I haven’t seen anyone blog about this Salon article, which rather surprises me. The article discusses why Big Oil really doesn’t want war with Iraq, at least not now. A lot of the points this article makes are quite sensible when you think about it: We don’t need to go to war to free up Iraqi oil, we could simply drop our sanctions against Iraq instead. Given that the US is easily the biggest consumer of oil, it hurts Iraq a lot more than it hurts us for their oil to be unavailable to us. Most critically from the point of view of US oil producers, once Iraqi oil is freely available on the world market, the price will go down as the supply has increased.
This doesn’t mean that the United States doesn’t have a vested interest in securing Iraq’s oil. There’s a whole lot of oil in Iraq, and it’s certainly in our long term economic interests to have that oil be under the control of a government that’s not as loony and despotic as the current one. One could say the same about oil in Iran and Saudi Arabia as well, two other countries that the Perle/Wolfowitz crowd is surely thinking about. And it’s absolutely in George W. Bush’s political interest to bring about a more stable oil supply; if that in turn leads to lower prices at the pump, a happenstance that will surely boost his reelection prospects, so much the better. The point is simply that the long term economic interests of the United States and the short term political interests of President Bush are not necessarily the best interests of ChevronTexaco or ExxonMobil.
Another reason why Big Oil is queasy about invading Iraq is the fact that none of the US-based oil companies have any contracts to drill in Iraq. Guess which country stands to gain the most from opened-up Iraqi oil fields?
The U.S. lost a three-quarter share of Iraq’s oil production in 1972, when Iraq nationalized its oil fields. The oil company with the most — and best — contracts to extract Iraqi oil is France’s TotalFinaElf. Russia’s LUKoil runs a close second. Chevron’s bluntspoken CEO, Kenneth Derr, supported sanctions against Iraq in 1988 because, he said in a 1998 speech to San Francisco’s tony Commonwealth Club, “Iraq possesses huge reserves of oil and gas I’d love Chevron to have access to.” Sanctions offered a chance to pressure Saddam into making room for the American companies.
But sanctions are different from war. Some analysts say that removing Saddam will make it harder for American oil companies to gain the foothold Chevron covets, rather than easier. France and Russia, recalcitrant Bush allies, may be holding out for promises that the U.S. will require a post-Saddam government to honor the preferential contracts their oil companies enjoy — starting with commissioning French and Russian oilmen for billions of dollars of restoration work. Ironically, as a political price for winning French and Russian support for war in the U.N. Security Council, American oil companies could be frozen out of postwar Iraq.
“There’s absolutely no guarantee that U.S. Big Oil will participate” in post-Saddam Iraq, says Kyle Cooper, an oil-industry analyst at the brokerage Salomon Smith Barney in Houston.
Yes, the one country which will undoubtedly profit from an invasion of Iraq is none other than France, that beacon of Old European obstinacy. One can only wonder if their stubbornness and threatened Security Council veto isn’t actually part of an elaborate scheme to strengthen Bush’s resolve and possibly whip up American support for an invasion. Since everyone knows that anything the French oppose must be good for America, the best way for them to facilitate an invasion and thus reap the eventual rewards is to appear to be blocking our every step. It’s a rope-a-dope strategy that’s as brilliant in its audacity as it is in its subtlety. I can’t believe Stephen den Beste hasn’t already written 50,000 words on it.
While the article goes on to discuss how an influx of Iraqi oil will be bad for several other oil-based economies, especially Russia, it doesn’t talk about some of the other costs that US-based oil companies will incur with an invasion. War in Iraq will threaten the security of many American and European expats who are currently based at large drilling sites in Africa and the Middle East. You can be sure that their companies are prepared to evacuate most if not all of their staff in places like Kuwait should the US invade Iraq. Not only is that a large expense for them, it also means their production capacity is reduced. (It’s also not just Americans and not just oil workers, too.) I think it’s pretty clear why that’s bad for business.
