Iraqis face the prospect of losing up to US$200 billion ($290 billion) of the wealth of their country if a US-inspired plan to hand over development of its oil reserves to US and British multinationals comes into force next year.
A report produced by American and British pressure groups warns Iraq will be caught in an “old colonial trap” if it allows foreign companies to take a share of its vast energy reserves.
The report is certain to reawaken fears that the real purpose of the 2003 war on Iraq was to ensure its oil came under Western control.
The report claims that multinationals entering the Iraqi oil business will expect high returns on any investment - and Iraq will lose between US$127 billion and US$194 billion over a 40-year period.
Iraq has announced plans to seek foreign investment to exploit its oil reserves after next month’s election. Iraq has 115 billion barrels of proven reserves, the third largest in the world.
According to the report Crude Designs (see link below), from groups including War on Want and the New Economics Foundation, the new Iraqi constitution opened the way for greater foreign investment. Negotiations with oil firms are already under way before oil laws are passed, it said.
The groups said they had amassed details of pressure from the US and UK Governments on Iraq to look to foreign firms to rebuild its oil industry.
It claimed a British Foreign Office code of practice issued in the northern summer of last year said at least US$4 billion would be needed to restore production to the levels before 1990-91.
“Given Iraq’s needs it is not realistic to cut Government spending in other areas and Iraq would need to engage with the international oil companies to provide appropriate levels of foreign direct investment,” it said.
The report said the use of production sharing agreements (PSAs) was proposed by the US before the invasion and adopted by the Coalition Provisional Authority.
“The current Government is already negotiating contracts with oil firms in parallel with elections and passage of a Petroleum Law,” it said.
Earlier this year a BBC Newsnight report claimed to have uncovered documents showing the Bush Administration made plans to secure Iraqi oil even before the September 11 terrorist attacks on the US.
Based on its analysis of PSAs in seven countries, it said multinationals would seek rates of return on their investment from 42 to 162 per cent, far in excess of typical 12 per cent rates.
Taking an assumption of US$40 a barrel, below the current price of almost US$60, and a likely contract term of 25 to 40 years, it said that Iraq stood to lose between US$127 billion and US$194 billion.
Andrew Simms, the NEF’s policy director, said: “Over the last century, Britain and the US left a global trail of conflict, social upheaval and environmental damage as they sought to capture and control a disproportionate share of the world’s oil reserves.
“Now it seems they are determined to increase their ecological debts at Iraq’s expense. Iraq is caught in a very old colonial trap.”
There are a few problems with your report, namely it’s source, and obvious bias.
I notice that it mentions the Iraqi people losing billions in revenue, and even makes mention of the billions that it would take to rebuild to take advantage of oil revenue, but never bothers even trying to connect the two. Having foreign investors come in is a win/win for the Iraqis. The government get’s tax revenue from companies operating in the country. Local workers will be hired, which means jobs, and tax revenue from workers. And the Iraqi people don’t have to spend a dime to get this. The only downside, is that this means that Iraq would miss out on the gross profits from direct sales, but they also don’t have to worry about the associated costs of building and operating an entire industry, while so much else needs to be built up.
I notice that their math based on a ridiculous premise. Mainly, that the figures assume that the companies would be selling oil at a rate a third less than than the current average, for twenty five to forty years. That’s ridiculous to start with. That, coupled with the costs to essentially build an industry, is supposed to somehow net a return of 42 - 164%? The fact that the margin is so huge should set off warning bells, to begin with. Not to mention, that the final “money lost” is not money that would even be earned without a large influx of money to build the industry: money that the Iraqi people might need to spend on other things.
Of course, the report itself isn’t included. This is just the text of an opinion piece on it. It’s entirely possible that the author got things wrong. However, given the overt bias of the groups that put together the report, I find it quite within the realm of possiblity that they Moore’d up a report to support their preconceived notions about eeevil KKKapitalists.
Iraq has announced plans to seek foreign investment to exploit its oil reserves after next month’s election. Iraq has 115 billion barrels of proven reserves, the third largest in the world.
Another non-biased progressive opinion piece provided by CM.
Yes it was. I specifically chose a piece that included a link to the actual report (at the end of the story).
But cheers for your comments - I will look into this some more with those points in mind.
Another non-biased progressive opinion piece provided by CM.
