FPIF Talking Points:

War in Iraq: The Oil Factor

By Miriam Pemberton
September 2002

0209oil.pdf [printer-friendly version]

How much is the Bush administration’s push for war with Iraq motivated by its desire to gain control of Iraq’s oil fields? “Regime change” to a pro-U.S. government would permit the privatization of Iraq’s state-controlled oil resources—and a bonanza for U.S. oil companies. As former South African president Nelson Mandela said in a recent interview in Newsweek, “It is clearly a decision that is motivated by George W. Bush’s desire to please the arms and oil industries in the United States of America.”

• Iraq possesses the world’s second-largest proven oil reserve, estimated at 112.5 billion barrels, or 11% of the world’s total. In addition, many experts believe that Iraq has massive untapped reserves, putting it nearly on par with Saudi Arabia. Iraq’s oil is also high quality and very inexpensive to produce, making it an extraordinarily profitable source. According to one industry expert, “There is not an oil company in the world that doesn’t have its eye on Iraq.”
• The U.S. market makes up a quarter of the world’s demand for oil. In recent years, the U.S. has imported over half of what it consumes. According to the May 2001 Bush administration’s national energy policy paper (known as the Cheney report), by 2020 oil imports will account for two-thirds of U.S. consumption.
• Iraq is the 6th major source of U.S. oil imports, supplying between a half million and a million barrels a day. However, currently there’s “little trace of big U.S. oil companies, which are barred from Iraq by UN sanctions and U.S. laws,” according to the Wall Street Journal (September 19).
• All five permanent members of the UN Security Council have international oil companies with major stakes in regime change in Iraq. According to the Washington Post (Sept. 15), the U.S. is using the promise of access to Iraq’s oil as a bargaining chip in its negotiations with Security Council members. “It’s pretty straightforward,” former CIA director James Woolsey told the Post. “If they [Security Council members] are of assistance….we’ll do the best we can to ensure that the new [Iraqi] government and American companies work closely with them.”
• Five companies dominate the world oil market. Four are based in the U.S. and Britain: Exxon Mobil, Royal Dutch-Shell (often described as a British-Dutch company), British Petroleum-Amoco, and Chevron-Texaco. (The fifth, TotalFinaElf, is sometimes described as a French-Italian company.) The U.S. and Britain see regaining control over the Iraqi market, which they lost when the Iraqi government nationalized its oil industry in 1972, as key to maintaining their dominance over this critical economic resource.
• Representatives of major U.S. oil companies have been meeting with Iraqi opposition leaders. Ahmed Chalabi, leader of the Iraqi National Congress (INC), the U.S.-funded umbrella opposition organization, told the Washington Post that “American companies will have a big shot at Iraqi oil.”
• The Bush administration has close ties to the oil industry: both President Bush and Vice President Cheney worked in the oil business. Forty-one senior Bush administration officials were former oil companies executives or have substantial stock holdings or other financial ties to the industry.
• Governments including Russia, China, and France have been negotiating with Iraq over plans to develop its oil fields once sanctions are lifted. A resolution of the current crisis through inspections, without a regime change, would allow these negotiations to go forward. This could be contrary to the interests of U.S. oil companies. The Bush administration, in other words, with its extremely close ties to the U.S. oil industry, has an interest in regime change that is not related to concerns over Iraq’s development of weapons of mass destruction.
• In congressional testimony in 1999, General Anthony Zinni, then commander of the U.S. Central Command which includes the Middle East and Central Asia, stated in congressional testimony (April 13, 1999) that the Gulf region, with its huge oil reserves, is a “vital interest” of “long standing” for the U.S., and that the U.S. “must have free access to the region’s resources.”
• War in Iraq will certainly affect the oil industry in various ways—prices, levels of production, and balance of power among both oil companies and oil-producing countries. According to the Wall Street Journal, “Iraq’s vast oil potential means wide ripple effects of any shakeup there.” But exactly how the ripples flow depends on the length and veracity of the war and the level of on-going instability in Iraq and the wider Middle East. Saudi Arabia may well become less important and Iran more important if Saddam Hussein is removed, the Journal analysis concludes.