The bottom line is that while oil is certainly a component of the rationale for invading Iraq, it’s a lot more complicated than “blood for oil”.
The truth about oil and the potential war with Iraq
From Off the Kuff: “I haven’t seen anyone blog about this Salon article, which rather surprises me. The article discusses why Big Oil really doesn’t want war with Iraq, at least not now. A lo…
Some of us have been trying to make this point for a while, but some time back I just threw my hands in the air. The same people who were yelling at Bush for the high gas prices in 2001 were the ones making the argument that this was all about oil. Oil companies want high gas prices and they want limited supply.
That this is done at the oil companies’ bidding is more than just wrong, it’s nonsensical.
It’s a Salon premium article, which is probably one reason not many people have blogged about it. And as subscription services go, the WSJ has had far superior coverage of the postwar Iraq oilpatch, which may be another reason.
I’ll second Alex that supermajors (sorry, but “Big Oil” sounds a little too Marxist for me) aren’t enamored with war in Iraq. Frankly, supermajors can work anywhere in the world if there is an economic reason to do so (look at Shell in Nigeria for perhaps the best example). Almost all risks can be managed (think again of Nigeria, but also Sudan, Angola, even Colombia). What no company likes is discontinuities — rapid unpredictable political changes that have the potential to upset complicated cash flow models. And that’s not because they’re “greedy” (though we all like to make money on our investments, I presume!), but because international E&P is a complex, risky, expensive proposition, and major changes to a model can be the difference in making money or losing millions.
As discontinuities go, think of it this way: in many ways, Saddam Hussein is the ultimate guarantor of a contract! Who is going to challenge his authority? And an election isn’t going to bring in an unfavorable government! The same is true of nearby Libya. I don’t think much of their dictator in terms of political philosophy or human rights, but I would wager there have been few better guarantors of an E&P contract in the history of the business! Why would any oil exec in his right mind want to see those guys go?
Anyway, I’m not at all sure why Salon tapped a Salomon Smith Barney broker whose expertise is oil futures to talk about operations and logistics in postwar Iraq. But I have to disagree with their expert. On a level playing field (i.e. one rid of sanctions), American supermajors can compete with any company anywhere. Current contracts will likely be honored, of course, because that’s one of the few commandments of international E&P (ask the Ecuadorian government about the impact of the mere perception that a contract might be altered). And there are likely to be some international legal issues that could interfere with offering a new bid round while the U.S. is present as an occupying power. But there will be an almost immediate demand for oil service companies, because Iraq’s oil infrastructure is crumbling as it is, and desperately needs refurbishment and Western expertise/investment. American service companies will almost certainly be involved in that, and quickly. That’s just a given to me. Indeed, the most interesting question will be who will sit at Iraq’s place during OPEC meetings? Tommy Franks? Dick Cheney? Ken Lay (I hear he’s available)?
I also have my doubts that companies are going to evacuate much in the way of actual staff from Kuwait. I suspect very few oilpatch folks will actually leave, although many families will be sent home and some “nonessential” staff may be sent home. But that’s fairly routine in turbulent times (many families and nonessential staff have been similarly sent home from Venezuela, where there’s no radical Islamic threat to American expats).
Why does it surprises you that no is talking about his article, because you guy dont understand money, and how its acquired by oil companies.
Listen people. That salon Article is more a justification for WAR with Iraq for control of OIL that it is not.
Exactly how do you think oil companies make their money in foreign countries. Fossil fuel companies do it by contracting to drill for oil. Yes the US can buy oil from other countries at whatever price they choose to sell it to us and only if they choose to sell oil to us but US fossil fuel companies will not make any money that way.
Here is a letter from a man who writes to Bush on why Bush wants to attack Iraq.
Go to this Link
And here is an excerpt:
So, why are you so attached to invading Iraq?
I believe that we both know that the answer is that you desire to occupy and control Iraq through a puppet government for the benefit of U.S. oil corporations. Why would this be the case? Let’s start with The National Energy Policy Report (the “Cheney Report”). The report indicates that by 2020, 67 percent of our oil will come from foreign sources.
