Blood for Oil

Fight for "Black-Blood" of Global Economy in Iraq

Tahir M. Qazi, MD, Axis of Logic

Hidden behind the smoke of firing guns and chaotic scenes in Iraq is the greedy face of Multinational Corporations and their political patrons, who have been waiting to make a killing in the oil fields of Iraq. Oil exploration and extraction used to be a state enterprise of Iraq during Saddam Hussein's rule. With Saddam Hussein through the gallows, one obstruction is cleared.

Oil, the "Black-Blood" of Global Economy, is an Iraqi natural resource. But the draft legislation is on the table to be presented to the Iraqi parliament to sign it into a law. It is currently being termed as "Hydrocarbon Law". This law will allow oil-hawks to take a bigger bite out of the energy resource in the war ridden and collapsed state of Iraq. It is going to be called Production Sharing Agreement (PSA). Common practice for investments is to offers rights for extraction for 10-15 year whereas in case of Iraq it may be up to 30 years. Until the costs of a project have been recovered oil companies would be allowed to keep 70% of the profit. Elsewhere 40% would be a standard. Once the costs are recouped the companies' share falls to 20%, which is still double other comparable agreement.

There were prophetic voices in the world alarming about greed for oil when WMD-danger was being moved as an argument for invasion of Iraq. British and the US high officials, at that time, had vehemently denied any intentions of controlling Iraqi oil. Tony Blair went to the extent of saying that Iraqi oil should be put into a trust fund to be run by UN for Iraqis. Obviously, it seems that the promises made before the war have been conveniently forgotten.

There are vast oil reserves in many parts of the world. Iraq has about 115 billion barrels, the second largest in the world. Despite the present violence there, it appears to be most promising for future profits. Elsewhere there are hindrances like tight controls of states, limitations on extraction of oil as in Venezuela by Hugo Chavez, and high cost of drilling out of North America etc. These are few factors for looking at huge oil fields in Iraq where the oil geological stratum is not too far deep under the surface. It will translate into the lowest cost of extraction in the whole world.

In a scenario where cost of extraction remains the same as the selling price is not a viable business strategy, to state the obvious; projections in case of Iraq are that there will be high yield with good profit margins. Oil corporations have always been aware of this fact. This fact alone makes the core of US Middle East foreign policy that was turning progressively hawkish against Iraq over the decades, partly due to the absence of polarity in the world that former Soviet Union provided and partly due to Saddam Hussein's nationalism-based opposition to opening oil fields to private corporations for extraction of oil.

Fast forward to the present; the US did not anticipate such a stiff resistance in Iraq against the most powerful military in the world. It has made the US rethink the course by which private oil companies could be offered security in the future Iraq. While Saddam's fate from tribunal to gallows was fast moving towards its destiny, counseling and consultancy for draft of legislation that is soon to be presented to the legislative body, was being provided by the US to Iraqi administration to ensure opening oil fields well before such recommendations appeared in the Baker-Hamilton Commission Report on Iraq (Recommendations 62 & 63).

The importance of this fact alone can be understood by the fact that the Baker-Hamilton Report frequently talks about the US interests and specifically refers to oil on second page of its opening, "It has the world's second-largest known oil reserves".

Nonetheless, the draft bill that has been obtained by Dow Jones Newswire Service and also widely published by The Independent newspaper details some interesting key elements that can help foresee the future of Iraq.

There was one bill passed by the Kurdistan Regional Government in December claiming rights to oil of the region. What is interesting is that the Hydrocarbon Law currently under consideration by Iraqi administration precludes any regional control of oil and stipulates control from Baghdad.

It sows the seed of future conflicts because the Kurdish authority has already signed agreements with several small oil and gas companies, including U.S.-based Calibre Energy Inc., Norway's Det Norske Olje Selskap, and Turkey's Petoil and has signed memoranda of understanding with Australia's Woodside Petroleum Ltd., Canada's Heritage Oil Corp., and the U.K.'s Sterling Energy PLC.

The part of Iraqi hydrocarbon law, the way it has come open to the media that describes Baghdad's control of oil has important implications for the future: It means Iraq will not be divided into three regions as has advocated by many including presidential candidate for 2008 Joseph Biden, Senator from the State of Delaware. Since Baghdad wishes to maintain control on oil, there is a good possibility of friction between center and Kurdistan and a civil war that has engulfed Baghdad may spread towards northern areas of Iraq.

If a favorable deal is reached between Baghdad and Kurdistan, it will serve as precedence for southern Shiites who will find it hard to stay alienated from control unless special guarantees are offered to them, which in turn would not fare well with Sunnis, located in central Iraq.

In short, according to an old adage, "There are no friends in oil politics, only enemies and competitors" rings true in the case of Iraq also. Such fears validate predictions that the US would fight viciously to stay in Iraq and that the black-blood of industrial civilization is firmly in the grips of capitalism for the foreseeable future. It also measures willingness of the US to trade human blood for its greed for oil.

[This article is dedicated to my niece Sarah Choudhry, with love.]

Authors e-mail: tahir.qazi@yahoo.com

Original article posted here.