Iraqi oil Minister Hussein Shahristani announced last week that he aimed to sign oil production contracts with foreign companies by the end of next year. Notably, the announcement was made in Australia - like most of the significant statements of Iraqi oil policy, it was made to non-Iraqi ears.

The same was true of the confirmation last month of the form of such contracts. Speaking to the conference of the International Compact for Iraq, a meeting of international donors in Abu Dhabi, Deputy Prime Minister Barham Salih, who heads the committee drafting a new oil law, announced that production sharing agreements (PSA) would be used - the type of contract favoured by the companies themselves.

Putting Mr Salih's comments into context, the US government representative to those talks threatened that any future economic assistance to Iraq would be conditional on economic reforms - the priority among which was the passing of an acceptable oil law.
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During the drafting of the oil law over the last five months, three consultations have taken place - none of them with Iraqis. The US government and the multinational oil companies were presented the draft law for their comments in July. Last month, the International Monetary Fund joined this list, examining the draft oil law in its quarterly review of the Iraqi government's compliance with its economic conditions.

But the Iraqi people have not been consulted, nor even has the Iraqi parliament. Indeed, Iraqi civil society groups and parliamentarians who have asked to see the draft have been told that it does not exist. Instead it will be presented to the parliament in December, to be pushed through (the government intends) as a fait accompli.

Russia realised the mistakes it made by signing PSA contracts only when it was too late. It remains to be seen whether Iraq follows the same course.

At a meeting in Amman, Jordan, leaders of Iraq's five trade union federations - between them representing hundreds of thousands of workers - called for a fundamental rethink of the forthcoming oil law, which is designed to allow foreign investment in the oil sector.

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According to a recent study by the Global Policy Forum, sixty out of Iraq's eighty known oil fields may be explored under PSAs, handing at least 64 percent of Iraq's known oil reserves over to foreign investors.

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WHY SADDAM HAD TO GO

"Control is what it's all about," one oilman told me. "It's not about getting the oil, it's about controlling oil's price."

Also, the oil is light, sweet crude that is close to the surface. Not like the tarry s**t from Iran, which is why Iran actually sends much of its oil out to be refined. That is also why they, ironically, have to ration gas. That is about the only thing that keeps Iran from sending missles into the SA refineries, which they will surely do if Israel nukes their enrichment facilities.

bush and cheney both have, very recently, proclaimed that we cannot let Iraq's oil and oil revenue fall into the hands of "terrorists", so this should come as no surprise at all.

Meantime, and I've said this many times here over the last few months, the Communist Chinese are quietly circling to globe purchasing oil contracts for PENNIES compared to the untold billions that we have BORROWED from them to spend in absolutely the least cost-effective manner possible to obtain oil: endless war and wars of aggression.

The Chinese recognized long ago that eventually they would be competing with the West for oil, so what better way for them to guarantee cheap oil for themselves than by helping America go the way of the Soviet Union and bankrupt ourselves fighting to win oil we could have purchased much more cheaply. And without breaking our military, emptying our treasury, and becoming the biggest debtor nation on earth.

As the world switches to a more stable currency than the dollar for making oil purchases, in this case the euro, we will not be able to compete on a global scale with the Chinese in pursuit of oil contracts for those reasons.

The pain of adjusting to our reduced influence in the world and dealing with a greatly enhanced China competing for what oil remains will be an extremely dangerous time for America, as the Chinese, our bankers, can yank the world out from beneath us just by starting a worldwide run on the dollar and devaluing it so greatly as to reduce our purchasing power, cause runaway inflation, sky-high interest rates, and, in general, destroy our economy.

So, yes, Iraq -and, again, maybe soon Iran - and this senseless war only makes any sense at all as a war for oil, not a battle in some nebulous war on terror, which is undefinable and therefore cannot be won by any objective measure.

The Independent on Sunday has obtained a copy of an early draft which was circulated to oil companies in July. It is understood there have been no significant changes made in the final draft. The terms outlined to govern future PSAs are generous: according to the draft, they could be fixed for at least 30 years. The revelation will raise Iraqi fears that oil companies will be able to exploit its weak state by securing favourable terms that cannot be changed in future.

Iraq's sovereign right to manage its own natural resources could also be threatened by the provision in the draft that any disputes with a foreign company must ultimately be settled by international, rather than Iraqi, arbitration.

Oil in Iraq: the heart of the Crisis

Oil is at the heart of the crisis that leads towards a US war against Iraq. For more than a hundred years, major powers have battled to control this enormous source of wealth and strategic power. The major international oil companies, headquartered in the United States and the United Kingdom, are keen to regain control over Iraq's oil, lost with the nationalization in 1972. Few outside the industry understand just how high the stakes in Iraq really are and how much the history of the world oil industry is a history of power, national rivalry and military force.
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According to Iraq oil expert Mohammad Al-Gallani at British-based GeoDesign Ltd, Iraq has 526 prospective drilling sites, of which only 125 have been drilled. Of those, 90 have proven potential as oil fields, but only 30 have been partially developed and just 12 are on stream. "You can imagine the huge potential that lies there for the future," Al-Gallani told Canadian Press in a story datelined December 14, 2002.

