In My View

Petro TNCs set to grab Iraq’s oil

Readers of this column may recall a few weeks ago, this space had argued that the USA’s Iraq Study Group (ISG) could not recommend what it had set out to do at the beginning – partitioning Iraq into three entities based on sectarian lines – because it could not resolve the oil tangle. Iraqi oil lies primarily in the hands of the Shi’is in the south and Kurds in the north. The Sunnis are bereft of much of the oil wealth. And this natural blemish could be a cause for long term violence in the region, jeopardising the business interests of US-based petroleum transnational corporations (TNCs).

But this did not stop the ISG from recommending short term and long term plans to reorganise the oil sector in Iraq. In recommendation no 62 of the ISG report, the panel had set out the short term goal "to prepare a draft oil law that ... creates a fiscal and legal framework for investment." It further suggested the US government should intervene in the writing of the draft Iraqi Petroleum law to ensure that the new law covers the huge oil reserves of the southern oil fields.

The ISG had emphasised the importance of introducing the Petroleum law, as a keystone to be approved by Iraqi Parliament, “no later than early 2007.” The ISG even admitted that the US-led occupation forces in Iraq were going to stay for a long time to come, to ensure the protection of the oil flow, when they recommended that "the US military should work with the Iraqi military and with private security forces to protect oil infrastructure and contractors."

As a long term strategy, recommendation 63 the ISG report emphasises that US interests lie with the international oil companies and specifically the US companies, to ensure that they have complete control of Iraqi oil reserves (the second largest in the world). It also stated that, "the United States should encourage investment in the Iraqi oil sector by the international community and by international energy companies."

First steps towards that end have been taken by the dummy government in Baghdad. This Sunday, 21 October, the Iraqi Oil minister extolled the virtues of the new Bill that would become a law when Parliament approves it.

A crucial element in the law is the provision of Production Sharing Agreement (PSA). An ingenious plan to hoodwink the public, the PSA was tried out in Indonesia for the first time in the late 1960s, experts say. While unlike Aramco in Saudi Arabia (a conglomerate with Saudi royal family participation and US oil majors like Chevron) that owns the oil wealth of that country signifying State control, a PSA does not devolve ownership rights to a corporate body – instead hoodwinking the people into believing that they retain control of their often only natural resource, oil – but all exploration, extraction, production and selling rights remain with the investing corporate. This ensures that people tend to not raise a furore as symbolically they retain the sovereign right on their oil wealth, thus also having the responsibility to keep it secure. Yet, barring that one responsibility meant as deterrence against nationalist unrest, you may well understand, the real power gets transferred to the investing corporates.

Considering that Iraq is beholden to the West, mainly the Anglo-American combine in more ways than one, this is how the Independent newspaper of Britain saw the developing situation, “Critics fear that given Iraq's weak bargaining position, it could get locked in now to deals on bad terms for decades to come. ‘Iraq would end up with the worst possible outcome,’ said Greg Muttitt of Platform, a human rights and environmental group that monitors the oil industry. He said the new legislation was drafted with the assistance of BearingPoint, an American consultancy firm hired by the US government, which had a representative working in the American embassy in Baghdad for several months.”

Same Platform, the civil society group quoted by the London-based newspaper had prepared a report entitled, Crude Designs: The rip-off of Iraq’s oil wealth. In that they have quoted the ‘Oil and Energy’ working group of the US State Department’s Future of Iraq project, set up in 2003. In their report the group had apparently stated with obvious obfuscations, “Key attractions of production sharing agreements to private oil companies are that although the reserves are owned by the State, accounting procedures permit the companies to book the reserves in their accounts, but, other things being equal, the most important feature from the perspective of private oil companies is that the government take is defined in the terms of the [PSA] and the oil companies are therefore protected under a PSA from future adverse legislation.”

In other words, the Anglo-American TNCs want to hedge for the future in the present when the going is good and they have absolute control. George W Bush Administration’s current Iraq plan of a troop ‘surge’ or escalation is designed to create a Baghdad that would function as the holding headquarter of their oil interests in the future, even as the United Nations under a new South Korean Secretary General watches from the wings in apparent paralysis.

Pinaki Bhattacharya, currently located in Kolkata is a Special Correspondent with the Mathrubhumi, Kerala. He writes on Strategic Security issues. He can be contacted at pinaki63@dataone.in.