Global Policy Forum

Iraq's Oil


Transcript from CBS 60 Minutes

Burrelle's Information Services
December 15, 2002

STEVE KROFT, co-host:

If and when the United States decides to take military action against Iraq and get rid of Saddam Hussein, the Iraqi dictator will leave something behind: oil, and lots of it, 112 billion barrels of proven reserves, the second-largest supply in the world, behind Saudi Arabia. What happens to all that oil if Saddam goes, and what role is it playing in the current showdown with Iraq? If you ask anyone in the Bush administration about the importance of oil in the current crisis, as I did of Secretary of Defense Donald Rumsfeld a few weeks ago during an interview for Infinity Radio, you get this answer.

Mr. Secretary, what do you say to people who think this is about oil?

Secretary DONALD RUMSFELD (Defense Department): Nonsense. It just isn't. There--there--there are certain things like that, myths that are floating around. I'm glad you asked. I--it has nothing to do with oil, literally nothing to do with oil.

(Footage of oil worker; oil well; refinery)

KROFT: (Voiceover) Nothing? If you ask people in the oil industry, you'll get a slightly different answer. They'll tell you it definitely has something to do with oil.

Is oil part of the equation here?

Mr. PHILLIP ELLIS (Boston Consulting): Of course it is.

KROFT: No doubt?

Mr. ELLIS: No doubt.

(Footage of Phillip Ellis; Ellis and Kroft)

KROFT: (Voiceover) Phillip Ellis is head of global oil and gas operations for Boston Consulting, based in London. He travels the world planning strategies for large international oil companies. Ten days ago we went with him to get a glimpse of Saddam Hussein's oil, traveling north from Kuwait City on what is still called the Highway of Death, towards the Iraqi border.

Mr. ELLIS: We are driving on this road....

(Footage of Sarah Akbar; desert; oil wells)

KROFT: (Voiceover) We were the guests of Kuwait Petroleum, and one of its top engineers, Sarah Akbar, who got us access to a vast stretch of desert that is off-limits to everyone but oil workers and an ever-growing number of American and allied military forces who are gathered near the Iraqi border directly to the west, conducting live-fire training exercises.

So this part of the country is completely closed off.

Mr. ELLIS: Completely closed. Completely closed.

CROFT: For how long?

Ms. SARAH AKBAR (Kuwait Petroleum): Until military action, I guess.

Mr. ELLIS: Till ...(unintelligible) military action.

KROFT: Until further notice.

Mr. ELLIS: Until further notice.

(Footage of Kroft, Ellis, Akbar; oil wells behind fence)

KROFT: (Voiceover) Our destination was an outpost the Kuwaitis call Ritka, where a sand berm and miles of barbed wire and electrified fence now define the long-disputed border between Kuwait and Iraq. This is where Saddam Hussein's troops first crossed the border 12 years ago, to capture the Rumaila oil field, which is half in Kuwait, and half in Iraq.

How important is this real estate to the world oil economy?

Mr. ELLIS: Oh, this real estate here straddling Kuwait and Iraq is--is very important. It's a giant field and it's, you know, maybe got 3 percent, 4 percent of the world's oil resources pretty much under our feet.

KROFT: Really? Is that an Iraqi rig right over here?

(Footage of oil rigs)

Mr. ELLIS: That's an Iraqi rig. Evidently what they're doing is every time a Kuwait--Kuwait oil drills a well on this side, they move this rig to drill a well directly opposite it.

KROFT: In a line?

Mr. ELLIS: In a line, you know, either because they want to say--you know, it's a tit-for-tat sort of thing or because they think that, you know, `Well, if the Kuwaitis know that, you know, this is the best place to drill, maybe we ought to drill here.' The interesting thing is, most of the drilling, a lot of the drilling, in Iraq now is being done by Russian firms. I have no idea whether this is a Russian rig. Be, you know, very curious to know. But there's a lot of--a lot of activity going on on that side of the border.

