Iraq oil and fragmentation Shiites and Kurds

By pjain      Published Aug. 31, 2020, 3:33 a.m. in blog Geo-Politics   

US-Anglo Alliance - BushJr Lies and $2.5 Trillion wasted!

Iraq Lessons

2002 Politics of WMD BushJr Lies

Costs to West of Iraq "freedom"

While BushJr and Congressional leaders at the time denied it was a motivation there is no doubt the country’s huge oilfields did offer possible post-conflict opportunities for the Iraqi industry and international corporations. After all, the White House was being run by retired oil executives—Cheney, Condoleezza Rice and Bush himself. In fact the biggest beneficiaries were Halliburton and KBR - the massive mercenary outfit that made billions in non-competitive-bid profits.

US citizens paid with 4,424 total deaths (including both killed in action and non-hostile) and 31,952 wounded in action (WIA) as a result of the Iraq War.

Irony Western oils did not take risks of Investing in Iraq!

After the fall of Baghdad in April 2003, no major oil company could even consider investing in Iraq.

What went wrong? Why Iraq was destroyed not reconstructed?

  1. Shock and Awe destroyed major infrastructure

2a. Unrealistic, lack of plans on developing Iraq or its oil. The occupation never worked out how to share Iraq’s oil. The occupation was also in no position to push through any reform that could unite nearly all the country’s political forces in opposition. In the end, the US-led administration announced in September 2003 that foreign investment was acceptable for the rest of the economy but not for the oil sector. The occupiers never actually resolved how the Iraqi oil sector would be rebuilt and its wealth distributed.

2b. Chest-thumping vaulting ambition of the American occupation

  1. Saddam had destroyed Iraqi institutions to bare desert floor, nothing left to build on!

  2. Dysfunctional institutions US bequeathed

  3. Iraq’s internal rivalries that may lead to its partition.

Q. Were oil fields and archaelogical monuments saved?

=== Iraq History and Timeline

Saddam as US Ally - Rise of Baathist party

Baathist party era leading to Saddam's dictatorship from 1968-2003 used "Arab oil for the Arabs” as one of the most popular slogans to sway populace

Saddam got Anglo support for towing the line. Ironically the anti-Iran pitch and keeping this disparate country together was the British strategy that cobbled together this chimera of a country, so they could use tribal divide and conquer to control the prize of oil. This was continued by the tail (British racists/nobility) wagging the stupid tiger (USA). Basically US followed in footsteps letting BP profit massively for decades while not getting much out of the deal.

Iran, Iraq War

1992 Kuwait

1972 Oil Nationalisation

  • 1950s Iraqi Nationalism was policy of Oil for Iraqis had first been demanded.

Oil was most plentiful in non-Sunni dominated areas, yet rewards were grabbed by Saddam using Sunni tribal repression. In fact Saddam manipulated the West "as an ally" of Uncle Sam to consolidate his hold. 1. Supergiant fields of Rumaila, near Basra in the Shia-dominated south, 2. near Kirkuk in the north-east with the Kurds.

In 1973 Western oil companies were forced out of the country after nationalisation in 1972

Prior to 2003 all oil profits had gone to Baghdad, providing a succession of authoritarian leaders with the means to maintain their rule (Saddam Hussein being the final and most brutal example).

2003 to Dec 2005 - elections

Distrust and Hate of Western Invasion - Shock and Awe rebellion. Ironically Saddam was a hero for the majority Sunnis! The average Iraqi thinks western oil companies are operating in Iraq is simply to steal Iraq's oil. "If Iraq had no oil, would America have sacrificed thousands of its soldiers and hundreds of billions of dollars to come here?" It is hard for them to understand the global Anglo military-industrial complex that loves wars and burning trillions of dollars just to get a fat juicy profitable cut of the USD as reserve currency.

Elections were not scheduled till 2 years after 2003 as "Iraq needed to be stabilized" (read pacified).

