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Democratic Congressmen Call on Bush to Halt, Reverse Iraq Oil Deals

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Have you ever watched a movie and suddenly hit a section that doesn’t quite make sense? Usually, I figure I missed a crucial twist, like a envelope being slipped to the chief baddie, or the fact that the receptionist is the detective in the opening scene.

I’m throwing this one open to readers, because it seems there is a plot thread here I am missing.

Storyline: The Iraqis are finally starting to negotiate development deals with big and middle sized oil companies. This should be good news on a lot of fronts. First, it means that enough stability has been established in some areas for economic progress to start taking place. Oil programs mean local jobs and royalties. Second, longer term, it means more oil supply which is badly needed. Although these project will take some time to come to fruition, bringing Iraq back to its formerly level of output, or perhaps even above that, will take a great deal of pressure off international oil supplies. At 2.5 million barrels per day, Iraqi production is still one million barrels per day below its pre-war level.

Yet some high profile Democratic congressmen have complained to Bush, contending that the revenue from these deals will encourage sectarian fighting. Narrowly, I suppose it might, seeing that rebels have targeted oil infrastructure, but one would assume that Big Oil is acutely aware of the security risks and deem them to be acceptable.

Note also that these objections have not yet been raised via high pressure, high profile means, say a resolution opposing the deals, a letter to the editor of the Post signed by the Congressmen plus, say, some Middle Eastern experts and some oil analysts. However, three Congressmen did have a press conference on this matter (although it appears not to have garnered much coverage) so this may rate as mid-level saber-rattling.

The bone of contention is that the proceeds from oil deals are being split among the key ethnic groups, the Kurds, Shias, and Sunnis, under a patchwork of oil laws left over from Saddam’s era, plus a compromise worked out among the groups. The legislators argue that not having new law in place is a prescription for disaster.

Normally, that line of argument would make sense, but this is not a normal situation. The reality is that any arrangement has good odds of being renegotiated whether laws are in place or not. You could easily see a new governing group repudiating considerable amounts of legislation created by their predecessors. That sort of thing happens in young, unstable countries.

Iraq has high odds of splintering into separate nations, just as Yugoslavia did (and note that the oil deals are with regional authorities, which may be the real issue here). The solons can’t be insinuating bribery; all these companies are subject to the Foreign Corrupt Practices Act. And what is even more interesting is that the State Department (in effect) said the Bushies have nothing to do with this matter, the deals are in the hands of the Iraqi Oil Ministry.

Any theories very much appreciated.

From United Press International (hat tip Iraq Oil Report):

U.S. congressional leaders are pressing the Bush administration to block deals to be signed between the Iraqi federal government and the world’s largest oil companies and to cancel deals between the Iraqi Kurdish region and smaller U.S. oil firms.
Sens. Charles Schumer, D-N.Y., John Kerry, D-Mass., and Claire McCaskill, D-Mo., want the United States to dam negotiations on contracts the senators claim will, in part, further sectarian fighting.

United Press International has also obtained a letter from Senate Committee on Armed Services Chairman Carl Levin, D-Mich., to President Bush’s national security adviser Stephen Hadley, asking the administration to press Hunt Oil and other U.S. companies to cancel their oil deals with the Kurdistan Regional Government of Iraq.

The Iraqi Oil Ministry is negotiating two-year, technical support contracts — also being called technical service contracts — with Shell, BP, ExxonMobil, Chevron, Total, BHP Billiton and a consortium led by Anadarko. The deals, the scope and price of which have not been made public, are presumed to be worth $500 million each and provide technology, training and equipment to six key oil fields in Iraq, according to past ministry statements.

Each field would increase production by 100,000 barrels per day. The companies would likely not send any workers to Iraq. Shell, BP, Exxon and Total were part of the Iraq Petroleum Co., which controlled Iraq’s oil sector for decades before being kicked out in the 1960s and 1970s.

International oil companies have been providing free training to Iraq’s oil workers, and Iraq has signed contracts with companies to provide engineering, procurement and other oil field services. This and an increase in security for the northern pipeline have allowed Iraqi oil production to grow to 2.5 million barrels per day, according to the Oil Ministry’s May averages. Exports crossed the 2.1 million bpd mark, a record since the 2003 invasion.

