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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. In his recent memoir, former Federal Reserve chairman Alan Greenspan said: "I am saddened that it is politically inconvenient to acknowledge what everyone knows: The Iraq war is largely about oil."

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 an adviser 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 we'll decide.

Five years later, they still haven'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.

Steven Mufson covers energy for The Post. 

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