Features » January 15, 2007

Spoils of War (cont’d)

An Iraqi worker tends to pipe at the Iraqi-Turkish pipeline in Kirkuk.

On December 21, 2004, Mahdi joined U.S. Undersecretary of State Alan Larson at the National Press Club and announced Iraq’s plans for a new petroleum law that would open the oil sector to private foreign investment.

“I think this is very promising to the American investors and to American enterprise, certainly to oil companies,” said Mahdi. He described how, under the proposed law, foreign companies would gain access both to “downstream” and “maybe even upstream” oil investment in Iraq. (“Downstream” refers to refining, distribution, and marketing of oil. “Upstream” refers to exploration and production.)

The draft petroleum law adopted Allawi’s recommendation that currently producing oil fields are to be developed by Iraq’s National Oil Company, while all new fields are opened to private companies using PSAs.

The Bush administration and U.S. oil companies have maintained constant pressure on Iraq to pass the petroleum law. The administration appointed an advisor to the Iraqi government from Bearing Point to support completion of the law. And in July 2006, U.S. Energy Secretary Samuel Bodman announced in Baghdad that oil executives told him that their companies would not enter Iraq without passage of the new oil law. Petroleum Economist magazine later reported that U.S. oil companies considered passage of the new oil law more important than increased security when deciding whether to go into business in Iraq.

The Iraq Study Group, recognizing as it did the primacy of oil in its Iraq calculations, recommended that the U.S. “assist Iraqi leaders to reorganize the national oil industry as a commercial enterprise” and “encourage investment in Iraq’s oil sector by the international community and by international energy companies.”

Put simply, U.S. oil companies want access to as much of Iraq’s oil as they can get and on the best possible terms. The fact that Iraq is a war-ravaged and occupied nation works to the companies’ benefit. As a result, the companies and the Bush administration are holding U.S. troops hostage in Iraq until they get what they want. Once the companies get their lucrative contracts, they will still need protection to get to work. What better security force is there than 144,000 American troops?

Three days after the release of the Iraq Study Group Report, the al-Maliki government announced that Iraq’s oil law was near completion. The law adopts PSAs and not only opens Iraq to private foreign companies, but permits “for the first time—local and international companies to carry out oil exploration in Iraq.”

To ensure that this model prevails, the Iraq Study Group recommends that Iraq’s constitution be rewritten to give the central government of Iraq—as opposed to individual regions—the ultimate decision-making authority over all of Iraq’s developed and undeveloped oil fields.

Standard Oil Company’s John D. Rockefeller famously said, “Own nothing, control everything.” He would be proud of the U.S. oil companies and the Bush administration, as they seem poised to get exactly the control they want over Iraq’s oil.

Beyond Iraq: the U.S.-Middle East Free Trade Area

But the Bush agenda has never been limited to Iraq. As the Wall Street Journal reported in May 2003, “For many conservatives, Iraq is now the test case for whether the U.S. can engender American-style free-market capitalism within the Arab world.” To this end, the administration has used the “stick” of the Iraq war to convince nations across the Middle East to adopt its free trade agenda. The mechanism for doing so is the president’s U.S.-Middle East Free Trade Area (MEFTA).

The corporate lobbying group behind the MEFTA, the aptly named U.S.-Middle East Free Trade Coalition, includes among its 120 members Chevron, ExxonMobil, Bechtel and Halliburton—companies intimately connected to the Bush administration that have already been big winners in Iraq.

Insulated by oil revenue, the Middle East has largely avoided succumbing to the sacrifices required under free trade agreements. But since the war began, negotiations for the MEFTA have progressed rapidly.

The Bush administration devised a unique negotiating strategy for the MEFTA. Rather than negotiate with all of the nations as a bloc, the United States negotiates one-on-one with each country. This means that every nation—some half the size of one state in the United States—must try to make a deal that serves its own interests with the most economically and militarily dominant nation in the world. The reality is that there can be no “negotiation” between such thoroughly unequal pairings.

