Iraq's "Petroleum Wars" Escalate

The line between politics and the oil industry in Iraq has become increasingly blurred. Despite warnings from the American government, oil giant Exxon Mobil has been signing contracts with certain Iraqi provinces, notably in the south. It has also been pressuring the Iraqi government, pushing for greater provincial autonomy. Exxon’s meddling in Iraqi political affairs is but the latest in a long list of historical interferences by oil companies in Middle Eastern politics, writes Tarek al-Dalimi.

al-monitor Hussain al-Shahristani, Iraq's oil minister speaks during a signing contract ceremony in Baghdad 17/05/2010. Photo by REUTERS/Saad Shalash.

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Jan 13, 2012

Since Iraq achieved its political independence in 1921, organic relationships have been established between the country’s “political geography” and the foreign relations [it maintains] with great powers. [These relationships] have led to direct and important consequences for this new existential experiment. Among the most important elements of these relationships is the fact that [Iraq’s] “administrations” formulate ironclad agendas that reconcile the need to provide political stability with the “legitimate” exploitation of its “oil” riches based on sound constitutional foundations. Yet these relationships suffer from an intriguing problem: There is an inherent conflict between these “great” nations. [This conflict] has manifested itself from the very beginning when the international borders were drawn between Iraq and its neighbors following the resounding collapse of the Ottoman Empire.

In this context, the current problem arising from the oil contracts signed last October between Exxon Mobil and the Kurdish Regional Government (KRG) does not solely revolve around the issue of legitimacy regarding who decides on the fate of oil resources. [The issue] goes beyond [the question of legitimacy]. [One must wonder how] Exxon was able to insist on signing the contracts despite the official American warnings for them not to do so. It seems that Exxon also signed two contracts in Southern Iraq - the first for oil exploration in the Great Qurna Field in partnership with Shell, and the second for a water injection project aimed at rehabilitating and modernizing the exploration and production of oil fields in the south. The main question revolves around why Exxon insisted on challenging Baghdad. The contracts encompass six regions, some of which lie outside the “borders” of the province and inside what are known as the “disputed territories” between the central government and the province. Renowned [Iraqi oil affairs] expert Ruba Husari affirms that one of the areas specified in the contracts is Bashiqa, which presumably lies outside the province and is part of the Ninawa-Mosul governorate.

A “provincial fever” is spreading through political circles. [It is being stirred up] by certain important political leaders, and has been accompanied by public threats from some Kurdish leaders or administrative figures in Southern Iraq in response to the failures of [Iraqi Prime Minister Nouri] Al-Maliki’s government on the administrative and oil fronts. [They also accuse Maliki of] failing to generate true national accord, especially following the “staged” American military withdrawal from the country. We find that the double noose of politics and oil is capable of stifling all attempts at dialogue. It also invalidates all efforts to amend parts of the constitution and effect real change in the country’s administration on all levels, particularly on those that are vital to Iraq’s future existence!

Exxon has a long history of [meddling in political and oil] related activities. [The company] is an offshoot of Standard Oil, which at the beginning of the century played a pivotal role in pressuring the American administration at the time to object to the return of Mosul to Iraq. When the League of Nations ruled that Mosul was indeed part of Iraq, the United States agreed only after Standard Oil was granted a 23.75 percent share of the [British owned] Iraq Petroleum Company, and after the international border with Turkey had been defined through a joint agreement with Britain in 1926. [Standard Oil] also played a suspicious role in the discussions that were held with the Iraqi government concerning Law 80 (which returned 99 percent of lands owned by the Iraq Petroleum Company to Iraq). [What’s more], one of the company’s senior officials, Nelson Rockefeller, took part in some unusual activities [in Iraq] prior to the 1963 coup. In 2007, the British newspaper The Guardian detailed Exxon’s financial support to important American strategic political institutions. These included the well known right wing Heritage Foundation, and the American Enterprise Institute - run by neoconservatives and an important player in backing the policy of “federal provinces,” encouraging [Iraqi] governorates to promote [this policy].