Well, you can always just make fun of me if you like (I’m sure it’s not hard), or you can actually make comments on the piece like Lusepher did.
Or is this forum reserved solely for people who think exactly like Crichton - did I miss the memo ?
Iraq has announced plans to seek foreign investment to exploit its oil reserves after next month’s election. Iraq has 115 billion barrels of proven reserves, the third largest in the world.
Iraqis face the prospect of losing up to US$200 billion ($290 billion) of the wealth of their country if a US-inspired plan to hand over development of its oil reserves to US and British multinationals comes into force next year.
Whose plan is it?
So do you think we are going to strongarm the Iraqis into this plan, or they are ignorant and will sign up to lose all that money, or are they free to use somone elses plan to exploit all that oil?
Iraq has announced plans to seek foreign investment to exploit its oil reserves after next month’s election. Iraq has 115 billion barrels of proven reserves, the third largest in the world.
Iraqis face the prospect of losing up to US$200 billion ($290 billion) of the wealth of their country if a US-inspired plan to hand over development of its oil reserves to US and British multinationals comes into force next year.
Whose plan is it?
So do you think we are going to strongarm the Iraqis into this plan, or they are ignorant and will sign up to lose all that money, or are they free to use somone elses plan to exploit all that oil?
It would be nice if the actual Iraqi’s had a choice in the matter, given the whole official premise of the endeavour (ya know, democracy and freedom and all). Put it to a referendum. At least give them a choice in the matter.
‘Strongarm’ is perhaps too emotive a word. How about ‘strongly suggest’ with some nods and winks. And as for being ‘ignorant’ and signing up to lose money, who are ‘they’ specifically?
So you are saying that the Iraq has announced plans is not true, that they are not Iraq’s plans?
They would be the Iraqis in the bolded part in the first quote. If they would willingly sign up for a plan that will cost them all that money, I was assuming that you might think they were ignorant. Think how much money they would lose if they dealt with Venezeula. I see that you instead think we are going to lean on them to go with that “plan”. Fair enough. We will see.
(Thanks CM, Happy Anniversary to you. :) )
There are a few problems with your report, namely it’s source, and obvious bias.
I’d certainly be more than willing to look at an equivalent study by someone you’d consider less biased. It seems that the ITIC (industry lobby group) has been seriously misleading already.
Lusepher - 23 November 2005 04:20 PM
I notice that it mentions the Iraqi people losing billions in revenue, and even makes mention of the billions that it would take to rebuild to take advantage of oil revenue, but never bothers even trying to connect the two. Having foreign investors come in is a win/win for the Iraqis. The government get’s tax revenue from companies operating in the country. Local workers will be hired, which means jobs, and tax revenue from workers. And the Iraqi people don’t have to spend a dime to get this. The only downside, is that this means that Iraq would miss out on the gross profits from direct sales, but they also don’t have to worry about the associated costs of building and operating an entire industry, while so much else needs to be built up.
The main point is that the most significant public good in the country will be made private, with no public debate. The Iraqi people have virtually no say in the matter. Can you imagine something like this ever happening in a Western country these days ??! No way. The Iraqi government would be left with control of only 17 fields out of 80 known fields. Multi-national oil companies are pushing for lucrative terms by international standards, based on Iraq’s high level of political and security risk. These risks place the Iraqi government in an extremely weak negotiating position. Immune from public scrutiny and the report suggests that the people of Iraq will be locked into economic terms that cannot be altered for decades.
PSA’s have four key features that will in practice limit and remove the democratic control from the Iraqi people:
(1) They fix terms for 25-40 years, preventing future elected governments from changing the contract.
(2) Secondly, they deprive governments of control over the development of their oil industry.
(3) Thirdly, they generally over-ride any future legislation that compromises company profitability, effectively limiting the government’s ability to regulate.
(4) Fourthly, PSAs commonly specify that any disputes between the government and foreign companies are resolved not in national courts, but in international arbitration tribunals which will not consider the Iraqi public interest.
As it says, if democracy is supposed to be so important, why allow it (force it) to be surrendered immediately ?