Iraq has the world’s third largest oil reserves, capable of handling higher volumes than current output. But the sector needs to recover from decades of war, Saddam Hussein’s mismanagement and sanctions. The ministry has decided to first move on these six contracts, and is readying for a bidding round for an undisclosed number of oil and gas fields later this year.

In a separate letter to Secretary of State Condoleezza Rice, Schumer and Kerry called for Iraq to pass legislation governing the oil sector first.

“We ask that you work with the (government of Iraq) to ensure that they do not sign any agreements relating to oil or gas until they have passed a fair, equitable and transparent hydrocarbon revenue sharing agreement that benefits the Sunni Arabs, Shia Arabs, Kurds and all other Iraqi citizens,” the senators wrote.

Without a new law, Iraq is relying on regulations left over from Saddam. A draft oil law has been stalled in Parliament by internal Iraqi disputes over the extent foreign oil companies should be allowed into the national oil sector and how much control over the oil strategy will be given to local governments. Three companion laws — revenue sharing, reconstituting the national oil company and reorganizing the Oil Ministry — are further behind in the legislative process.

Iraq is already splitting revenue by compromise between factions. Schumer, Kerry and McCaskill in a short press conference Tuesday said without a revenue sharing law the oil deals will cause more fractures.

“You can’t blame Iraq for the desire to expand oil production,” Schumer said. “However, signing oil contracts without a revenue sharing law is a recipe for disaster.”

The three warned against possible perceptions that the war was fought to benefit international oil companies, and that no-bid contracts were not transparent…..

The other companies couldn’t be reached or couldn’t provide comments before the article was published.

“We welcome Iraq’s decision to negotiate with companies on these contracts, as we believe that commercial partnerships with private companies will accelerate Iraq’s ability to develop its oil and gas resources,” said State Department Iraq Press Officer John Fleming, though the State Department has not seen the senators’ letter and wouldn’t comment on it directly.

“The Ministry of Oil has been developing relations with about 40 international oil companies since 2004,” he said, adding the U.S. government “is not playing any role in the Ministry of Oil’s commercial negotiations.”

The senators said the administration should use the contracts as leverage to press Iraq to pass the oil and revenue sharing laws. When asked whether this contradicts the sovereignty of Iraq, they said U.S. efforts in Iraq — and troops on the ground — make the oil deals an American concern.

“If it’s in Iraq, it’s not a private sector matter,” McCaskill said.

This is the first public outcry by Congress over oil deals in Iraq. The six contracts were first made public late last year, and Iraq’s Kurdistan Regional Government has signed 20 exploration and production deals since 2004.

Schumer, Kerry and McCaskill fielded three questions before ending the press conference.

Kerry, responding to reporters’ shouted questions, said, “The Kurds are separate and independent.”

Dallas-based Hunt Oil is the most prominent of the half-dozen U.S. firms that signed deals with the KRG. The deals are controversial because the regional government claims a constitutional right, which is disputed by Baghdad.

Levin, in his June 5 letter to Hadley, said the KRG deals are hurting reconciliation efforts within Iraq, including on the oil law.

“I believe the administration should request Hunt Oil, and other U.S.-based oil companies, to withdraw from any (production sharing contract) they have signed and to advise the KRG that they are doing so in order to facilitate the passage of national hydrocarbon legislation,” he wrote.

“We’ve received the letter and are reviewing it,” said National Security Council spokesman Gordon Johndroe. “We’ll get back to the senator in the coming days.”

Hunt Senior Vice President for Corporate Affairs & International Relations Jeanne Phillips, when asked about the letter, said, “We would never presume to comment on correspondence between a member of the United States Senate and other government agencies.”

Levin also questioned whether the State Department warned Hunt Oil against signing the deal, saying he received differing versions of communication from the company and the State Department.

“The clear inconsistency between the State Department and Hunt Oil in their accounting of the meetings leading up to the company’s signing of a (production sharing contract) with the KRG is deeply troubling,” Levin wrote.

