According to experts at BP, Iraq has 112 billion barrels of oil in the ground – reserves second only to neighbouring Saudi Arabia’s 261 billion barrels. More than a tenth of the entire world’s future oil supply lies within Iraq’s frontiers. This doesn’t include the area where boundaries with Kuwait were tinkered with after the 1991 war. This represents 10.8 percent of the world total. Plus, its oil is high quality and Iraq’s oil production costs are among the lowest in the world.
The US Department Of Energy has noted that the:
“true resource potential may be far greater than this, however, as the country is relatively unexplored due to years of war and sanctions. Deep oil-bearing formations located mainly in the vast Western Desert region, for instance, could yield large additional oil resources (possibly another 100 billion barrels), but have not been explored.”
Viewed another way, that represents a staggering amount of potential revenue. Assuming USD 30 per barrel and between 160 billion to 200 billion barrels potential, that is about USD 4.8 trillion to USD 6 trillion to be found in the gross value of the oil reserves of Iraq.
As Dr. Abdul Hay Zallom, the author of The New Empire of Evil and Forewarnings of Globalization pointed out in an interview with Al Jazeerah on 14 April 2003:
“the world’s demand for oil will reach 112 million barrels per day in the year 2020 and that only six countries namely Iraq, Saudi Arabia, Iran, Kuwait, the United Arab Emirates, and Venezuela, will be able to meet that demand. The US is the world’s largest oil consumer. While an US citizen consumes 28 barrels per year, his Chinese counterpart burns only two barrels per year.”
Iraq was producing 3 million barrels a day up to the conflict with the US and UK, funnelling most of it to world markets through a United Nations-monitored program that directs the proceeds to food and medicine for the Iraqi people. But Saddam Hussein was also exporting his oil to Syria, which was glad to resell Iraqi oil as if it were Syrian. The United States had become one of Syria’s biggest customers, because it likes the low sulphur content of Iraqi oil, says Nimrod Raphaeli, publisher of the Middle East Economic News, a Washington-based newsletter. Iraq earned USD 1.5 billion a year from oil smuggling and oil sales outside UN controls, through Syria, Turkey, and Jordan, as well as by ship down the Gulf.
OIL AS A MEANS OF FUTHERING DIPLOMACY
Since 9/11/01, the Bush regime has threatened to include Iraq in its “war on terrorism.” Iraq responded by desperately trying to ingratiate itself with the Gulf Arab Co-operation Council (GCC) members: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE). Iraq also cultivated Russia.
Overall Russia had signed 862 UN-approved contracts to supply oil industry equipment and parts. Russia’s Lukoil Oil Company and two Russian government agencies have a 23-year contract to develop Iraq’s West Qurna oil field. By the terms of the contract, Lukoil gets one half, Iraq one quarter, and the Russian government agencies get one quarter of the oil field’s 667 million tons of crude, potentially a USD 20 billion deal. Iraq still owes Russia at least USD 8 billion from the old cold war days when Russia armed Iraq, considering it a client state.
But due to United Nations sanctions on Iraq, Lukoil has not pumped a drop from West Qurna since it won drilling rights in 1997. In 2001, Saddam gave Russia USD 1.3 billion in oil contracts under the United Nations oil-for-food program that allows Iraq to sell oil to buy supplies to help Iraqi civilians. In September, 2001, Saddam announced plans to award Russian companies another USD 40 billion in contracts as soon as United Nations sanctions were lifted. Russia, Iraq’s closest U.N. Security Council ally and a major beneficiary of contracts to purchase Iraqi oil and to sell Iraq humanitarian supplies, demanded “a comprehensive settlement” of the sanctions issue, including steps leading to lifting the military embargo against Iraq. On January 24, 2002, Russian Foreign Minister Igor Ivanov made a formal statement that Moscow was opposed to any U.S. military operation against Iraq.
In February, 2002, Russia’s foreign minister, Igor S. Ivanov, said that Russia and Iraq saw eye to eye on questions of extremism and terrorism and that the American-backed sanctions against Iraq were counterproductive and should be lifted. He then emphasised that Russia solidly opposed “spreading or applying the international antiterror operation to any arbitrarily chosen state, including Iraq.”
