Washington Post Pretends Not to Understand Oil Profits

That the United States invaded Iraq to control its oil, build bases from which to attack nearby countries, and enrich oil barrons and other corporate war and "reconstruction" profiteers is no secret. The Project for a New American Century was no secret. Yet the Washington Post, which pushed the WMD and al qaeda ties and "war on terra" lies down our throats, now claims that there's no way to know the reason for this occupation. And if it was for oil, the Post claims, it didn't work. Why not? Well, because we got less oil out of it. As if the point was to get each American family more oil. The point, of course, was to control Iraq and its oil, and to enrich oil executives. The occupation of Iraq has succeeded marvelously in both regards.

Below is the Washington Post's take. Submit questions to the reporter for a "chat" here.

A Crude Case for War?
By Steven Mufson
Sunday, March 16, 2008; B01

It's hard to miss the point of the "Blood for Oil" Web site. It features one
poster of an American flag with "Blood for oil?" in white block letters
where the stars should be and two dripping red handprints across the
stripes. Another shows a photo of President Bush with a thin black line on
his upper lip. "Got oil?" the headline asks wryly.

Five years after the United States invaded Iraq, plenty of people believe
that the war was waged chiefly to secure U.S. petroleum supplies and to make
Iraq safe -- and lucrative -- for the U.S. oil industry.

We may not know the real motivations behind the Iraq war for years, but it
remains difficult to distill oil from all the possibilities. That's because
our society and economy have been nursed on cheap oil, and the idea that oil
security is a right as well as a necessity has become part of our foreign
policy DNA, handed down from Franklin D. Roosevelt to Jimmy Carter to George
H.W. Bush. And the war and its untidy aftermath have, in fact, swelled the
coffers of the world's biggest oil companies.

But it hasn't happened in the way anyone might have imagined.

Instead of making Iraq an open economy fueled by a thriving oil sector, the
war has failed to boost the flow of oil from Iraq's giant well-mapped
reservoirs, which oil experts say could rival Saudi Arabia's and produce 6
million barrels a day, if not more. Thanks to insurgents' sabotage of
pipelines and pumping stations, and foreign companies' fears about safety
and contract risks in Iraq, the country is still struggling in vain to raise
oil output to its prewar levels of about 2.5 million barrels a day.

As it turns out, that has kept oil off the international market at just the
moment when the world desperately needs a cushion of supplies to keep prices
down. Demand from China is booming, and political strife has limited oil
production in Nigeria and Venezuela.

In the absence of Iraqi supplies, prices have soared three-and-a-half-fold
since the U.S. invasion on March 20, 2003. (Last week, they shattered all
previous records, even after adjusting for inflation.) The profits of the
five biggest Western oil companies have jumped from $40 billion to $121
billion over the same period. While the United States has rid itself of
Saddam Hussein and whatever threat he might have posed, oil revenues have
filled the treasuries of petro-autocrats in Iran, Venezuela and Russia,
emboldening those regimes and complicating U.S. diplomacy in new ways.

American consumers are paying for this turmoil at the pump. If the overthrow
of Hussein was supposed to be a silver bullet for the American consumer, it
turned out to be one that ricocheted and tore a hole through his wallet.

"If we went to war for oil, we did it as clumsily as anyone could do. And we
spent more on the war than we could ever conceivably have gotten out of
Iraq's oil fields even if we had particular control over them," says Anthony
Cordesman, an expert on U.S. strategy at the Center for Strategic and
International Studies who rejects the idea that the war was designed on
behalf of oil companies.

But that doesn't mean that oil had nothing to do with the invasion. Says
Cordesman: "To say that we would have taken the same steps against a
dictator in Africa or Burma as we took in Iraq is to ignore the strategic
realities that drove American behavior."

* * *

There is no single conspiracy theory about why the Bush administration
allegedly waged this "war for oil." Here are two.

Version one: Bush, former Texas oilman, and Vice President Cheney, former
chief executive of the contracting and oil-services firm Halliburton, wanted
to help their friends in the oil world. They sought to install a pro-Western
government that would invite the major oil companies back into Iraq. "Exxon
was in the kitchen with Dick Cheney when the Iraq war was being cooked up,"
says the Web site of a group called Consumers for Peace.

Version two: As laid out in an April 2003 article in Le Monde Diplomatique,
"The war against Saddam is about guaranteeing American hegemony rather than
about increasing the profits of Exxon." Yahya Sadowski, an associate
professor at the American University of Beirut, argues that "the
neo-conservative cabal" had a "grand plan" to ramp up Iraqi production,
"flood the world market with Iraqi oil" and drive the price down to $15 a
barrel. That would stimulate the U.S. economy, "finally destroy" OPEC, wreck
the economies of "rogue states" such as Iran and Venezuela, and "create more
opportunities for 'regime change.' "

There are historical roots for all this suspicion. After World War I, the
Western powers carved up oil-producing interests in the Middle East. In
Iraq, the French were given about a quarter of the national consortium, and
the U.S. government pressured its allies to turn over an equal share to a
handful of American companies.

Even now, the fate of Iraq's concessions is laden with politics. Russia's
Lukoil hopes to regain access to a giant field. China is seeking new fields.
The big U.S. firms are angling to return to fields they ran before sanctions
barred them during the 1990s. Smaller U.S., Turkish, European and Korean
firms are gambling on new exploration deals with the autonomous Kurdish
regional authority despite threats from Baghdad.

