Middle-east Arab News Opinion | Asharq Al-awsat

The United States and the Iraqi Oil Prize | ASHARQ AL-AWSAT English Archive 2005 -2017
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&#34America, our coalition, and Iraqi leaders are working towards the same goal — a democratic Iraq that can defend itself, and that will serve as a model of freedom for the Middle East.&#34 This is how President Bush summarized the White House”s policy in Iraq in his 18 December 2005 address to the nation. In his address, the president sought to reassure the US public about events in Iraq. Three days have passed since the 15 December legislative elections, which were held under extremely tough conditions and which will possibly represent an important step towards pacifying the situation and bringing it back to normal. Yet, the basic question that needs to be asked is: Which political forces will gain legitimacy through these elections, and who will head the sovereign government in &#34liberated&#34 Iraq?

Regardless of the importance attached to these elections and their outcomes which will steer Iraq in the right direction, these elections must not divert the Iraqi people”s attention away from the major long-term deals that are being negotiated covertly, behind the scenes and outside the circle of discussion, inside and outside Iraq. These deals are being made in extreme silence and confidentiality, in restricted conference halls and meeting rooms that belong to influential governments and big firms. The &#34prize&#34 in this case is Iraq”s oil. While the issue of oil was an object of great concern during the period that preceded the invasion of Iraq, this issue has become less important, now that the amount of negligence from which the Iraqi oil sector is suffering has transpired. As a result, the United States has not been able to pump the quantity of oil required to finance the war, redress any strategic reserve shortages, and make profits.

On the other hand, US Vice President Cheney, who was the head of the US Halliburton oil company in 1999, told a group of oilmen in London that &#34the prize ultimately lies in the Middle East.&#34 There is no doubt that a large share of this prize exists in Iraq.

The new Iraqi Government might find itself in a real predicament, because it will face three arduous challenges in the fields of achieving security and pacifying the situation in the country; providing essential services; and dealing with the US military presence in Iraq. The new Iraqi Government will most probably need the United States” support to succeed in addressing these three challenges. In facing these tough tests, the elected government will be required to endorse plans involving the implementation of long-term agreements, known as production sharing agreements (PSA), with some big multinational firms that are controlled by the Americans and the British, in an effort to give such agreements a legitimate stamp of an elected and sovereign government.

Production sharing agreements for oil extraction are usually employed when the probability of not finding oil is high and when the production cost is also high. However, this is not the case in Iraq, where crude oil is available and the production cost is low. These contracts protect firms from loss, if oil prices drop. Big oil firms have failed to sign such agreements with Kuwait and Saudi Arabia, but they are about to succeed in Iraq, particularly in light of the readiness demonstrated by the interim Iraqi Government to guarantee the signing of such long-term contracts during the first nine months of 2006. If the signing of such contracts is achieved in order for the newly signed contracts to be added to the previous ones, then this will mean that the economic and financial future of Iraq will be negotiated in almost complete confidentiality, without a national discussion on how to exploit Iraq”s strategic resources.

If the Iraqi Government is to sign production sharing agreements with foreign oil companies at an oil price of 40 dpb, Iraq stands to lose between $74 billion and $194 billion in revenue, over the lifetime of the proposed contracts (25 to 30 years), according to a study issued by the US Global Policy Forum in November. Also, if the price of oil remains the same as it is now, that is, 60 dpb, the loss will be greater. According to the study, production sharing agreements involving 60 out of the 80 known fields will be signed, thus allowing these multinational companies to control about 60 percent of the proven crude oil reserves. If Iraq truly holds 200 billion barrels of undiscovered reserves, according to the Iraqi Oil Ministry”s estimations, foreign companies will consequently control more than 85 percent of Iraq”s oil reserves.

Protecting this &#34prize&#34 will naturally require signing a contract with a big security company. Therefore, our search should not be limited — in substance — to finding out when the US forces will leave Iraq. Instead, it should look into the number of military bases that the United States is seeking to keep under its control in Iraq, which is being pacified for the sake of protecting this &#34prize.&#34