IRAQI OIL and the Global Economy.
Go to Original
It's the Oil
By Jim Holt
The London Review of Books
18 October Issue
Iraq is 'unwinnable', a 'quagmire', a 'fiasco': so goes the received
opinion.
But there is good reason to think that, from the Bush-Cheney
perspective,
it is none of these things.
Indeed, the US may be 'stuck'
precisely where Bush et al want it to be,
which is why there is no 'exit
strategy'.
Iraq has 115 billion barrels of known oil reserves.
That is more than
five times the total in the United States.
And, because of its long
isolation,
it is the least explored of the world's oil-rich nations.
A mere
two thousand wells have been drilled across the entire country;
in Texas
alone there are a million.
It has been estimated, by the Council on Foreign
Relations,
that Iraq may have a further 220 billion barrels of undiscovered
oil;
another study puts the figure at 300 billion.
If these estimates are
anywhere close to the mark,
US forces are now sitting on one quarter of the
world's oil resources.
The value of Iraqi oil, largely light crude with low
production costs,
would be of the order of $30 trillion at today's prices.
For purposes of comparison,
the projected total cost of the US
invasion/occupation is around $1 trillion.
Who will get Iraq's oil?
One of the Bush administration's 'benchmarks'
for the Iraqi government
is the passage of a law to distribute oil revenues.
The draft law that the US has written for the Iraqi congress
would cede
nearly all the oil to Western companies.
The Iraq National Oil Company would
retain control of 17
of Iraq's 80 existing oilfields,
leaving the rest -
including all yet to be
discovered oil - under foreign corporate control for
30 years.
'The foreign companies would not have to invest their earnings
in
the Iraqi economy,'
the analyst Antonia Juhasz wrote in the New York Times
in March,
after the draft law was leaked.
'They could even ride out Iraq's
current 'instability' by signing contracts now,
while the Iraqi government
is at its weakest,
and then wait at least two years before even setting foot
in the country.'
As negotiations over the oil law stalled in September,
the
provincial government in Kurdistan simply signed a separate deal
with the
Dallas-based Hunt Oil Company,
headed by a close political ally of President
Bush.
How will the US maintain hegemony over Iraqi oil?
By establishing
permanent military bases in Iraq.
Five self-sufficient 'super-bases' are in
various stages of completion.
All are well away from the urban areas where
most casualties have occurred.
There has been precious little reporting on
these bases in the American press,
whose dwindling corps of correspondents
in Iraq cannot
move around freely because of the dangerous conditions.
(It
takes a brave reporter to leave the Green Zone without a military escort.)
In February last year, the Washington Post reporter Thomas Ricks described
one such facility, the Balad Air Base, forty miles north of Baghdad.
A piece
of (well-fortified) American suburbia in the middle of the Iraqi desert,
Balad has fast-food joints, a miniature golf course,
a football field, a
cinema and distinct neighbourhoods
- among them, 'KBR-land',
named after the
Halliburton subsidiary
that has done most of the construction work at the
base.
Although few of the 20,000 American troops stationed there
have ever
had any contact with an Iraqi,
the runway at the base is one of the world's
busiest.
'We are behind only Heathrow right now,' an air force commander
told Ricks.
The Defense Department was initially coy about these bases.
In 2003,
Donald Rumsfeld said: 'I have never, that I can recall,
heard the subject of
a permanent base in Iraq
discussed in any meeting.'
But this summer the Bush
administration began to talk openly
about stationing American troops in Iraq
for years,
even decades, to come.
Several visitors to the White House have
told the New York Times that
the president himself has become fond of
referring to the 'Korea model'.
When the House of Representatives voted to
bar
funding for 'permanent bases' in Iraq,
the new term of choice became
'enduring bases'
, as if three or four decades wasn't
effectively an
eternity.
But will the U.S. be able to maintain an indefinite
military presence in
Iraq?
It will plausibly claim a rationale to stay there
for as long as civil
conflict simmers,
or until every groupuscule that conveniently brands itself
as 'al-Qaida' is exterminated.
The civil war may gradually lose intensity as
Shias, Sunnis and Kurds withdraw into separate enclaves,
reducing the
surface area for sectarian friction,
and as warlords consolidate local
authority.
De facto partition will be the result.
But this partition can
never become de jure.
(An independent Kurdistan in the north might upset
Turkey,
an independent Shia region in the east might become a satellite of
Iran,
and an independent Sunni region in the west might harbour al-Qaida.)
Presiding over this Balkanised Iraq
will be a weak federal government in
Baghdad,
propped up and overseen by the Pentagon-scale US embassy that has
just
been constructed - a green zone within the Green Zone.
As for the
number of US troops permanently stationed in Iraq,
the defence secretary,
Robert Gates,
told Congress at the end of September that 'in his head'
he
saw the long-term force as consisting of five combat brigades,
a quarter of
the current number,
which, with support personnel,
would mean 35,000 troops
at the very minimum,
probably accompanied by an equal number of mercenary
contractors.
(He may have been erring on the side of modesty,
since the five
super-bases can accommodate between ten and twenty thousand troops each.)
These forces will occasionally leave their bases
to tamp down civil
skirmishes, at a declining cost in casualties.
As a senior Bush
administration official told
the New York Times in June,
the long-term bases
'are all places we could fly in and out of
without putting Americans on
every street corner'.
But their main day-to-day function will be to protect
the oil infrastructure.
