Oil Connections to War 


Graham Phillips philligr@uwec.edu

Part of Iraq & Our Energy Future, by students of
Geography 378 (International Environmental Problems & Policy)
at the University of Wisconsin-Eau Claire, USA, Spring 2003.


    The wars in Iraq in 1991 and 2003 have both had oil as a contributing factor. The 2003 war was not only about Saddam's regime and weapons of mass destruction, but about who will control the second-largest oil reserve in the world. Iraqi oil reserves represent a major asset that could quickly add capacity to world oil markets and bring in a more competitive intention to oil trade. This is one reason why the U.S. and U.K. supported the war in Iraq, and also one why Russia and France opposed the war.

    Why it may have been an Oil War

    Oil is seldom mentioned for the reason why the U.S. invaded Iraq, but it may be one of many reasons. Some governments and people questioned U.S. intentions, but others say that Bush is just looking out for the future of the country. Some Bush Administration officials, such Vice President Cheney, have had extensive connections to the oil industry. During the Clinton Administration, Donald Rumsfeld, Paul Wolfowitz, Richard Perle and other current Bush Administration officials joined together in the Project for a New American Century, which advocated "regime change" in Iraq and other countries. A 1998 letter by Project members stated that “we should establish and maintain a strong US military presence in the region, and be prepared to use that force to protect our vital interests in the Gulf—and, if necessary, to help remove Saddam from power.”

    Most Middle Eastern oil goes to Europe and Japan, but U.S. and British companies pump most of the oil for sale. Using military force in Iraq to remove Saddam also puts the U.S. and U.K. in control of Iraq's huge oil reserves. Control over the oil would limit U.S. dependence on OPEC (Organization of Petroleum Exporting Countries), and increase the production of Iraqi oil, which was limited after economic sanctions were put on Iraq in 1990. OPEC members are required to make an agreed upon quota of oil to keep the price high enough to make a profit but not too high where the West has to go other places or conserve.

    U.S. oil reserves (at current production levels) would only last only a decade if the U.S. was cut off from all other oil sources. Iraqi oil reserves (at their current use levels) would last about 526 years. Iraq has a reserve of about 112 billion barrels of oil. Now that Saddam Hussein has been removed from power, the Iraqi oil industry is up for grabs. It will depend on a new Iraqi government to decide how it will distribute the oil.

    "The fundamental issue is, the day after Saddam is removed, the Iraqi oil industry is open for grabs, and it will depend upon the government of Iraq to decide how it will dispense that resource," says oil consultant Rob Sobhani, a professor at Georgetown University in Washington. "Certainly, American companies would be in a very, very strong position to compete for the right." (ABC News). On May 9, 2003, the European Union's EU Commissioner for Development and Humanitarian Aid, Poul Nielson, visited with the U.S. military commander in Baghdad, and said that the U.S. "will appropriate the oil. It is very difficult to see how this would make sense in any other way. I think that the United States is on its way to becoming a member of OPEC." (Reuters).



    U.S. oil interests in Iraq

    Oil fields were the first places in Iraq to be occupied by the U.S. and U.K. troops in the first hours of the 2003 war. Commanders said the move was to protect the wells, but many Iraqi citizens and other people around the world are suspicious that American and British companies will gain the first oil concessions in the new Iraq. Oil is not the only reason for this war, but as MSNBC observes, "neither is it irrelevant." In the words of Grant Goodman, the 2001 EPA Local Entrepreneur Award Winner: "Let's start with national security--the billions and billions we waste dancing around the issue, protecting those pipelines, invading Iraq, doing whatever else we're doing in the Middle East. It all gets down to continuing the flow of oil to this country."