“We continue to advise companies that they incur significant political and legal risk by signing contracts with any party before a national law is passed by the Iraqi Parliament,” said Fleming of the State Department. “It is in the interest of all Iraqi parties to enact a set of national laws to govern the oil and gas industry, and to develop an equitable revenue sharing system.

“All companies which have spoken with the United States government about investing in Iraq’s oil sector have and will continue to be given the same advice,” he said.

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21 comments

  1. Anonymous

    Look at a map, and contrast where the oil is, and where the three major ‘ethnic’ groups live. The Sunnis basically get nothing, which the Shia dominated federal government doesn’t find a problem. The same way that the Shia dominated government doesn’t mind the Kurds getting their hands on a major revenue stream to be able to use to defend themselves with – from the Turks, from the Sunnis, etc. Of course, the Turks are utterly opposed to the Kurds being able to create their own state, but this is not a Shia problem, though the Iranians are certainly not in an ideal position if such were to occur.

    There were any number of good reasons not to invade Iraq in the early 1990s, and this was just one of them. Iraq is not a functional nation state without a brutal ruler at the top, and though America during the Cold War had no problem supporting brutal rulers, it was always excused through the need to fight communism. Installing our own torturing thugs is only possible domestically, where they get their hands dirty in the White House basement, not internationally.

    Quite honestly, the winners of the Iraq war are likely to end up being the Iranians, since the only power structure likely to be able to hold the southern Iraqi oil areas and facilities will be Shia.

    The sheer stupidity of Bush’s son is hard to overstate, at least when it comes to the sort of geopolitical mastery which Bush demonstrated – running a major war in the Middle East without Soviet intervention, overseeing the peaceful reunification of Germany, and in general, winding down the Cold War to American advantage, without major wars erupting.

    Sometimes, I feel a certain sympathy for Bush, Sr. as he watches his formerly alcoholic son squander America’s legacy, without even having the seeming awareness that he is doing it.

    The war in Iraq is about maintaining control over oil – and that is just as much true for those living on top of the oil as for those wanting to burn it.

  2. Yves Smith

    Anon of 2:49 AM,

    I recognize that the oil is concentrated in what probably soon will be Kurdistan and the south, leaving the Sunnis in the middle with little, but my impression (perhaps incorrect) is that these provisional deals cut the Sunnis in for now.

    And as I indicated (and again I probably should have said so more clearly), the country is probably going to fracture anyhow, so the idea that codifying a deal into law by a government that isn’t going to be around for long is an illusory benefit.

    So I am left with my immediate question; what are the Dems trying to gain with this? Is this a mere delaying tactic? If so, why? Do they want to deny McCain the talking point that economic progress is being made? I still don’t get it.

    And as for Bush Sr. I don’t sympathize. He had a duty to speak out against his son. The fact that he didn’t suggests that the neocons on the periphery during his Administration have the 5 x 7 glossies on him.

  3. Anonymous

    Last point first – my sympathy is not really for America’s first secret police president (and boy, did the family members and neighbors who worked for various three letter agencies love that way of describing one segment of Bush’s government service) personally, but more for his position.

    Ex-presidents are generally not expected to play a political role after their term ends, and in Bush’s case, having his son as president makes that problem much worse.

    I think he decided to follow a basic New England style of simply not acknowledging anything amiss, while keeping his opinions locked away from any public appearance. To this extent, he is likely in self-imposed agony, and to that extent alone, I have a certain sympathy.

    This is not agreement with Bush’s sense of loyalty or duty, but I do think he has one.

    But to your major question – at this point, I believe that the essential bankruptcy of America, both political and economic, is in plain view. No other explanations seem so robust in detailing the reality of American institutional incompetence. And in a year, don’t be surprised if it is a group of Republicans proposing exactly the same thing.

  4. Anonymous

    “The solons can’t be insinuating bribery; all these companies are subject to the Corrupt Practices Act.”
    Corruption is exactly what they are insinuating, it has always been bubbling under the surface of the Bush administration. There’s been a steady emasculation of law, oversight and then stonewalling of any investigations the White House doesn’t like.

