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Oil Companies to Make $30 to $40 Billion on Iraqi Oil Infrastructure After War

It will take between $30 and $40 billion to rehabilitate active wells and to develop new oil fields in Iraq following Gulf War II, to keep gas cheap and the SUVs rolling in Amerika. There is no doubt that this money will go to well-connected international oil companies and that George Bush and Dick Cheney's buddies will reap most of the benefits. Where will much of this money come from? The US taxpayers, no doubt.
Energy policy
A future for Iraq's oil

As the United States plans for a possible war in Iraq, an important question has become: What should U.S. policy be toward Iraq the day after the last shot is fired? An integral part of that question is deciding how to approach Iraq's tremendous reserves of oil. The reserves are huge, second only to Saudi Arabia, but annual oil production is low, due to years of sanctions and war. Increased oil production could pay for a portion of the country's reconstruction costs, as well as affect world oil supply and prices.

The James Baker Institute at Rice University and The Council on Foreign Relations, two nongovernmental think tanks, have teamed up to craft a vision for Iraq in the event of a U.S.-led ouster of Iraq's president Saddam Hussein. The hallmarks of the vision, described in a report published Dec. 18, include that Iraq should retain complete control of its own oil sector and that, immediately following Hussein's fall, revenues from oil sales should be reinvested in oil infrastructure in order to boost production.

The ideas in the report, written by 23 policy experts and energy analysts, have resonated in recent comments by the Bush administration. However, concern that Hussein may intentionally destroy Iraq's oil fields in the first few days of a war has led some public officials to hint at the possibility of a quick, if temporary, U.S. takeover of the fields. Secretary of State Colin Powell, speaking on Dec. 29, said: "If coalition forces go into those oil fields, we would want to protect those fields and make sure that they are used to benefit the people of Iraq, and not destroyed or damaged by a failing regime on the way out the door."

"We started talking about this report in August," says project co-director Rachel Bronson, head of Middle East Studies at the Council on Foreign Relations. "At that time we felt, and we continue to feel, that not enough attention was being given to the day-after issues, which could be harder to manage than the actual fighting itself."

In Iraq, the maturing of oil fields and the deterioration of oil infrastructure have outpaced new investments in technology and exploration. Over the past several years, average daily oil production has dropped by 100,000 barrels each year. The report estimates that returning to pre-1990 production levels of 3.5 million barrels per day will cost billions of dollars and take months, if not years.

Despite these difficulties, oil production in Iraq remains the number one source of revenue for the country. And, the report says, reinvesting revenues from oil sales back into oil infrastructure is the only sure-fire way to significantly boost the country's income. "If there is ever going to be an economically independent Iraq, oil is the most immediate short-term way to get revenue back in the country," Bronson says. However, the report cautions, short-term increases in oil production will necessarily be modest and will not produce the windfall needed to pay all the costs of reconstructing the country after war.

Whatever the immediate fate of Iraq's oil production, control of Iraq's oil sector should remain in the hands of the Iraqi people, the report says. The goal of a possible war is to disarm Iraq, dismantling its weapons of mass destruction. The report adds that if the United States takes control of the oil fields, it will only lend credence to critics who argue that the United States is going to war for oil. "A heavy American hand will only convince [Iraqis], and the rest of the world, that the operation against Iraq was undertaken for imperialist, rather than disarmament reasons," the report says.

Iraq will be able to maintain its own oil sector because it has a cadre of oil experts who know how to manage the reserves well, Bronson says. A few of the top oil industrialists are part of Hussein's inner circle of friends and relatives, and they will likely be removed and tried for war crimes. However, 85 percent or more of the oil experts are not part of this circle, comprising a skilled work force large enough to efficiently and fully run the oil program.

"Iraq certainly has some expertise because it has been able to, over all these years of sanctions and wars, maintain some oil production without foreign investment or expertise," says Lowell Feld, an economist at the Department of Energy's Energy Information Administration.