"One can imagine Iraq's oil fields as a pimple waiting to be pricked," says
Antonia Juhasz, author of "The Bush Agenda: Invading the World, One Economy
at a Time." She notes that the Bush administration put former oil executives
on the reconstruction team, hired the Virginia consulting firm BearingPoint
to write a framework for Iraq's oil industry, picked the Iraqis who took key
oil ministry posts and has pressured Iraq to adopt a petroleum law favorable
to international companies.

The petroleum law has become a rallying point for critics who say that the
war was about oil. It would allow long-term production-sharing agreements,
which Juhasz says are only used in 12 percent of the world "and only where
the country needs to entice the companies to come." Defenders of the law,
including exiled Iraqi oil experts, say that it provides for different types
of contracts; how generous they are will depend on how well they are
negotiated, but the law sets minimum conditions.

Greg Muttitt, another widely quoted war critic, who works for Platform
London, a group of British environmentalists, human rights campaigners,
artists and activists, says that an occupied country can't negotiate freely.
What ended up in the proposed petroleum law, he says, was "pretty close" to
what was in papers drafted by the State Department before the invasion.
"Perhaps not surprising," he adds, given lobbying by U.S. officials and the
role of former oil company executives in the reconstruction hierarchy.

That's the theory. The problem is: The petroleum law has not been adopted.

* * *

The idea that the Bush administration was in the tank for the oil industry
glosses over a story of conflicting views before the U.S. invasion and the
bungled execution of plans afterwards. There were two rival interagency
policy groups before the war, one led by the Pentagon and one by the State
Department. Some key differences were never resolved. Some Pentagon planners
wanted Iraq to maximize oil output, while State worried that a flood of
Iraqi oil could threaten Saudi interests and market share.

The notion of an oil war also conjures up an image of a swashbuckling,
string-pulling oil industry that no longer reflects a business that in many
ways has become cautious and fearful of political turmoil. Western oil
interests did encourage the overthrow of Iranian leader Mohammed Mossadegh
in the early 1950s and the war in Suez in 1956. But generally oil companies
are content to forge alliances of convenience with leaders as diverse as
Saudi kings, Angolan communists and Indonesia's late, long-time autocrat
Suharto as long as they're predictable. On those leaders' politics, human
rights record, ethnicity or religion, oil giants are agnostic.

"Companies don't like and won't make investments where there's uncertainty,
and war is the biggest uncertainty of all," said Rob McKee, the former
number two executive at ConocoPhillips and a former top U.S. official
overseeing Iraq's oil sector. "On the other hand, companies were hoping that
Iraq would open up, and as long as Saddam was there, Iraq couldn't. . . .
>From that point of view, maybe they were happy that there would be a
change."

Still, the big firms had trepidations. In a conversation with a consultant
shortly before the invasion, the chief executive of one of the five major
oil companies described what he would say if asked to invest billions of
dollars in Iraq after the war: Tell me about the contract system,
arbitration, physical security and social cohesion, then I'll decide.

Five years later, he still hasn't decided, and physical security is so
tenuous that the oil giants are still declining Iraqi invitations to send
their employees to inspect existing fields.

This wasn't what Bush administration planners had expected.

Leading administration officials expected a postwar Iraq to reclaim its
former position among oil exporters. "We are dealing with a country that can
really finance its own reconstruction and relatively soon," then-Deputy
Defense Secretary Paul Wolfowitz told Congress just after the invasion,
predicting that oil would generate $50 billion to $100 billion in revenues
within two to three years. Ironically, Iraq might approach that figure this
year because of high prices, not higher production.

Prewar planning settled who would oversee Iraq's oil sector. The Pentagon
picked Phil Carroll, a well-respected former top executive at Royal Dutch
Shell, who was succeeded by McKee. War critics point to such industry ties
as evidence of nefarious influence, but former administration members say
the choices were made on the basis of expertise. "If you wanted to get
someone to help run an oil industry, who would you choose?" asked one person
involved in selecting Carroll. "A broker on an exchange? An environmental
expert? Or the head of an oil company?"

* * *

The controversial details were all part of the larger strategic picture.
"When we first decided on the war, I don't remember oil playing an important
part," says Brent Scowcroft, national security adviser under the elder Bush
and a critic of the current president's decision to invade.

But that's because concern about oil supplies is part of the architecture of
U.S. foreign policy. Scowcroft notes that oil can't be disregarded because
Iraq and its neighbors sit on two-thirds of the world's oil reserves. But
oil needn't be mentioned either because it's self-evident. War critics might
call that the perfect conspiracy.

In a sense, though, all Americans are part of that conspiracy. We have built
a society that is profligate with its energy and relies on petroleum that
happens to be pooled under some unstable or unfriendly regimes. We have
frittered away energy resources with little regard for the strategic
consequences. And now it's hard and expensive to change our ways.

Zaab Sethna, a business consultant and former official of the Iraqi National
Congress, says that he attended many Pentagon and State Department meetings
and never heard postwar oil policy discussed.

But, he says, "Let's not kid ourselves. Iraq is sitting on a very large
portion of oil itself and is in a key region of the world. And that makes it
important for U.S. security interests. . . . The Iraqi opposition . . .
realized that Rwanda wouldn't be getting the attention of the superpower."

Until Rwanda discovers oil.

mufsons@washpost.com

Steven Mufson covers energy for The Post.