These individual free trade agreements are then united under the MEFTA. If successful, the MEFTA would be concluded by 2013 and include 20 countries: Algeria, Bahrain, Cyprus, Egypt, Palestine, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syria, the United Arab Emirates, Tunisia and Yemen.

To date, the Bush administration has signed 13 Trade and Investment Framework Agreements (TIFAs), which demonstrate a country’s commitment to the MEFTA, and are considered the key step towards passage of a full Free Trade Agreement (FTA). Things have moved briskly since the invasion of Iraq. Algeria and Bahrain signed before the war, while agreements with Lebanon (the most recent, signed in December), Tunisia, Saudi Arabia, Kuwait, Yemen, the United Arab Emirates, Qatar, Egypt, Morocco, Oman and Iraq all followed the war.

The United States has signed FTAs with five Middle Eastern countries: Israel, Jordan, Morocco, Bahrain, and Oman. The last three were signed after the 2003 invasion of Iraq. Negotiations with the United Arab Emirates are underway and near completion.

The winners, of course, are U.S. corporations. On January 19, 2006, for example, then-U.S. Trade Representative Robert Portman sent a letter to Oman’s minister of commerce and industry affirming that, when it signs contracts, the Omani government may not give preference to the government’s state-controlled oil companies.

As for Oman’s apparel industry, the U.S. International Trade Commission estimates that the U.S.-Oman agreement will lead to a 66 percent increase in U.S. imports of apparel manufactured in Oman. What are the likely effects? In May, a report by the National Labor Committee detailed the cost of the first Middle East trade agreement signed by Bush in December 2001—the U.S.-Jordan FTA. After that agreement was implemented, new factories arrived in Jordan to service American companies, primarily apparel firms such as Wal-Mart, JC Penney, Target and Jones New York. These factories have engaged in the worst kinds of rights violations, including 48-hour shifts without sleep, physical and psychological abuse, and, in the case of imported foreign workers, employers who hold passports and refuse to pay. (Wal-Mart also is a member of the U.S.-Middle East Free Trade Coalition.)

The Bush administration will spend the next two years aggressively pushing the MEFTA as it seeks to expand the economic invasion of Iraq to the entire region.

What’s next?

Throughout his presidency, George W. Bush has claimed that we will live in a safer, more prosperous, and more peaceful world if the United States remains at war and if countries throughout the world change their laws and adopt economic policies that benefit America’s largest multinational corporations. The Bush Agenda has proven to have the opposite effect: increasing deadly acts of terrorism and economic insecurity, reducing freedom, and engendering more war. To replace the Bush Agenda, we must address each of its key pillars individually—war, imperialism and corporate globalization.

The most urgent first step is ending the war in Iraq by ending both the military and corporate occupations. We in the peace movement have already made tremendous progress in reaching these ends. Most Americans now oppose the war. The peace movement has welcomed with open arms U.S. soldiers and their families who share this opposition and unity has made us all stronger. Counter-recruitment efforts are blossoming across the country. The U.S. labor movement has joined forces with its counterpart in Iraq. Protests at corporate headquarters and shareholder meetings have led to U.S. war profiteers being called to account for their abuses in Iraq. Our success was made concrete with the dismissal of the president’s party from power in both the House and the Senate.

According to “Election 2006: No to Staying the course on Trade,” by Public Citizen, 18 House races saw “fair traders” replace “free traders” in the midterm election, and not a single “free trader” beat a fair trade candidate. In every Senate seat that changed hands, a fair trader beat a free trader. One of their most important tasks this year will be to deny Bush the renewal of Fast Track negotiating authority when it expires in July. Fast Track allows the president to move trade bills through Congress quickly by overriding core aspects of the democratic process, such as committee deliberations, full congressional debate and the ability to offer amendments.