Iraqi control of its own oil sector does not, however, negate the importance of international investment in developing Iraq's oil fields, according to the report. It will take between $30 and $40 billion to rehabilitate active wells and to develop new fields, and the Iraqi government may want to enlist international companies to meet this investment cost. The report advocates that, at least in the short-term, the U.N. oversees an Iraqi-led bidding process to ensure that oil contracts are awarded fairly and openly.

Says Stephen Walt, professor of international affairs at Harvard's Kennedy School: "If this war happens, it is an American production: conceived, written, produced and starring the U.S.A. One way to minimize the repercussions is to try to represent that what the U.S. is doing is on behalf of the worldwide community. ... In a post-Saddam Iraq, if the U.S. ended up with all the [oil] contracts, it would look really bad."

yap yap 15.Feb.2003 02:41

The Lamet Vali

MUNICH When Secretary of Defense Donald Rumsfeld visited "Old Europe" last week, the placards and protesters lining his path were a visceral reminder of what the Bush administration already knew: Solid majorities in key European countries think that greed is our motive for wanting to depose Saddam Hussein. In fact, in a recent Pew Research Center poll 75 percent of respondents in France, 54 percent in Germany and 76 percent in Russia said that America wants to invade Iraq because "the U.S. wants to control Iraqi oil."

Although Americans are divided on the wisdom of an invasion, only 22 percent of us subscribe to the cynical view that it's just about oil. Even Jimmy Carter, hardly a hawk, rebutted the accusation at the Nobel Peace Prize ceremony: "I know my country, I know my people, and I can assure you that's not the policy of my government."

What accounts for this trans-Atlantic disconnect? To answer that question, start by considering the accusation on the merits: Is America going into Iraq in search of "black gold"?

The charge has a surface plausibility because Iraq does have the second-largest known reserves in the world. But we certainly don't need to send 250,000 soldiers to get at it. Saddam Hussein would gladly sell us all the oil we wanted. The only thing preventing unlimited sales are the United States-enforced sanctions, which Baghdad (and the big oil companies) would love to see lifted. Washington has refused to go along because Saddam Hussein flouts United Nations resolutions. This suggests that our primary focus is the threat he poses, not the oil he possesses.

It's true that overthrowing Saddam Hussein would lead to the lifting of sanctions and a possible increase in oil exports. But it would take a lot of time and money to rebuild Iraq's dilapidated oil industry, even if the regime didn't torch everything on the way out. A study from the Council on Foreign Relations and the James A. Baker III Institute at Rice University estimated that it would take three years and $5 billion to restore Iraqi production just to its pre-1990 level of 3.5 million barrels a day. That would increase total world production by only 1.3 percent, and might not reduce prices at all if other countries cut output or banded together to keep prices stable.

Some optimists think a postwar Iraq would stiff OPEC and slash prices radically. This seems unlikely, if the experience of Kuwait is anything to go by. While oil prices spiked before the Persian Gulf war and plummeted afterward, the long-term impact has been close to nil. Kuwait hasn't exactly been offering to fill up American sport utility vehicles free out of gratitude for being liberated. It hasn't even carried out its pledge to allow direct foreign investment in state-owned oil fields.

As with Kuwait, a liberated Iraq would likely remain an enthusiastic member of OPEC because it would need to establish its nationalist credentials and maintain amicable relations with its oil-cartel neighbors.

For that matter, would our government really want a steep drop in prices? The domestic oil patch including President Bush's home state, Texas was devastated in the 1980's when prices fell as low as $10 a barrel. Washington is generally happy with a range of $18 to $25 a barrel, about where oil was before the strikes in Venezuela and jitters about Iraq helped push prices over $34 a barrel. If we were really concerned about cheap oil above all, we'd be sending troops to Caracas, not Baghdad.

The other possible economic advantage in Iraq would be for American companies to win contracts to put out fires, repair refineries and help operate the oil industry, as they did in Kuwait. What's the total value of such work? It's impossible to say, but last year Iraq signed a deal with Russian companies (since canceled by Saddam Hussein) to rebuild oil and other industries, valued at $40 billion over five years.

