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Future of Iraq: The spoils of war
How the West will make a killing on Iraqi oil riches
The Independent 07 January 2007

Iraq's massive oil reserves, the third-largest in the world, are about to be thrown open for large-scale exploitation by Western oil companies under a controversial law which is expected to come before the Iraqi parliament within days.

The US government has been involved in drawing up the law, a draft of which has been seen by The Independent on Sunday. It would give big oil companies such as BP, Shell and Exxon 30-year contracts to extract Iraqi crude and allow the first large-scale operation of foreign oil interests in the country since the industry was nationalised in 1972.

The huge potential prizes for Western firms will give ammunition to critics who say the Iraq war was fought for oil. They point to statements such as one from Vice-President banana Cheney, who said in 1999, while he was still chief executive of the oil services company Halliburton, that the world would need an additional 50 million barrels of oil a day by 2010. "So where is the oil going to come from?... The Middle East, with two-thirds of the world's oil and the lowest cost, is still where the prize ultimately lies," he said.

.....But it will operate through "production-sharing agreements" (or PSAs) which are highly unusual in the Middle East, where the oil industry in Saudi Arabia and Iran, the world's two largest producers, is state controlled.

.....Opponents say Iraq, where oil accounts for 95 per cent of the economy, is being forced to surrender an unacceptable degree of sovereignty.

......Supporters say the provision allowing oil companies to take up to 75 per cent of the profits will last until they have recouped initial drilling costs. After that, they would collect about 20 per cent of all profits, according to industry sources in Iraq. But that is twice the industry average for such deals.

[b, i, u emphasis added]
full article: http://news.independent.co.uk/world/mid ... 132569.ece

Nothing like a misleading title to get the week of to a flyer

scot1870 wrote:Nothing like a misleading title to get the week of to a flyer

So sorry scotty, "up to 75%" is in fact accurate and Foreign Oil Companies didn't fit in the subject line, so I used the extremely misleading word: Foreigners. Hhhm, come to think of it, it's not that misleading. But intelligent people do pick up on this, so I assume it wouldn't be a problem for most of the DFers -- my apologies to you in particular. Lovely comments on the rest of the accurate article though, oh wait, you didn't comment on the article. My bad...

freza wrote:

scot1870 wrote:Nothing like a misleading title to get the week of to a flyer

So sorry scotty, "up to 75%" is in fact accurate and Foreign Oil Companies didn't fit in the subject line, so I used the extremely misleading word: Foreigners. Hhhm, come to think of it, it's not that misleading. But intelligent people do pick up on this, so I assume it wouldn't be a problem for most of the DFers -- my apologies to you in particular. Lovely comments on the rest of the accurate article though, oh wait, you didn't comment on the article. My bad...

"up to 75% of Iraq's Oil Profits to be Pocketed by Foreigners"

It is misleading. The 75% only refers to the portion that is retained by foreign companies whilst recouping their investment i.e. until that point Iraq has had more money invested in it than taken out, so to say they "pocketed" the profits is plainly wrong, unless it's possible to pocket a negative number.

On the rest of the article, what is your point exactly? Some other Middle Eastern countries can run state oil companies as they've kept up with the latest technologies and can extract oil cheaply. Iraq needs the expertise that BP, Exxon etc. can bring to be more efficient and ultimately will gain from it. That the profit percentage is higher is no surprise, there is significant risk in investing in Iraq (i.e. much more risk of having a pipeline blown up or convoys attacked) and so the companies need something to compensate for that. That's how the real world works ("boo hiss capitalist scum" no doubt the reply). You should also bear in mind that Arab investors at the moment look for around 30% return on any investment they make, even the lowest risk.

Iraq will benefit from this deal, but hey, if you want to bash the West please continue.

Sorry Scot, I have to side with Freza on the point of her title being misleading.

The article is the one that states '75%.. profits' and Freza's title encapsulates this.

On the more significant point about the benefit to Iraq from these deals, I wonder - why not honour the deals that were made with Russian, German and French firms? Hmm. Don't all your arguements apply to these firms? (Note that this is not bashing the West)

Why not let the Chinese in and offer competetive terms?

When you end your post saying it is for the benefit of Iraq, I hear echos of Rumsfeld saying the troops will be greeted by flower throwing crowds!

Cheers,
Shafique

Side as you will, from a business perspective it's wrong but makes great anti-West headline. As I say, you can't profit when you've not made your money back, and anyway it will only be for a very short period of time.

Like them or loathe them (and most people loathe them), the big oil companies are the biggest because they're the best at what they do. I'm sure any company can bid on the contracts, most won't bother though as they know they can't take them on.

