Iraq’s Oil Law: Robbery As Usual
Woody Guthrie had a line: “Some men’ll rob you with a six-gun, and some with a fountain pen.” The Cheney Administration has realized that it’s not an either-or proposition. “We can do both!” they said.
About 20% of Iraq’s huge oil reserves are currently producing. The other four fifths are in known and potential reserves. (The boffins seem to be rather confident about the potential reserves, because I haven’t seen much dispute about these proportions.)
The oil law says that the revenues from currently producing fields are to be split equally among various Iraqi groups. This is the part that gets the publicity. It’s very nice. It also refers to a mere fifth of the country’s oil wealth.
The other four fifths of Iraq’s oil will be “opened” to investment by foreign oil companies. This is supposedly necessary because of all the cash needed to bring the fields into production.
Funny. I’d noticed that about the oil industry too. It’s so hard to make any money in it that investors with bottomless pockets are essential. They can wait years to turn a profit. There’d be no way for the Iraqis to sell their own oil and make enough money to build infrastructure.
Apparently these investments are structured so that the company keeps all the profits until its costs have been recovered. Judging by the spirit of the thing, the company probably decides when that point has been reached. After that, the company keeps some portion of the profits, such as more than half, for the life of the contract (which typically runs for decades). I’d bet the terms Iraq gives its (fallen) angel investors will be favorable even by industry standards.
I keep thinking the Cheney Administration has sunk so low they’ve hit bottom. And then they keep proving to me that I lack imagination.
(The details of the new oil law above are from Richard Behan in Counterpunch. I haven’t tried to find original sources, since they’re still hidden in specialist publications where the foot of the average schmoe like me hath not trod. This law is currently somewhere in the process of passage. The cabinet has approved a draft, and it is now waiting for parliament. That may be a long wait, since much of Iraq’s parliament spends its time in relative safety outside of Iraq.
Previous posts suspecting this very outcome here and here.)
Technorati tags: Iraq, oil, oil industry, politics, current affairs
[…] It’s becoming very clear that Iraq’s Oil Law is a give-away to Big Anglo Oil. No surprise there. What’s getting less attention is the so-called benchmarks being discussed in the US Congress. These are supposed to be the end of the free ride Congress has been giving Bush. They’re supposed to show that Iraq is actually accomplishing something with all that US aid that the Americans are firmly convinced they are giving Iraq. […]
Acid Test » Iraq must prove viability by being nonviable on May 7th, 2007 at 12:37
[…] The biggest bone of contention is, of course, who gets the money from the oil. Much noise is made about the need to pass the new Oil Law that divides the revenues from oil fairly among all Iraqis. Less noise is made about the fact that the “fair” part applies to the 20% of known reserves which are currently in production. The other 80% would be “opened to foreign investment.” The Iraqis rightly read this as “handed to Anglo oil companies.” Even some in the puppet government have balked at enabling such an obvious rip-off. […]
Acid Test » The US Obligation to Iraq on August 28th, 2007 at 11:54