(Footage of Ellis and Kroft standing by fence; oil well)

KROFT: (Voiceover) This was as close as we could get, but just a few hundred yards off in the distance, you could see Iraqi oil workers flaring off the natural gas escaping from their oil wells.

Mr. ELLIS: It is the biggest field in Iraq, and it is one of the biggest fields in the world.

(Footage of oil wells; refinery; pipelines; various activities related to oil pumping, refining and transport)

KROFT: (Voiceover) Because of the UN embargo and a 20-year estrangement from Western oil technology, Ellis says Iraq is producing less than half of the oil it's capable of. He doesn't believe the US is interested in controlling Iraqi oil fields, even if it could. The United States, he says, now gets only about 12 percent of its oil from the Middle East and is only interested in insuring reliable supplies at stable prices. But if there were to be a regime change in Iraq, its oil would become a prize worth billions of dollars for nations and corporations on the winning side of any conflict.

Mr. ELLIS: If Saddam's out of power, there's a friendly Western government, there's going to be technology coming from all over the world into Iraq, which they desperately need, to rebuild their--their industry.

KROFT: And presumably, some US participation in that rebuilding and reconstruction.

Mr. ELLIS: No doubt. No doubt. There's plenty of room in Iraq for every--every nationality of--of oil company and oil service company and--and financial institution. There is an enormous amount of oil in Iraq that hasn't been discovered yet, a huge amount. And not only that exploration, but the rebuilding of what's already there is going to take more capital than any one country or certainly any small handful of companies can possibly muster. It's got to be a global effort.

(Footage of oil wells; refinery)

KROFT: (Voiceover) It may take a decade or more, but Ellis says all of that Iraqi oil is going to come on the market one way or another. It's just a question of who gets most of the business.

(Footage of Saddam Hussein)

KROFT: (Voiceover) If Saddam could somehow manage to satisfy the United States and the world that he has no weapons of mass destruction, sanctions would be lifted, and the biggest contracts would go to Russian and French oil companies who already have signed contingency agreements with Saddam. But if Saddam is deposed and a new government installed, it could be a whole new ballgame.

(Footage of Ahmed Chalabi and Kroft; oil tanker trucks)

KROFT: (Voiceover) Ahmed Chalabi, the head of the Iraqi National Congress, an umbrella organization of Iraqi opposition groups, says all oil contracts negotiated by Saddam's regime will be up for review.

Mr. AHMED CHALABI (Iraqi National Congress): Any contracts are either illegal or unfair, and no Iraqi government is bound by them once Saddam goes. This is our belief, and of course, it is up to the Iraqi government in the future to decide those things.

(Footage of Chalabi)

KROFT: (Voiceover) It's impossible to know whether Chalabi or the Iraqi National Congress would be part of a new Iraqi government, but Chalabi says he has already held informal discussions with international oil companies eager to explore opportunities.

KROFT: Can you tell me which oil companies?


KROFT: American oil companies?

Mr. CHALABI: Some.

(Footage of American gas stations; Chalabi)

KROFT: (Voiceover) The US government wouldn't allow American oil companies to deal with Saddam, and it's unlikely he would have signed contracts with them anyway. But Chalabi makes no secret of his willingness to let Americans share in the profits of a post-Saddam oil boom.

Mr. CHALABI: American companies did very well by abstaining from dealing with the illegal regime of Saddam, and American companies, we expect, will play an important and leading role in the future oil situation in Iraq.

KROFT: You would be willing to tear up the contracts, let's say, of the Russians or the French and give those deals to the United States?

Mr. CHALABI: It's up to the future Iraqi government to do that. But my view is American companies must be introduced and given a chance to--to bid and to negotiate for the same things that these people do. The future democratic government in Iraq will be grateful to the United States for helping the Iraqi people liberate themselves and getting rid of Saddam.

(Footage of French and Russian gas stations; Vladimir Putin and President Bush; James Woolsey)

KROFT: (Voiceover) Those existing contracts that French and Russian companies have to develop oil in Iraq are among the strongest bargaining chips the United States has in building and maintaining an international coalition to push Saddam Hussein out of power. And former CIA Director James Woolsey believes the United States should continue to use them in the weeks and months ahead.