    And in Iraq there’s not even a need to care about laws! Most American companies over there operate under no supervision or accountability at all. Bush even set up a situation where you can’t charge these companies for crimes. They’re in a foreign warzone outside American jurisdiction and thanks to immunity treaties the Iraqi government’s hands are tied too.

    These companies are in the end only accountable to the President, and Bush just won’t change the system he set in place. So the next president maybe? Like John “100 years in Iraq” McCain?

    And that’s what the senators are after, insinuating Bush is corrupt and McCain somebody who will continue these practices. Not only does it keep Iraq in the spotlight but it can also chip away at McCain’s reputation for integrity and principled action.

  5. Yves Smith

    Google “Foreign Corrupt Practices Act.” The law is pretty clear, and actually one of the few enforced upon occasion. With regime change coming in DC, I don’t think any big oil company would risk that sort of trouble.

    Bush has created so many ways to cheat via outsourcing and corruption of the contracting process that there are plenty of ways to feed at the trough that pose no risk, unlike a FCPA violation.

  6. Melancholy Korean

    This does seem like an odd move for the Dems. My only thought is that some of them have finally found their backbone, and now with a majority in Congress, as they eagerly await the looming November disaster for the Republicans, the Dems finally feel ready to “stand up” to the President on Iraq.

    Whether this is the right issue to fight him on, of course, is another question entirely. Your points, Yves, seem persuasive and rational. But perhaps the headline “Democrats to Fight Big Oil Companies over Iraq” is too tempting to pass on. It’s like a two for one deal.

    So, perhaps, the one thing that the Bush Administration may finally get right about Iraq, restarting and rebuilding its oil infrastructure, is the one issue the Dems decide to fight him on. The irony would be amusing, if it weren’t all so horrible.

  7. Anonymous

    Is this really that difficult to understand?

    Bush and Cheney — two oil men — lie the US into an illegal war and occupation with devastating consequences.

    Now, five years later, oil companies seek to gain control/access/profits from the world’s largest oil reserves (or 2d largest; can’t recall).

    Democratic Senators, seeing the possible shift in power in the US, cry foul.

    This is, actually, rational. But the objective is the rationality of political power in the US — not the rationality of problem solving a way through the chaos called Iraq (as if any such rationality exists).

  8. DownSouth

    Here’s an article that might help to explain the thinking of the three Democrats…

    http://www.tomdispatch.com/post/174779/michael_schwartz_the_prize_of_iraqi_oil

    An example:

    “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.”

    There’s another article that gives a lot more poling data on what rank and file Iraqis think about the control of their oil. If I can find it I will post it also.

  9. PrintFaster

    Yves, surely you jest.

    This is about democrat politics and nothing about Iraq. It is about posturing into the fall elections. Here are the democrat goals:

    1. Keep oil prices high, blame Bush.
    2. Keep the Iraq political situation unstable, blame Bush.
    3. Keep the Iraq war on the headlines, blame Bush.
    4. Keep the Iraq oil from coming to market, blame Bush.
    5. Focus on US oil companies, blame them, blame Halliburton, blame Bush.
    6. Blame the US consumers for using oil, blame the US consumer, tax them because they sin.

    By the way, I have heard that Iraq has more oil that Saudi. Perhaps the Saudis are stirring the pot too?

    Any questions?

  10. DownSouth

    The UPI story is an example of incredibly sorry reporting. It’s little more than a U.S. oil industry puff piece. It has gaping holes in it, which make it more of an opinion/advocacy piece than a news story:

    1) No mention that the new contracts were “no-bid”

    2) No mention that bids by companies from Russia, China and India were rejected

    3) No mention, as the Dallas Morning News reported, that it “is not clear what role the U.S. played in awarding the contracts.”

    http://www.dallasnews.com/sharedcontent/dws/dn/latestnews/stories/061908dnintiraqoil.170bec.html

    And the war has implications that go well beyond Iraq’s borders. The Turks certainly do no want the Kurds to get control of the oil wealth of northern Iraq.

    Iraq’s insurgency certainly could be proxies for China and Russia, who funnel their support through Iran.

