Thursday, March 04, 2010

Oil’s not the only spoil of Iraq

The US may have lost out on Iraq's oil bids, but there's plenty more to go round

Oil tankers anchored at Basra harbor aren’t likely to be flying the stars and stripes any time soon

Commentary, Executive magazine

The recent round of oil tenders in Iraq did not turn up trumps for American oil companies, with only ExxonMobil and Occidental Petroleum winning contracts. This has been viewed as a refutation of critics of the United States-led invasion who believed it was a “war for oil.” On the other hand, it has also caused some Americans to feel they’ve been denied their rightful spoils of war.

“They’re opening [the oil fields] up to other companies all over the world,” said US oil tycoon T. Boone Pickens at the Congressional Natural Gas Caucus last year. “We’re entitled to it. Heck, we even lost 5,000 of our people, 65,000 injured and a trillion [or] $500 billion… We leave there with the Chinese getting the oil.”

However, both Pickens and the peaceniks are being overly simplistic, overlooking America’s modus operandi for invasion and conquest and the fact that many American businesses have been war profiteers.

Historically, US military adventurism has been less about securing contracts for the boys back home than spreading the ideology of American-style capitalism, with corresponding knock-on benefits for US businesses and multinational corporations.

America’s involvement in Germany and Japan following the end of Word War II demonstrated its interest in the stability of the global economic order, even if it meant heightened competition down the road. In Iraq, the war has cost US taxpayers an estimated $1 trillion, but has earned billions for the military industrial complex, with companies such as Lockheed Martin — in the red prior to the invasion — now firmly back in the black.

Private military contractors (PMCs) have also cashed in. The US Department of Defense in Iraq allocated some $76 billion from 2003 to 2007 to PMCs. In 2007 and the first half of 2008, contracts for the 113,000 PMCs in the country were worth approximately $25 billion, according to a US Congressional Research Service report. Then there are the reconstruction contracts, where nearly all of the large projects awarded since 2003 have been to US companies. For instance, Halliburton and its former subsidiary KBR — once run by former Vice President Dick Cheney — have won contracts of over $24 billion since the war started.

And while US oil companies may not be winning many tenders for Iraqi oil fields, US firms keep piling into Iraq to rebuild the country’s dilapidated infrastructure, repair thousands of kilometers of oil pipelines and build new oil terminals — Iraq needs some $300 billion in infrastructure investment and an estimated $50 billion in the oil and gas sectors. Courting such contracts are Houston-based oil services companies Halliburton, Baker Hughes, Weatherford International and Schlumberger Limited. Meanwhile, firms KBR, Bechtel, Parsons, Fluor and Foster Wheeler are after construction and engineering projects.

“I think you see everybody trying to establish a base there, and we’re no exception,” said David J. Lesar,

Halliburton’s chief executive, in October 2009. “Clearly, [there is] a great future there and one we will participate in — in a big way.” So, while the major US oil companies are not benefiting, associated industries are. Some analysts suggest the oil firms are sitting it out until they can buy into Iraqi and other national oil companies, and become involved in the country at a later date. Indeed, Russia’s second largest oil producer, Lukoil, which won a bid to develop Iraq’s giant West Qurna Phase Two oil field in December, is 20 percent owned by America’s third largest oil company, ConocoPhillips.

One of the war’s chief proponents also appears to be profiting from the post-invasion environment. Former British Prime Minister Tony Blair has come under criticism of late for receiving $1.55 million per year to be an international advisor for the United Arab Emirates’ investment firm Mubadala, which derives 80 percent of its revenues from the energy sector and is actively bidding to be part of a consortium to develop the Zubair oilfield in southern Iraq.

So, while the war in Iraq may not have been about weapons of mass destruction and seemingly not oil per se, the invasion has been big business. And, lest it be overlooked, it will be Iraqi oil revenues that will pay for the reconstruction tenders to contractors, be they from Houston or Beijing.