Friday, 2 December 2005
in the next war will occupy the place of coal in the present war, or at
least a parallel place to coal. The only big potential supply that we
can get under British control is the Persian and Mesopotamian supply .…
Control over these oil supplies becomes a first class British war aim – Sir Maurice Hankey in 1918 and Britain’s First Secretary of the War Cabinet
So what’s changed?
Anybody who has read William Engdahl’s excellent book 'A Century of War – Anglo-American oil politics and the New World Order’ (reviewed here),
will not be surprised to learn that the convoluted machinations of
those who rule empires, whether past or present, are intrinsic to the
workings of the ruling class. History reveals that a mere handful
relatively speaking of individuals are able to determine the fate of
millions through the economic and political power they wield. The
political class that represents the interests of the owners of economic
power is to maintain the rule of the owners of capital by making damn
sure that opposition is neutralised and/or made to look ridiculous or
ultimately 'removed’. Hence the 'loony left’, 'fellow travellers’,
'dinosaurs’ et al are but a few of the pejoratives the
corporate/state-run media use to marginalise the views of those who
oppose such power.
in times of crisis and failing propaganda and persuasion, more extreme
measures need to be taken and such people and movements need to be
re-labelled as 'extremists’ or a 'danger to the state’. Laws are passed
making such opposition illegal, such as those now being enacted, even
thinking 'seditious’ thoughts become the subject of the state’s wrath.
quick scan of the media reveals the tactics used; President Chavez is
described as a 'leftist with authoritarian ambitions’, Castro as a
'Marxist dictator’, and anybody who opposes the rule of capital is
invariably labelled as an 'opponent of the free market’ or
'anti-privatisation’; a 'demagogue’ and so on and so forth. Attempts
are made to link 'leftists’ to 'extremists’ and even to 'terrorists’.
Such terms, in use for so long, trigger conditioned reflexes in the
reader, the associations are buried deep in the public’s mind as
'received opinion’; all thinking ceases; we metaphorically salivate
when we hear or read the terms and dismiss such people and ideas as
beyond the pale or even dangerous to our health.
of those of us who analyse the workings of our rulers are quick to
dismiss us as 'conspiracists’, nutty people who apparently have nothing
else to do with our time but weave complex plots, spun out of what are,
at least according to the pundits, accidents of time and place, mere
serendipity. This is of course a tactic to relegate our opinions to
'Area 51’, and obviously there are those who do spin complex webs,
making connections where none exist.
But connections do
exist between events, else there would be no cause and effect, no one
with interests and objectives they’d rather not reveal to the world for
what they are, vested interests and real criminal conspiracies. That
it’s governments or business doing the conspiring doesn’t make them any
the less conspiracies, indeed it makes them all the more dangerous
because of the immense power they wield. Without connections the world
would be one of chaos and happenstance, a world where as Margaret
Thatcher said, "there is no such thing as society", an obviously loony
idea but one that has a subversive appeal, as it implies that
circumstances are ultimately beyond our control hence why bother as
there is nothing we can do about it. The implication is that we are at
the mercy of 'natural’ forces, hence capitalism for example, is a
'force of nature’. The intended result of course is that we adopt a
position of fatalism, very convenient for our rulers, they can get on
with the business of ruling undisturbed by 'winters of discontent’.
problem of course is that any investigation of events does reveal
vested interests, possessing economic and political power is not an
accident and rarely is its possession the result of good intentions or
a social conscience. As Engdahl’s book reveals, the past 100 years and
more have been shaped by a small group of individuals who possess vast
wealth intimately connected to an equally small group of people who
possess enormous political power. The centres of their economic power
are predictably energy, banking, weapons and communications and
maintaining control of such enormous power inevitably connects directly
into the comparable key areas of government; trade, investment,
'defence’ and foreign policy. Those who sit on the boards of big
corporations are also found in key government positions and they
regularly make the trip back and forth between the two in a revolving
door relationship. The examples are numerous, the most obvious being
for example in the UK, the relationship between the Blair government
and British Petroleum or in the US, between the Bush regime and
Halliburton and the big oil companies.
identifying such connections an invention, a conspiracy or a reflection
of the common interests of those who hold economic power and the
political class that seeks to maintain an environment that preserves
that power? Most importantly, to what lengths will they go in order to
maintain their power? Considering what’s at stake it is no surprise
that there is virtually nothing they won’t do in order to maintain the
status quo including murdering their own citizens, attacking sovereign
states, concocting 'threats’ and fabricating entire 'histories’ to
justify their piratical ways. The apologists for such activities would
have us believe that such actions belong to the past, the past being
conveniently, well before the current crop of rulers inherited power.