Iraq had also been trying to cultivate China and France using oil interests. Chinese state-run companies were interested in developing the billion-barrel Ahdab field while the French ELF Aquitaine and Total were interested in the Majnoon and Nahr Umar fields amongst others. The French oil company, TotalFinaElf, had negotiated oil deals that would give it control over 25 percent of Iraq’s oil reserves. French companies have signed 798 contracts for parts and equipment for the Iraqi oil industry. China had signed 227 UN-approved contracts to supply oil industry equipment and parts.
It’s no great surprise that both China and France were hostile to the plans by the UK/US coalition for a war on Iraq.
Despite the objections of countries standing to gain from doing business with Iraq, however, Bush pushed ahead with his plan to install a client regime in Iraq and control oil supplies. This was what the war was all about not the propaganda spin of a “war on terror” or the “search for weapons of mass destruction”.
THE ISRAELI CONNECTION
Readers of Third Way may recall that during the recent conflict the SAS and other Special Forces were said to have been sent to secure “airfields called H2 and H3? Friends tell me this was actually “Haifa 2” and “Haifa 3”, critical pumping stations on the oil pipeline that originally ran all the way from Mosul in the north of Iraq to Haifa in Palestine, and pumped oil until 1948. During that year Palestine was invaded by the “Jewish State”, at which time Iraq blocked the pipeline near its western end.
The Mosul to Haifa pipeline runs all the way down the Western Desert of Iraq, then crosses into Jordan rather than Syria, continuing west to a point near Amman, just a few miles short of the Israeli border. The pipeline would need considerable work, which would add to the post-war costs.
The idea is economically tempting for Israel and some of its friends, especially those whose firms might profit from such a project. Oil-poor Israel wants high-quality Kirkuk crude oil for its Haifa refinery. Israeli refineries currently use Russian, West African, Egyptian, and other crude oils.
They would require a compliant Iraqi regime.
Chalabi the leader of the unrepresentative Iraqi National Congress has, coincidentally, a strong following in the American Jewish community, whose influence on US policy in the Middle East is considerable.
“There’s no track record of anyone else in Iraqi leadership having a relationship with the Jewish community,” the Jewish Telegraph Agency (JTA) quoted Tom Neumann, executive director of the Jewish Institute for National Security Affairs, as saying in Washington this month.
The INC’s relationship with the Jewish Institute for National Security Affairs (JINSA) is of particular significance. It has been developing for a decade. JINSA has close ties with the Pentagon and US defense companies and counts among its board such prominent figures as Vice-President Dick Cheney, his chief of staff Lewis “Scooter” Libby, Deputy Defense Secretary Paul Wolfowitz, and the eminence grise of the pro-Israel neoconservatives, Richard Perle, recently forced to step down as chairman of the Pentagon’s influential Defense Policy Board because of his business interests. Retired US General Jay Garner, who has been tasked with “overseeing the reconstruction of Iraq”, has traveled with JINSA groups to Israel and supported the organization’s agenda.
None of this is a secret in Israel. According to a report on an American Jewish website
“Infrastructure Minister Yosef Paritsky said April 9 that he has ordered his ministry to conduct a feasibility study for reopening and possibly widening the 350 mile pipeline. He estimated that oil coming straight from Iraq could reduce Israeli energy prices by 15 to 20 percent providing a much-needed break for the flagging economy. Northern Iraq’s oil fields are among the richest in the world, and according to some sources have reserves as large as Saudi Arabia’s.
The Israeli source said Jordan took “a huge gamble in supporting the United States.” The implicit price for Jordan’s unparalleled help to coalition forces will undoubtedly be a quick infusion of economic aid, part of which, said the source, “could be significant revenues from the pipeline.”
As an article on the Jane’s website pointed out
“US efforts to get Iraqi oil to Israel are not surprising. Under a 1975 Memorandum of Understanding (MoU), the US guaranteed all Israel’s oil needs in the event of a crisis. The MoU, which has been quietly renewed every five years, also committed the USA to construct and stock a supplementary strategic reserve for Israel, equivalent to some USD 3bn in 2002. Special legislation was enacted to exempt Israel from restrictions on oil exports from the USA. Moreover, the USA agreed to divert oil from its home market, even if that entailed domestic shortages, and guaranteed delivery of the promised oil in its own tankers if commercial shippers were unwilling or not available to carry the crude to Israel. All of this adds up to a potentially massive financial commitment.”