2006 Rise of UIA - Iranian influence via Shiites Majority

However, a HUGE blow to was when elections delivered a decisive defeat for the secular pro-U.S. elements (such as the INA) and a huge victory for Shia Islamist parties, in the form of the United Iraq Alliance (UIA).

May 2006 was earliest a permanent government could be formed.

History of Oil in Iraq before 2003 Invasion was Timeline of Iraq

Oil is central to Iraq’s present and future. It accounts for 99% of all government revenue. Along with existing reserves of 143 billion barrels (5th in the world) it is estimated there are 50 to 200 billion barrels yet to be discovered making it the largest unexplored market in the world.

Oil ministry operates several State-owned companies, including the North Oil Company, the Midland Oil Company, the South Oil Company, and the Missan Oil Company.

Big Oil unwilling to Risk investment 3-5 yours - Theory of Obsolescing Model in international trade with Unstable Countries

While an unstable underdeveloped country may hand over its resources to multinationals because it’s desperate for investment, the risk is that once a country recovers its government will reject what it sees as an unfair deal.

Big Oil would have to wait three years from mid-2003 before its representatives could bargain with a government that would be considered sovereign. Only this could allow them to sign contracts that would be protected under international law.

Iraq Oil Law Attempts 1960s to 2007

Legislation from the 1960s that stated any oilfield development contract would have to be approved by a specific new law passed in the Iraqi parliament, potentially stalling or torpedoing new deals.

FEAR of Privatization - fight over LAWS vs Crony Capitalism politics

Iraq could have become a beacon of oil industry privatisation if fair contracts from open competition were allowed. There was no appetite among Iraqi politicians or people for privatisation.

The opposition to Anglo oil development was so intense, that the occupation was also in no position to push through any reform that could unite nearly all the country’s political forces in opposition. In the end, the US-led administration announced in September 2003 that foreign investment was acceptable for the rest of the economy but not for the oil sector. The occupiers never actually resolved how the Iraqi oil sector would be rebuilt and its wealth distributed.

"The US and other western oil companies and their governments had been lobbying for passage of a new national law in Iraq, the Iraq Oil Law, which would move Iraq from a nationalised to a largely privatised oil market using Production Sharing Agreements (PSAs), a type of contract model used in just approximately 12 per cent of the world's oil market. [Such] agreements have been summarily rejected by most countries, including all of Iraq's neighbors, "because it provides far more benefits to the foreign corporation than to the domestic government. .. The public is against privatisation, which is one reason why the law has not passed. " -- Oil analyst Juhasz

2005 Iraqi Constitution Oil for Iraqi

The Iraqi Constitution suggests oil is owned by all Iraqis but does not specify how its wealth would be shared.

2007 National Hydrocarbon Law Proposed

This was drawn up back. However various drafts continue to fail to resolve disputes among oil and non-oil producing regions and the law still awaiting parliamentary approval nine years later.

Oil is being controlled and developed in Ad-Hoc manner

The oil industry continues functioning in a complex framework of varying interpretations of the constitution and laws dating back to before 2003.

Baghdad has driven a hard bargain with western oil companies - and it is likely Western Oil did not get an easy or cheap pass. However first "right of refusal" is all they got, but they are afraid "some new government in Iraq changes its policies to let other outsiders make more money."

Dec 2010, the third round of contracts were signed DIRECTLY with the central government unlike under Iraq's Oil Law these contracts do not need to go through parliament. This means the contracts are being signed without public discourse. Obviously lots of leeway for political cronyism. But also "The contracts are enacting a form of privatisation without public discourse and essentially at the butt of a gun - these contracts have all been awarded during a foreign military occupation with the largest contracts going to companies from the foreign occupiers' countries. It seems that democracy and equity are the two largest losers in this oil battle." -- Oil analyst Juhasz and Al-Jazeera

Russia, China winning. There are tons of foreign governments who did NOT antagonize Iraq by invading and bombing it - the Chinese, Russians, Indians and Singapore all want a piece of the action.