Paul, on the road to Damascus is said to have gone through a major
conversion, he proverbially 'saw the light’ and in all likelihood there
are many of us who experienced a comparable flash of illumination when
the forces of Darkness invaded Iraq and came to rational and
well-founded conclusions about the relationship between war and
economics – the two go hand-in-hand, to pretend otherwise is either
sheer ignorance or deliberate deception.
mainstream media was (and still is) all to quick to condemn all those
who cried 'it’s all about oil’ as 'conspiracists’ and in their haste to
condemn us they revealed much about their own ideological leanings,
leanings that would have us believe that the invaders were actually
operating out of concern for the Iraqi people. Indeed, the mainstream
media was awash with apologists for the invaders. Most are now
noticeable by their absence given the results of the invasion and
occupation. Most noticeable is the absence of any alternative
explanation for the invasion except the laughable "failure of
intelligence", which only a cretin would actually believe.
2010 we will need on the order of an additional fifty million barrels a
day. So where is the oil going to come from? .… While many regions of
the world offer great oil opportunities, the Middle East with two
thirds of the world’s oil and the lowest cost, is still where the prize
ultimately lies – Dick Cheney in 1999, then CEO of oil services company Halliburton
is it all about oil? For over 100 years oil has been lifeblood of
capitalism, two world wars have been waged over possession of it, but
not merely its possession but because without it, the larger economic
objectives of capitalism would be unrealisable, hence to say it’s all
about oil is only part of the answer. Oil fuels the armies, powers the
factories and control of its production and distribution enables the
West to exert control over the natural resources needed to make the
entire shambolic enterprise lurch from crisis to crisis and of course,
make profits for the shareholders. It is, when all’s said and done,
astounding simple, one might say juvenile were it all not so murderous
officials believed that the area [the Middle East] was a "vital prize
for any power interested in world or domination, while their US
counterparts saw the oil resources of Saudi Arabia as a "stupendous
source of strategic power and one of the greatest material prizes in
A report, 'Crude Designs – The rip-off of Iraq’s oil wealth’, available here,
is a comprehensive analysis of the centrality of oil to the invasion of
Iraq and for anyone who is really interested in the real motivations
behind the invasion and occupation, it is required reading. I’ll do my
best to produce an overview of its findings as understanding what is
really going on is central to countering all the nonsense surrounding
the policies and actions of our governments and those who would condemn
us as 'conspiracists’ or defend the motivations of our rulers as
has been made in the corporate/state-run media of Blair being some kind
of 'restraining influence’ on Bush and the 'neo-cons’ but as the report
makes abundantly clear, US-UK foreign and energy and military policies
are 'joined at the hip’ and have been so for the past century and in
spite of the rivalries. As Jack Straw made clear in January 2003,
of the Foreign Office’s seven priorities was "to bolster the security
of British and global energy supplies." The geography of such a
strategy had been spelled out in the 1998 Strategic Defence Review
Europe our interests are most likely to be affected by events in the
Gulf and Mediterranean. Instability in these areas also carries wider
risks. We have particularly important national interests and close
friendships in the Gulf. Oil supplies from the Gulf are crucial to the
lest anyone think that the UK government’s relationship with the major
oil companies is not central, a later paper states that a key objective
investment regimes and energy sector management in these regions [the
Middle East, parts of Africa and the former Soviet Union], focusing on
key links in the supply chain to the UK"
as the report demonstrates the US-UK relationship is no 'one-night-
stand’, but an on-going relationship a century-old. Moreover the label
'neo-con’ is a total misnomer, for whilst it may well be true that Bush
is some kind of weird Christian fundamentalist and his close associates
are heavily involved with Israel’s imperialist strategy, it is a big
mistake to confuse the ideology of Bush or that of Israel with the
fundamental strategic/economic interests of the US (and UK).
is made abundantly clear by the 'parting of the ways’ of the
'traditionalists’ within the US ruling elite currently taking place as
the Middle East strategy of the Bush regime goes pear-shaped, revealing
the fact that as long as objectives can be realised, Bush’s 'peculiar’
ideas are neither here nor there in the larger scheme of things.
the policies of America and Britain are coordinated. The US-UK Energy
Dialogue – a bilateral initiative established during the April 2002
meeting of Prime Minister Blair and President Bush in Crawford,
Texas, and designed to "enhance coordination and cooperation on
energy issues" – demonstrates the close convergence of Anglo-American
views and interests on Middle Eastern oil.
