Iraq Oil Minister says, "Iraqi Oil Law Approval is Months Away"

Reuters reports:

Final approval of a long-awaited Iraqi oil law that would help usher in new investment is months away, Oil Minister Hussain al-Shahristani said on Thursday.

"The different factions in parliament need to resolve their differences and they haven't done that yet. This could take some time and could be months," he told reporters at an OPEC heads of state summit in the Saudi capital.
Iraq would try to find ways to work with international oil companies on its giant southern fields even without the oil law in place, Shahristani said.

"We don't necessarily need a new law for that, we have the existing legislation in the country," he said.

"We have started talking with oil majors on these fields and we'll find a way to cooperate and enhance production from these fields."

Iraq's cabinet agreed a draft law for dividing the world's third largest oil reserves in February, but disputes with the regional government in Kurdistan, as well as objections from Shi'ite and Sunni Arab politicians, have hobbled progress.

Oil companies have been providing technical assistance and training to Iraq for years as they look to position themselves for contracts when the law is passed.

Shahristani reiterated that Baghdad would block companies that had signed deals with the Kurdish regional government (KRG) in the north from contracts elsewhere in Iraq.

"Our position is that any company that signed such contracts will compromise their chances of getting any business in the future in Iraq and this message has been conveyed to the companies," Shahristani said.

Companies that produce oil under the deals will not be able to export it without approval from the federal authorities, he said.

The KRG has pushed ahead with plans to attract foreign firms to develop its oil and gas despite opposition from Baghdad, which says the new contracts are illegal.

On Monday, the regional government in Iraq's semi-autonomous Kurdistan said it had awarded five new petroleum production sharing contracts to foreign firms, further angering Iraq's central government.

An improvement in the country's security situation would allow exports to rise to 2 million bpd by the end of the year, Shahristani said.

Iraq's Leaders Still Can't Agree On New Oil Law

Reuters reports:

Iraq's political leaders are in intensive talks to resolve lingering disputes over a draft law that will decide control of the world's third-largest oil reserves, Iraqi Prime Minister Nuri al-Maliki said on Sunday.

"Everyone agrees that this law should be passed. There is positive progress and understanding between the parties. I believe talks in the coming days will be intensive to resolve the disputes," he told reporters in Baghdad.

The oil law is seen as vital to securing foreign investment to boost Iraq's oil output and rebuild its shattered economy. Most of Iraq's proven oil reserves are in the Shi'ite south and in the Kurdish north.

The cabinet agreed on a draft in February and sent it to parliament for approval, despite disagreement over the rights of regions to negotiate contracts with foreign oil companies and whether the federal or regional governments would control the oil fields.

Maliki said the bill, which will provide a legal framework for foreign firms to do business in Iraq, had since been sent back to cabinet for more talks to iron out the disputes.

The prime minister said there was still disagreement over the exploration of undeveloped fields and production-sharing agreements, as well as contracts that had already been signed with some foreign companies.

Iraq's Kurdish region said last week it had signed seven new oil and gas contracts with international firms.

The Kurds say the draft law's annexes are unconstitutional, objecting to a proposal that would wrest oilfields from regions and place them under the control of a new state oil company.

Maliki said some parties in the negotiations wanted the annexes separated from the draft law to ease its passage through parliament.

"These disputes, some of them are based on the interests of the whole country and others are based on specific provinces," Maliki said, without referring to Kurdistan by name.

What's Holding Up The Iraqi Oil Law?

From ZNet, Munir Chalabi writes:

As deadline after deadline and benchmark after benchmark passes and with all the pressure imposed by the IMF, the US Administration, the US oil lobby and International Oil Companies (IOCs) on the Iraqi government, the oil law, against all the odds, refuses to be born.

Despite all the attempts by the Occupation's Governing Council (GC) and its appointed puppet, Allawi's Government, as well as the efforts by both of the elected governments, several US/IMF deadlines have passed including one in December 2006, then in March, May and the latest one in July 2007, but the draft of the law has not even been presented officially to the Federal Parliament in Baghdad.

In parallel with all these deadlines and benchmarks, we have seen several versions of the drafts for the new Iraqi oil law leaked one way or another to the international press. This includes one in June 2006, another on January 15, then February 15, June 25, and finally July 3, 2007.

Many international political analysts and oil experts cannot comprehend how such unprecedented pressure can fail to produce results.

The answer to this is to be found within the methodology used in investigating the reasons behind the failure of the US Administration in achieving their objectives.

Analysts must not only look for external influences on any US plan in Iraq but they should also study and analyze the internal Iraqi causes affecting the success or the failure of the plan.

A. External factors and influences:

External influences were for the most part, behind the approval of a draft of the oil law, which will be the first and major step in the privatization of Iraqi oil wealth and will ensure that the oil will be produced and marketed by the IOCs with enormous profit to them.

Neither the US Republican administration nor the Democrats had any disagreement with this policy and made the approval of the oil law a benchmark for future US strategy in Iraq within the Iraqi Study Group report.[1]

The IMF made the approval of the oil law one of the main conditions for reducing the Iraqi international debts, as declared in December 1, 2005 in the Paris meetings between the IMF and representatives of the Iraqi Government.

The IOCs were united in their approval of the oil law and there were no indications from any of them to the contrary.

In addition, we have to remember that Iraq is still under US occupation. Over 180,000 US/multinational troops and over 50,000 active mercenaries are putting all types of pressure on the Iraqi government and parliament to ensure the success of the US oil plans.

Several international organizations which oppose the oil Law, including a number of environmental groups, anti-occupational movements and several international trade unions[2] provide vital support to the Iraqi anti-oil law movements and had very positive media campaigns. However, their effectiveness was understandably limited, as they could not influence the international decision-making powers.

B. Domestic influences and factors:

There are several Iraqi factors behind all the delays in the delivery of the oil law and these include:

1. The Disagreement between the Central Government and the Kurdistan Regional Government on several issues of the law including who should control the strategic oil policies and which giant oil fields should be given to the IOCs. The Kurdish Government insisted that several of the major oil fields which are allocated to the Iraqi National Oil Company under annex 2 of the draft, be moved to annex 3 in order to be given to the IOCs.

2. Increased Iraqi public awareness and pressure -- the public awareness has increased noticeably in the past year against the oil law. We have seen this public pressure mounting because of:

· An increased awareness by the public of the Iraqi civil society organizations, trade unions, in particular the IFOU ("Iraqi Federation of Oil Unions"[3]), oil experts[4], economists and the Iraqi media concerning the threat of the oil law on the future of the sovereignty of the nation, which has consequently increased the opposition to the law.

· More and more MPs are calling for the law to be carefully studied before its approval. The Iraqi parliament has gone into summer recess without discussing the oil law, but up until now the only members who are openly standing against the oil law are the MPs from Sadr's Movement and some individual members from the "Iraqi Accord," the Dawa Party and some independent MPs.

· The "State Shuraa Council," which is the highest legal office in the Iraqi Ministry of Justice, submitted on July 25, 2007, 13 legal comments on the "Draft Oil & Gas Law" to the Iraqi government. The main points included the need to first re-establish the Iraqi National Oil Company which was dissolved by the Baath regime in 1987 (in their first step to privatize the nation's oil wealth) before the Oil & Gas Law is be put to parliament. Also the Council emphasized the importance of the leading role of the central government in planning the strategic policies concerning the future of the nation's oil and gas wealth in accordance with the needs of article 111 of the Iraqi Constitution. The third vital comment by the Council was their recommendation that all agreements with any international oil companies should be approved by the Iraqi Parliament.

The Council's comments made it more difficult for the Iraqi Government to push the Draft Oil Law through the Iraqi Parliament.

· The latest Oil poll, which was carried out in June and July 2007 by KA Research, has shown that the Iraqis oppose plans to open the country's oil fields to foreign investment by a factor of two to one (63% oppose to 31% for).

3. The security crises: More and more Iraqis are questioning the wisdom of trying to rush the Oil & Gas law through parliament while the country is in such a devastating state.

· Thousands of innocent civilians are slaughtered every month due to suicide bombings by the Al-Qaeda/Baathist terrorists, the occupying forces' military attacks, the secret CIA controlled death squads and the sectarian clashes.

· Most Iraqi cities and towns have either no or severe shortages of electricity, clean water and other basic life necessities

· People are afraid to stay in their homeland and around four million are displaced, many driven from their homes by force.

Conclusions:

The legislation of the new Iraqi Oil & Gas Law by the Iraqi parliament has become the most important benchmark of the US Administration, its oil lobbies, the IOCs, the IMF, and the occupying forces. The Bush administration wants this law to be passed as soon as possible, whatever the cost to the Iraqi people.

The failure of the US policies in the occupation of Iraq, the success of the Democratic Party in the 2006 elections in controlling both legislative houses in the US, and the presidential elections next year, have made the Bush Administration and its allies more desperate in their attempts to reach a successful conclusion on the oil law in order to prepare the ground for a partial US withdrawal from Iraq, within the lifetime of this administration.

This has led to enormous pressure being imposed by the US administration and its forces on the ground in Iraq on Al-Maliki's government in the past eight months. They insisted that the government should go ahead and get this oil law approved by parliament, together with the re-Baathification law, and other privatization laws such as the privatization of the Iraqi oil processing industries which they succeeded in passing through parliament three days before the start of summer session.