    Here’s an example from our own history of how it works:

    “Beaumarchais wanted France to supply the means of the [American] colonies’ liberation. Its success would at the same time lessen English power in the world. The royal council rejected his proposal for fear of war with England…”

    “With a renewed plea Beaumarchais offered a new scheme–in a word, privatize the pro-American campaign. This time the minister agreed. Beaumarchais became the imaginary firm of Rodrigue, Hortalez, and Company. Its activities were officially forbidden, but it was to supply the Continental Congress with 200 cannon, with mortars, with 25,000 firearms and ammunition in scale, including 200,000 pounds of powder, besides clothing and camping equipment for 25,000 men.”

    (Jacques Barzun, “From Dawn to Decadence”)

  11. Anonymous

    Yves,

    the democrats are worried that it will end up like Nigeria with MEND or even worse(for the West) like Venezuela.

  12. Richard Kline

    *sigh* Two points. First, the Iraqi Oil Ministry is completely a captive balloon of US policy. Oh, there are many Iraqi oil interests not under US thumb, most of which are directly contrary to US policy. Look to the Legislature there, the oil unions, or mid-level experts. The _Oil Ministry_ are minions who do what they are paid to do.

    What you really have here, Yves, isn’t an argument between Dems and Reps but an argument between factions of US Big Oil on how best to steal the stuff from the serfs of Mesopotamia. The proposed hydrocarborn law is a Big Steal, designed to lock up long-term control of fields _and extraction pricing_ in the hands of US plutocrats. —But the hydrocarbon law is going nowhere fast. Sooo, other factions of Big Oil have been getting in to cut their own side deals with local Iraqi factions to lock up exports at least from these local fields; an end around on nationalist oppostition to having the oil stolen. However, such side deals, should they occur, favor separatist factions inordinately, and are problematic for the country as a whole. In addtition to being steals, but that isn’t the issue. Big Republican money is mostly still behind the Big Steal. Big Democrat money has been bought round to the idea of mand Little Steals. _That_ is the argument you are trying to parse, as I read it.

    Under no circumstances should any foreign oil country be allowed to sign any contract in Iraq giving them control of anything. Period. The response will be explosive in kind, and enduring. If and when the Iraqis can make a decision without our guns held to their heads, as now, they may choose to contract with some US firms on rehabilitating their extrative infrastructure. I think that this is most unlikely: they have every reason to hate our guts. We should have no entangling dalliances with Iraqi oil; we will only get burned. Period. We are only going on pursuing it now to keep the neocons from looking as exacrable and deluded as in fact they are. Rome conquered Mesopotamia from Parthia, too; they held it for not a dozen years, and went bankrupt in the endeavor. Just so. This Great Game has already failed miserably: it’s over, it’s just not done.

  13. Anonymous

    and the fact that global demand is decelerating appears to be inconsistent with accelerating oil prices.

    It only appears inconsistent if you do not understand the terminology.

    Demand is said to be ‘decelerating’ but has it actually declined? I think not. No, all that has happened is that the pace of increased demand has slowed. That is, it is merely a rate change.

    Understood simply, if you are driving your Prius from NYC to LA, and you slow from 80 mph to 55 mph are you still getting closer to LA? Why yes, you are.

    So demand is still rising and supplies are not keeping pace. This is not an argument against the role of speculation. I think speculation plays a large role. But is not the nefarious ‘commodity speculator’ that many seem to want to target.

    No, it is the actual product puveyors who are speculating. After all, if you are in the business of selling petroleum how will you price your product – on what you actually paid for it, or on what (you speculate) the replacement cost will be?

  14. Yves Smith

    Deep South, Richard Kline,

    Those filled in the pieces I was missing. Thanks. And FYI, the national news outlets reports were pretty much like UPI but less detailed (Reuters did at least mention no-bid, but that was the only major addition).

  15. Kidder Reports

    I recommend this article for perspective on US policy in Iraq:

    Separatism and Empire Building in the 21st Century, by James Petras

    http://www.dissidentvoice.org/2008/06/separatism-and-empire-building-in-the-21st-century/

    A couple of points:
    The key to US military empire building follows two principles: direct military invasions and fomenting separatist movements.