The result of the conflict with Iraq is US control of Iraqi oil. It may allow the US to take a more belligerent stance with OPEC countries (including Saudi Arabia). It will also shore-up Israel. Attempts will be made to bribe Jordan with oil and other forms of economic aid to allow the reconstruction of the pipeline. To create a political climate to allow Jordanian-Israeli cooperation Israel must do some deals with the Palestinians. The appointment of Mahmoud Abbas (Abu Mazen) on the Palestinian side (supported by the US) and Subsequent maneouverings should be seen as part of that enabling process.
While Israel wins Turkey will lose out . The existing Kirkuk oil pipeline, which terminates in southern Turkey’s Yumurtalik is unlikely to be greatly used if the Israel project goes ahead.
EFFECTS ON CHINA AND RUSSIA
China has meagre domestic oil reserves. It is forced to depend on imports mainly from the Arabian Gulf. A potential obstacle to its rise as a global power is whether it can ensure a sufficient supply of energy to maintain economic stability, wrote Frank Umbach, a senior researcher at the German Council on Foreign Relations in a recent paper. By 2015 three-quarters of the Gulf’s oil will go to Asia, mainly China, according to a study by the Central Intelligence Agency’s National Intelligence Council. If Iraqi oil floods world markets Russia’s oil exports, already expensive to produce, would not be as competitive globally. This should be viewed alongside strategic moves by the US in the Caspian area. Economic clout translates into political power. A US client State in Iraq would eliminate other competitors for Gulf oil and block potential global power rivals.
NO QUICK FIX
Overall these plans follow a US State/Corporate strategy aimed at controlling oil supplies, which also includes Afghanistan and the Caspian Region. I shall examine these other areas in future articles. Whether the plans for Iraq will succeed will depend on how hostile the population there becomes to the presence and influence of the US and the reaction of Arab opinion to the planned pipeline. So far there are ominous developments from the occupier’s point of view.
Shia Muslims make up more than 60 percent of Iraq’s population of 23 million. The Supreme Council for Islamic Revolution in Iraq has called for U.S. troops to withdraw. “We need our independence,” the statement issued on April 22 said. “We reject foreign rule, and Iraq will not be fertile ground for any foreign rule.”
Commenting on Shia Muslim feeling The Daily Star of Lebanon stated
“Washington’s game plan is running into stiff opposition from Iraq’s Shiite majority, which seeks to dominate the post-Saddam government and which is increasingly hostile to the US and its Iraqi surrogates like the INC, including Chalabi � even though he is a Shiite. Tehran’s reported efforts to encourage leading Shiite clerics to demand an Islamic republic are likely, if they are as widespread as the Americans claim they are, to further spoil US efforts to promote Israel’s interests in the post-Saddam era. Indeed, the Bush administration’s support for Iraq to enter into what eventually would have to be recognition of the Jewish state by a country that has been one of its most implacable enemies helps reinforce the widely held belief that the war in Iraq was launched to strengthen Israel.”
But will Iraqi oil be a quick fix anyway? A joint report by Rice University’s Baker Institute and the Council on Foreign Relations in December 2002 found:
“Oil production capacity in Iraq is dropping by 100,000 barrels per day (bpd) annually. Significant technical challenges exist in staunching the decline and eventually increasing production … It will take 18 months to three years and USD 5 billion to bring the Iraqi oil industry back to pre-1990s production levels of 3.5 million bpd, in addition to USD 3 billion in annual operating costs. To get to the oft-quoted 6 million bpd will take years and require massive expansion of infrastructure, billions of dollars in investment and a stable political environment.”
The US is pursuing an ambitious imperialist strategy. Yet it is a strategy that may yet fail. As we were so recently reminded: “No plan survives contact with the enemy.”
Third Way Research Department (SID), April 2003