The Bush Administration and their Ambassador in Baghdad had openly threatened to replace Al-Maliki's government with a new government, headed by their man in Iraq -- the old Baathist, Iyad Allawi. Al-Maliki has openly accused Allawi in several speeches of attempting to overthrow his government with the help of some units of the Iraqi army and security generals including the head of the Iraqi security forces, the old Baathist general Mohammed Al-Shahwani. These generals were appointed to their positions during Allawi's appointed government by the last US official administrator Paul Bremer back in May 2004, and are still taking their orders directly from the US embassy in Baghdad.

The US administration recognized that a US-led military coup d'etat would not result in any laws being recognized as legitimate by the international community if parliament were to be dissolved. They therefore moved to a new policy, which involved direct interference with the political process in Iraq through their more reliable allies to reorganize the political alliance on which the government relied in order to achieve their goals. They finally succeeded in achieving the establishment of such a front, which was called the "The front of the moderates" on August 15, between the two main Kurdish parties (KDP and PUK), two of the Shiite parties (the SCIRI and Al-Dawa party -- the Al-Maliki wing is called the "External organization"), with negotiations still ongoing to persuade the Islamic Party/Accord front -- the main Sunni party -- to join this new alliance.

The US administration made it clear that the new Iraqi government has important targets to accomplish, and they listed the oil law as the first priority and the re-Baathification law as a second main concern.

The claim of the US Administration that the oil and gas law will allow all Iraqis to share the oil revenue is no more than another peace of misinformation, as the "Revenue Sharing Law" is a separate federal revenue law which is still being negotiated between the different Iraqi parties representing all sectors of Iraqi society.

The US Administration is aware that time is not on their side, especially when it concerns the oil law. They now recognize that as more people come to understand the law, this will increase the chance of its defeat. This was the main reason behind all the attempted secrecy that surrounded any information about the oil law.

The latest oil poll which was carried out in June and July 2007 by KA Research has shown that the vast majority of Iraqis (91%) did not feel informed enough about the oil law. This included the 33% who said they knew a little information on the law, 30% who said that they were not very informed and 28% that stated that they knew nothing about it.

If the formation of the new political right wing alliance succeeds, then this will create for the first time, perilous circumstances which will allow the oil and gas law together with other US benchmarks to be passed through the Iraqi parliament within the next few months.

This danger is very real and should be seriously considered by all the parties who are opposing the law in their future planning.

There have been several attempts by some Iraqi groups opposing the law to raise several important issues, in order to prevent the law being approved by parliament within the near future. Issues such as this law should be treated as sovereignty issues due to their affect on the future of the nation and therefore should only be passed by a referendum.

It is time for the US administration to recognize that their attempts to get the Iraqi parliament to approve this oil law by using all manner of pressure and threats, will not guarantee their chances of succeeding in implementing a law which does not reflect the interests of Iraqis in any shape or form, in the near and long term future, as was the case with many of their original plans.

It is international law which states that the occupying forces have no right to impose laws which reflect their interests only, and do not reflect the interests of the occupied people and that such laws are null and void if any future elected Iraqi parliament declares them to be so.[5]

Notes:

1. Munir Chalabi, "The Future of Iraqi oil as proposed by the Iraqi Study Group," ZNet, Jan. 8, 2007.

2. UK Organizations: PLATFORM; War on Want; US Organizations: Global Policy Forum; Institute for Policy Studies; Oil Change International; US Labor against the War.

3. IFOU, the "Iraqi Federation of Oil Unions," was the first to recognize the threats within the law and started their campaign against the law in May 2005 when they organized the first conference in Basra to discuss the future of the Iraqi oil industry and are in opposition to the PSA type of agreements.

4. Some Iraqi oil experts are having an increase role in raising the awareness of the Iraqi public and the members of the Iraqi Parliament. The letter to parliament from 106 Iraqi oil experts, technocrats is an example of such activities. The Iraqi oil experts Fouad Alamir and Issam Chalabi are leading the campaign.

5. See more details in the analyses of February 2007 draft of the Oil
Law in my article "Is Iraq in need of such an oil law," ZNET, March 11, 2007.

Munir Chalabi is an Iraqi political analyst living in UK.

Iraqi PM Urges Parliament To Shorten Vacation & Pass Bush's Laws . . . .

. . . . As more civilian men, women and children are killed and wounded by U.S. military targeting insurgents.

The Guardian reports:

Iraq's prime minister urged parliament on Saturday to cancel or shorten its summer vacation to pass laws Washington considers crucial to Iraq's stability and the debate on how long U.S. forces should remain.

Parliament was scheduled to adjourn for all of August. American officials, however, began pressing Prime Minister Nouri al-Maliki and parliament late last year to pass at least two laws viewed as a way to defuse the sectarian violence crippling Iraq: one on the distribution of oil and another on how to handle former members of Saddam Hussein's Baath party.

Al-Maliki's office said he discussed parliament's failure to pass key legislation during a meeting with U.S. Ambassador Ryan Crocker and presidential adviser Meghan O'Sullivan. There was no immediate report on the meeting from U.S. officials.

A statement by the Shiite prime minister's office said he ``hoped that the parliament would cancel its summer vacation or limit it to (two weeks) to help the government solve the pending issues on top of which (are) the vacant ministerial posts.''

In northeast Baghdad, meanwhile, the U.S. military said it killed six militants in an airstrike on a Shiite stronghold. Iraqi officials and relatives of the victims claimed 18 civilians died in the attack.

The infusion of about 30,000 more American forces, completed last month, was President Bush's attempt to calm the capital and give parliament and al-Maliki ``breathing space'' to pass the legislation. But so far nothing of consequence has reached the floor of the legislature and some are predicting the critical oil law might not even be taken up until September.

The oil law, approved by al-Maliki's Cabinet but not sent to parliament because of major opposition, calls for a fair distribution of the income from Iraq's massive petroleum resources among Shiites, Kurds and Sunnis.

Sunnis, who make up the bulk of the insurgency, have virtually no known oil reserves in their territories yet still oppose the current draft legislation. Kurds, who control large reserves in northern Iraq, also oppose the measure because it could loosen their control over a key asset.

Shiites, meanwhile, opposed the measure on former Baath members because it would allow many former members of the Saddam's regime to return to their old jobs. The former regime heavily oppressed Iraq's Shiite majority, which has gained political ascendancy since the 2003 U.S. invasion that toppled Saddam.

American commander Gen. David Petraeus must report to Congress on progress in Iraq by Sept. 15, and the absence of legislative progress will cast a heavy cloud over any attempt to paint a positive picture.

The U.S. military, meanwhile, said it ordered the airstrike near the Shiite stronghold of Husseiniyah after American forces came under small-arms fire from a structure there late Friday. It said helicopters fired missiles at the building and three gunmen fled to a second building nearby.

U.S. aircraft then bombed the second structure, setting off at least seven secondary explosions believed caused by explosives and munitions stored inside the building, the military said.

Iraqi police inspected the site and reported six militants killed and five wounded, it said.

The military account contradicted reports from Iraqi police and hospital officials, who said 18 civilians had been killed and 21 wounded in a 2 a.m. attack in Husseiniyah, an area in which Shiite militias operate openly near the road leading to volatile Diyala province.

AP Television News videotape showed wounded women and children lying in hospital beds, and white pickup trucks carrying at least 11 bodies wrapped in blankets to the morgue. Men unloaded the bodies, including several that were small and apparently children, as women shrouded in black wailed in mourning.

Relatives said the dead were killed in the airstrike. The conflicting accounts could not be reconciled.

The Iraqi officials, who spoke on condition of anonymity because they feared retribution, also said three houses were destroyed and five cars were damaged.

Loyalists of radical Shiite cleric Muqtada al-Sadr, whose Mahdi Army militia operates in the Husseiniyah area, condemned the airstrikes.

In other violence Saturday:

- A minibus was struck in a mortar attack in the predominantly Shiite area of Baladiyat in eastern Baghdad. At least five people died and 11 were wounded, police said.

- Mortars also slammed into the eastern outskirts of Baghdad, killing two people and wounding four, another officer said. Both spoke on condition of anonymity because of security concerns.

- The U.S. military announced that a roadside bomb killed a U.S. soldier in Diyala province on Friday, raising to at least 3,631 members of the U.S. military who have died since the Iraq war started in March 2003, according to an Associated Press count.

- A British soldier was killed in Basra, southern Iraq, the British Defense Ministry said. The statement only said the soldier ``died as a result of an indirect fire attack on Basra Palace,'' without elaborating.

- The Iraqi army said troops have detained 46 suspected militants and killed five others since launching a new operation Wednesday in the eastern half of volatile Diyala province. A kidnap victim also was freed and two car bombs and six other explosive devices were seized, it said.

U.S. and Iraqi forces have stepped up efforts in recent weeks against the violence in Diyala, particularly in the provincial capital, Baqouba, 35 miles northeast of Baghdad.

Military Funding Bill Includes Benchmark For Giving Up Oil Rights

Bangor Daily News reports:

For the first time, Congress has put conditions on its approval of funding for the war in Iraq. Although the president has leeway in meeting these conditions, this is an important step in better assessing progress in Iraq, which in turn should lead to a clearer understanding of how long U.S. troops should remain there.
The House and Senate on Thursday approved more than $100 billion for the wars in Iraq and Afghanistan and some domestic projects. The bill did not include a timetable for the withdrawal of U.S. troops — the reason President Bush vetoed an earlier funding bill. But it does include provisions from Sens. Susan Collins, John Warner and Ben Nelson to set benchmarks for the Iraqi government to meet in order to receive U.S. reconstruction funds. It is the first time Congress has supported economic consequences if the Iraqis do not meet certain benchmarks.