This is the 'mess' that Bush-Cheney
is going to hand on to the next
administration.
What if that administration is a Democratic one?
Will it
dismantle the bases and withdraw US forces entirely?
That seems unlikely,
considering the many beneficiaries of the continued
occupation of Iraq and
the exploitation of its oil resources.
The three principal Democratic
candidates -
Hillary Clinton, Barack Obama and John Edwards -
have already
hedged their bets, refusing to promise that,
if elected, they would remove
American forces from Iraq before 2013,
the end of their first term.
Among the winners: oil-services companies like Halliburton;
the oil
companies themselves
(the profits will be unimaginable, and even Democrats
can be bought);
US voters, who will be guaranteed price stability at the gas
pump
(which sometimes seems to be all they care about);
Europe and Japan,
which will both benefit
from Western control of such a large part of the
world's oil reserves,
and whose leaders will therefore wink at the permanent
occupation;
and, oddly enough, Osama bin Laden, who
will never again have to
worry about US troops profaning the holy places
of Mecca and Medina,
since
the stability of the House of Saud
will no longer be paramount among
American concerns.
Among the losers is Russia, which will no longer be able
to lord its own energy resources over Europe.
Another big loser is Opec, and
especially Saudi Arabia,
whose power to keep oil prices high by enforcing
production quotas
will be seriously compromised.
Then there is the case of Iran, which is more complicated.
In the short
term, Iran has done quite well out of the Iraq war.
Iraq's ruling Shia
coalition is now dominated
by a faction friendly to Tehran,
and the US has
willy-nilly armed and trained the most pro-Iranian elements
in the Iraqi
military.
As for Iran's nuclear programme, neither air strikes nor
negotiations seem likely to derail it at the moment.
But the Iranian regime
is precarious.
Unpopular mullahs hold onto power by financing internal
security services
and buying off elites with oil money,
which accounts for
70 per cent of government revenues.
If the price of oil were suddenly to
drop to, say, $40 a barrel
(from a current price just north of $80),
the
repressive regime in Tehran would lose its steady income.
And that is an
outcome the US could easily achieve by
opening the Iraqi oil spigot for as
long as necessary
(perhaps taking down Venezuela's oil-cocky Hugo Chavez
into the bargain).
And think of the United States vis-a-vis China.
As a consequence of our
trade deficit,
around a trillion dollars' worth of US denominated debt
(including $400 billion in US Treasury bonds) is held by China.
This gives
Beijing enormous leverage over Washington:
by offloading big chunks of US
debt,
China could bring the American economy to its knees.
China's own
economy is, according to official figures,
expanding at something like 10
per cent a year.
Even if the actual figure is closer to 4 or 5 per cent, as
some believe,
China's increasing heft poses a threat to US interests.
(One
fact: China is acquiring new submarines five times faster than the US.)
And
the main constraint on China's growth
is its access to energy - which,
with
the U.S. in control of
the biggest share of world oil, would largely be at
Washington's sufferance.
Thus is the Chinese threat neutralised.
Many people are still perplexed by exactly what moved Bush-Cheney
to
invade and occupy Iraq.
In the 27 September issue of
the New York Review of
Books,
Thomas Powers, one of the most astute watchers of the intelligence
world,
admitted to a degree of bafflement.
'What's particularly odd,' he
wrote,
'is that there seems to be no sophisticated, professional, insiders'
version of the thinking that drove events.'
Alan Greenspan, in his just
published memoir,
is clearer on the matter.
'I am saddened,' he writes,
'that it is politically inconvenient to
acknowledge what everyone knows:
the
Iraq war is largely about oil.'
Was the strategy of invading Iraq to take control of
its oil resources
actually hammered out by Cheney's 2001 energy task force?
One can't know for
sure, since the deliberations of that task force,
made up largely of oil and
energy company executives,
have been kept secret by the administration
on
the grounds of 'executive privilege'.
One can't say for certain that oil
supplied the prime motive.
But the hypothesis is quite powerful when it
comes to
explaining what has actually happened in Iraq.
The occupation may
seem horribly botched
on the face of it,
but the Bush administration's
cavalier attitude towards
'nation-building'
has all but ensured that Iraq
will end up as
an American protectorate for the next few decades - a
necessary condition
for the extraction of its oil wealth.
If the US had
managed to create a strong, democratic government
in an Iraq effectively
secured by its own army and police force,
and had then departed,
what would
have stopped that government from taking control of its own oil,
like every
other regime in the Middle East?
On the assumption that the Bush-Cheney
strategy is oil-centred,
the tactics - dissolving the army,
de-Baathification, a final 'surge' that has hastened internal migration -
could scarcely have been more effective.
The costs - a few billion dollars a
month plus a few dozen American fatalities
(a figure which will probably
diminish, and which is
in any case comparable to the number of US
motorcyclists killed
because of repealed helmet laws)
- are negligible
compared to $30 trillion in oil wealth,
assured American geopolitical
supremacy and cheap gas for voters.
In terms of realpolitik,
the invasion of
Iraq is not a fiasco; it is a resounding success.
Still, there is reason to be sceptical of the picture I have drawn:
it
implies that a secret and highly ambitious plan turned out
just the way its
devisers foresaw,
and that almost never happens.
--------
Jim Holt writes for the New York Times Magazine and the New Yorker.
Click here for "The Truth About Iraq, From The Source, IRAQ".
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