17. Iraq Invasion Promotes OPEC Agenda

Sources:

Harper’s in coordination with BBC Television Newsnight, October 24, 2005
Title: “OPEC and the economic conquest of Iraq”
Author: Greg Palast

The Guardian March 20, 2006
“ Bush Didn’t Bungle Iraq, You Fools: The Mission Was Indeed Accomplished”
Author: Greg Palast

Faculty Evaluator: David McCuan
Student Researcher: Isaac Dolido

According to a report from journalist, Greg Palast, the U.S. invasion of Iraq was indeed about the oil. However, it wasn’t to destroy OPEC, as claimed by neoconservatives in the administration, but to take part in it.

The U.S. strategic occupation of Iraq has been an effective means of acquiring access to the Organization of Petroleum Exporting Countries (OPEC). As long as the interim government adheres to the production caps set by the organization, the U.S. will ensure profits to the international oil companies (IOCs), the OPEC cartel, and Russia.

With the prolonged insurgency following the invasion, along with internal corruption and pipeline destruction, hard line neoconservative plans for a completely privatized Iraq were dashed. According to some administration insiders, the idea of a laissez-faire, free-market reconstruction of Iraq was never a serious consideration. One oil industry consultant to Iraq told Palast he was amused by “the obsession of neoconservative writers on ways to undermine OPEC.”

In December 2003, says Palast, the State Department drafted a 323-page plan entitled “Options for Developing a Long Term Sustainable Iraqi Oil Industry.” This plan directs the Iraqis to maintain an oil quota system that will enhance its relationship with OPEC. It describes several possible state-owned options that range from the Saudi Aramco model (in which the government owns the whole operation) to the Azerbaijan model (in which the system is almost entirely operated by the International Oil Companies).

Implementation of the plan was guided by a handful of oil industry consultants, promoting an OPEC-friendly policy but preferring the Azerbaijan model to the “self-financing” system of the Saudi Aramco, as it grants operation and control to the foreign oil companies (the 2003 report warns Iraqis against cutting into IOC profits). Once the contracts are granted, these companies then manage, fund, and equip crude extraction in exchange for a percentage of the sales. Given the way in which the interests of OPEC and those of the IOCs are so closely aligned, it is certainly understandable why smashing OPEC’s oil cartel might not appeal to certain elements of the Bush administration.

According to the drafters and promoters of the plan, dismantling OPEC would be a catastrophe. The last thing they want is the privatization of Iraq’s oil fields and the specter of competition maximizing production. Pumping more oil per day than the OPEC regulated quota of almost 4 million, would quickly bring down Iraq’s economy and compromise the U.S. position in the global market.

Since the invasion of Iraq in 2003, profits have shot up for oil companies. In 2004, the major U.S. oil companies posted record or near record profits. In 2005 profits for the five largest oil companies increased to $113 billion. In February 2006, ConocoPhillips reported a doubling of its quarterly profits from the previous year, which itself had been a company record. Shell posted a record breaking $4.48 billion in fourth-quarter earnings—and in 2005, ExxonMobil reported the largest one-year operating profit of any corporation in U.S. history.