The benchmarks include increasing the number of Iraqi security forces capable of operating independently, enactment and implementation of de-Baathification legislation, enactment of constitutional and electoral reforms, and passage of legislation to ensure the equitable distribution of oil revenues.

The legislation also requires the president to submit reports — in July and September — on whether the Iraqis are making satisfactory progress.

"This sends a very strong message to the Iraqi leaders that the status quo is not acceptable," Sen. Collins said. "It also tells the Iraqis that our presence and our commitment in Iraq is neither open-ended nor unconditional."

It also mirrors the recommendations of the Iraq Study Group. When it was released six months ago, the report landed with a thud. Its recommendations for incentives to encourage the Iraqi government and talks with Iraq’s neighbors were largely ignored as focus remained on military action. As the Bush administration and Congress struggle to find a new direction for Iraq, it is not surprising that they are following the advice of the study group since few other options exist.

The group’s call for a diminished U.S. military presence, greater Iraqi government authority and regional diplomacy is as relevant today as when it was first issued in December. The question remains, however, how to implement such a policy as Iraq descends further into sectarian chaos.

Requiring reports from the president and tying financial assistance to the Iraqis meeting benchmarks they had devised, although small steps, set the stage for a fuller debate on the U.S. role in Iraq.

The debate will become more serious this summer after Gen. David Petraeus, the commander of American forces in Iraq, issues his report. After that, expect more focus on benchmarks and diplomacy as military options are exhausted.

What Congress Really Approved: Benchmark No. 1: Privatizing Iraq's Oil for US Companies

Ann Wright served 29 years in the US Army and US Army Reserves and retired as a colonel. She served 16 years in the US diplomatic corps in Nicaragua, Grenada, Somalia, Uzbekistan, Kyrgyzstan, Sierra Leone, Afghanistan, Micronesia and Mongolia. She resigned from the US Department of State in March, 2003 in opposition to the war on Iraq.

For Truthout, Ann Wright writes:
On Thursday, May 24, the US Congress voted to continue the war in Iraq. The members called it "supporting the troops." I call it stealing Iraq's oil - the second largest reserves in the world. The "benchmark," or goal, the Bush administration has been working on furiously since the US invaded Iraq is privatization of Iraq's oil. Now they have Congress blackmailing the Iraqi Parliament and the Iraqi people: no privatization of Iraqi oil, no reconstruction funds.
This threat could not be clearer. If the Iraqi Parliament refuses to pass the privatization legislation, Congress will withhold US reconstruction funds that were promised to the Iraqis to rebuild what the United States has destroyed there. The privatization law, written by American oil company consultants hired by the Bush administration, would leave control with the Iraq National Oil Company for only 17 of the 80 known oil fields. The remainder (two-thirds) of known oil fields, and all yet undiscovered ones, would be up for grabs by the private oil companies of the world (but guess how many would go to United States firms - given to them by the compliant Iraqi government.)

No other nation in the Middle East has privatized its oil. Saudi Arabia, Kuwait, Bahrain and Iran give only limited usage contracts to international oil companies for one or two years. The $12 billion dollar "Support the Troops" legislation passed by Congress requires Iraq, in order to get reconstruction funds from the United States, to privatize its oil resources and put them up for long term (20- to 30-year) contracts.

What does this "Support the Troops" legislation mean for the United States military? Supporting our troops has nothing to do with this bill, other than keeping them there for another 30 years to protect US oil interests. It means that every military service member will need Arabic language training. It means that every soldier and Marine would spend most of his or her career in Iraq. It means that the fourteen permanent bases will get new Taco Bells and Burger Kings! Why? Because the US military will be protecting the US corporate oilfields leased to US companies by the compliant Iraqi government. Our troops will be the guardians of US corporate interests in Iraq for the life of the contracts - for the next thirty years.

With the Bush administration's "Support the Troops" bill and its benchmarks, primarily Benchmark No. 1, we finally have the reason for the US invasion of Iraq: to get easily accessible, cheap, high-grade Iraq oil for US corporations.

Now the choice is for US military personnel and their families to decide whether they want their loved ones to be physically and emotionally injured to protect not our national security, but the financial security of the biggest corporate barons left in our country - the oil companies.

It's a choice for only our military families, because most non-military Americans do not really care whether our volunteer military spends its time protecting corporate oil to fuel our one-person cars. Of course, when a tornado, hurricane, flood or other natural disaster hits in our hometown, we want our National Guard unit back. But on a normal day, who remembers the 180,000 US military or the 150,000 US private contractors in Iraq?

Since the "Surge" began in January, over 500 Americans and 15,000 Iraqis have been killed. By the time September 2007 rolls around for the administration's review of the "surge" plan, another 400 Americans will be dead, as well as another 12,000 Iraqis.

How much more can our military and their families take?

Petroleum Law not About Fair Distribution of Revenues

The Iraqi petroleum bill has run into heavy opposition in parliament from Kurds and other political forces. The Bush administration had made passing it by June 15 one of 4 major "benchmarks" for the progress of the al-Maliki government.

But there is another corner of the petroleum bill that is often misreported. It has to do with the weakness of the central government and the power of the provincial confederacies or "Regions."

Juan Cole's explains:
An informed observer of Iraq affairs with expertise in finance and law allowed me to reprint the following email message, though he wants to remain anonymous:

The reporting in the press-media about the proposed Petroleum Law omits a material fact. The proposed Law does not have a word that relates to the “fair distribution of revenues.” That phrase relates to the dispersion of gasoline stations, not to the distribution of revenues. The gasoline stations will be covered by another petroleum law not yet considered by the Council of Ministers. What is really going on relates to the Iraqi Constitution. The context is Article (113): "The federal system in the republic of Iraq is made up of the capital, regions, decentralized provinces, and local administrations."

The Iraqi Constitution has a unique feature distinguishing it from the US federal structure. The provinces are the basic units of governance. But the Constitution treats regions [provincial confederacies] as more important in the federal structure. There are extensive provisions with respect to the permitted regional governing institutions. There are only two relating to provinces.

The proposed Petroleum Law has provisions which deal with the ownership rights – including rights to award oil field development contracts – granted by the Constitution to “Regional Authorities.” Article 110 of the Constitution expressly gives the power, in the case of the oil industry, to the federal government and “the producing regions and provinces,” but the provinces are not included as such; they are disempowered. The way the Constitution is written permits, even requires, the substitution of the regional governments for the provincial governments.

The “Regional Authorities” have the power and jurisdiction over the production segment of the oil industry. Basra should “own” the Rumayla Oil Field, but apparently does not. In the cases of many other things, the provinces will also be disenfranchised.

The power and jurisdiction is established by the reservation article, just as all powers not expressly granted to the US federal government are reserved to the states. But the power is reserved not to the provinces, but to the regions:

“Article (111): All that is not written in the exclusive powers of the federal authorities is in the authority of the regions. In other powers shared between the federal government and the regions, the priority will be given to the region's law in case of dispute.”

I don’t know where this came from or whether the US Government had any part in devising it. Much is explained by taking this unique feature into account. It is not clear to me that it has been thought through by the US Government or the Iraqis.

Note also the use of the word “granted.” The US had states. They got together and formed a federal government and gave it powers. That is not what has happened in Iraq.

When Muqtada al-Sadr and others speak of a “unitary government” and a “united country,” they really mean it.

The federal government is going to pass many laws which, under a federal system, should be enacted by the provinces. The problem the Iraqis have is that the Constitutional default or reserved power system calls for the regions to enact the laws, but, outside of the Kurdistan Regional Government’s territory, there are no regional governments in existence to enact the laws.

This unique feature might or might not cause serious problems in the future. The Iraqis are probably developing in sophistication daily. Notwithstanding the elemental struggle going on in Basra, I have seen indications that there are at least a few sophisticated people who appear to have received outside advice in the trade unions and at least one gentleman in South Oil Company. They have a decision to make. They could form their own three-province regional government or they could go it alone. If they decide upon the latter, they will be carving new ground and will have trouble. But they also will have a lot of de facto power.

Abdul Aziz al-Hakim also is breaking new ground. Does he really intend that there will be a replica of the Kurdistan Regional Government (KRG), with a constitution, a legislature, a council of ministers, a court system and other institutions nearly all of which will be new and unprecedented?

If he does not, or if the proposal is defeated in the Council of Representatives – which is a real possibility, see next paragraph – what is going to happen is that the powers of the federal government will be unlimited as a practical matter in relation to the provinces. When the Sunni leaderships look at their options, a regional government must seem to them conceptually and existentially to be a non-starter. What that means is that, with respect to voting or fighting, there are only two alternatives: live with the new system or fight. It would take a significant effort to lay out for them what Mr. al-Hakim might be, but is not necessarily, considering. That is why I have been stressing the point, because preparation should have begun yesterday. One trouble might be that the Embassy has no one who understands the problem in specific detail. They might simply be applying the embedded US model without focusing on the fact of this unique feature in the Iraqi Constitution. I am not clear that the PRTs are being appropriately staffed and have the right mission. Their first and main task after they assure that food and medical assistance is available, is or should be to get the provinces, that is the Regions, started drafting a lot of laws. At the moment, with the exception of the Investment Law, the only laws of Iraq are in decrees of the former regime or orders issued by the Coalition Provisional Authority.

