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Saturday, May 12, 2007

Michael Schwartz: on Oil and Iraq

Micael Schwartz's latest opus on Oil and Iraq, The Struggle over Iraqi Oil starts off slowly but is well worth a read by anyone interested in a rundown of what exactly the "oil provisions" that both Congress and the President are including in proposals for "what next" in Iraq. Here's a sample discussing how forgiveness of Iraq's enormous Saddam-generated debt is being used as leverage to open Iraq's oil fields to cheap development by multi-national corporations:

As soon as the first elections for a temporary Iraqi government were completed in January 2005 American officials in Iraq began lobbying forcefully for adoption of the very policy that the State Department's pre-invasion Future of Iraq project had drafted. The State Department planners had concluded that Production Sharing Agreements -- a method that granted multinational oil companies effective control of oil fields without transferring permanent ownership to them -- would be the basic instrument through which a future "independent" Iraq would develop new oil fields. Wary by now of being seen as the chief advocate of this policy, which it so desperately wanted in place, the Bush administration concocted a strategy that would enlist the international community in pressuring Iraq to adopt its program.

This was done by making the International Monetary Fund (IMF) a key player in Iraqi oil policy. Through loans in the 1980s and reparations imposed for his invasion of Kuwait in 1990, Saddam had accumulated $120 billion in external debt, the largest per capita debt in the world and a potentially insurmountable obstacle to economic recovery, even in oil-rich Iraq.[...]

The "standard International Monetary Fund program," not surprisingly, included the now familiar American policies regarding Iraqi oil, as well as the use of Profit Sharing Agreements and a host of other provisions that would open the Iraqi economy as a whole, and the oil sector in particular, to investment by multinational corporations. Among the most punitive of the provisions was a demand for an end to the economic breadbasket that guaranteed all Iraqi families low prices for fuel and food staples. In a country with, by 2005, somewhere between 30% and 70% unemployment, average wage levels under $100 per month, and escalating inflation, these Saddam-era subsidies meant the difference between basic subsistence and disaster for a large proportion of Iraqis.


The issue of Production Sharing Agreements is one that receives very little attention in the U.S. Press or even in the political debate of the Iraq Supplemental in Democratic circles. Michael Schwartz shows how the terms of these agreements, however, are very important to the Bush Administration, their allies in the oil industry, and, we might add, among Democrats in Congress as well. Remember all that talk about the "Hydrocarbon Law" in the Democratic sponsered H.R. 1591? Well, the "Hydrocarbon Law" that Democrats are calling for is the same Production Sharing Agreement that Bush and Cheney have been clamoring for all along.

Matt Taibbi breaks it down in layperson's terms:

The proposed Hydrocarbon Law is a result of pressure from the American government on the Iraqis to draft an oil policy that would adhere to the IMF guidelines. It allows foreign companies to take advantage of Iraqi oil fields by allowing regions to pair up with foreigners using what are known as "production-sharing agreements" or PSAs, which guarantee investing companies large shares of the profits for decades into the future. The law also makes it impossible for the Iraqi state to regulate levels of oil production (seriously undermining OPEC), allows oil companies to repatriate profits, and would also allow companies to hire foreign workers to man facilities. Add all the measures up and the Hydrocarbon law not only takes control of the oil industry away from the Iraqi state, but virtually guarantees that the state will profit very little from future oil exploitation.


Both parties in Washington are committed to this proposal. It's no wonder that the Republicans are behind Bush and Cheney on this one; the question is, why are the Democrats?

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