Most of Iraq’s political powers as well as some of the country’s decision making officials have revealed information that shows that Exxon, ignoring the recommendations of the American government, also refused to heed warnings made by the Iraqi Central Government. Certain [analysts] think that the company is waiting to see what future political developments will look like, as well as how the Iraqi and regional conflicts will unfold. Greg Muttitt, an expert in oil related affairs, compares the American role in this dilemma to that of a “watchdog” guarding a source of food - not because it wants it for itself, but simply to prevent anybody else from getting at it.

The Iraqi petroleum wars have taken on a new level of intensity and developed “political” dimensions. [Accusations are being hurled over] which party is sneaking in to establish direct relations with international oil companies, and who is trying to further expand on the ever-increasing number of proposals for the transformation of the “governorates’ into administratively and economically independent provinces. It is worth noting that the Diyala Governorate has joined this the federalist “club,” according to statements issued by a deputy belonging to the Kurdish Alliance affirming his party’s support [of greater provincial autonomy,] because it would guarantee that the oil rich Khanaqin region would be attached to the Kurdish province. But the prime minister, who distanced himself from these disruptive statements and continues to dodge the important issue of the long-awaited hydrocarbons law, hastened to declare that he would not nullify Exxon’s contracts in Southern Iraq’s West Qurna Field. [Instead], he is searching for a way to make Exxon’s other agreements come into line with the law. He disregarded the oil minister’s strong remarks which demanded that the Kurdish side show decisiveness not only in oil related matters, but also in its geopolitical stance as part of and with regards to Iraq. [The oil] minister hinted that it was necessary for international oil companies to put an end to their futile diatribes, and expressed hope that the American administration would clarify its stance on these companies’ meddling in the country’s affairs. But the tea leaves predict that these companies - Exxon among them - have heavily intertwined interests and will not be forced into adopting a one-dimensional stance on the naïve solutions proposed by the Iraqi authorities.

In this regard, we can rely on two sources in our discussion of the present oil/political situation and in our quest to determine its short term horizons. [These horizons] will at least include the period of recovery that Iraq will enjoy now that [US troop] withdrawal has ended the charade of military occupation and a political-administrative relationship with America is established. The first source is a study by [strategic] expert Anthony Cordesman, in which he writes: “the Obama administration must make efforts to ensure that … [no] new strong man emerge in Maliki or some other figure, and it should take action to make the United States a leading investor in Iraq's oil sector and the rest of its economy.”1

The second source is the report written on the well known Bloomberg website, which discusses the complicated relationship between Baghdad and Erbil [the capital of Iraqi Kurdistan] and [Erbil’s] independent oil policy, which some see as a precursor to [its] long sought-after political independence. The report offered a temporary solution which would take the form of a hydrocarbon law that would include provisions for two types of agreements between Iraq and the oil companies. The first type of agreement would be a technical services [contract] between the Baghdad government and the [oil] companies investing in southern Iraq’s oil fields. The second type would take the form of production-sharing agreements between the [oil] companies and the provincial authorities, such as the KRG in the north. But the report sidesteps the main question arising from the [ambiguities] contained within the potential hydrocarbon law. [This law has the potential] to become a dangerous stepping stone towards “partitioning” [the country], given the profound divide between the different components of the current government [on this issue].

The real problem actually lies elsewhere. The [Iraqi] Prime Minister angrily and briefly pointed this out in an interview with The Wall Street Journal prior to his controversial visit to Washington. He expressed his surprise at the newfound inexplicable “audacity” of the Turkish Government’s policy on Iraq and matters pertaining to Iraq. If we study some of the side notes of both sources, we discover that Turkey is obstructing any potential agreement between the central government and the [Kurdish] region, because Kurdish oil production contracts with Exxon are not feasible without first building huge pipelines to transport both “light and heavy crude” from the province’s oil fields to the Turkish port of Ceyhan. Turkey would fund the project, as it would benefit from the exploitation of the province’s gas and the necessity to transport the gas to [Ceyhan]. There is no need to dig deep into Prime Minister [Maliki’s] comments if we take into account Turkey’s strategic aspirations of becoming an “energy bridge” between Asia, the Gulf and Europe - by making use of Iraq.


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