Joe Hendren

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Sunday, October 17, 2004

Iraq opens oil reserves to Western companies

Just read a report on the NZ Herald Online 'Iraq opens oil reserves to Western companies'.

Opening up Iraq's natural resources to widespread foreign investment completes the neo-liberal agenda of the US and its former viceroy Paul Bremer. In September 2003 Bremer imposed Order 39, a 'law' that rescinded nearly all of Iraq's legal and constitutional restrictions on foreign investment and banking. This law allowed 100% foreign investment in Iraqi companies (and state assets) and 100% repatriation of profits to their offshore owners. The only sector to be excluded from this carte blanche neo-liberalism was 'natural resources' (i.e. oil). This law is clearly illegal under the Geneva and Hague conventions, as Iraq was under under military occupation when Bremer imposed the changes, and the provisions of Order 39 clearly breached Iraq's constitution of 1970, a constitution that is still valid under international law.

Oil was exempted from Order 39 because it was thought that domestic political opinion would not stand for it. That’s not to say these changes were in any way democratic, as Order 39 was imposed before elections. The US clearly thinks that Iraqis will be happier with US part ownership of oil infrastructure, if the policy is advocated by an Iraqi face. This is where the (unelected) interim government comes in.
In an interview in a Shell newsletter that is distributed to its Middle Eastern clients, [Oil Minister] Mr Ghadban added that Iraq would open its doors to the oil giants early next year.

"We would like to open a dialogue with international oil companies [IOCs]. We are now formulating our policies ... and we think there is room for IOCs in Iraq - in particular in the upstream because we need new investment."

"We believe that there is at least 2.5 to 3 million barrels per day of new oil production capacity that could, in the long term, be added to our production levels."

The 'problem' for such 'investment' is the 1970 constitution that provides that "natural resources" and the "basic means of production" are owned by "the People". Not even Bremer attempted to override the clear constitutional prohibition to foreign ownership of the oil. It would not surprise me if the latest comments by the 'Iraqi' Oil minister are part of a strategy to move public opinion in favour of privatisation. Expect the interim unelected 'government' to stitch up a deal with BP or Shell and then claim 'there is no alternative' to Iraqis accepting full or part US/UK profiteering from the oil. Then expect such clauses to be missing when a replacement constitution for Iraq is drawn up next year.

Luckily, global justice activists have time to fight this issue, as the western oil companies are hesitant about investing in Iraq while the violence continues.

The Iraqi Oil Ministry was forced to cancel a conference in April when most companies pulled out after a surge in violence in the country.
Today, neither BP nor Shell has any staff working there. Shell has one consultant in Iraq and it is monitoring developments from its Dubai office. A spokeswoman refused to say if it was planning to send employees to the country. But she added: "Iraq does offer opportunities. We are following developments and working with the Iraqi Minister of Oil.". A BP spokesman said that the company would only consider opportunities in Iraq when "there is a proper regime" in the country.

While it would be nice to think that BP regards the current Iraqi administration as illegitimate, it is more likely they are worried about the prospect of their 'investments' being renationalised by a future representative Iraqi government, on the grounds that privatisation under effective occupation is illegal (and they would be right!)

Also expect US relations with Saudi Arabia to cool further as more barrels of oil roll out of Iraq. Saudi Arabia was one of the most significant beneficiaries of the 1991 Gulf War, as it was able to increase its production as Iraq's oil infrastructure was bombed. Saudi Arabia picked up the slack, and Iraq will soon want and be able to take the 'slack' back.

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