As world demand for oil increases and as oil reserves in other areas decline at a fast rate, oil in Iraq will represent a steadily-larger proportion of the world's total. If Iraq's fields meet high-end estimates in the 3-400 billon barrel range, Iraq's reserves could reach over 30% of total global reserves by mid-century or even before.

The prize was enormous and irresistable, and after inventing what turned out to be a multitude of shifting rationales and justifications and conducting a smoke and mirrors propaganda campaign to deceive the American people, Bush invaded Iraq in March 2003.

Paul's article continues with:

The long, bitter experience of oil producing countries with the US-UK companies has left behind an anger and militancy in local politics that hinders the companies' efforts to re-organize the "upstream" system. Such feelings run deep in Iraqi politics, going back to British seizure of Iraq after World War I and the bloody repression (including the use of poison gas) that crushed the nationalist revolt of 1920. British leaders fulminated against "Turkish misrule" in Iraq, but their own rule proved equally odious to Iraqis seeking independence and democracy.

Iraqis also remember the way the companies treated the country after it gained its independence and how the companies held Iraqi production down, to manage international supply and price levels. Iraqi's also remember the fierce company resistance to Iraqi proposals for new exploration contracts in the 1960s. Such sentiments would doubtless not change after the ouster of Saddam Hussein.

These feelings are magnified by US support for Israel and by the long, punishing US-UK-UN sanctions. The US-UK would thus find it very politically difficult to create an indigenous post-Saddam government that would agree to a sweetheart deal for the US-UK companies. For this reason, the US-UK have announced that they are planning a military government that will "purge" Iraqi politics of its Baathist and nationalist elements and remain in power more than a year or as long as necessary. Though the US-UK official announcements speak about "human rights" and "democracy," it would appear that the main goal of the war and "regime change" is to carry out the oil deals and re-fashion Iraqi politics on a new and more conciliatory and pro-US basis.

For the rest of us, everyone who's making less than 5 million a year, we'll be paying for the Iraq debacle/war crime, for the rest of our lives.  In fact everyone here who has children, can be comforted by knowing that when they grow up, and become taxpayers, they'll be paying for the invasion and occupation of Iraq throughout the course of their lives, and when their children, your grandchildren, become taxpayers, they'll also be footing the bill.

And while we all pay, even you jimakaPPJ, the oil corporations will continue to subvert our democracy with all those surplus dollars.  They'll be working hard in every election cycle to insert another puppet dictator, like George W. Bush, who will do their bidding while telling himself that it's OK to be a traitor to the Constitution and the people of the United States, because they know who really controls America, and it sure isn't the voters.

As long as they can keep enough people scared, enough people saying to the government, tell us what to do, instead of the people telling their elected representatives what to do, these haters of democracy will always win, and it will ultimately lead to demise of our great country, the demise of this great experiment in democracy.

To summarize, Iran's claim that its nuclear technology is entirely peaceful appears to be false (insofar as we can judge from the statements of arms control officials). However, the oil export decline we project implies that Iran's claim to need nuclear power to preserve exports is genuine. U.S. insistence that Iran's nuclear technology program has no economic purpose has obscured the regime's petroleum crisis, of which the nuclear power need is one symptom.

First, the oil industry in the Middle East is almost uniformly nationalized--including in Iraq, right now. But, as The New York Times notices, oil production in Iraq is way down, roughly half what it was pre-war (if these numbers can be trusted; the CIA World Factbook has pre-war production at only 2 million bbl per day).

One consequence of these nationalized industries is that the profits from oil production go to the rulers and their families, who turn around and fund violence against their neighbors and the minorities in their countries. As has been noted around here more than once,  the nationalized oil industry and corruption in Saudi Arabia was one of the problems which contributed to Osama bin Laden's dissatisfaction and fatwa.

Second, perhaps my favorite part of this article is the breathless way that the issue of profit is covered. Rather than question why companies are not being allowed to keep all of their profits less taxes, the author--and apparently everyone else--is shocked at the idea that companies would be allowed to keep three-quarters of their profits. That is, until they pay off the start-up costs. Then, the companies will be forced to give up 80% of their profit.

What's really shocking is the gloss given to the idea of an "industry average" 90% of seized profits. Note, that is the "industry average" for nationalized industries (which Iraq's obviously won't be after this law). That type of robbery is not tolerated, generally, in free markets.