    From The Observer (UK): "Paul Wolfowitz, Assistant Defence Secretary, and Richard Perle, a key Pentagon adviser, see military action as part of a grand plan to reshape the Middle East. To this end, control of Iraqi oil needs to bypass the twin tyrannies of UN control and regional fragmentation into Sunni, Shia and Kurdish supplies. The neo-conservatives plan a market structure based on bypassing the state-owned Iraqi National Oil Company and backing new free-market Iraqi companies. But, in the run-up to war, the US oil majors will this week report a big leap in profits. ChevronTexaco is to report a 300 per cent rise. Chevron used to employ the hawkish Condoleezza Rice, Bush's National Security Adviser, as a member of its board. Five years ago the then Chevron chief executive Kenneth Derr, a colleague of Rice, said: 'Iraq possesses huge reserves of oil and gas - reserves I'd love Chevron to have access to.' "

    From The Age (Australia): "Ahmed Chalabi, leader of the exiled opposition Iraqi National Congress, which is financed in part by US oil companies, has said he would not feel bound by contracts signed by Saddam and that "American companies will have a big shot at Iraqi oil" under a new regime. The stakes are beyond imagination. According to a report for the Global Policy Forum, a think tank with consultative status at the UN, based on conservative assumptions of oil prices of $US25 a barrel and reserves of 250 billion barrels and a 50-50 profit split, yearly profits for the oil companies would run to $US29 billion a year - which is two-thirds of the $44 billion profits earned by the world's five major oil companies combined in 2001. The costs are also beyond comprehension, but trivial compared to the prize, which is control of prospective oil fields capable of producing more than $3 trillion of oil.

    From The Independent (U.K.) : "Once an American regime is installed in Baghdad, our oil companies will have access to 112 billion barrels of oil. With unproven reserves, we might actually end up controlling almost a quarter of the world's total reserves....The US Department of Energy announced at the beginning of this month that by 2025, US oil imports will account for perhaps 70 per cent of total US domestic demand. (It was 55 per cent two years ago.) As Michael Renner of the Worldwatch Institute put it bleakly this week, "US oil deposits are increasingly depleted, and many other non-OPEC fields are beginning to run dry. The bulk of future supplies will have to come from the Gulf region." No wonder the whole Bush energy policy is based on the increasing consumption of oil. Some 70 per cent of the world's proven oil reserves are in the Middle East."

    From the Indo-Asian News Service: "Sources said control over Iraq and its oil wealth would allow American firms to manipulate global market prices by deciding on production levels. Analysts said Iraq -- with proven reserves of 112 billion barrels of crude oil, next only to Saudi Arabia -- could throw the global oil market into a tailspin by resuming full-fledged production if U.N. sanctions against it were lifted. ....Iraq is permitted to produce 3 to 3.5 million barrels of oil a day under a U.N. oil-for-food programme, but actual production is about 1.5 to 2 million barrels. This ensures that crude oil prices are kept high, as a steep drop is not in the interest of U.S. companies, a source said. "If prices fall, it could jeopardise their deep water exploration, as it would not be viable due to the high costs involved. "By keeping Iraqi supplies disrupted, the U.S. is able to ensure that Saudi Arabia and Kuwait are benefited, as they are able to raise their production to meet the shortfall and earn more revenue." The source noted that U.S. President George Bush and Vice-President Dick Cheney have strong links with the oil industry and alleged that the threat to attack Iraq was aimed at helping American oil companies. In 1973, Iraq nationalised all oil companies. By displacing Saddam Hussein and installing a friendly regime, U.S. and British companies would be able to re-enter the country and get a major share of its oil industry."