ISIS takeover of vast regions hurt plans from 2014-2018 in most of non-Shia/Kurd fields

Oil is a target for ISIS as a resource to be captured for its nascent state or an industry to be disrupted in the territories it does not control. Oil facilities in Baiji were a site of fierce fighting between government and ISIS forces in 2014 and 2015.

Oil distribution and pipelines are frequently attacked - preventing profiting from resources without ISIS taking its unholy cut.

Ongoing crime and ethnic/tribal strife limit production. Iraq has a multitude of problems - political, ethnic, tribal, religious etc - that have prevented them from exploiting it as well or as quickly as the Saudis which benefit from a strong and harsh central government aligned with Saudi princes. Kurdistan demonstrates the very real potential of the country dividing.

As a spasm of violence wracked Baghdad in the wake of the US military withdrawal and political rifts widen, Iraq's instability is evident.

Bravely oil ministry spokesmen claim attacks against Iraq's oil pipelines have minimal effect on production capabilities, and claimed "sabotage will not affect our oil production and exports because we can fix these damages within days, or even hours.

Iraq and Oil

Oil is Key to Iraqi Economy

Iraq increased production since the end of the Iraq War in 2003 to 3m by 2012, but did not meet its 2011 goals, and unlikely to meet 4.5m 2013 goal, or the 5m 2014 one.

It has a stated goal of 12 mbpd by 2017 - PROBLEM is will require at least $200bn in physical and human investments.

  • Now second-largest producer in the Middle East and sixth in world

Iraq increased production since the end of the Iraq War in 2003 to 3m by 2012, but did not meet its 2011 goals, and unlikely to meet 4.5m 2013 goal, or the 5m 2014 one.

It has a stated goal of 12 mbpd by 2017 - PROBLEM is will require at least $200bn in physical and human investments and due to its internal problems unlikely will get beyond 4-5 mbpd.

  • Now second-largest producer in the Middle East and sixth in world

Needs of Iraq after 2003 - But what really happened

After the 2003 invasion, everyone knew an equitable distribution of oil wealth was therefore key to resolving conflict in Iraq and avoiding the emergence of another Saddam. ** Regional Fragmentation and Disagreements Dominate. Ready to fight to end by Shia/Iran and Kurds to protect against Weak Sunni central government

What Iraqi Oil Needed - Capital, Technology and Fair Market Competition By 2003, the Iraqi oil industry was in desperate need of renovation and modernisation. A combination of war and sanctions had crippled its production technologically. Well production rates had fallen. New techniques in seismic surveying and drilling technologies held the potential to transform current and future production.

1. Produce from Proven Reserves - Low Cost of Production

Iraq's proven oil reserves of 112 billion barrels ranks second in the world, only behind Saudi Arabia.

There is development of the existing fields, while easy money needing basically repair of infrastructure due to wars. One is to renovate the infrastructure, since for most of the past 25 years it has depreciated due to the sanctions and turmoil.

However on the downside, the Iraqi Oil ministry will probably take the biggest cut of production profits here.

2. Drill more Wells in Proven Areas - Low Risk

These are relatively low risk but need modern technology and investment to maximize output. After all there is some reason why they were not developed earlier even if explored but not-yet-produced field. So, some of these fields have different stratum, so once they use innovative techniques like horizontal drilling, there is a huge potential in the fields they have explored.

To balance the investment, Iraq's production costs are among the lowest in the world.

To date, only about 2,000 wells have been drilled in Iraq, compared with roughly one million wells in Texas alone. However, the production history of decades from these oil fields gives a pretty clear idea of where to drill.

3. Drill in Unexplored regions of Iraq

Up to 90 per cent of the country remains unexplored, due to decades of US-led wars and economic sanctions.

This could yield an additional 100bn barrels on top of this.

Anglo-US Oil Companies in Iraq - Countries that Invaded

  • Since then to the 2003 invasion and occupation of Iraq, US and other western oil companies were all but completely shut out of Iraq's oil market
  • 2005, while the Anglo military has formally ended its occupation of Iraq, some of the largest western oil companies remain

There is massive corruption, lack of transparency and clarity of vision regarding the legal issues behind Western oil contracts.

