oil Company that would be charged with doling out oil income to the provinces on a per-capita basis. The Bush administration latched onto that provision to hype the 43-article Iraqi bill as a key to reconciliation between Sunnis and Shiites — since the Sunni areas of Iraq lack hydrocarbons — and so included it (as did Congress) in its list of “benchmarks” the Iraqi government had to meet.

Overlooked by Washington was the way that particular article, after mentioning revenue-sharing, stated that a separate Federal Revenue Law would be necessary to settle the matter of distribution — the first draft of which was only published four months later in June.

Far more than revenue sharing and reconciliation, though, what really interested the Bush White House were the mouthwatering incentives for foreign firms to invest in Iraq’s hydrocarbon industry contained in the draft law. They promised to provide ample opportunities to America’s Oil Majors to reap handsome profits in an oil-rich Iraq whose vast western desert had yet to be explored fully for hydrocarbons. So Bush pressured the Iraqi government to get the necessary law passed before the parliament’s vacation in August — to no avail.

The Bush administration’s failure to achieve its short-term objectives does not detract from the overarching fact — established by the copious evidence marshaled in this article — that gaining privileged access to Iraqi oil for American companies was a primary objective of the Pentagon’s invasion of Iraq.

Dilip Hiro is the author of Secrets and Lies: Operation "Iraqi Freedom" and, most recently, Blood of the Earth: The Battle for the World's Vanishing Oil Resources , both published by Nation Books. Read other articles by Dilip, or visit Dilip's website.

8 comments on this article so far ...

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  1. JB said on September 27th, 2007 at 8:07am #

    As the big, horrible truth continues to penetrate the confused public mind, we will soon be faced with the following question: How many dead and maimed US soldiers and how many slaughtered Iraqis is it worth tolerating to continue to allow the sale of super-powerful, extra- heavy gas guzzling vehicles…you see ads all the time for cars touting their 400- horsepower engines; far more power than is ever necessary. I favor a big gas guzzler tax on any vehicle that gets from zero to 60 in less than 8 seconds. Bush himself said in an address to Congress, “‘WE ARE ADDICTED TO OIL” Well here’s how to end the addiction!!

  2. Deadbeat said on September 27th, 2007 at 9:10am #

    When did Alan Greenspan become the paragon of truth especially by the left. Here we have Dilip Hiro, Ron Jacobs, and Amy Goodman quickly looking to Alan Greenspan to convince the left that the illegal invasion in Iraq was solely about oil.

    Here we have Alan Greenspan who contrived the biggest theft of working class value — shifting the tax burden in 1983 and was rewarded for this scheme by being Fed Chairman for the subsequent 20 years. So now Greenspan is now hail by the left as the paragon of truth — “WAR FOR OIL”.

    Oil clearly was AMONG one of the reason but again Hiro ignores that the oil company executives and the lobby arm did NOT support the invasion of Iraq. He also ignore the policy position of PNAC that was written in the 1990′s by the “Zioncons” and ignore Clinton’s policy of sanctions and bombings of Iraq.

    There seem to be a real effort on the left to ignore the role of Zionism and its effect on policy and culture WITHIN the United States. Ron Jacobs especially likes to write articles using a strawman argument that Tel Aviv is yanking the string in Washington. This is a ridiculous premise that he can easily knock down. The truth is clearly more complex than such a bogus strawman.

    What is true is that the influence of Zionism on the body politic and especially in the media has indoctrinated how the American pubic think and feel about people of Arab/Muslim origins. In other words anti-Arab racism in the U.S. is quite acceptable. While the word “nigger” has become an unacceptable term the military in Iraq use “acceptable” terms like “sand nigger” and “hajis” and “terrorist” to label the Iraqi people.

    The silence about this obviously racist tend within the U.S. among the “left” and the “left” desire to sweep this issue under the rug is more revealing about the so-called “leftist”. What is it that they fear? Or better yet are they themselves Zionist?

  3. Deadbeat said on September 27th, 2007 at 11:35pm #

    EXCLUSIVE NETWORK INTERVIEW OF SENATOR JOE BIDEN

    Presidential hopeful calls Israel “the single greatest strength America has in the Middle East”

    Says Jonathan Pollard deserves leniency but not a pardon

    In an exclusive Shalom TV interview, US Senator Joseph R. Biden Jr. (D-DE) emphatically stated his commitment to the State of Israel, calling the country “the single greatest strength America has in the Middle East.”

    Senator Biden further stressed that without Israel, one could only imagine how many battleships and troops America would have to station in the Middle East.

    Meeting with Shalom TV President Rabbi Mark S. Golub in Washington, DC, the candidate for the Democratic Party’s presidential nomination said that it’s insulting for any American to suggest that Israel is somehow the cause of the war in Iraq.

