Iraq’s Oil Wealth May Be Headed For Privatization


While U.S. military and civilian appointees of the Bush administration attempt to restore order and repair Iraq’s infrastructure, protests against American occupation continue across the war-torn nation. Over the last several weeks, U.S. soldiers shot and killed 18 civilians and wounded nearly 100 demonstrators who took to the streets, angrily objecting to the presence of American forces in the city of Fallujah. Meanwhile, Lt. General Jay Garner, the man appointed by president Bush to rule post war Iraq, is working to establish an interim government by selecting delegates to a national assembly. The provisional assembly, to be handpicked by Iraqi exiles and Bush administration allies, would then in turn select an executive council or prime minister.

One of the biggest questions confronting the White House is the administration of Iraq’s oil industry which has the second largest proven reserves in the world. A partial answer to that question was revealed when the U.S. appointed former Shell Oil Company CEO Philip J. Carroll to be chairman of an advisory committee that will oversee Iraq’s oil industry. But, even before the U.S. launched its war against Baghdad in violation of the United Nation’s charter, the State Department was meeting with oil company executives and exile groups to plan for the management and possible privatization of Iraq’s oil sector.

Between The Lines’ Scott Harris spoke with Michael Renner, a senior researcher with the World Watch Institute, who discusses the role Iraq’s oil wealth may have played in the Bush administration’s decision to prosecute a war against Baghdad and the likelihood that the industry will soon be privatized and offered up to U.S.-based oil companies.

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Michael Renner: You know it’s interesting, certainly when one listens to any of the administration officials, any of the spokespeople, there is of course sort of an immediate denial that any of what has been happening in Iraq — related to the war, leading up to the war — is even in the remotest way related to oil. That really strains credulity, I think, because clearly it’s hard to understand what’s been happening in Iraq and what’s been happening in the Middle East for really many decades now without looking at the fact that this is the region that by far has the richest oil reserves in the world. That’s something that becomes actually more and more important because the United States and other countries are becoming more and more dependent on imported oil and therefore, securing access or having political leverage over the terms under which access is made available to the oil is certainly very important. It’s been important for previous administrations. I think this is something that has not just gone away.

Between The Lines: Tell us a little about the discussions that were going on within the State Department and oil corporations here in the United States. What if anything was discussed before the war actually broke out about a role for U.S.-based petroleum companies in Iraq’s oil industry?

Michael Renner: There were apparently a number of meetings both involving State Department officials, but apparently also Pentagon officials, Iraqi exile figures and various representatives from U.S. oil companies. But we don’t really know what was discussed at these meetings. Some of the participants even went so far as to deny that any meetings had taken place. I think very clearly they were tight-lipped because this is an extremely sensitive subject and was of course even more sensitive before the war because the Bush administration kept insisting that it had not decided to go to war, that war was supposedly a last resort and so on. I think what’s been happening, though, by and large and this is really what we’ve heard more recently, is that particularly among key officials in the Pentagon there is a very strong push toward a privatization of the oil industry, and apparently actually pretty much across the spectrum of Iraqi industries. The details again, of course, we don’t really know, but I think that would imply that a far more important role would be given to representatives of non-Iraqi oil companies than had been the case before.

We know, of course, that we have had a number of privatizations both in the oil sector and elsewhere in many, many countries around the world and the argument in favor of that had always been that it creates greater economic growth and greater opportunity for everybody; “everybody will be better off.” But I think the reality in many, many countries was that the discrepancies between poor and rich increased dramatically. It’s not clear why Iraq would come out better, why that kind of an outcome would not be present in Iraq as well. Particularly if this is being pushed by basically somewhat the same kinds of officials and the same kinds of economists that had been pushing earlier privatization programs elsewhere. So that, to me, I think, is one big concern.

Between The Lines: There was enormous suspicion as to the motives of the United States when it invaded Iraq. Many governments, many people around the world thought that a U.S. goal in Iraq was to gain access to the oil. So, if now an Iraqi government under U.S. tutelage all of a sudden privatizes the oil, won’t that not only raise eyebrows, but maybe even cause a lot of unrest in Iraq itself and around the region?

Michael Renner: I would think the answer is quite likely “yes.” It certainly would add to the suspicions that are clearly out there. And I think also, even given the very early response within Iraq to the U.S. occupation, which certainly was not all positive, one would have to assume that some of these moves would actually add to the hostility that seems to be present quite strongly in Iraq.

There is, I think, a big question in terms of why is the administration pushing so hard for an advisory council to the Iraqi oil ministry, which of course is now in process of being put together. Why is that advisory council being headed by the former CEO of Shell Oil, which is the U.S. subsidiary of Royal Dutch Shell? Why is one of the other key advisors, a person who was formerly with ExxonMobil? What many analysts of the oil industry have, I think, agreed on for a long time, is that Iraq was really quite capable of running its oil industry. There’s the technical skill, the management knowledge and so on. While it’s certainly true that much of the facilities of that industry are now in tatters largely because of long years of sanctions and Iraq having been unable to import spare parts and equipment and so on, that skill and know-how within Iraq has not gone away. So there is I think, a big question mark attached to this question: “Why is there this need for an advisory council?” Why not just try to reconstitute the Iraqi Oil Ministry? Let them run things and basically not try to really just change the entire structure. So I think a lot is at stake because clearly then, the question becomes “What are the terms?” Who really wins out? Who loses? How much of the benefit, how much of the revenues do go to the local civilian population? I mean, we hear a lot about this in terms of rhetoric, but not very much in terms of specifics.




Contact World Watch Institute by calling (202) 452-1999 or visit their Web site at http://www.worldwatch.org

For related links on postwar Iraq and Michael Renner’s article “Post-Saddam Iraq: Linchpin of a New Oil Order,” visit our Web site Between The Lines for the Week Ending May 16, 2003

More ZNet articles on The Occupation and Other Interviews.

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