Global Policy Forum

As Decision-Time Approaches, the USA Pulls Levers on Iraqi Oil Policy

By Greg Muttitt

"The oil belongs to the Iraqi people. It's their asset," declared George W. Bush in a press conference on the White House lawn in June. He had just returned from his surprise visit to Baghdad, in which oil had been one of the main subjects of discussion. "We talked about how to advise the government to best use that money for the benefit of the people", he clarified. Since the Iraqi government was formed in May, the US government has scaled up such "advice" even while senior American and British officials warn of potential civil war in the country.

A new framework to restructure Iraq's oil industry is under preparation, and has been presented to the US government and multinational oil companies before even being seen by the Iraqi parliament. Meanwhile, Iraqi civil society and public are being excluded altogether. Iraq is seen by many as the frontline battle in a global push for multinational companies to retake control of oil production, much of which they lost to nation states in the 1970s.

A month after President Bush's trip, he and the other G8 leaders agreed in their statement on energy security' to "work to reduce barriers to energy investment and trade", so that "companies from energy producing and consuming countries can invest in and acquire upstream and downstream assets". Whilst Mr. Bush was shaping the global agenda in St. Petersburg, his Energy Secretary Samuel Bodman was on his way to the frontline. In Baghdad, Secretary Bodman insisted that the Iraqi government must "pass a hydrocarbon law under which foreign companies can invest."

After nearly four years of concerted oil "advice" to Iraq by the USA, Oil Minister Husayn al-Shahristani had already been convinced. Following his appointment in May, Dr. Shahristani announced that one of his top priorities would be to pass such a law through parliament by the end of 2006 - a timescale set in Iraq's agreement with the International Monetary Fund last December. The agreement also stipulated that IMF officials will review and comment on a draft in September.

Since the start of the occupation, former executives of major oil companies have served as senior oil advisers, in daily contact with the Iraqi Oil Ministry. Initially, they were based in the Coalition Provisional Authority, and after June 2004, in the Iraq Reconstruction Management- Office, part of the US Embassy. Even six months before the invasion, US planning for Iraq's oil had begun, with the State Department's Future of Iraq Project, a grouping of American officials and Iraqi exiles. In recent months, the Embassy has increased its focus on the oil law. In February 2006, an oil adviser was hired from the privatisation specialists BearingPoint to provide "legal and regulatory advice in drafting the framework of petroleum and other energy-related legislation, including foreign investment". Commenting after his visit, Secretary Bodman approved of the way things were going. "We got every indication that they were willing and also felt a necessity to open the sector," he said. But not content with reviewing the draft law himself while in Baghdad, Mr. Bodman arranged for Dr. Shahristani to meet with nine major oil companies - including Shell, BP, ExxonMobil, ChevronTexaco and ConocoPhillips - for them to comment on the draft as well, during the Minister's trip to Washington DC the following week.

Meanwhile, the Iraqi parliament will be shown the oil law only after the comments and amendments by the US government, oil companies and IMF. Even that is more than Iraqi civil society will get. According to Hassan Juma'a, leader of Iraq's oilworkers' trade union, "What was not taken into consideration is the fact that there are [Iraqis] qualified scientifically and technically... Were these experts in oil policies asked to participate in drawing up the oil law?"

In a telling interview for Iraqi radio by the Jordan-based Media in Cooperation and Transition (MICT), oil ministry spokesman Asim Jihad was asked whether Iraqi civil society would be consulted before the parliamentary vote on the oil law. "We believe that most members of parliament are also active members in civil society institutions", he replied. So civil society could be considered consulted. Would there be a public debate? No. "Everything depends on the Iraqi parliament. Surely, the Iraqi parliament will look out for the interests of Iraq and its people". But what about external bodies such as the IMF and BearingPoint? This time the answer was different: "We will benefit from the experts' experience."

For most Iraqis, oil is considered a national asset, which should remain in the public sector. That is why the Iraqi people are not being asked what is in their interests.