The Sadrists, plus the IAF and Mutlak’s Dialogue have 87 votes. (Those two, in addition to their allotted 30, that the Sadrists cleverly won are going to come in handy at some point.) They would need 51 more. Allawi would add 25, leaving a deficiency of 26. Maliki’s Da’awa has 30; the UIA independents have 23; Fadhila 15.

If the Council of Representatives were to reject the proposed Petroleum Law, that would be that, short of another revolution. The agreement struck between Mr. al-Hakim and Adnan al-Dulaimi to postpone the effective date of the Regions Law until mid-2008 means that the matter might not come up again until after the Regions Law becomes effective, and Provincial elections are held after the enactment of an Elections Law. During that time, staffing and intra-government relationships will be firmly entrenching the new regime in Baghdad. The power of the federal government will be absolute. It should be noted that no reference is being made to the third source of law, the Sharia.

The Prize of Iraqi Oil

Michael Schwartz follows the oil slicks deep into the Gulf of Catastrophe in Iraq. He offers a sweeping view of the role oil, the prize of prizes in Iraq, has played in Bush administration considerations and what role the new oil law is likely to play in that country's future.

TomDispatch.com and 'The Struggle over Iraqi Oil':

In the run-up to the invasion of Iraq in 2002-2003, oil was seldom mentioned. Yes, Deputy Secretary of Defense Paul Wolfowitz did describe the country as afloat "on a sea of oil" (which might fund any American war and reconstruction program there); and, yes, on rare occasions, the President did speak reverentially of preserving "the patrimony of the people of Iraq" -- by which he meant not cuneiform tablets or ancient statues in the National Museum in Baghdad, but the country's vast oil reserves, known and suspected. And yes, oil did make it prominently onto the signs of war protestors at home and abroad.

Everybody who was anybody in Washington and the media, not to speak of the punditocracy and think-tank-ocracy of our nation knew, however, that those bobbing signs among the millions of antiwar demonstrators that said "No Blood for Oil" were just so simplistic, if not utterly simpleminded. Oil news, as was only proper, was generally relegated to the business pages of our papers, or even more properly -- since it was at best but one modest factor among so very many in Bush administration calculations -- roundly ignored. Admittedly, the first "reconstruction" contract the administration issued was to Halliburton to rescue that country's "patrimony," its oil fields, from potential self-destruction during the invasion, and the key instructions -- possibly just about the only instructions -- issued to U.S. troops after taking Baghdad were to guard the Oil Ministry. Then again, everyone knew this crew had their idiosyncrasies.

Ever since, oil has played a remarkably small part in the consideration of, coverage of, or retrospective assessments of the invasion, occupation, and war in Iraq (unless you lived on the Internet). To give but a single example, the index to Thomas E. Ricks' almost 500-page bestseller, Fiasco: The American Military Adventure in Iraq, has but a single relevant entry: "oil exports and postwar reconstruction, Wolfowitz on, 98." Yet today, every leading politician of either party is strangely convinced that the key "benchmark" the government of Prime Minister Nouri al-Maliki must pass to prove its mettle is the onerous oil law, now stalled in Parliament, that has been forced upon it by the Bush administration.

Michael Schwartz writes, 'Eyes Eternally on the Prize:
The struggle over Iraqi oil has been going on for a long, long time. One could date it back to 1980 when President Jimmy Carter -- before his Habitat for Humanity days -- declared that Persian Gulf oil was "vital" to American national interests. So vital was it, he announced, that the U.S. would use "any means necessary, including military force" to sustain access to it. Soon afterwards, he announced the creation of a Rapid Deployment Joint Task Force, a new military command structure that would eventually develop into United States Central Command (Centcom) and give future presidents the ability to intervene relatively quickly and massively in the region.

Or we could date it all the way back to World War II, when British officials declared Middle Eastern oil "a vital prize for any power interested in world influence or domination," and U.S. officials seconded the thought, calling it "a stupendous source of strategic power and one of the greatest material prizes in world history."

The date when the struggle for Iraqi oil began is less critical than our ability to trace the ever growing willingness to use "any means necessary" to control such a "vital prize" into the present. We know, for example, that, before and after he ascended to the Vice-Presidency, Dick Cheney has had his eye squarely on the prize. In 1999, for example, he told the Institute of Petroleum Engineers that, when it came to satisfying the exploding demand for oil, "the Middle East, with two thirds of the world's oil and the lowest cost, is still where the prize ultimately lies." The mysterious Energy Task Force he headed on taking office in 2001 eschewed conservation or developing alternative sources as the main response to any impending energy crisis, preferring instead to make the Middle East "a primary focus of U.S. international energy policy." As part of this focus, the Task Force recommended that the administration put its energy, so to speak, into convincing Middle Eastern countries "to open up areas of their energy sectors to foreign investment" -- in other words, into a policy of reversing 25 years of state control over the petroleum industry in the region.

The Energy Task Force set about planning how to accomplish this historic reversal. We know, for instance, that it scrutinized a detailed map of Iraq's oil fields, together with the (non-American) oil companies scheduled to develop them (once the UN sanctions still in place on Saddam Hussein's regime were lifted). It then worked jointly with the administration's national security team to find a compatible combination of military and economic policies that might inject American power into this equation. According to Jane Mayer of The New Yorker, the National Security Council directed its staff "to cooperate fully with the Energy Task Force as it considered the 'melding' of two seemingly unrelated areas of policy: 'the review of operational policies towards rogue states,' such as Iraq, and 'actions regarding the capture of new and existing oil and gas fields.'"

While we cannot be sure that this planning itself was instrumental in setting the U.S. on a course toward invading Iraq, we can be sure that plenty of energy was being expended in Washington, planning for the disposition of Iraq's massive oil reserves once that invasion was successfully executed. In 2002, just a year after Cheney's Task Force completed its work, and before the U.S. had officially decided to invade Iraq, the State Department "established a working group on oil and energy," as part of its "Future of Iraq" project. It brought together influential Iraqi exiles, U.S. government officials, and international consultants. Later, several Iraqi members of the group became part of the Iraqi government. The result of the project's work was a "draft framework for Iraq's oil policy" that would form the foundation for the energy policy now being considered by the Iraqi Parliament.

The Prize

The specific prize in Iraq is certainly worthy of almost any kind of preoccupation. Indeed, Iraq could someday become the most important source of petrochemical energy on the planet.

According to the U.S. Energy Information Administration, Iraq possesses 115 billion barrels of proven oil reserves, third largest in the world (after Saudi Arabia and Iran). About two-thirds of its known oil reserves are located in Shia southern Iraq, and the final third in Kurdish northern Iraq. However, in energy terms, only about 10% of the country has actually been explored and there is good reason to believe that modern methods -- which have not been applied since the beginning of the Iraq-Iran War in 1980 -- might well uncover magnitudes more oil. Estimates of the possible new finds offered by officials of various interested governments range from 45 billion to 214 billion additional barrels, depending on the source; but some non-governmental experts see the final treasure exceeding 400 billion barrels. If the latter figure is correct, then Iraq would likely become the world's largest source of oil.

For the most part, Iraq's petroleum has "attractive chemical properties;" that is, its oil is considered to be of very high quality. Moreover, both its current fields and many of the potential new discoveries would be extremely cheap to access, if security weren't such a problem today in Iraq. James Paul of the international policy monitoring group, the Global Policy Forum, offers this positive view:


"According to Oil and Gas Journal, Western oil companies estimate that they can produce a barrel of Iraqi oil for less than $1.50 and possibly as little as $1…. This is similar to production costs in Saudi Arabia and lower than virtually any other country."
With the price of a barrel of crude oil today above $64 a barrel, the potential for profits is stupendous and the only question is: Who will pocket them -- the oil companies or the Iraqi government -- and, if the former, which oil companies those will be? It is not inconceivable that any major oil companies able to claim a large portion of the Iraqi oil spoils could double, triple, or even quintuple their already gigantic global profits.

Under Saddam Hussein, Iraqi oil never fulfilled the potential of even its proven oil fields. A modest goal for the country's oil industry would have been producing 3.5 million barrels per day, but the temporary disruptions caused by the Iraq-Iran War and the more permanent ones caused by UN sanctions imposed after the Gulf War in 1991 severely limited production. From the late 1990s until the American invasion in 2003, Iraq averaged around 2.5 million barrels per day.

Knowledge of this level of underproduction was certainly one factor in Deputy Secretary of Defense Paul Wolfowitz's pre-war prediction that the administration's invasion and occupation of Iraq would pay for itself; he hoped for a quick postwar increase in production to 3.5 million barrels per day or, at the $30 per barrel price of oil at that time, close to $40 billion per year in revenues. An expected expansion in production levels (once the oil giants were brought into the mix) to perhaps 6.5 million barrels, through the development of new oil fields or more efficient exploitation of existing fields, had the potential to more than cover the expected American short-term military costs and leave the new Iraqi government flush as well.

This, then, was the allure of melding energy policy and military policy, as Cheney's energy group and allied administration officials envisioned it.

The Initial Campaign to Capture Iraqi Oil

With all this history, the particular way the U.S. sprang into action as soon as its forces arrived in Baghdad was hardly surprising. While American troops simply stood by as unrestrained looting severely damaged the dawn-of-civilization treasures in the National Museum, compromised the ability of hospitals to deliver health care, and destroyed many government offices, large numbers of American soldiers were deployed to protect the Oil Ministry and its associated holdings. This effort was certainly emblematic of the newly established occupation's priorities.