    Clearly US military intervention promotes separatism as a means of establishing a regional ‘base of support’. Separatism facilitates setting up a minority puppet regime and works to counter neighboring countries opposed to the depredations of empire. In the case of Iraq, US-backed Kurdish separatism preceded the imperial campaign to isolate an adversary, create international coalitions to pressure and weaken the central government. Washington highlights regime atrocities as human rights cases to feed global propaganda campaigns.

  16. DownSouth

    Please excuse me if I’m being verbose, but I did find one more article that gives a little more background…

    http://www.tomdispatch.com/post/174853

    To wit:

    “In September, when the effort to enact U.S.-favored oil legislation — a much-announced ‘benchmark’ of both the White House and Congress — collapsed in Iraq’s legislature, the coup de grace seemed to be delivered by a wildcat agreement between the Kurdistan Regional Government and Hunt Oil of Dallas, Texas, headed by Ray L. Hunt, a longtime Bush ally and a member of the President’s Foreign Intelligence Advisory Board. This agreement, undertaken against the stated wishes of the central government, provides for the separate development of Kurdistan’s oil resources and puts the Kurds in blatant, preemptive violation of the pending legislation. It makes, in fact, such a mockery of that legislation that the prospect of its passage before the Development Fund mandate expires is now vanishingly small.”

    “If the mandate expires and the law is not passed, then what? Then others in Iraq may well seek to follow the Kurdish example and cut comparable deals with whomever they wish. The central government, even if it has lost effective control of the Kurdish north and the Sunni west, could well ratify resource-separatism by contracting for the development of the oil resources in the territory generally remaining under its control. Thus, a new, Iran-allied, oil-rich, nine-province Shiite Iraq could match Kurdistan’s deal with one of its own, perhaps even with ready-and-willing China. Will any combination of American military and diplomatic pressure suffice to stop such an untoward outcome?”

    My questions are these:

    1) Does the announcement of these contracts last week signal that the Bush administration has given up hope for an oil law?

    2) Has the Bush administration now decided to instead “ratify resource-separatism by contracting for the development of the oil resources in the territory generally remaining under its [Shiite] control?”

    3) If this is true, what will be the reaction of the Sunnis?

    4) If this is true, what will be the reaction of Saudi Arabia (also Sunni)?

    5) If this is true, and especially given that China and Russia were so conspicuosly cut out of the newly announced contracts* (see below), what will be their reaction?

    *”In all cases but one, the same company that had provided free advice to the ministry for work on a specific field was offered the technical support contract for that field, one of the companies’ officials said.”

    “The exception is the West Qurna field in southern Iraq, outside Basra. There, the Russian company Lukoil, which claims a Hussein-era contract for the field, had been providing free training to Iraqi engineers, but a consortium of Chevron and Total, a French company, was offered the contract. A spokesman for Lukoil declined to comment.”

    http://www.nytimes.com/2008/06/19/world/middleeast/19iraq.html?pagewanted=2&_r=1&sq=exxon-mobil%20iraq%20contracts&st=nyt&scp=4

  17. roger

    I have to disagree with the oft expressed idea that Iraq would not exist without some iron handed dictatorial power in the center. I see nothing particular to Iraq to distinguish it from Turkey or Iran, here. It is, if anything, much more ethnically homogenous than Great Britain (the break up of which has not caused a deal of talk about Iron hands). Due to the eight years of autonomy under which Northern Iraq – Kurdistan – existed, I think there is a good chance that it will go its own way under some legal cover – otherwise, Iraq is a much more “natural” entity than, say, Saudi Arabia – the latter being a conqueror’s patchwork that is held together only by tyranny and the most rabid and inquisitorial religious institutions. Hmm, I wonder why nobody talks about the “unnaturalness” of the Saudis? Yemen, at the moment, is on the verge of civil war, yet you see nobody advocating that the U.S. occupy that mostly oil-less country.

    I can’t imagine that the contracts that are being made right now between Iraq and the oil companies will hold up over the next decade – if the U.S. doesn’t keep occupying the place. It is easy to envision Maliki or Sadr re-nationalizing the oil companies – and they’d have every right to do so, since the contracts have been signed under extraordinarily coercive circs.