As Juhasz, author of the books The Tyranny of Oil and The Bush Agenda, says that US and other western oil companies have not yet received all the cheap oil hoped for, they've certainly done quite well for themselves, landing production contracts for some of the world's largest remaining oil fields under some of the world's most lucrative terms. But it seems European firms did better than US ones.

" I believe western oil companies have successfully acquired the lions' share of Iraq's oil, "but they gave a little piece of the cake for China and some of the other countries and companies to keep them silent ... The last thing the US cares about in the Middle East is democracy. It is about oil, full stop." -- Dr Zalloum

ExxonMobil

  • with junior partner Shell beat Lukoil/COP for 8.7 bb West Qurna Phase 1 project

Chevron - failed to sign contracts with Iraq

ConocoPhillips - failed to sign contracts with Iraq

BP

- Iraq's supergiant Rumaila 17 bb oil field is already being developed by BP and CNPC (China National Petroleum Corporation)

Other Western Oil Companies in Iraq thad did NOT invade - seem to have benefited

Royal Dutch Shell

- 2010 only western firm (EU didn't invade Iraq) won 3rd round of contracts
- end 2012 took 3 years to contract a massive $17bn flared gas  deal in southern Iraq, the oil giant
- Supergiant reserve in southern Iraq, Majnoon oil field with 25 bb (along with Malaysia's Petroliam Nasional Bhd)

Eni of Italy

- Eni/OXY/Korea Gas won 4.4 bb reserve Zubair oil field

Norway's Statoil

- won Dec 2010 fields contracts

Shiites and Iranian Influence

Iran-Iraq war and its Legacy

Basra fields "owned" by Shiites and Iranians

Competitor Oil Companies in Iraq

There are tons of foreign governments who did NOT antagonize Iraq by invading and bombing it - the Chinese, Russians, Indians and Singapore all want a piece of the action.

Lukoil and Gazprom Russian oil companies

  • won Dec 2010 fields contracts

Angolan company Sonangol, among others."

  • won Dec 2010 fields contracts

Chinese Influence - Iran deal bypasses

References

Kurds in Iraq, Syria, Turkey and Iran

Iraqi Kurds

In the autonomous Kurdistan region of Iraq, oil production is controlled by the local Kurdish Ministry of Natural Resources.

Fight to death willinginess of Kurds defense against ISIS

In the north of Iraq where the semi-autonomous Kurdistan Regional Government (KRG) divided up its territory into blocks for exploration, inviting international companies in on production sharing contracts. When discoveries were made, major companies like ExxonMobil and Chevron got involved.

For the leadership of Kurdistan, oil is a key political and economic asset, potentially leading to an independent future, although the recent global fall in the price of oil has called into question if this is financially viable.

Kurdistan demonstrates the very real potential of the country dividing. Saddam got Anglo support for towing the line. Ironically the anti-Iran pitch and keeping this disparate country together was the British strategy that cobbled together this chimera of a country, so they could use tribal divide and conquer to control the prize of oil. This was continued by the tail (British racists/nobility) wagging the stupid tiger (USA). Basically US followed in footsteps letting BP profit massively for decades while not getting much out of the deal.

The difficulty the KRG faced was that, although oil had been discovered, the lack of an Iraq-wide agreement meant it was unclear how it could be monetised.

Baghdad and the KRG have had endless disputes over ownership and budget allocation. The greater the dispute between the two, the more the KRG has pulled away.

PROBLEM of shipping and defensible pipelines

Eventually KRG signed energy deals with the Turkish government and selling its oil on the international market with transport through Turkey and later in smaller quantities through Syria - letting these dictators dip their beaks in Kurdish money.

Getting oil out of Kurdistan was initially a problem, but in 2014 a new pipeline joined KRG oil fields to Turkey.

Iran backed Shiite areas near Basra - also defensible pipelines


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