Not long after President Bush declared "major combat operations in Iraq have ended" under a "Mission Accomplished" banner on the deck of the aircraft carrier, the USS Abraham Lincoln, Paul Bremer, the new head of the American occupation, promulgated a series of laws designed, among other things, to kick-start the development of Iraqi oil. In addition to attempting to transfer management of existing oil facilities (well heads, refineries, pipelines, and shipping) to multinational corporations, he also set about creating an oil-policy framework, unique in the region, that would allow the major companies to develop the country's proven reserves and even to begin drilling new wells.

All these plans were, however, quickly frustrated, both by the growing Sunni insurgency and by civil resistance. Iraq's oil workers quickly unionized -- even though Bremer extended Saddam's prohibition on unions in state-owned companies -- and effectively resisted the transfer of management duties to foreign companies. In one noteworthy moment, the oil workers actually refused to take orders from Bechtel officials in the oil hub of Basra, thus preserving their own jobs as well as the right of the Iraqi state-owned Southern Oil Company to continue to control the operation in that region. Bechtel's management contract was subsequently voided.

At the same time, the growing insurgency, acting on a general Iraqi understanding that a major goal of the occupation was to "steal" Iraqi oil, systematically began to attack the oil pipelines that traveled through the Sunni areas of the country. Within a few months, all oil exports in the northern part of Iraq were interrupted -- and the northern export pipelines have remained generally unusable ever since.

To resistance of various sorts must be added the "contribution" of the major American corporations involved in "reconstructing" Iraq, notably Halliburton and Bechtel. These crony corporations, with close ties to the Bush administration, accepted huge fees to rehabilitate dilapidated or damaged oil facilities. Almost without fail, they chose not to repair existing plants locally or to employ the raft of skilled Iraqi technicians who had used remarkable ingenuity in maintaining these facilities during a dozen years of UN sanctions. Working under cost-plus agreements that guaranteed a fixed profit rate no matter how much an operation ultimately cost, they preferred instead to install expensive new proprietary equipment. Then, in the absence of any outside oversight, they ran up huge expenses and frequently failed to complete their contracts, leaving the oil facilities they were servicing in states of disrepair or partial repair -- and equipped with technology that local technicians could not service.

Meanwhile, the major oil companies refused Bremer's invitation to invest their own money in Iraqi projects, pointing out the obvious -- that the insurgency and the spreading chaos made such investments unwise. In addition, they were well aware that Bremer's regime in Baghdad lacked clear authority to sign contracts with them. This, in turn, meant that their investments might be in jeopardy once a legitimate government took power. When technical sovereignty was finally handed over to an appointed Iraqi government headed by the CIA's favorite Iraqi exile, Iyad Allawi, in June 2004, the new premier embraced Bremer's policy, but to no avail. The international oil companies were no more impressed with his future than they had been with Bremer's. Like Wolfowitz, they knew that Iraq "floats on a sea of oil"; unlike him, they were no dreamers. They weren't willing to risk their capital in the dangerous and legally ambiguous circumstances then prevailing.

As a result, the first two years of Bush administration efforts to "access" Iraqi oil failed -- and dismally so at that. Average production never exceeded the bottom-of-the-barrel 2.5 million barrels Saddam's regime managed to extract on its worst days. By 2006, production had slipped below 2 million barrels per day.

Dealing with the Iraqi Government

It is difficult to judge how much Bremer's inability to implement the pre-planned oil policy contributed to the Bush administration decision to reverse its plans for Iraqi "democracy" -- which, as Juan Cole has pointed out, involved council-based elections, an electorate restricted to a small elite, and Bremer as "a MacArthur in Baghdad for years" -- and push for an elected Iraqi government. It certainly is true, however, that this change triggered a campaign aimed at the "capture of new and existing oil and gas fields."

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. One option available to the new government was to declare this debt "odious," a technical term in international law referring to debt accumulated by authoritarian rulers for their own personal or political aggrandizement.

Saddam's expansionist war against Iran, his use of public funds to build ostentatious monuments and palaces, his transfer of billions to his personal accounts, and his failure to maintain the infrastructure of the country all were excellent evidence that the debt was indeed odious; and the U.S. claimed as much for almost $40 billion of it, held by 19 industrialized countries known as the Paris Club. Instead of seeking to cancel this debt (and the remaining $80 billion) entirely, however, the Bush administration sent James Baker, former Secretary of State under George H. W. Bush, to the Paris Club to negotiate conditional forgiveness. The resulting agreement immediately forgave $12 billion, but left $28 billion on the books. A second $12 billion would be abrogated when the Iraqi government signed onto "a standard International Monetary Fund program," and a further $8 billion three years later, after the IMF confirmed Iraqi compliance. Even if "successful," almost $8 billion would still be outstanding to the Paris Club -- together with $80 billion not covered by the agreement.

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.

Independent journalists Basav Sen and Hope Chu summarized the new agreement thusly:

"A move that appears on the surface to be beneficial for Iraq -- debt cancellation -- is being used as a tool of control by the World Bank, the IMF and the wealthy creditor countries. What is more, it is a tool of control that will last long after the withdrawal of U.S. combat forces."

Zaid Al-Ali, an international lawyer working on development issues in Iraq, described the agreement as a "perfect illustration of how the industrialized world has used debt as a tool to force developing nations to surrender sovereignty over their economies."

The newly elected Iraqi National Assembly promptly denounced this agreement as "a new crime committed by the creditors who financed Saddam's oppression." This forceful expression reflected the opinions of the Assembly's constituents. After all, 76% of Iraqis believed that the main reason for the Bush administration's invasion was "to control Iraqi oil."

As it happened, the protest did not prevent that government from endorsing the deal. Otherwise, it faced the prospect of the U.S. -- which still had operational control over Iraqi finances -- simply appropriating most of its revenues for debt service. When the agreement was announced, interim Oil Minister Thamir Ghadbhan, a British-trained technocrat, publicly protested the provisions eliminating fuel and food subsidies. He was subsequently pushed out.

The U.S. then began pressuring the Iraqi government to draft a definitive petrochemical law that would conform to the IMF guidelines. Given the levels of resistance to the very idea, this work was conducted in secret and took until the end of 2006 to complete. As independent journalist Joshua Holland described the process:

"Just months after the Iraqis elected their first constitutional government, USAID sent a BearingPoint adviser to provide the Iraqi Oil Ministry 'legal and regulatory advice in drafting the framework of petroleum and other energy-related legislation, including foreign investment'…. The Iraqi Parliament had not yet seen a draft of the oil law as of July [2006], but by that time… it had already been reviewed and commented on by U.S. Energy Secretary Sam Bodman, who also 'arranged for Dr. Al-Shahristani to meet with nine major oil companies -- including Shell, BP, ExxonMobil, ChevronTexaco and ConocoPhillips -- for them to comment on the draft.'"

Even the Iraqi Study Group, James Baker's Commission, got into the act at the end of 2006, devoting three pages of its proposal for a partial redeployment of American forces from Iraq to exhorting the Iraqis to enact a petrochemical bill that would place its oil reserves in the hands of the major oil companies.

The Proposed Petrochemical Bill

When the "Draft Hydrocarbon Law" was finally delivered to the Iraqi Parliament on February 18, 2007, key provisions had already been leaked and immediately denounced by the full spectrum of the Iraqi opposition. Taking turns registering dismay were the majority of the Parliament, a wide range of government officials, the leadership of major Sunni political parties, the union of oil workers, the Sadrists -- the most powerful Shia grouping -- and the visible leadership of the insurgency.

All this led to many changes in the law, including the removal of all mention of either privatization or Production Sharing Contracts, which would have given multinational oil companies 15-25 years of basically unregulated operational control over Iraqi oil facilities. The amended version in no way excluded the use of PSAs, but it removed the explosive designation from the actual wording of the law.

It is worth reviewing the logic of PSAs to understand why the U.S. was so determined to make them a part of the law, and why many Iraqis were so ferociously opposed.

Production sharing agreements are generally applied in circumstances where there is a strong possibility that oil exploration will be extremely costly or even fail, and/or where extraction is likely to prove prohibitively expensive. To offset huge and risky investments, the contracting company is guaranteed a proportion of the profits, if and when oil is extracted and sold. In the most common of these agreements, the proportion remains very high until all development costs are amortized, allowing the investing company to recoup its investment expenditures (if oil is found), and then to be rewarded with a larger-than-normal profit margin for the remainder of the contract which, in the Iraqi case, could extend for up to 25 years.

This is perhaps a reasonably fair, or at least necessary, bargain for a country which cannot generate sufficient investment capital on its own, where exploration is difficult (perhaps underwater or deep underground), where the actual reserves may prove small, and/or where ongoing costs of extraction are very high.

None of these conditions apply in Iraq: huge reservoirs of easily accessible oil are already proven to exist, with more equally accessible fields likely to be discovered with little expense. This is why none of Iraq's neighbors utilize PSAs. Saudi Arabia, Kuwait, Iran, and the United Arab Emirates all pay the multinationals a fixed rate to explore and develop their fields; and all of the profits become state revenues.

