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OPEC and the Economic Conquest of Iraq
(Greg Palast, Harpers Magazine, October 24, 2005)
Two and a half years and $202 billion into the war in Iraq, the United States has at least one significant new asset to show for it: effective membership, through our control of Iraq's energy policy, in the Organization of the Petroleum Exporting Countries (OPEC), the Arab-dominated oil cartel. . . . Just what to do with this proxy power has been, almost since President Bush's first inaugural, the cause of a pitched battle between neoconservatives at the Pentagon, on the one hand, and the State Department and the oil industry, on the other. At issue is whether Iraq will remain a member in good standing of OPEC, upholding production limits and thereby high prices, or a mutinous spoiler that could topple the Arab oligopoly. . . . According to insiders and to documents obtained from the State Department, the neocons, once in command, are now in full retreat. Iraq's system of oil production, after a year of failed free-market experimentation, is being re-created almost entirely on the lines originally laid out by Saddam Hussein. . . . Under the quiet direction of U.S. oil company executives working with the State Department, the Iraqis have discarded the neocon vision of a laissez faire, privatized oil operation in favor of one shackled to quotas set by OPEC, which have been key to the 148% rise in oil prices since the beginning of 2002. This rise is estimated to have cost the U.S. economy 1.5% of its GDP, or a third of its total growth during the period. . . . the original scheme for reconstruction, at least the one favored by neoconservatives, was to privatize Iraq's oil entirely and thereby undermine the oil cartel. One intellectual godfather of this strategy was Ariel Cohen of the Heritage Foundation, who in September 2002 published (with Gerald P. O'Driscoll, Jr.) a post-invasion plan, The Road to Economic Prosperity for a Post-Saddam Iraq, that put forward the idea of using Iraq to smash OPEC. . . . Under Saddam Hussein, Iraq adhered to the OPEC quota limit (historically set to equal Iran's, now 3.96 million barrels a day) via state ownership of all fields. Cohen reasoned that if Iraq's fields were broken up and sold off, a dozen competing operators would quickly crank up production from their individual patches to the maximum possible, swiftly raising Iraq's total output to 6 million barrels a day. This extra crude would flood world petroleum markets, OPEC would devolve into mass cheating and overproduction, oil prices would fall over a cliff, and Saudi Arabia-both economically and politically - would fall to its knees. . . . Following the U.S. military's swift advance to Baghdad, those skeptical of the neocon plan were summarily brushed aside. . . . In plotting the destruction of OPEC, the neocons failed to predict the virulent resistance of insurgent forces: the U.S. oil industry itself. . . . With pipelines exploding daily, the fantasy of remaking Iraq's oil industry also went up in flames. Carroll was replaced by another Houston oil chieftain, Rob McKee, a former executive vice-president of ConocoPhillips and currently the chairman-even during his tenure in Baghdad-of Enventure, an oil-drilling supply subsidiary of the Halliburton Corporation. McKee had little tolerance for the neocons' threat to privatize the oil fields. . . . In November 2003, McKee quietly ordered up a new plan for Iraq's oil. The drafting would be overseen by a "senior adviser," Amy Jaffe, who had worked for Morse when he held the formidable title of Chairman of the Council on Foreign Relations-James Baker III Institute Joint Committee on Petroleum Security. Jaffe now works for Baker, the former Secretary of State, whose law firm serves as counsel to both ExxonMobil and the defense minister of Saudi Arabia. The plan, nominally written by State Department contractor BearingPoint, was guided, says Jaffe, by a handful of oil industry consultants and executives. . . . For months, the State Department officially denied the existence of this 323-page plan for Iraq's oil, but when I identified the document's title from my sources and threatened legal action, I was able to obtain the complete report, dated December 2003 and entitled "Options for Developing a Long Term Sustainable Iraqi Oil Industry." The multi-volume document describes seven possible models of oil production for Iraq, each one merely a different flavor of a single option: the creation of a state-owned oil company. . . . Given how easily the interests of OPEC and those of the IOCs can be aligned, it is certainly understandable why smashing the oil cartel would not strike oilmen as a good idea. In 2004, with oil approaching the $50-a-barrel mark all year, the major U.S. oil companies posted record or near record profits. ConocoPhillips, Rob McKee's company, this February reported a doubling of its quarterly profits from the previous year, which itself had been a company record; Carroll's former employer, Shell, posted a record-breaking $4.48 billion in fourth-quarter earnings. ExxonMobil last year reported the largest one-year operating profit of any corporation in U.S. history. . . . According to Morse, the switch to an OPEC-friendly policy for Iraq was driven by Dick Cheney himself. "The person who is most influential in running American energy policy is the Vice President," who, says Morse, "thinks that security begins by . . . letting prices follow wherever they may." . . . And Dick Cheney, far from "putting the squeeze on OPEC," has taken his de facto seat there, assenting by silence to the oil monopoly's piratical price gouging. But hasn't OPEC's stratospheric crude prices choked the life out of America's auto industry and bankrupted half a dozen airlines? In the Vice-President's bunker the elimination of jobs of Democratic-leaning union members is likely seen as a bonus for the good deed of boosting oil industry profits far above the ozone layer.

posted by LoZo 4:44 PM