this is a guest post from Munir Chalabi, an Iraqi Political Analyst living in London.
The US Democrats and the Republicans may disagree on many tactics and
probably on part of the strategy for how to sustain the military occupation
of Iraq, but when it comes to the strategy for the future of Iraqi oil they
seem to be in agreement on every detail.
The Iraq Study Group (ISG) report represents a joint approach by both
parties and its recommendations look to be very similar to the right-wing
Republican’s policies set by the State Department’s “future for Iraq
project” prior to the 2003 invasion.
The short-term objectives are as outlined in recommendation 62 which stated “to prepare a draft oil law that … creates a fiscal and legal framework for investment” (meaning investments by international oil companies).
It goes further by calling on the US government to interfere in the writing
of the draft of the Petroleum law to ensure that the new law should
specially cover the huge oil reserves of the southern oil fields.
The ISG emphasizes the important of introducing a Petroleum law, as a
milestone to be approved by the Iraqi Parliament no later than early 2007.
Furthermore the ISG admits that the occupying forces in Iraq are going to
stay for a long time to come, to ensure the protection of the oil flow, when
they recommended that “the US military should work with the Iraqi military
and with private security forces [meaning the foreign mercenaries] to
protect oil infrastructure and contractors.”
The long-term objectives are outlined in recommendation 63. It highlights
long-term US interests and shows that the reason for the war on Iraq was to sustain full control of the huge reserve of Iraqi oil. The proven reserve is
over 115 billion barrels of oil and potentially another 215 billion barrels
within the 400 unexplored structural anomalies.
The ISG emphasizes that US interests lie with the international oil
companies and specifically the US companies, to ensure that they have
complete control of Iraqi oil reserves (the second largest in the world).
This policy has been highlighted in the report stating that “the United
States should encourage investment in the Iraqi oil sector by the
international community and by international energy companies.”
So what model of oil contracts is the report calling for?
The report proposes that the US should provide Iraqi officials with
contracting templates without naming the model of oil contracts.
But at the same time recommendation 63 states, “the United States should
assist Iraqi leaders to reorganize the national oil industry as a commercial
Looking at both proposals, together with all the other suggestions in the
“Assessment of the Current Situation” part of the report provides an
overwhelming indication that the report is calling for some kind of
re-privatization of the Iraqi oil industries but from “the back-door
” and is very likely directed towards the type of contracts known as “Production Sharing Agreements or PSA.”
The information available on the best-kept secret — the draft of the oil
(hydrocarbon) law — confirms that the new oil law will recommend that Iraq should implement PSAs and other types of contracts such as buyback and service contracts.
The PSA was introduced by the oil companies in the early 1960s to replace
the out-of-date “concessionary” contracts (the early twentieth century
model) to ensure that it reflects the interests of the oil companies, and
maintains their profits at the same level as the concessionary model.
The PSA technically keeps the legal ownership of the oil reserves in the
hands of the Iraqi state whilst actually giving full control to the oil
In short, the PSA model will cost the Iraqi people hundreds of billions of
dollars in lost revenue whilst providing the oil companies with enormous
For a comprehensive analyses of the PSA contracts see the Platform study [co-published by Oil Change International] “Crude Designs: The rip-off Iraqi’s oil wealth.”
1. The ISG recommendations are clearly calling for a back-door form of
re-privatization of Iraqi oil wealth, which represents the interests of the
US government and the international oil companies and not the Iraqi people.
2. The recommendations also call for long-term US military bases on Iraqi
soil to protect US oil interests in Iraq.
3. The World Bank, the US administration and the IMF are also putting all
manner of pressure on the Iraqi government to get a new hydrocarbon law
through the Iraqi parliament in line with the ISG recommendations as soon as possible.
4. All indications are pointing to the fact that the draft of the new oil
law is complying with many requirements of the ISG recommendations.
5. The major obstacle that seems to be delaying the presentation of the oil
draft to the parliament is the disagreement between the Iraqi central
government/ISG recommendations on one hand and the Kurdish regional
government on the other hand with regard to the interpretation of article
111 of the Iraqi constitution.
6. Both the Iraqi Government and the ISG are calling for changes to article
111 to give more power to the federal government when it comes to taking
strategic decisions on the future of the nation’s oil wealth.
It is obvious in the mind of many analysts that the reasons behind the ISG’s support for more power to the Iraqi central government on strategic
decisions, is to give more legitimacy to any new contracts which could be
signed between the federal government and the international oil companies, in case these are challenged in the future by a new Iraqi government in international court.
7. All indications are that the draft of the new oil law will recommend the
re-instatement of the “Iraqi National Oil Company — INOC” (which was
dissolved by the Baathist government back in 1987), but with fewer powers than the old INOC.
8. It is in the interests of the Iraqi people not to rush into any new
strategic oil law that will decide the future of the country’s wealth within
the lifetime of this parliament whilst Iraq is still under occupation and
the Iraqi state is on its knees.
9. It will be in the Iraqi peoples’ interest to have a temporary oil law
which re-establishes INOC and gives it full decision-making powers.
Furthermore, it should permit only a short-tem contract between INOC and the international oil companies so as to provide technical help to develop the existing oil fields, which can produce up to 3.5 million barrels/day — the same level of oil production as in 1979.
Munir Chalabi can be contacted at munir [[AT]] chalabi[[DOT]]screaming[[DOT]]net>.