The advocates of PSAs in Iraq justify their use by arguing that $20 billion would be needed to develop the Iraqi fields fully and that favorable PSAs are the only way to attract such heavy doses of finance capital under the current highly dangerous circumstances. This assertion seems, however, to be little more than a smokescreen. No major oil companies are willing to invest in Iraq now, no matter how sweet the deal. If order is restored, on the other hand, Iraq would have no trouble attracting vast amounts of finance capital to develop reserves that could well be worth in excess of $10 trillion and hence would have no need whatsoever for PSAs.

Based on leaked information, journalists reported that the PSAs envisioned by the Iraqi petrochemical law contained extremely favorable provisions for the oil companies, in which they would be entitled to 70% of profits until development expenses were amortized and 20% afterwards. This would have guaranteed them at least twice the typical profit margin over the long run and many times that figure during the initial years.

There are other elements in the law (and the possible PSA contracts) that have also roused resistance inside Iraq. Among the most controversial:

*Insofar as PSAs or their legal equivalent were enacted, Iraq would lose control over what levels of oil the country produced with the potential to substantially weaken the grip of OPEC on the oil market.

*The law would allow the oil companies to fully repatriate all profits from oil sales, almost insuring that the proceeds would not be reinvested in the Iraqi economy.

*The Iraqi government would not have control over oil company operations inside Iraq. Any disputes would be referred instead to pro-industry international arbitration panels.

*No contracts would be public documents.

*Contacting companies would not be obliged to hire Iraqi workers, and could pursue the current policy of employing American technicians and South Asian manual laborers.

Several African countries with vast mineral riches have been subjected to these sorts of conditions, with large multinational companies extracting both minerals and profits while returning only a tiny fraction of the proceeds to the local population. As the resources are taken out of the ground and the country, the local population actually becomes poorer, while the potential for future prosperity is drained.

The draft petrochemical law, if enacted and implemented, could ensure that Iraq would remain in a state of neoliberal poverty in perpetuity, even if order did return to the country.

The Resistance

The petrochemical law is hardly assured of successful passage, and -- even if passed -- is in no way assured of successful implementation. Resistance to it, spread as it is throughout Iraqi society, has already shown itself to be a formidable opponent to the dwindling power of the American occupation.

The Parliament itself may be the first line of defense. It challenged the original IMF agreement and has refused to consider the bill for two months, already missing a March deadline for passage that American politicians of both parties had pronounced an important "benchmark" by which to judge the viability of Prime Minister Nouri al-Maliki's government.

In addition, the government officials responsible for administering the oil industry could prove formidable opponents. Rafiq Latta, a London-based oil analyst, told Nation reporter Christian Parenti, "The whole culture of the ministry opposes [the law].... Those guys ran the industry very well all through the years of sanctions. It was an impressive job, and they take pride in 'their' oil."

Perhaps most formidable of all is the Federation of Oil Unions, with 26,000 members and allies throughout organized labor. The oil workers overturned contracts in 2003 and 2004 that would have placed substantial oil facilities under multinational corporate control; and they initiated a vigorous campaign against the U.S. sponsored oil program as early as June 2005 -- calling a conference to oppose privatization attended by "workers, academics, and international civil-society groups." In January 2006, they convened a convention composed of all major Iraqi union groups in Amman, Jordan, which issued a manifesto opposing the entire neo-liberal U.S. program for Iraq, including any compromise on national control of oil production.

At a second Amman labor meeting in December of 2006, the Federation of Oil Unions announced its opposition to the pending law even before it was released. Iraq's trade unions, speaking in a single voice, declared that:

"Iraqi public opinion strongly opposes the handing of authority and control over the oil to foreign companies, that aim to make big profits at the expense of the people. They aim to rob Iraq's national wealth by virtue of unfair, long term oil contracts that undermine the sovereignty of the State and the dignity of the Iraqi people."

When the bill was made public, oil union president Hassan Jumaa denounced it before yet another protest meeting, stating:

"History will not forgive those who play recklessly with our wealth…. We consider the new law unbalanced and incoherent with the hopes of those who work in the oil industry. It has been drafted in a great rush in harsh circumstances."

He then called on the government to consult Iraqi oil experts (who had not participated in drafting the law) and "ask their opinion before sinking Iraq into an ocean of dark injustice."

If the oil workers and their union allies decide to organize protests or strikes, they are likely to have the Iraqi public on their side. Fully three-quarters of Iraqis believe that the United States invaded in order to gain control of Iraqi oil, and most observers believe they will surely agree with the oil workers that this law is a vehicle for that control. Even Iyad Allawi has now publicly taken a stand opposing it, perhaps the best indication that opposition will be virtually unanimous.

Finally -- and no small matter -- the armed resistance is also against the oil law. The Sunni insurgency underscored its opposition by assassinating Vice President Adel Abdul Mahdi, a major advocate of the pending law, on the day the bill was made public. The significance of the opposition of the Sunni insurgency is amplified by the stance of the Sadrists, the most rebellious segment of the Shia majority. Sadr spokesman Sheikh Gahaith Al Temimi warned journalist Christian Parenti that while the Sadrists would "welcome" foreign investment in oil, they would do so only "under certain conditions. We want our oil to be developed, not stolen. If a bad law were to be passed, all people of Iraq would resist it."

It seems clear that what the oil law has the power to do is substantially escalate the already unmanageable conflict in Iraq. Active opposition by the Parliament alone, or by the unions alone, or by the Sunni insurgency alone, or by the Sadrists alone might be sufficient to defeat or disable the law. The possibility that such disparate groups might find unity around this issue, mobilizing both the government bureaucracy and overwhelming public opinion to their cause, holds a much greater threat: the possibility of creating a unified force that might push beyond the oil law to a more general opposition to the American occupation.

Like so many American initiatives in Iraq, the oil law, even if passed, might never be worth more than the paper it will be printed on. The likelihood that any future Iraqi government which takes on a nationalist mantel will consider such an agreement in any way binding is nil. One day in perhaps the not so distant future, that "law," even if briefly the law of the land, is likely to find itself in the dustbin of history, along with Saddam's various oil deals. As a result, the Bush administration's "capture of new and existing oil and gas fields" is likely to end as a predictable fiasco.

Michael Schwartz, Professor of Sociology and Faculty Director of the Undergraduate College of Global Studies at Stony Brook University, has written extensively on popular protest and insurgency, and on American business and government dynamics. His books include Radical Protest and Social Structure, and Social Policy and the Conservative Agenda (edited, with Clarence Lo). His work on Iraq has appeared on numerous Internet sites including Tomdispatch, Asia Times, Mother Jones, and ZNet, and in print in Contexts, Against the Current, and Z Magazine.

Interview: Iraq Kurd Leader on Oil Law

UPI reports:
To Iraq's Kurdish leadership, the issue of how to apportion the third-largest pools of oil in the world is "a make-or-break deal" for the country as a whole, a top official told United Press International.

"The oil issue for us is a red line. It will signify our participation in Iraq or not," Qubad Talabani, son of Iraqi President Jalal Talabani and the Kurdistan Regional Government's representative to the United States, said in an interview from his Washington office.

The KRG and the central Iraqi government reached a deal in February on the hydrocarbons framework -- though not on other key companion bills -- and a self-imposed deadline of late May seemed possible to meet.

But the Iraqi Oil Ministry, at a meeting it set up last month in Dubai, in the United Arab Emirates, with other Iraqi oil experts and politicians, unveiled the annexes to the hydrocarbons law -- its list distributing control of oil fields between central and KRG control -- and a law re-establishing the Iraq National Oil Co., which Kurdish leadership automatically rejected.

"This sets us back to square one, a point that's unacceptable to us. We're trying to modernize Iraq, build a new Iraq, built on new foundations, new policies. The symbol of this new Iraq will be how it manages its oil infrastructure," Talabani said. "And if people want to revert back to Saddam-era policies of a state-controlled oil sector with no accountability, with no accountability to the Parliament or the people of the country, with no oversight except from by one or two, then I'm sorry, that is not the Iraq that the Kurds bought into. That is not the Iraq that the Kurds would want to be part of."

"If a centralized oil regime is imposed on us, we will not participate in the state of Iraq," Talabani said. "And we have to make it absolutely clear to our friends in Washington, to our brothers in Baghdad, this is a make-or-break deal for Iraq."

He said Iraq needs to embrace the free market and break free from the nationalized mindset. Numerous oil and Iraqi experts as well as key Iraq oil union leaders have told UPI that Iraqis see nationalized oil with pride. And opponents of the oil law also say it gives too much to foreign companies.

The Kurds, however, have little to show from the Saddam Hussein era, aside from persecution, death and little investment in its economy or oil sector. They gained autonomy in 1991 and, governing an autonomous three-province region now, are prospering. Airplanes fly internationally from the airport in Irbil, Iraqi Kurdistan's capital. Violence in the region is relatively nil compared with the rest of the country, though the first major attack in more than four years killed 14 people in Irbil Wednesday. Despite lacking the law, the KRG has signed multiple deals with foreign companies to develop its oil and natural-gas sector.

Iraq only produces about 2 million barrels per day. With investment -- domestic or foreign -- Iraq's 115 billion barrels in reserves could handle much higher output.

Many of the arguments over the law are related to the 2005 constitution. It was written vaguely to garner support. Now there is a dispute as to which oil fields are to be governed by the central government and which by the regions.