    “If, tomorrow, peace broke out between Israelis and Palestinians, does anybody think there wouldn’t be a full-blown war in Iraq? And, conversely, if Iraq were transported to Mars, does anyone think there would not be terrorism visited upon the Israelis every day?

    “So let’s get it straight. Israel is not the cause of Iraq. Iraq being settled or not settled has nothing to do with Israel’s conduct.”

    The Senator also expressed a sensitivity and empathy for Israelis who have had to live with terrorism.

    “[From 9/11], Americans can taste what it must feel like for every Israeli mother and father when they send their kid out to school with their lunch to put them on a bus, on a bicycle or to walk; and they pray to God that cell phone doesn’t ring.”

    “I am a Zionist,” stated Senator Biden. “You don’t have to be a Jew to be a Zionist.”

  4. gerald spezio said on September 28th, 2007 at 5:04am #

    Deadbeat, your commentary is on point. I see it the same way.
    The Israeli murder machine has fifteen months to pull off more of the master plan.

    When Joe Biden can be quoted, as you do, anybody can see the Senate whorehouse. It costs plenty. Another lawyer on the take – just doing his job for Israel.

    Exposing Israeli agent, Russ Wellen, is only a crumb, but it shows how pervasive the doubltalking scams are. Wellen even tried to push Daniel Pipes in another of his pseudo-leftist “pieces.”

    The “Middle East ally” spin has been cropping up more and more lately.
    Greenspan and Kissenger are whoring and spinning the “it’s all about oil”
    frame as part of the push. Ditto for Hiro’s piece. Orchestration.

    I am fearful that it is going to come down to pure political hell and worse.

  5. gerald spezio said on September 28th, 2007 at 8:06am #

    Hiro has been an integral player for years in the carefully orchestrated Israel peeyar preaching against dependence on Arab oil. Much of the PEAK OIL, PEAL OIL, agenda is pure Israel ANTI ARAB propaganda.

    “Set America Free” is a Zionist website with NY Times whore, Tom Friedman, dutifully selling in the spin. Click the video in the right hand corner. You will love Israel whore an former CIA head, James Woolsey, selling the spin.

    The Israeli Army Lt. Colonel, Gal Luft, ranting about the foul Saudis and their filthy oil is a peeyar classic. Catch the spin here; http://setamericafree.org/

  6. Deadbeat said on September 28th, 2007 at 9:25am #

    gerald,

    You are right about “PEEK OIL”. Chavez stated recently that Venezuela has enough oil reserves for at least 200 years. What Chavez desires is a price guarantee of $50.00/barrel because Venezuela has heavy oil that cost more to refine. Right now oil is hovering at $70 – $80 per barrel so the current world prices clearly satisfies Venezuela’s requirements.

    Chavez also asserted that Venezuela has more reserves than Saudi Arabia therefore it makes no logical sense that the illegal invasion and occupation of Iraq was for oil. It would have made more logical sense for the U.S. to have invaded Venezuela if the reason was the need for oil.

    The failure to examine Zionism and its role and influence on U.S. policy making and Zionism’s effect upon U.S. culture by the left is profoundly anti-Marxist and IMO — racist and is the main reason why the anti-war movement in the U.S. has been totally demobilized.

    While I would expect the right and reactionaries to behave in this manner the so-called “left” in the U.S. has this strain of racism and Zionism that has to be confronted and expose if there is going to be any chance for real social and economic change in the U.S.

  7. gerald spezio said on September 28th, 2007 at 9:55am #

    Mr or Mrs Deadbeat, you keep writing, and all I will have to do is follow you with, Yes Sir or Yes Ma’m.

    If more good Jews; like Illan Pappe, Stephen Lendeman, and Norman Finkelstein, come out with their brains and objectivity protecting and defending truth, the people of Palestine, all religions including their religion, and the country of Israel with truth and intelligence; it is at least conceivable that this murdering could stop.

    Other than that, this mad dog murdering going on into Iran could unleash some unstoppable anti-who-knows-what-madness.

  8. Ceri Cat said on October 1st, 2007 at 3:34am #

    The issue is OPEC has/had a stranglehold on oil prices and production which obviously could not be tolerated, knocking out one of the key OPEC nations definitely hurt them to a degree. And as disgusting as it sounds to some nearly all foreign interest in that region has been about the oil for as long as any of us have been alive. For the old movie buffs go find the follow up to Lawrence of Arabia (A Dangerous Man: Lawrence After Arabia [1990]), it’s actually about the seperation of Iraq and Iran and why it happened while it’s definitely not entirely true it does stick pretty close to the reality of the meetings about the fate of the region. I don’t dismiss the idea of other motives behind the attack on Iraq, however anyone who dismisses oil as a motive is kidding themselves. It’s been nearly 90 years since the Paris conferences where the “winners” split the spoils. Humanity hasn’t changed much.