    Which may well be why the U.S. seems determined to stay in Iraq forever.

  18. rich

    Given that the U.S. runs Iraq, what legitimacy do those contracts have among Iraqis. Frankly, I could care less about oil, who owns it or who gets it. What I do care about is the image signing such contracts in the current environment engenders. And frankly, I do not care so much about sectarian disputes among Iraqis. I support the Democratic senators requesting that the U.S. authorities put the kabosh to these contracts, to then leave Iraq and let them do business with whomever they prefer.

  19. Yves Smith

    Rich,

    Iraq has a government that is recognized as sovereign by other powers. Per Wikipedia:

    It was recognized by the U.S., the United Nations, the Arab League and several other countries as being the sovereign government of Iraq (see Iraqi sovereignty for more information). The U.S. retained significant de facto power in the country and critics contend that the government existed only at the pleasure of the United States and other coalition countries, whose military forces still remain in Iraq. The coalition did promise that its troops would leave if the new sovereign government requested it, but no such request was made.

    Perhaps more important than its formal status, the Iraqi has taken some moves that were most assuredly not approved by the US and therefore point to at least a degree of autonomy. In particular, the Iraqi government has made overtures to Iran (humanitarian and cultural), announced that it refuses to allow Iraq to be used to launch attacks against Iran, and undermined US efforts to claim that Iran is supplying weapons to Iraq (a press conference to announce the same was cancelled after the Iraqi government announced that there was no evidence that the weapons that the US claimed were from Iran actually were, and the Iraqis further contended that they could establish that their origins. This was a very big embarrassment that went completely unreported in the US).

  20. roger

    Yves, while the Baghdad goverment is starting to “monopolize the violence” in Iraq – outside of Kurdistan, and without having any authority in Sunni territory as yet – it is still hard to call the Iraqi government sovereign. If Blackwater killed seventeen Americans in Times Square, and the U.S. government was helpless to either arrest the perpetrators or even expel them, you’d have a hard time making the case that the U.S. government was sovereign.

    Given the total lack of transparency in decisionmaking by the government and the presence of a huge American force, the order of the day should have been to reconstruct the very good Iraqi oil ministry and leave it as a functioning state institution, under previous law, until the occupiers left. Many oil producing states are wildly corrupt. This particular state, however, is American business insofar as it hooks up with American corruption, of which we receive reports daily as various deals that the Pentagon and the State department make get audited or reported on.

    All of which points to a need for a larger framework of restraint.

  21. David

    You’ve given a very credible question to the Democratic leaders of this perhaps snub of the current administration in Washington. Being ever more critical of Republicans on my part, I can also see this as pure vindictive politicking on the part of the said three Senators. Besides anything with the Hunt name on it leaves most people dubious of the contracts involved. As mentioned on a recent oil speculation pro and con debate (again Tom Ashchroft’s NPR On Point this week.), a caller brought up a historical fact that the Hunt family was involved in market manipulation of the silver market awhiles back involving a huge run-up of silver prices that benefited them and afterwards the market returned to prior prices. The three Senators maybe are suggesting the Iraqi contracts look like another similar Contract on America.

    However, Republicans could be justified in saying any large increase of Iraqi oil coming our way (which is supposed to very good oil compared to the Saudi’s sour crude) will ease the financial crunch that is upon middle America. You bet the Democrats are seeing a chance that oil prices could go down as a result and thus less of a reaction against the current regime. Sour grapes? But then again why should US tax payers be used militarily to profit the Hunt family of Texas?

    And if the Kurds are making separate contracts with different companies than the Baghdad govt. that does verify the Senator’s concerns. Turkey might also differ with an independent Kurdistan too. Isn’t this oil supposed to be shipped through Turkey? I googled “Kurdish oil piped through Turkey” and got 200K+ hits incl. this hot one! (disclaimer–not my politics but interesting history none-the-less) and there are interesting twists and turns including anti-Israeli rants about an Kurdish-Jordan-Israel pipeline that doesn’t sound that bad considering the Turkish anti-western attitudes of late.

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