In addition to the newcomers, several existing allies have been elevated to new positions of power. Rep. Ike Skelton (D-Mo.) is now chairman of the House Armed Services Committee. He has pledged to resurrect the subcommittee on oversight and investigations. Rep. David Obey (D-Wisc.) will use his chairmanship of the House Appropriations Committee to exercise greater oversight of Bush’s war spending. The most important ally, however, will likely be Rep. Henry Waxman (D-Calif.), the new chairman of the House Government Reform Committee. Waxman has been one of the most effective and aggressive critics of Halliburton’s work in Iraq, greatly contributing to Halliburton’s loss of its LOGCAP contract.

Our allies in the new Congress should put forward two key demands:

First, all remaining and future U.S. reconstruction funds must be turned over to Iraqi companies and Iraqi workers. SIGIR found that when Iraqi companies receive contracts (rather than subcontracts from U.S. companies), their work is faster, less expensive and less prone to insurgent attack. There are literally hundreds of both private and public Iraqi companies—and millions of Iraqi workers—ready, able and willing to do this work. U.S. military commanders and soldiers in Iraq have repeatedly made this demand as they have learned firsthand that a person with a clipboard or a shovel in his or her hands is far less likely to carry a gun.

Second, U.S. corporations must not be allowed to “cut and run.” Every U.S. corporation with reconstruction contracts in Iraq must be individually audited and each project investigated by SIGIR. Misspent funds must be returned and made available to Iraqis for reconstruction. SIGIR has begun this process with plans for a full audit of Bechtel’s work due out early this year. SIGIR needs more staff, greater oversight authority and more money to complete this work in a timely manner.

The Democrats must abandon the Bush administration’s plan to remake Iraq into an economic wonderland for U.S. corporations. Iraq must belong to the Iraqis to remake as they see fit. Nowhere is this demand more critical than in the case of Iraq’s oil.

It is clear that Iraq needs to develop its oil sector to survive and that it needs to retain as much of the proceeds from its oil as possible. It is also clear that it should be the Iraqi public—freed of the external pressure of a foreign occupation, the Bush administration and U.S. corporations—that decides how its oil is developed. U.S. oil corporations cannot be permitted to “win” the war in Iraq while we—Iraqis and Americans—pay the price for their victory.

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• Reader Comments

  What impresses me about this article is not the oil angle which we could all take for granted but the 150 companies granted over $50 billion in mostly no bid contracts. The $50 billion figure is big money. I would estimate that over a third of the world’s nearly 200 sovereign nations don’t have an annual GDP totalling $50 billion. As time goes on the figure increases. This figure also exceeds Iraqi oil revenues and GDP of late I’m sure. All this being the case, it is easy to see how corporate globalization has created, structured, staffed, and also determined the distribution of the benefits of the “new Iraqi economy” through the US military intervention and long term occupation. A new division of labor in the increasingly integrated middle east will involve Saudi financing, some other Arab State manufacturing investment, Israeli technology (if the peace process can get going again in which Bush seems wholly uninterested), cheap Arab labor, and US Markets. Here the US hopes to outwardly diversify the increasingly concentrated consumer goods manufacturing investment in China. Indeed, the rate of manufacturing FDI was growing faster than oil investment despite record gas prices. The economic basis of the war is not just about a valuable and scarce resource but the long term structuring of global capitalism. Here is where the real value of Juhasz’s analysis comes into play. It’s not just about the profits of one sector of the US economy. It’s about the historic laws of motion of capital in the concentration of the capitalist economy on a global scale in order to insure continued profitability and the continued deepening of global capitalist relations of production.

  Posted by cabdriverinchicago on Jan 15, 2007 at 1:20 PM

  “Remember oil? That thing we didn’t go to war in Iraq for?”

  Not exactly a straw man in the truest sense, but also not worth arguing about. Of course the Middle East is about oil — it has been for at least a century.
  But…
  It is crucial to our economy and our very existence. (Whether it should be or must be is a different issue.) People will fight over water or wheat, corn, whatever is essential to their survival. If not nation against nation, then as individuals.

  I would not be surprised to see globalization’s threat to individual jobs erupt into far more violence than we’ve seen so far.