Yet the White House estimates the military operation alone would cost $50 billion to $60 billion. (Others suggest the figure would be far higher.) And rebuilding of the country's cities, roads and public facilities would cost $20 billion to $100 billion more, with much of that money in the initial years coming from the "international community" (read: Uncle Sam).

Thus, if a capitalist cabal were running the war, it would have to conclude it wasn't a paying proposition.

This doesn't mean that oil is entirely irrelevant to the subject of Iraq. It does matter in one very important way: Oil revenues make Saddam Hussein much more dangerous than your run-of-the-mill dictator, because they give him the ability to build not only palaces but also top-of-the-line weapons of mass destruction.

Americans recognize this. Europeans don't. Why not? Here's my theory: Europeans are projecting their own behavior onto us. They know that their own foreign policies have in the past often been driven by avarice all those imperialists after East Indian spices or African diamonds. (This tradition is going strong today in Russia and France, whose Iraq policies seem driven at least in part by oil companies that were granted lucrative concessions by Saddam Hussein.)

Nobody would claim that America's global intentions have always been entirely pure. Still, our foreign policy from the Barbary war to Kosovo has usually had a strain of idealism at which the cynical Europeans have scoffed. In the case of Iraq, they just can't seem to accept that we might be acting for, say, the general safety and security of the world. After more than 200 years, Europe still hasn't figured out what makes America tick.

Max Boot, a senior fellow at the Council on Foreign Relations, is author of "The Savage Wars of Peace: Small Wars and the Rise of American Power."

From NYT, 2/13/03

so is it an issue, or isn't it? 15.Feb.2003 08:21

this thing here

>Thus, if a capitalist cabal were running the war, it would have to conclude it wasn't a paying proposition.<

>This doesn't mean that oil is entirely irrelevant to the subject of Iraq. It does matter in one very important way: Oil revenues make Saddam Hussein much more dangerous than your run-of-the-mill dictator, because they give him the ability to build not only palaces but also top-of-the-line weapons of mass destruction.<

i love these right wing apologists. these master magicians of spin. these guys who speak out of both sides of their mouth...

"oil is not what this is about! but iraq has the second largest supply of it. and we can't let saddam make profit off of it. but wait! it's not about oil. oooh no no. nope, it's definitely not about oil. it's just that well, you know, iraq has a lot of it, and we could, ahhh, you know, we could use some of it. but no! no! oil has nothing to do with this. don't even think that it does! but it is important. no, no! no it's not! it's not important! nope, not important..."

what a fuckin' joke.

this reminds me of when somebody's trying to cover their ass because they've been busted on something, so they keep trying to come up with more and more lies to keep covering their ass, and it seems to not be working, so then they get all squirrley and sweat breaks out on their foreheads and they start saying two contradictory things at the same time, and then no matter how hard they lie, it just no longer works...

c'mon guys. you're not fooling anybody. give it a rest.

So What About the Saudis? 15.Feb.2003 10:21

The Truth

Lamet Vale's assertions just don't hold up to close scrutiny. What about the Saudi's? Osama Bin Laden is a Saudi national as were most of the 9/11 hijackers, and oil money flows from the Saudis to al Queda, yet we still buy plenty of oil from the Saudis. Could it be because of their relationship with Papa Bush's Carlyle Group? And why is it not OK for OPEC to control oil prices, but it is for our government? Oh my god, regulating oil prices is socialism, not free-market capitalism. Too bad on the Texans, when the middle east oil cartel wrested control of oil prices from the Texas Railroad Commission, which had regulated oil prices from the early part of the 20th century up until the 1970s, when OPEC took over against the Texans' will. Still, most oil field exploration, drilling, production and refining technology and capabilies continues to reside in the west, so as long as we cozy up to the middle east despots and dictators of our choosing, we'll continue to have a guaranteed supply of cheap oil and the multinational oil corporations will continue make a handy profit on the bidness, as they say in Texas...