The relationship between economics and politics is revealed by the following quote taken from the Executive Summary
development model being promoted in Iraq, and supported by key figures
in the [Iraqi] Oil Ministry, is based on contracts known as production
sharing agreements (PSAs), which have existed in the oil industry since
the late 1960s. Oil experts agree that their purpose is largely
political; technically they keep legal ownership in state hands, while
practically delivering oil companies the same results as the concession
agreements they replaced.
report describes the background as well as the context leading up to
the invasion and occupation; the key players and their interests and
connections as well as supplying a detailed analysis of the effects of
the Iraqi 'government’ signing away not only its one and only natural
resource, oil, but in doing so, also renouncing its sovereignty and
democratic control over it.
the report states, "PSAs are effectively immune from public scrutiny
and lock governments into economic terms that cannot be altered for
decades". The potential losses to the Iraqi people are staggering, the
most conservative estimates puts it at $94 billion over the usual (25 year length of a PSA contract) assuming oil at $40 per barrel and $250 billion if the cost is $50 per barrel!
The degree of influence of both the US and UK governments over future Iraqi oil policy is revealed by the following
discuss with the Iraqi Ministries their priorities on a regular
basis." Freedom of information requests on the nature of the
discussions have been turned down because advice was "voluminous".
too with the US. When the Coalition Provisional Authority 'handed over
power’ to the Iraqi Interim Government, a senior US official said
still here. We’ll be paying a lot of attention and we’ll have a lot of
influence. We’re going to have the world’s largest diplomatic mission
with a significant amount of political weight."
important aspect of the debate around Iraq’s oil has hinged on the
issue of 'privatisation’ which has, according to the report obscured
the nature of the PSA, for as the report states, it’s "who gets the
revenue and who controls the way in which oil is developed" that counts.
first appeared in Indonesia in the late 1960s (not surprisingly
following the US-inspired and backed overthrow of Sukarno). PSAs are an
"ingenious arrangement" as "PSAs shift the ownership of oil from
companies to the state, and invert the flow of payments between state
the relationship between the foreign oil companies and the state was
based on royalty payments (and still is in the major oil- producing
countries of the world such as Kuwait, Saudi Arabia and Venezuela),
with the oil company taking the investment risk. PSAs reverse this
process. PSAs are an ingenious arrangement for although "… the oil is
still legally in the hands of the state, foreign companies are
compensated for their investment in oil production infrastructure and
for the risks they take." PSAs are
convenient marriage between the politically useful symbolism of the
production-sharing contract (appearance of a service contract to the
state company acting as master) and the material equivalence of this
contract model with concession/licence regimes in all significant
aspects…The government can be seen to be running the show – and the
company can run it behind the camouflage of legal title symbolising the
assertion of national sovereignty."
The report states the following facts about PSAs
A right to oil reserves.
Companies want a deal that guarantees their right to extract the
reserves for many years, thus ensuring their future growth and profits.
Furthermore, they want a contract that allows them to 'book’ these
reserves – including them in their accounts – which increases their
company value. Production sharing agreements, like concession
contracts, permit companies to book reserves in their accounts.
An opportunity to make large profits.
Generally, oil companies make their profits from investing and risking
their capital. In some cases, they lose their capital, for example when
they drill a 'dry well’. But in some cases they will find large and
hugely profitable fields. Oil companies are therefore very different
from service companies like Halliburton, which make money from fixed
fees on predictable contracts. Oil companies aim for deals which may be
more speculative, but which give them a chance of making super-profits.
Production sharing agreements are designed to allow companies to
achieve very large profits if successful.
Predictability of tax and regulation.