Tariq Shafiq, an Iraq oil expert now living in Amman, Jordan, and drafter of the original law last summer, said the Iraq National Oil Co. should be independent of the Oil Ministry, and regions could choose the company's board of directors. (Shafiq has since come out against the law, saying it has been altered too much in negotiations.) He said Iraq needs a central strategy for the best management of the country's oil.

Talabani said the KRG favors an INOC limited in scope and open to foreign investment, and says the current law gives INOC control over 93 percent of Iraq's oil. "This will hamper needed investment," he said.

"It's only by bringing in the biggest and the best from the international community, to partner with, not to steal, but to partner with the Iraqi government, can we develop Iraq's oil accordingly," Talabani said. "And there's a worrying unwillingness to act under a free-market-style concept here. It won't go through. It won't go through the Parliament this way. There will be too many people opposed to it."

Other bills needing to be passed include a reorganization of the Oil Ministry and the revenue-sharing law. Talabani said there were lingering fears Kurds will again be deprived of funds and investment.

"We want to create an automatic payment mechanism where it doesn't rely on the goodwill of the finance minister or the oil minister for the regions to get their fair share," he said.

"Trust is lacking in Iraq, and unfortunately it's been Iraq's miserable history that has created this system, this society that mistrusts each other, which is why something as critical as oil can be a trust-building measure," Talabani said. "By putting in place mechanisms and institutions that can ensure that I will not get robbed again, that my resources will not be used against me again, will eventually over time build my trust."

Why There Is No Exit Plan

There are people in Washington ... who never intend to withdraw military forces from Iraq and they're looking for 10, 20, 50 years in the future ... the reason that we went into Iraq was to establish a permanent military base in the Gulf region, and I have never heard any of our leaders say that they would commit themselves to the Iraqi people that 10 years from now there will be no military bases of the United States in Iraq.

-- former President Jimmy Carter, Feb. 3, 2006

Dan Hamburg, former U.S. congressman and current executive director of Voice of the Environment, and Lewis Seiler, president of Voice of the Environment, write in the SF Chronicle:
For all the talk about timetables and benchmarks, one might think that the United States will end the military occupation of Iraq within the lifetimes of the readers of this opinion editorial. Think again.

There is to be no withdrawal from Iraq, just as there has been no withdrawal from hundreds of places around the world that are outposts of the American empire. As UC San Diego professor emeritus Chalmers Johnson put it, "One of the reasons we had no exit plan from Iraq is that we didn't intend to leave."The United States maintains 737 military bases in 130 countries across the globe. They exist for the purpose of defending the economic interests of the United States, what is euphemistically called "national security." In order to secure favorable access to Iraq's vast reserves of light crude, the United States is spending billions on the construction of at least five large permanent military bases throughout that country.

A new Iraq oil law, largely written by the Coalition Provisional Authority, is planned for ratification by June. This law cedes control of Iraq's oil to western powers for 30 years. There is major opposition to the proposed law within Iraq, especially among the country's five trade union federations that represent hundreds of thousands of oil workers. The United States is working hard to surmount this opposition by appealing directly to the al-Maliki government in Iraq.

The attack upon, and subsequent occupation of, Iraq can be seen as a direct result of the 2001 National Energy Policy Development Group (better known as vice president Cheney's energy task force) that was comprised largely of oil and energy company executives. This task force -- the proceedings of which have been kept secret by the administration on the grounds of "executive privilege" -- recommended that the U.S. government support initiatives in Middle Eastern countries "to open up areas of their energy sector to foreign investment." As Antonio Juhasz, an analyst with Oil Change International wrote last month in the New York Times, "One invasion and a great deal of political engineering by the Bush administration later, this is exactly what the proposed Iraq oil law would achieve."

The people of the United States have indicated, in the national election last November and in countless polls, that they no longer support the Bush administration's war. The Scooter Libby trial revealed that top administration officials, including the vice president, "cherry-picked" and distorted intelligence in order to sell a "pre-emptive" war to a spooked public. The squandering of hundreds of billions of dollars, some billions of which, according to Seymour Hersh writing in the New Yorker, is being siphoned into "black-ops" programs being run out of Cheney's office (a stunning redux of Iran-Contra carried out by many of the same actors), has also strained the patience and credulity of the American people.

Another betrayal is the "contracting out" of "war-related activities" to corporations such as Halliburton, Bechtel, Chemonics and Blackwater. Halliburton, Vice President Cheney's previous employer, calls itself an "energy services company" but has tentacles reaching into nearly every aspect of the war (originally dubbed Operation Iraqi Liberation until some bright bulb among the Bushies realized that "OIL" might not be the best handle for this venture). Halliburton has also profited handsomely from no-bid government contracts awarded in the wake of Hurricane Katrina, the construction at the national embarrassment known as "Gitmo," and most recently, from the fiasco at Walter Reed Army Hospital in Washington, D.C.

Unfortunately, all this corruption, mayhem and death are good for some (or it wouldn't go on).

The U.S. military budget, larger than the military budgets of the rest of the world's nations combined, continues skyward, even without all the "supplementals" passed regularly by Congress to fight the "war on terror."

The question we must ask as citizens is this: Is the United States a democratic republic or an empire? History demonstrates that it's not possible to be both.

The Proposed Iraqi Oil Law

Indymedia reports:
Iraq has the world’s second or third largest proven oil reserves. The proposed Iraqi law (translated pdf) would give Western oil companies control over Iraqi oil. It provides for “exploration risk contracts” allowing foreign companies control of oil exploration, development and production for up to 30 years. If the law is adopted as is, control of the Iraqi oil industry will shift from the public sector, where it’s been since the 1970s, into the hands of the multinational oil companies, especially British and American firms. Under the new law, Iraq will reportedly be breaking away from the normal procedure that is used by all major oil-producing countries, none of whom allow such foreign control. In Saudi Arabia, the country that has the world’s largest oil reserves, oil is fully owned and controlled by the national oil company.

The same is true for Kuwait. The United Arab Emirates and Iran allow some foreign investment but maintain national control.

Prime Minister Nouri al-Maliki endorsed the draft law February 26, 2007, and it was approved by the Iraqi cabinet in March. The law is waiting for a vote in the Iraqi Parliament.

Foreign Oil Projects Stall In Wait For Iraqi Permits

The WSJ reports:

After building a 42 kilometer pipeline and sending out a flurry of optimistic news releases over the past three years, Det Norske Oljeselskap, a small Norwegian oil company, is still waiting for permission to open the taps on what could be post-Saddam Hussein Iraq's first foreign-developed oil field.

The holdup: Iraqi politicians in Baghdad, a nine-hour drive south of here, have yet to approve a hydrocarbon law laying down the legal framework for foreign investment in the country's sensitive oil industry. Lawmakers could vote on a version of the law in May, but the legislation has already missed a series of deadlines since the American-led invasion four years ago.
DNO's plight in this remote Kurdish town in northern Iraq underscores one of the thorniest obstacles to jump-starting Iraq's creaky petroleum industry. Most of the oil-rich country is wracked with political, ethnic and religious violence, making it almost impossible for big international oil companies to work here.

But even in this peaceful, semiautonomous Kurdish enclave, a number of small foreign companies like DNO are still waiting for their operations to be officially sanctioned by Iraq's central government. DNO was one of the first to sign development deals with the Kurdish government back in 2004 and has spent millions drilling wells and building transportation and storage infrastructure.

But DNO needs an export license to sell its crude to global markets, and a decision to grant one won't come until after the Iraqi Parliament passes a petroleum law. And even after the law is approved there is no certainty as to when the export license will be granted. DNO had originally planned to start pumping oil for global-oil markets earlier this year.

"We have heard so much about DNO's oil coming on stream, and yet the production-start date remains uncertain. It says a lot about the political and legal challenges of working in Iraq," says Alex Munton, an analyst based in Edinburgh, Scotland, for consultant Wood Mackenzie.

Kurdish politicians enthusiastically support DNO's project. A booming oil industry here could boost economic activity and further underpin Kurdish aspirations for more autonomy from Baghdad or even formal independence.

DNO says it is ready to pump crude as soon as it gets the green light from Baghdad. Its almost-finished pipeline snakes over this region's rolling hillsides to an existing export line, which runs to the Mediterranean port of Ceyhan in Turkey.

Iraq's oil legislation has been stalled most recently over differences between Kurds on one side and Sunni and Shiite politicians and oil ministry officials on the other. The Kurds want authority to sign deals like the one they have with DNO. Baghdad officials have so far insisted on federal oversight.

Iraqi officials have said they expect a prolonged parliamentary debate on the issue. Executives from some of the world's biggest international oil companies, meanwhile, say many crucial details aren't addressed in current drafts, making any decision on foreign exports even more remote.

The delays have frustrated DNO shareholders. Back in June 2004, DNO shares soared when the company announced it had signed a contract with Kurdish officials. DNO shares have gyrated since, climbing to a record a year ago when the company said it had made a sizable find at the Tawke oil field here.

In Oslo, DNO shares currently trade at around 12 kroner, or about $2, down 29% from a stock-split adjusted record of 16.94 kroner hit a year ago. The current level is still about eight times the price of shares in 2004 before the Kurdish deal was announced and when global oil prices were much lower.

DNO Chief Executive Helge Eide is taking the legal uncertainty in stride. "We're currently awaiting the outcome of the ongoing process," Mr. Eide said recently, referring to the oil law.

Mr. Eide is sanguine on the impact of near-term delays on cash flow, although analysts caution that delays of several months would begin to hurt. "Our cash balance at the end of 2006 was about $70 million, and we expect that our cash flow from operations will increase in 2007 on the back of increased production," Mr. Eide said.

