It Really Is the Oil, Stupid!

Many observers (including myself in What After Iraq?) have suggested that the real reason the United States invaded Iraq was to gain control of the country’s vast oil deposits, from which the United States had been excluded since the Iraqis nationalized their oil in 1972. The administration has historically denied such motivation, preferring to rely on the flimsy excuses surrounding WMD and terrorism, and more recently, President Bush’s stated belief that getting rid of “bad guy” Saddam Hussein was reason enough to justify the effort.

Once one discounted the stated motivations, the invasion and occupation made little sense, particularly measured in realist terms (which is why so many classic realists condemned it from the beginning). Even if Iraq had WMD and/or was consorting with terrorists, was this adequate reason for military action, particularly as that action has turned out? To realists, the answer was–and is–a resounding no! If, on the other hand, the purpose was to gain control over one of the world’s last largely unexploited sources of petroleum (thereby relieving the United States of strained sources of petroleum and possibly even helping to drive down the price of crude), that might be another story.

The announcement on June 19, 2008, that the four oil companies that had formed the old Iraq Petroleum Company nationalized in 1972 (Mobil, Shell, Total, and BP) plus several others including Chevron have received no-bid contracts to help Iraq rebuild its oil industry suggests that the oil motivation was there all along. According to the New York Times story on the subject, the contracts, to be announced formally on June 30, are 1-2 year agreements that, in the words of one industry analyst quoted in the story, provide a “foothold” for the contracting companies when long-term contracts are let sometime later.

This is significant for a couple reasons. First, the idea of letting contracts to foreign private companies reverses an international trend among OPEC members to nationalize their industries and extract the oil themselves. As a number of observers of the Bush efforts in Iraq have chronicled since the occupation began, privatizing Iraqi state-owned industries has been a high priority for the administration. Score one for the Bushies! Second, the contracts significantly exclude Russia, China, and India, all of which have signed Memorandums of Understanding (MOUs) with Iraq but will not be part of the preliminary efforts that are included in the agreement. The United States presumably hopes those countries will be excluded when long-term agreements are struck. If true, score another one for the Bushies!

So was the real underlying purpose of the Iraq war (to paraphrase James Carville in 1992) “It’s the oil, stupid”? The administration has consistently denied that it is, despite evidence to the contrary. The potential benefits for the United States and western oil companies is huge: industry estimates are that Iraq could be pumping 4 million barrels per day in a few years and could reach a peak of 6 million. That amount would change radically the supply and demand equation for petroleum for several years, as the transition toward alternate fuel sources proceed. In the meantime, the oil companies that get the leases (and which, of course, have heavily supported Bush) stand to reap great benefits (given the niggardly profits they have made in recent years, something they clearly need). Moreover, the total worth of the oil under Iraq soilhas been estimated in the tens of trillions of dollars, beside which U.S. war costs pale. Was war in Iraq an investment in America’s energy future?

Presumably, there are a lot of suppressed smug grins on the faces of the Bush advisors who counseled war on Iraq at this latest news. Can it be long before they start slapping very public high fives to celebrate their triumph? It really always has been the oil, hasn’t it guys?

Source: Andrew E. Kramer. “Deals with Iraq Are Set to Bring Oil Giants Back.” New York Times (online), June 19, 2008.   



One Response to “It Really Is the Oil, Stupid!”

  1. cool stuff

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