While companies can accept exploration risk (that they won’t find oil)
or price risk (that the oil price falls), both being beyond their
control, they try to manage 'political risk’ (that tax or regulatory
demands will increase) by locking in governments. They thus seek to
bind governments into long-term contracts that fix the terms of their
investment. Production sharing agreements generally last for 25 to 40
years with terms protected from potential change by incoming
are also incredibly complex legal documents that require an army of
sophisticated legal eagles not only to draft but to understand.
generally consist of several hundred pages of legal and financial
language (often treated as commercially confidential). It is their
complexity, not their simplicity, which is advantageous to oil
companies … [O]il companies dislike royalties and prefer systems based
in an assessment of profits, such as PSAs. The reason is that they want
what they call 'upside’ (i.e. opportunities for greater profits) – ways
they can reduce their payments, rather than being subject to a fixed
level of payment for oil extracted … The more complicated the system,
the more opportunities there are for a company to maximise their share
of the revenue by sophisticated use of accountancy techniques.
we call 'creative accounting’ of the kind Enron was so adept at. And
the potential profits are "staggering", as much 178 per cent compared
to an average 12 per cent return on investment, assuming oil at $40 a
barrel, not very likely in the near term. With current price at around
$60 per barrel, the oil execs are salivating at the thought of getting
their hands on the biggest oil reserves on the planet (from 100-200
deals allow oil companies a favourable profit margin and, unlike
royalty schemes, insulate them from losses incurred when the oil price
drops. For years, big oil companies have been fighting for such
agreements in countries such as Kuwait and Saudi Arabia."
corporate lobby group ITIC (the International Tax & Investment
Centre) with most of its 110 listed sponsors large corporations a
quarter of which are oil companies is perhaps the best example of the
role of big capital in ripping off Iraq and it advocates the use of
PSAs. Yet the report’s assessment is that it is
difficult to overstate how radical a departure PSAs would be from
normal practice, both in Iraq and in other comparable countries of the
region … Iraq’s neighbours Kuwait, Iran and Saudi Arabia, foreign
control of oil is ruled out by constitution or by national law.
the interim constitution forced on the Iraqi people made quite sure
that the terms over which Iraq’s oil would extracted would not be
subject to oversight or control by the Iraqi people,
both the Iraqi elections and the drafting of a new constitution,
Allawi’s guidelines specified that while Iraq’s currently producing
fields should be developed by the Iraq National Oil Company (INOC), all
other fields should be developed by private companies, through the
contractual mechanism of production sharing agreements (PSAs)."
meshing of state and business objectives is made clear by the report
and the key role of PSAs play in the policies of both the US and the
UK. If the US-UK oil companies and their political/military capos get
their way Iraq
"along with much of its future income, could be surrendering its democracy as soon as it achieves it."
That’s assuming it ever gets a democratic government.
The terminology of PSAs labels the private companies as "contractors".
This report illustrates that this label is misleading because PSAs give
companies control over oil development and access to extensive profits.
Introductory paper on the Middle East by the UK, undated , FRUS,
1947, Vol. V, p. 569, cited in Mark Curtis, The Ambiguities of Power
(Zed Books, London, 1995), p. 21
US Department of Commerce, Memorandum for the President, Transmittal of
the Report on the US-UK Energy Dialogue, 30 July 2003
 Dr Kim Howells MP, answer to Parliamentary Question by Harry Cohen MP, 12 July 2005, Hansard column 878W
James McLaughlin (Iraq Policy Unit, Foreign & Commonwealth Office),
letter to Lorne Stockman (PLATFORM), response to request under the Code
of Practice on Access to Government Information, 9 December 2004
 Jim Krane, "US will retain sovereign power in Iraq," Associated Press, 21 March, 2004
Professor Thomas W Wälde, an expert in oil law at the University of
Dundee, 'The current status of international petroleum investment:
regulating, licensing, taxing and contracting’, in CEPMLP Journal, Vol
1, no.5, July 1995 (pub. University of Dundee)
 Carola Hoyos, 'Exiles Call for Iraq to Let in Oil Companies’, Financial Times, 7 April 2003
 Energy Compass, 'Iraq: Puzzling over the future’, 1 October 2004
Crude Designs – The rip-off of Iraq’s oil wealth.
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