Lusepher - 23 November 2005 04:20 PM
I notice that their math based on a ridiculous premise. Mainly, that the figures assume that the companies would be selling oil at a rate a third less than than the current average, for twenty five to forty years. That’s ridiculous to start with. That, coupled with the costs to essentially build an industry, is supposed to somehow net a return of 42 - 164%? The fact that the margin is so huge should set off warning bells, to begin with. Not to mention, that the final “money lost” is not money that would even be earned without a large influx of money to build the industry: money that the Iraqi people might need to spend on other things.
Being that oil prices are very high at the moment, why is it ridiculous to assume they will not fall. This graph shows that the average price of oil since 1947 is $19.27 a barrel.
The report is not just a negative rant - it analyses alternatives. It argues that there is more than one way to proceed. It states that while PSA’s are quite common in countries with small oil reserves and/or high extraction costs, none of the conditions which make it the preferred option in those places apply in Iraq. Iraq is the opposite, and PSA’s are not found in any country comparable to Iraq. So why would it be the best way to proceed, given the better alternatives ?
Both the corporate lobby group ITIC (see section 3) and the British Foreign Office have argued that foreign investment can free up Iraqi government budgets for other priority areas of spending, to the tune of around $2.5 billion a year. Although technically true, this is deeply misleading – as the investment now would be offset by the loss of revenues later.
Amazingly, in ITIC’s report advocating the use of PSAs, the economic impact is only examined up to 2010 – ignoring the fact that any foreign investment must be repaid. It is as if one took out a bank loan but only considered the economic impact prior to paying it back!
(from pg 22)
That sounds to me a like a pretty dishonest way to operate.
instead of drawing a bunch of graphs, more folks should be working on those alternative fuels. oil and the export of non-charity dollars seem to be causing most of of worldwide turmoil. eliminte these peacfully and things will fall into place
“Now it seems they are determined to increase their ecological debts at Iraq’s expense. Iraq is caught in a very old colonial trap.”
“you know, at least they had peace under saddam...”
As opposed to “it doesn’t matter what happens, because at least they’ll be better off than under Saddam” ?
Wow, what a theory to be proud of Jabba. Nice.
“Now it seems they are determined to increase their ecological debts at Iraq’s expense. Iraq is caught in a very old colonial trap.”
“you know, at least they had peace under saddam...”
As opposed to “it doesn’t matter what happens, because at least they’ll be better off than under Saddam” ?
Wow, what a theory to be proud of Jabba. Nice.
what? “the root of all evil is actually colonialism, as evidenced yet again in iraq?”
There you go again, taking an arugment to an extreme, in order to ridicule it. Even though that means what you are ridiculing is your own invention. But you never seem to notice that ever-so-slightly important point.
Ah but CM, you are so dumb that you don’t even realise that I’m just ridiculing those who do the same thing on the other side......
Yes, I should have written something. I was putting it up as a discussion point, but I am aware that Moorewatch rules state that I should state a position as well.
To be honest I hadn’t read enough of it at that point, was leaving work, so decided to post it and read the rest of the train. I didn’t want to state a position because I was unable to do it honestly at that point. But I wasn’t able to get online when I got home (even though I intended to).
Andrew Simms, the NEF’s policy director, said: “Over the last century, Britain and the US left a global trail of conflict, social upheaval and environmental damage as they sought to capture and control a disproportionate share of the world’s oil reserves.
europe of course, did none of that. of course, nobody else but the US and britain quasi stole and consumed all that oil. and those scant few other countries who did/do were forced to under colonio-capitalist pressure. china remains forced to produce petrochemical trinkets for mcdonalds after socialist-planned crops keep faiingl due to global warming - brought about by CO2 [paste global CO2 emissions chart here, showing the US 24% contribution].
American Oil companies offered five million dollars to each Iraqi MP to pass the Oil law Reported today on Akhbar Alkhaleej newspaper [link updated]
An Iraqi MP preferred to remain anonymous told the newspaper that highly confidential negotiations took place by representatives from American oil companies, offering $5 million to each MP who votes in favor of the Oil and Gas law.
The amount that could be paid to pass the votes do not exceed $150 million dollars in the case of $5 million to each MP, pointing out that the Oil law requires 138 votes to pass, which the Americans want to guarantee in many ways, including vote-buying, intimidation and threats!
Focusing on the heads of parliamentary blocs and influential figures in the parliament to ensure the votes, the Americans guaranteed the Kurdish votes in advance but they are seeking enough votes to pass and approve the law as soon as possible.