DNO and Kurdish officials tinkered with some provisions of their contract late last year to ensure it met requirements laid out in drafts of the current petroleum law. Mr. Eide and Kurdish oil minister Ashti Hawrami both say they don't expect to have to amend their deal further.

DNO, which operates in Norway, Africa and the Middle East, is hoping production from its operations here will start at around 5,000 barrels a day or so in the early stages and ramp up to 25,000 barrels a day, or double the company's current total output, by the end of the year.

These are drops in the ocean of the 85 million barrel-per-day global oil market, but significant to DNO, whose output has struggled to break out of a 13,000 to 15,000 barrels-per-day range the past three years.

Kurds to Block Iraq Oil Law

AINA.org reports:

Iraq's Kurdish region has said it will try to block a draft oil law in parliament, raising the stakes in a row with the central government.

The Kurdistan autonomous region backed the draft law in February but has disputed annexes to it that would give control of oilfields to a new state-run oil company.
Ashti Hawrami, minister of natural resources in Kurdistan, said: "These annexes are unconstitutional and will not be supported by the Kurdish regional government in the federal parliament."

The Kurdistan autonomous region could be on a collision course with Baghdad over the US-backed draft.

The threat to fight the bill in Iraq's national parliament comes just days after the oil ministry in Baghdad warned regions against signing contracts until the law was passed.

'Old regime'

Officials from the Iraqi government and Kurdistan have clashed over the annexes, raising the prospect of delays that have already dogged the lengthy drafting of the legislation.

Hawrami repeated a threat that his oil-rich region would implement its own oil laws if no agreement was reached on the dispute over the annexes.

And Kurdish officials have already signed deals with foreign oil companies.

"The annexes must recognise that the Kurdish regional government has already allocated exploration and development blocks in the Kurdistan region under Production Sharing Agreements pursuant to the Iraq Constitution," he said.

In a reference to Saddam Hussein, Hawrami said the newly created Iraq National Oil Company (INOC) would be a return to "old regime methods".

"The concentration of power in the hands of INOC will represent a return to method of petroleum management of previous Iraqi regimes.

"Where centralised oil power was ... used to fund violent campaigns by elites against neighbouring countries and against our own Iraqi citizens," he said.

Officials from the central government and Kurdish regional officials have said they would meet to settle the disputes, but Hawrami said sending a delegation to Baghdad was "futile".

A US government official in Baghdad said on Sunday Washington was confident the law would pass.

"I think that the government is committed to getting the oil law through. I know various bodies have expressed concern about the hydrocarbon law given the stakes involved," the official said.

"The government has a majority in parliament."

Battling Over The World's Oil Reserves

Alistair Tice looks at the rivalry for access to the world's oil supplies and assesses the likely consequences for the world economy, and the continued dominance of US imperialism.

Alistair Tice reports:
George Bush invaded Iraq for power, prestige and oil. Whilst the catastrophe of the occupation has dealt a huge blow to the prestige of US imperialism around the world and its power in the Middle East has been severely undermined, US and British oil companies are still set to get their hands on Iraq's oil.

Iraq's pro-western cabinet has approved a Hydrocarbon Law that will hand over long-term control of the country's untapped energy fields to foreign multinationals, with profit rates of up to 75 per cent! Iraq has the world's second largest known oil reserves and the Middle East currently supplies two-thirds of the world's oil.
Bush's war for oil was driven by his administration's close links to the major oil companies and by the United States' oil import needs. US oil production peaked in 1970 at ten million barrels per day (bpd); today it is less than five million bpd and the US consumes 20 million bpd. That is 25% of the world's oil consumption, yet the US only has 5% of the world's reserves.

Imports have risen from 36% of its oil needs in 1970 to two-thirds today. A recent submission to the Senate Committee on Energy and Natural Resources stated "there is no economically plausible scenario for a strategically meaningful reduction in the dependence of the Unites States and its allies on imported hydrocarbons during the next quarter century."

The major oil companies, mostly US-owned, are collectively known as 'Big Oil'. Closely connected to the Bush regime, many were originally based in the key oil state of Texas and are an essential element in the 'military-industrial complex'. Their profit-driven objectives have played a decisive role in Bush's aggressive, interventionist policy in the Middle East and Central Asia. Big Oil makes huge profits. In 2005, ExxonMobil became the world's biggest company, overtaking Wal-Mart. Five of the world's top ten corporations are now oil majors.

However, they face long term problems. Last year, the private oil corporations only replaced 75% of their reserves and now they only control 10% of world oil reserves.

State ownership
Despite two decades of neo-liberalism, national oil companies (wholly or partly state owned) control 90% of world oil reserves. And that share is rising.

On 1 May 2006, Evo Morales, the recently elected leftist president, announced the nationalisation of Bolivia's gas industry. Whilst it ended up as only partial state ownership, it was hugely significant after two decades of privatisation and was referred to as "the first nationalisation of the 21st century." Hugo Chávez, the radical president of Venezuela, has announced that by 1 May 2007, PDVSA (the Venezuelan state oil company) will take a 60% majority stake in the extra-heavy oil fields in the Orinoco Basin.

Vladimir Putin, the Russian president, has taken state-capitalist measures against the oil multinationals to increase his government's revenues and standing internationally.

Shell was forced to accept reduced shares in joint ventures in the giant Sakhalin oilfield. And now BP is under pressure from Gazprom, the Russian state gas company, over a new gas field project in Eastern Siberia.

The oil companies are having to accept lesser shares in future profits or risk expropriation and miss out altogether.

Even in the central African country Chad, last year the government created a new national oil company and threatened to expel Chevron for not paying taxes. In less than three years of exploitation of Chad's recently discovered oil resources, in a deal brokered by the World Bank, the foreign consortium had earned $5 billion for a $3 billion investment and Chad only got $588 million!

Globalisation
This retrenchment from globalisation is likely to increase with more governments nationalising or at least taking majority state holdings in their energy resources. Russia is now the world's biggest oil exporter (it overtook Saudi Arabia last year) and Gazprom is now the highest valued company outside the US.

But the Big Oil companies, and through them US imperialism, still control the international oil market: trading, transportation (tankers and pipelines) and refining. So Russia and China are trying to challenge their domination, and their state-owned energy companies could even make hostile takeover bids for Big Oil companies.

These would not be successful for political reasons. Last year for example, the US Congress blocked an attempted take-over of US energy company Unocal by the Chinese state oil company.

However, Russia and China have made a number of bilateral energy agreements and are planning to open their own oil and gas market exchanges to rival the US.

The world oil price peaked at around $80 per barrel last year but has now fallen back to $50-$60, still way above the $20 per barrel before the Iraq war started four years ago.

In the coming world economic slowdown or recession, the oil price is likely to fall further as energy demand falls, although probably not back to $20. However, any significant fall in the oil price below $50 a barrel will cause big economic and social problems for producer countries. It would also lead to another slump (as in the 1990s) in oil exploration and production (the economic viability of reserves is very much conditioned by the oil price) - paving the way for further shortages of supply and refining capacity later.

Would the leftist governments in Bolivia and Venezuela cut back on their social programmes for the poor or would they be forced into more radical policies of expropriation of capitalist interests?

Similarly, would Putin threaten to cut off western energy supplies if the west did not pay more for its gas and oil?

70% of Iran's state revenues comes from its oil exports so any fall in price would undermine President Ahmadinejad's already failing social promises and popular support. Saudi Arabia and the Gulf states too would face big social upheavals.

Whilst these would be the likely consequences of a fall in oil prices in the short term, in the longer run the price is likely to increase and could jump dramatically in response to internal crises.

The four biggest oilfields in the world (which account for 14% of world supplies) are all over 30 years old and in decline.

Saudi Arabia's Ghawar field, the world's largest, is over 50 years old and over half depleted (some observers say 90% depleted but the Saudi oil industry is shrouded in secrecy).

Daqing is the largest oil field in China and its major source of domestic oil; its decline will only make China even more desperate for imports. China is now the world's second biggest oil importer after the US, hence its deals with Iran, Sudan and Venezuela.

Last year, two senior US senators initiated a computerised simulation exercise called ShockWave to study the effects on the US economy if the oil price rose to $100 a barrel. Their inescapable conclusion was that it would lead to recession.

Many analysts believe that due to 'Peak Oil', prices could rise as high as $125-$150 a barrel. The Peak Oil theory is that a time will come when half the discovered and produced oil in the world has been consumed and after then the oil supply will decline. Some oil experts believe that time has already come, others that it may not be for another 30 years.

Either way, the reaction against neo-liberalism already evident in Latin America will spread to other continents as workers and poor people demand action against the super-profits of Big Oil.

There will be pressure from the masses for more windfall taxes and outright nationalisation.

The intensified rivalry between the declining and desperate US empire and energy-rich Russia and energy-hungry China will intensify, most immediately over Iran, and in Central Asia and Africa, leading to trade wars and further military conflicts.

As a consequence oil prices will become increasingly volatile, with falls and big rises, each with the potential to cause economic crises and social upheaval.

Just before the invasion of Iraq, media magnate Rupert Murdoch expressed his support for war to maintain oil prices at $20 a barrel and help sustain world economic growth (and his profits!). Like most things in his media, Murdoch got that one wrong and Iraq and oil will prove to be sources of world economic and political instability for years to come.