    From Mother Jones magazine:  "To the hawks who now set the tone at the White House and the Pentagon, the region is crucial not simply for its share of the U.S. oil supply (other sources have become more important over the years), but because it would allow the United States to maintain a lock on the world's energy lifeline and potentially deny access to its global competitors. The administration "believes you have to control resources in order to have access to them," says Chas Freeman, who served as U.S. ambassador to Saudi Arabia under the first President Bush. .... Iraq, in this view, is a strategic prize of unparalleled importance. Unlike the oil beneath Alaska's frozen tundra, locked away in the steppes of central Asia, or buried under stormy seas, Iraq's crude is readily accessible and, at less than $1.50 a barrel, some of the cheapest in the world to produce. Already, over the past several months, Western companies have been meeting with Iraqi exiles to try to stake a claim to that bonanza.... "Controlling Iraq is about oil as power, rather than oil as fuel," says Michael Klare, professor of peace and world security studies at Hampshire College and author of Resource Wars. "Control over the Persian Gulf translates into control over Europe, Japan, and China. It's having our hand on the spigot."....It is "highly possible" that the United States will maintain military bases in Iraq, Robert Kagan, a leading neoconservative strategist, recently told the Atlanta Journal-Constitution. "We will probably need a major concentration of forces in the Middle East over a long period of time," he said. "When we have economic problems, it's been caused by disruptions in our oil supply. If we have a force in Iraq, there will be no disruption in oil supplies."

    Form Counterpunch: "The Washington, D.C. Council on Foreign Relations, whose members include Vice President Dick Cheney and former Secretary of State Henry Kissinger, and the James A. Baker III Institute for Public Policy prepared the report, Strategic Energy Policy, Challenges for the 21st Century. Key executives in the energy industry helped prepare the report, including former Enron Chairman Kenneth Lay......Secretary of Defense Donald Rumsfield has been asked numerous times whether the U.S. is after Iraq's oil supplies and if that's what is driving this war. Rumsfield's most recent response to the question was "absolutely not." Yet the Baker report suggests that the U.S. should explore the possibility of a regime change in Iraq, line up "key allies" in Europe and Asia and "target (Iraq's) ability to maintain and acquire weapons of mass destruction" as the reasons behind attacking the country all in an effort to import oil into the U.S."

    From Time magazine: "For more than a half-century, American foreign policy dealing with oil has typically been manipulative and misguided, often both at the same time. The pattern of intrigue has ranged from U.S. officials' secretly writing tax laws in the 1950s (so the Saudi royal family could collect more money from the sale of its oil and American companies could write off the added payments on their tax returns) to overthrowing a government that showed too much independence in handling its oil sales. To illustrate the dark side of American oil policy, we offer two tales, stitched together from declassified government documents and oil-industry memos, involving a pair of Iraq's neighbors, Iran and Afghanistan. The first one begins with the rise of a member of Iran's parliament, Mohammed Mossadegh, an impassioned speaker and popular politician who had long chafed at British domination over his country's oil.... In 1951 Mossadegh successfully pushed to nationalize Anglo-Iranian, became Iran's Premier and established the National Iranian Oil Co.....On Aug. 19, 1953, after the deaths of about 300 people in street riots, the 71-year-old Premier was overthrown.....The American-friendly Shah, Mohammed Reza Pahlavi, who had earlier fled the country, returned triumphantly, resumed the throne and reasserted his control....The CIA's fingerprints were everywhere."


    Graph of Iraqi oil production http://www.iraqenergy.com/i/2d/c16b49d6.gif


    Other foreign oil interests in Iraq

    Over the past decade since the 1991 Gulf War, many companies from over 12 countries have been signing deals to develop the Iraqi oil reserves, as part of the limited United Nations "Oil-for-Food" program. Many of these companies were from Russia and France, and both countries want to keep their Iraqi oil concessions for financial reasons. Russia has its own vast oil deposits, but but they very expensive to extract because of their remote location. (ABC News).

    If France and Russia had more access to Iraqi oil reserves, it would allow them to have a greater strategic independence from U.S. oil companies. Oil was one factor in whether or not different countries supported the U.S. war in Iraq. Most permanent members of the UN Security Council have oil companies with a stake in who will rule Iraq. The U.S. says it does not want to control Iraq’s oil industry, but wants other countries to share the risks, and the benefits to go to the Iraqi people.


    Links on the oil connection to the Iraq War