December 2, 2005
AN EXCLUSIVE BUZZFLASH GUEST
Bush administration's covert plan to help energy companies steal Iraq's
oil could be just weeks away from fruition, and the implications are
staggering: continued price-gouging by Big Oil, increased subjugation
of the Iraqi people, more US troops in Iraq, and a greater likelihood
for a US invasion of Iran.
That's just for
starters. The administration's challenge has been how to transfer
Iraq's oil assets to private companies under the cloak of legitimacy,
yet simultaneously keep prices inflated.
But Bush &
Co. and their Big Oil cronies might have found a simple yet devious
solution: production sharing agreements (PSAs).
how PSAs work. In return for investment in areas where fields are small
and results are uncertain, governments occasionally grant oil companies
sweetheart deals guaranteeing high profit margins and protection from
exploration risks. The country officially retains ownership of its oil
resources, but the contractual agreements are often so rigid and severe
that in practical terms, it can be the equivalent of giving away the
deed to the farm.
Since Iraq sits on the world's third
largest oil reserves, the PSA model makes little sense in the first
place; Iraq's fields are enormous and the exploration risks are
accordingly miniscule, so direct national investment or more equitable
forms of foreign investment would be in order. But as a comprehensive
new report by the London-based advocacy group PLATFORM details, the PSA
model "is on course to be adopted in Iraq, soon after the December
elections, with no public debate and at enormous potential cost."
PLATFORM's "Crude Designs: The Rip-off of Iraq's Oil Wealth"
points out that the proposed agreements (with US State Department
origins) will prove a bonanza for oil companies but a disaster for the
- "At an oil price of $40 per barrel,
Iraq stands to lose between $74 billion and $194 billion over the
lifetime of the proposed contracts, from only the first 12 oilfields to
be developed. These estimates, based on conservative assumptions,
represent between two and seven times the current Iraqi government
- "Under the likely terms of the contracts,
oil company rates of return from investing in Iraq would range from 42%
to 162%, far in excess of usual industry minimum target of around 12%
return on investment."
Of course, given the current
political chaos, Iraqi citizens have little power over whether their
politicians sign the proposed PSA agreements. That critical decision
could be left to crooks like the former Interim Oil Minister Ahmad
Chalabi, who recently met with no less than Cheney, Rumsfeld and Rice
during his red-carpet visit to the White House. One can assume the
topic of Iraq's proposed PSAs came up more than once.
successor as Oil Minister, Ibrahim Mohammad Bahr al-Uloum, is expected
to toe the corporate line, and Iraq's former Interim Prime Minister
Iyad Allawi issued post-invasion guidelines stating: "The Iraqi
authorities should not spend time negotiating the best possible deals
with the oil companies; instead they should proceed quickly, agreeing
to whatever terms the companies will accept, with a possibility of
But PSAs are notoriously hard
to renegotiate. According to PLATFORM, "under PSAs future Iraqi
governments would be prevented from changing tax rates or introducing
stricter laws or regulations relating to labour standards, workplace
safety, community relations, environment or other issues." The Iraqi
people would be locked into inflexible agreements spanning 25-40 years
with disputes solved by corporate-friendly international arbitration
tribunals, rather than by national courts.
And we call that liberating the Iraqis?
to Greg Muttitt, co-author and lead researcher of the "Crude Designs"
report, "for all the US administration's talk of creating a democracy
in Iraq, in fact, their heavy pushing of PSAs stands to deprive Iraq of
democratic control of its most important natural resource. I would even
go further: the USA, Britain and the oil companies seem to be taking
advantage of the weakness of Iraq's new institutions of government, and
of the terrible violence in the country, by pushing Iraq to sign deals
in this weak state, whose terms would last for decades. The chances of
Iraq getting a good deal for its people in these circumstances are
minimal; the prospect of mega-profitable deals for multinational oil
companies is fairly assured."
Of course, ongoing oil
exploration in Iraq by administration-friendly companies would require
permanent US bases, a massive ongoing troop presence and billions more
in taxpayer-dollar subsidies to sleazy outfits like Halliburton.
implications of all of this for domestic oil prices is unclear. While
neo-conservatives initially pushed for privatizing Iraq's oil reserves
as a way of destroying OPEC (they wanted to boost production and flood
world markets with cheap oil) the administration seems to have taken a
more corporate-friendly stance. After all, the last thing oil
executives want is to break OPEC's stranglehold on pricing, because
keeping supply low has delivered record profits.
But the "National Strategy for Victory in Iraq"
which Bush released yesterday as part of his pro-occupation PR blitz
lists a surprising goal: "facilitating investment in Iraq's oil sector
to increase production from the current 2.1 million barrels per day to
more than 5 million per day." OPEC's quota for Iraq currently sits at
around 4 million barrels per day, so the administration's goal is not
only significantly higher, but (at "more than 5 million") a little too
open-ended for comfort. Could be that they want to have their cake and
eat it too: tighten the screws on OPEC, yet continue to rip-off
consumers through elevated prices.
The whole PSA affair
may also stoke the fires for a US invasion of Iran, which sits on oil
reserves even greater than those of Iraq. Tehran already is on the
administration's hit list, less for its nuclear aspirations than for
its plans to open a euro-based international oil-trading market in
early 2006. Iran's oil "bourse" would compete with the likes of New
York's NYMEX and provide OPEC the opportunity to snub the greenback in
favor of "petroeuros," a development the administration will avoid at
all costs. So if the PSA model is adopted in Iraq, it would provide a
clear precedent for implementing it in Iran too, and hand Bush &
Co. another reason to start bombing.
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AN EXCLUSIVE BUZZFLASH GUEST CONTRIBUTION
has a background in clinical psychology and works as a free-lance
writer and cross-cultural trainer. Her writing has been featured on the
web and in periodicals internationally.