  If we can see the kind of fighting we have now due merely to greed, think of the return to basic instinct when you or your family is truly cold and hungry, or even plunging down the economic ladder.

  The world economists have elevated corporate leaders to the status which used to be accorded movie stars and outstanding sports figures. It is a short step for CEOs to begin to believe their own press coverage. The top administration jobs have been dominated by “successful” CEOs from Bush on down.
  Knowing how to make money does not a statesman or military genius make.

  Posted by whattheheck on Jan 15, 2007 at 5:03 PM

  If oil was the only reason to have a presence in SouthWest Asia as the article insinuates. I would offer Mexico and Canda as the logical alternative.

  With a combined proven reserves of almost 200 billion barrels, combined with the US’s proven reserves of 21.9 billion barrels Iraq would pale into a greasy spot on the garage floor. A common border, access to pipelines, better quality oil, and elimination of tankers are the benefits.

  North American crude is “light sweet crude” which is superior in both gasoline production as well as crackability. Middle Eastern oil is “heavy crude” which costs almost double in terms of delivery as well as refining. 

  Any logical “empire” would have already consolidated Mexico and Canada into its fold and ignored the troubled SouthWestern Asia’s oil fields. Our protection of the Gulf is for the benefit of Europe and Japan. Both rely almost exclusively on Gulf crude.

  Posted by texasindependent on Jan 15, 2007 at 10:58 PM

  Any logical “empire” would have already consolidated Mexico and Canada into its fold ...

  Tex, they have. It’s called free trade.
  When ‘tar sands’ are included Canada has the second largest oil reserves in the world.

  Middle Eastern oil is “heavy crude” ...

  Hmm ... they have (or had) light sweet crude too. But it may be that most of the good stuff has already been pumped and they are left with mostly heavy crude now. Except maybe in Iraq?
  But it’s all oil.

  If oil was the only reason to have a presence in SouthWest Asia as the article insinuates.

  Tex, while oil, as a spoil of war, was the focus of the article, I don’t think that oil was the only reason for the war. There were and are many reasons put forward for this war. None of them good.

  Our protection of the Gulf is for the benefit of Europe and Japan.

  And for the protection and benefit of Israel ...

  “There’s nothing more deep than recognizing Israel’s right to exist. That’s the most deep thought of all. ... I can’t think of anything more deep than that right.”
  —George W. Bush, Washington, D.C., March 13, 2002
  “But now that I’m on Iran, the threat to Iran, of course—(applause)—the threat from Iran is, of course, their stated objective to destroy our strong ally Israel. That’s a threat, a serious threat. It’s a threat to world peace; it’s a threat, in essence, to a strong alliance. I made it clear, I’ll make it clear again, that we will use military might to protect our ally, Israel, and—(applause)”
  —George W. Bush, Cleveland, Ohio, March 20, 2006

  And always remember ...

  “I just want you to know that, when we talk about war, we’re really talking about peace.”
  —George W. Bush, June 18, 2002

  So, please understand that when we talk about oil, we are not talking about oil. Really.

  Posted by David in Canuckistan on Jan 15, 2007 at 11:45 PM

  Oil is measured by specific gravity and sulfur content.  The Persian Gulf’s oilfields are slightly varied but the bulk is heavy and high in sulfur. To the average “man on the street” oil is oil. But in refining the higher specific gravity and lower sulfur content of light sweet crude mean a greater percentage of volatile products ( Gasoline), and easier refining to meet EPA sulfur standards.

  Tar sands are Bitumen, sand, clay, and water. While technically not crude oil they can be economically processed into gasoline with higher crude oil prices. It is used as asphalt for roads without any modification.

  “War is a matter of vital importance to the State; the province of life or death; the road to survival or ruin.”

  Once again Israel gets smacked around for no real reason…...Strange.

  Posted by texasindependent on Jan 16, 2007 at 3:04 AM

• extended discussion >>>Continued...

  Discussions with more than 5 comments are continued on our special discussion page to encourage continuity and ease of use. There are currently 163 posts.

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