The report also says that the majority of foreign oil must come from the Persian Gulf and that the United States should take steps to secure access to this oil. In addition, a report prepared by the Council on Foreign Relations and the James A. Baker III Institute for Public Policy points out the possible need for military intervention to secure U.S. access to oil in the region. Dick Cheney is a member of The Council on Foreign Relations. Iraq, of course, has the world’s second largest oil reserves, which makes control of its oil especially important.
While the average person would probably figure that U.S. oil corporations would gain access to this oil if the situation with Iraq is ended peacefully, that isn’t quite the case. The reality is that, according to the Observer (UK), several European countries have standing contracts with Iraq for oil that can go into effect once the sanctions are lifted. If this happens, it is expected that U.S. and British oil companies will lose out on Iraq’s oil wealth. On the other hand, should the United States and Great Britain manage to occupy Iraq and put in place a puppet government, U.S. and British oil companies will profit handsomely. Indeed, according to Foreign Policy in Focus, these oil corporations have already begun to negotiate with Iraqi opposition leaders.–
—Mr. Bush, why might that be important to you and Mr. Cheney? Maybe because, according to Professor David Boje of New Mexico State University, energy corporations contributed $1.7 million to your presidential campaign, and a total of $26 million to all Republican candidates combined. Interestingly, according to Federal Election Commission figures, about 80 percent of all oil and gas corporation contributions go to the Republican Party.
Oil corporations won’t be the only ones to benefit. Haliburton, the country’s fifth largest defense contractor and the world’s largest supplier of oil-related equipment and services, also stands to do quite well. Until he left to be the vice-presidential candidate, Cheney was CEO of Haliburton. According to Boje, Cheney received $65 million in stock and salary during his five years as CEO. His retirement package was $34 million. Does it seem at all possible that Haliburton expects a return on that $34 million? Of course, they might also want a return on the $422,688 that they invested during the 2000 election year cycle — 98 percent of which went to Republican candidates.
So how much did Bush tell France they would have give up of their oil contract to accommodate American oil company interest? France had a cow and Bush then accuses France of not wanting to invade Iraq because of oil and because France doesn’t want to split or share it’s Iraqi oil contracts with US interest.
This statement is very misleading:
U.S. lost a three-quarter share of Iraq’s oil production in 1972, when Iraq nationalized its oil fields. The oil company with the most — and best — contracts to extract Iraqi oil is France’s TotalFinaElf. Russia’s LUKoil runs a close second. Chevron’s bluntspoken CEO, Kenneth Derr, supported sanctions against Iraq in 1988 because, he said in a 1998 speech to San Francisco’s tony Commonwealth Club, “Iraq possesses huge reserves of oil and gas I’d love Chevron to have access to.” Sanctions offered a chance to pressure Saddam into making room for the American companies.
Saddam hated the US for imposing sanctions in first place so Saddam excluded giving the US any contracts for oil.
AND this part right here is a outright lie:
require a post-Saddam government to honor the preferential contracts their oil companies enjoy — starting with commissioning French and Russian oilmen for billions of dollars of restoration work, because restoration work money would NOT come out of Russia or France’s share of mining their operation but rather would come out of Iraq’s share for allowing Russia and France to operate Iraqi drilling production. The oil gained from drilling still belongs to Iraq and Iraq will sell it’s oil to acquire goods and capital.
This Salon Article is an intentionally misleading document.
Here is another LINK
About how Cheney tried to lift sanction on Iraq in April of 2001 but it didn’t matter because Saddam didn’t want to deal with the US and that is why Bush wants Saddam dead because the US can’t make any contracts with Iraq.
obviously, NOW, its easy to see that the goal was to PREVENT Iraq from pumping oil, RAISE the price, INCREASE the profit to speculators and oil companies.
Greg Palast was sent a State Dept memo ordering the free Iraqi Democratic government to KEEP OIL PRICES HIGH.