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Iraq: Government pushes oil privatisation

November 19, 2011
Wednesday, November 18, 2009 – 11:00
By Tim Dobson

Before and after the invasion of Iraq, the war’s goal of privatising Iraq’s oil to the benefit of Western oil corporations was highlighted not just by the war’s opponents, but also by many of its supporters.

Just before the March 20, 2003 US-led invasion, the US state department’s Oil and Energy Working Group said Iraq “should be opened to international oil companies as quickly as possible after the war”.

The Iraq Study Group, which gave recommendations to the US government in 2006, said the US should “assist Iraqi leaders to reorganize the national oil industry as a commercial enterprise”.

It said Iraq’s leaders should also seek to “encourage investment in Iraq’s oil sector by the international community and by international energy companies”.

In 2007, former US Federal Reserve chairperson Alan Greenspan said: “I’m saddened that it is politically inconvenient to acknowledge what everyone knows: The Iraq war is largely about oil.”

Iraq’s oil production was nationalised in 1973. The idea that money raised from the sale of oil should go to foreign oil corporations is extremely unpopular in Iraq.

In 2005, the General Union of Oil Employees in Iraq said: “The privatisation of the oil and industrial sectors is the objective of all in the Iraqi state/government.

“We will stand firm against this imperialist plan that would hand over Iraq’s wealth to international capitalism such that the deprived Iraqi people would not benefit from it.

“We are taking this path for the sake of Iraq’s glory even if it costs us our lives. Iraqis are capable of managing their companies and their investments by themselves.”

Only 17 of 80 oil fields in Iraq are now being developed. The potential income from Iraqi oil production is billions of dollars. Oil revenue accounts for more than 70% of Iraq’s gross domestic product and 95% of government revenue.

The US-backed Iraqi government proposed the privatisation of oil production in a bill known as the Iraq hydrocarbon law. It was approved by the Iraqi cabinet in February 2007, but is yet to pass the Iraqi parliament due to widespread opposition.

A 2007 nationwide poll found 63% of Iraqis “prefer Iraq’s oil to be developed and produced by Iraqi state-owned companies [than] by foreign companies”. Oil workers also went on strike against the bill soon after it was brought to parliament.

Attempts to pass the law have been delayed until after the national elections, scheduled for January 15.

Such opposition has meant the quisling Iraqi government has had to find other ways to push privatisation. It has done this by signing agreements with oil corporations, which are called “service” agreements.

This means the Iraqi government pays foreign oil companies for the amount of barrels of oil the companies extract, as well as compensating them for any upgrades.

This is instead of granting oil companies a particular amount of the total revenue, which would be the case under the hydrocarbon law.

Despite the oil law not being passed, nearly 90% of Iraq’s oil reserves have been opened to foreign bidders to be “serviced”. In the first “auction”, only one of eight oil and gas fields has been sold, the giant Rumaila field in southern Iraq, to a consortium led by BP.

Oil companies complained the terms proposed by the Iraqi government were “unfair”. The government responded by weakening its terms for the second auction, to be held in December.

The Dow Jones newswire said on August 25 that one change means “international oil companies will be able to operate the fields. The first bidding round had stipulated that Iraqi oil officials would be involved in running the fields”.

It was announced on November 5 that the Iraqi oil ministry had struck a deal with major oil companies Exxon-Mobil and Royal Dutch Shell for the rights to “develop” West Qurna, which has verified reserves of 15 billion barrels.

Such contracts put the companies in a good position to gain further contracts for even more lucrative unexplored oil fields, and to get much better deals if the oil fields become fully privatised in the future.

An October 22 Reuters article explained the oil companies attitudes: “Oil tycoon T. Boone Pickens told Congress on Wednesday that US energy companies are ‘entitled’ to some of Iraq’s crude because of the large number of American troops that lost their lives fighting in the country and the US taxpayer money spent in Iraq.”

No mention at all was made of the more than 1 million Iraqi lives lost so tycoons like Pickens can accumulate even more wealth.

From GLW issue 818

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