Mr. JAMES WOOLSEY (Former CIA Director): I do think that our French and Russian friends, in the lead-up to whatever may happen in Iraq, really ought to hear two things. The nice thing is that the United States has no interest in dominating the future of Iraqi oil, but I think they should realize that if they create major obstacles to freeing Iraq from Saddam Hussein's dictatorship and there is a new government, and if that government should come to us some time, let's say late next year, and say, `You know, we're getting these calls from these Russian and French oil companies; should we call them back?' I think if I were in the government, I might say, `You know, I can't seem to find that phone number here anyplace.'

KROFT: Do you believe that the United States has said this to the Russians and to the French?

Mr. WOOLSEY: I don't know. I--I rather imagine we've said the carrot side of it. Whether we've said the--the--the stick side, I--I--I'm not sure.

(Footage of UN Security Council meeting; Putin and Bush)

KROFT: (Voiceover) There has been plenty of speculation, but little proof, that that's exactly what was said behind the scenes at the United Nations Security Council last month when the US persuaded both Russia and France to support a tough American-backed resolution ordering Saddam to disarm or face war. Not long afterwards, President Bush said Russia's economic interests in Iraq would be honored. This week, Saddam apparently retaliated, notifying three Russian oil companies that their contracts were canceled.

(Footage of Daniel Yergin)

KROFT: (Voiceover) Daniel Yergin is chairman of Cambridge Energy Associates. He's also a Pulitzer Prize-winning author and a leading expert on the history of the oil industry.

Mr. DANIEL YERGIN (Cambridge Energy Associates): It really doesn't matter whether it's an American company, a French company, a Russian company, a Chinese company producing that oil, as long as the oil is being produced with some kind of reliability and flowing in--into the world market.

(Footage of oil workers; pipelines)

KROFT: (Voiceover) Yergin believes Iraq's oil, post-Saddam, would be developed by lots of international oil companies working together in a consortium. The real issue, he says, is about oil security.

And is Saddam Hussein a threat to that security?

Mr. YERGIN: Well, Saddam Hussein has a unique place in the annals of--of oil, in that he has invaded two other major oil-producing countries. In 1980, he invaded Iran, in 1990, he invaded Kuwait, and it was pretty clear that his ambition was to dominate the oil supplies of the Persian Gulf.

Mr. WOOLSEY: When he had conquered Kuwait and was right on the border of Saudi Arabia in the summer of 1990, he was about 100 miles away from controlling over half of the world's oil. I think that's the only sense in which it's about oil.

KROFT: If Saddam Hussein is removed and a democratic government takes power in Iraq, isn't that a huge improvement in the strategic landscape for the United States as far as oil is concerned?

Mr. ELLIS: I think it is. I think it is. Given that the region is going to see several regime changes coming up in the next decade, having a--a partner would be a--a good counter to the--at least the--the--the possible downsides that we might see in other countries in the region.

KROFT: (Voiceover) Phillip Ellis is talking about Saudi Arabia. In a post-9/11 world, there are serious questions to be raised about the kingdom's political stability and uncertainties about the future of the Saudi royal family.

(Footage of oil refineries; OPEC meeting)

KROFT: (Voiceover) Right now Saudi Arabia pumps about 7.4 million barrels of crude oil every day, about 10 percent of the world's output. A fully operational oil industry in Iraq, under a new regime, with lots of Western investment, might be able to produce up to six million barrels a day within the next decade. That would weaken Saudi Arabia's dominant role in OPEC, put downward pressure on oil prices, and lessen US reliance on Saudi oil.

And you could make the argument that the United States seems to be distancing itself from Saudi Arabia and not counting on Saudi Arabia anymore.

Mr. ELLIS: I think we're spreading the risk, actually. It's important not to have all--all your eggs in--in one basket.


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FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.