Iraq, the War and Oil - a fascinating tale

The Iraqi Oil Conundrum
Energy and Power in the Middle East
By Michael Schwartz

How the mighty have fallen. Just a few years ago, an overconfident Bush administration expected to oust Iraqi dictator Saddam Hussein, pacify the country, install a compliant client government, privatize the economy, and establish Iraq as the political and military headquarters for a dominating U.S. presence in the Middle East. These successes were, in turn, expected to pave the way for ambitious goals, enshrined in the 2001 report of Vice President Dick Cheney’s secretive task force on energy. That report focused on exploiting Iraq’s monstrous, largely untapped energy reserves -- more than any country other than Saudi Arabia and Iran -- including the quadrupling of Iraq’s capacity to pump oil and the privatization of the production process.

The dream in those distant days was to strip OPEC -- the cartel consisting of the planet’s main petroleum exporters -- of the power to control the oil supply and its price on the world market. As a reward for vastly expanding Iraqi production and freeing its distribution from OPEC’s control, key figures in the Bush administration imagined that the U.S. could skim off a small proportion of that increased oil production to offset the projected $40 billion cost of the invasion and occupation of the country.

All in a year or two.

Unremitting Ambition Tempered by Political and Military Failure

Almost seven years later, it will come as little surprise that things turned out to cost a bit more than expected in Iraq and didn’t work out exactly as imagined. Though the March 2003 invasion quickly ousted Saddam Hussein, the rest of the Bush administration’s ambitious agenda remains largely unfulfilled.

Instead of quickly pacifying a grateful nation and then withdrawing all but 30,000-40,000 American troops (which were to be garrisoned on giant bases far from Iraq’s urban areas), the occupation triggered both Sunni and Shia insurgencies, while U.S. counterinsurgency operations led to massive carnage, a sectarian civil war, the ethnic cleansing of Baghdad, and a humanitarian crisis that featured hundreds of thousands of deaths, four million internal and external refugees, and an unemployment rate that stayed consistently above 50% with all the attendant hunger, disease, and misery one would expect.

In the meantime, the government of Shiite Prime Minister Nouri al-Maliki, fervently supported by the Bush administration and judged by Transparency International to be the fifth most corrupt in the world, has morphed into an ever less reliable client regime. Despite American diktats and desires, it has managed to establish cordial political and economic relationships with Iran, slow the economic privatization process launched by the neocon administrators sent to Baghdad in 2003, and restored itself as the country’s primary employer. It even seems periodically resistant to its designated role as a possible long-term host for an American military strike force in the Middle East.

This resistance was expressed most forcefully when Maliki leveraged the Bush administration into signing a status of forces agreement (SOFA) in 2008 that included a full U.S. military withdrawal by the end of 2011. Maliki even demanded -- and received -- a promise to vacate the five massive “enduring” military bases the Pentagon had constructed -- with their elaborate facilities, populations that reach into the tens of thousands, and virtually no Iraqi presence, even among the thousands of unskilled workers who do the necessary dirty work to keep these “American towns” running.

Despite such setbacks, the Bush administration did not abandon the idea that Iraq might remain the future headquarters for a U.S. presence in the region, nor in the 2008 presidential election did candidate Barack Obama. He, in fact, repeatedly insisted that the Iraqi government should be a strong ally of the U.S. and the most likely host for a 50,000-strong military force that would “allow our troops to strike directly at al-Qaeda wherever it may exist, and demonstrate to international terrorist organizations that they have not driven us from the region.”

Since entering the Oval Office, Obama has not visibly wavered in the commitment to establish Iraq as a key Middle East ally, promising in his State of the Union Address that the U.S. would “continue to partner with the Iraqi people” into the indefinite future. In the same address, however, the president promised that “all of our troops are coming home,” apparently signaling the abandonment of the Bush administration’s military plans. Secretary of Defense Robert Gates, on the other hand, has recently voiced a contrary vision, hinting at the possibility that the Iraqis might be interested in negotiating a way around the SOFA agreement to allow U.S. forces to remain in the country after 2011.

Dynamic Paralysis Keeps Iraqi Oil Underground

Iraqi oil, too, has been a focus of Washington’s unremitting ambition tempered by failure. Long before the cost of the war began to lurch toward the current Congressional estimate of $700 billion, the idea of using oil revenues to pay for the invasion had vanished, as had the idea of quadrupling production capacity within a few years. The hope of doing so someday, however, remains alive. Speculation that Iraq’s production could -- in the not too distant future -- exceed that of Saudi Arabia may still represent Washington’s main strategy for postponing future severe global energy shortages.

Even before the attacks of September 11, 2001, the secretive energy task force Vice President Cheney headed was tentatively allocating various oil fields in a future pacified Iraq to key international oil companies. Before the March 2003 invasion, the State Department actually drafted prospective legislation for a post-Hussein government, which would have transferred the control of key oil fields to foreign oil giants. Those companies were then expected to invest the necessary billions in Iraq’s rickety oil industry to boost production to maximum rates...

MUCH MORE (and a fascinating read): http://www.tomdispatch.com/post/175199/tom...