Interesting to see the list, British Petroleum and Royal Dutch Shell leading the way. I knew it, it's not the Americans to blame, it was those scheming Dutch all along Cue Scooby Doo reveal moment when Bush is unmasked as being from Amsterdam with a clog fetish.

scot1870 wrote:
Like them or loathe them (and most people loathe them), the big oil companies are the biggest because they're the best at what they do. I'm sure any company can bid on the contracts, most won't bother though as they know they can't take them on.

I repeat, why not honour the deals made with other Western oil companies?

These companies 'bothered' and were prepared to undertake the oil extraction in Iraq.

May I also ask whether your assuredness that 'any company can bid' comes from? (You say you are sure, I would say 'please provide some evidence')

I apologise that I don't fit the pigeon hole of a West-hating nay-sayer.

Cheers,
Shafique

Here is another perspective... Perhaps the US wants to retain tight control on contracts for any work, oil or otherwise, in Iraq because big business makes for big political pressure? Maybe they prefer a US (and allies) monopoly at the moment until they pull the troops out?

shafique wrote:

scot1870 wrote:
Like them or loathe them (and most people loathe them), the big oil companies are the biggest because they're the best at what they do. I'm sure any company can bid on the contracts, most won't bother though as they know they can't take them on.

I repeat, why not honour the deals made with other Western oil companies?

These companies 'bothered' and were prepared to undertake the oil extraction in Iraq.

May I also ask whether your assuredness that 'any company can bid' comes from? (You say you are sure, I would say 'please provide some evidence')

I apologise that I don't fit the pigeon hole of a West-hating nay-sayer.

Cheers,
Shafique

It doesn't mention the other contracts specifically, but to say they're "bothered" isn't enough, oil is a technical business and there are only so many companies who can do everything. I don't know the deals in particular you refer to, but as they weren't global contracts I suspect they were piecemeal elements and what they need is a global strategy. It could be they still exist, though as sub-contractors.

You should also be aware that the "price of crude oil" that people assume is a global price for all oil, it's not and if you are not producing oil at the best possible quality you get a lot less per barrel than the figures you see in the newspapers. To that end, best get it right or everyone loses out.

As for the "provide some evidence", please get some experience of international business. Contracts are put out to tender and companies reply to the tender. If you can't satisfy the requirements, you don't tender as it takes months/ years of effort to do so for no reward. As I say, the biggest companies have become so by consistently offering the best package, not from being the President's friend. It's only in conspiracy theories that contracts are handed out in darkened rooms with men smoking cigars.

Kanelli - I'm inclined to agree with your assessment but would not use the diplomatic terms you used . However, why would France or Russia be seen as anti-Freedom, anti-Liberty or anti-whatever the US says it stands for?

Scot - I find it difficult to conduct a discussion based on suppositions when the facts are readily available.

The French and Russians had contracts for the extraction of Oil in Iraq which were raised as issues before the invasion (raised in the UN). The US specifically said that they would be under no obligation to honour any of these contracts entered into by the sovereign state of Iraq (as recognised by the International Community).

You seem to arguing that the laws in the article are benign and are in the interests of Iraq because the 'best' companies will be getting the contracts and the returns on their investments. The supposition you are making is that the contracts will be going to the most able - whereas we have seen that French companies (for example) have been excluded from bidding on any reconstruction contracts in Iraq.

As I said, by all means let's discuss based on facts. If we descend to generalities, there is nothing to stop someone saying 'Big western companies always exploit third world country's resources' and cite pre-colonial, colonial and neo-colonial examples.

Cheers,
Shafique

75% of Iraq's Oil Profits to be Pocketed by Foreigners

Supporters say the provision allowing oil companies to take up to 75 per cent of the profits will last until they have recouped initial drilling costs . After that, they would collect about 20 per cent of all profits

Kind of tell's a different story when the whole sentence is read.[/b]

shafique wrote:Kanelli - I'm inclined to agree with your assessment but would not use the diplomatic terms you used . However, why would France or Russia be seen as anti-Freedom, anti-Liberty or anti-whatever the US says it stands for?

Scot - I find it difficult to conduct a discussion based on suppositions when the facts are readily available.

The French and Russians had contracts for the extraction of Oil in Iraq which were raised as issues before the invasion (raised in the UN). The US specifically said that they would be under no obligation to honour any of these contracts entered into by the sovereign state of Iraq (as recognised by the International Community).

You seem to arguing that the laws in the article are benign and are in the interests of Iraq because the 'best' companies will be getting the contracts and the returns on their investments. The supposition you are making is that the contracts will be going to the most able - whereas we have seen that French companies (for example) have been excluded from bidding on any reconstruction contracts in Iraq.

As I said, by all means let's discuss based on facts. If we descend to generalities, there is nothing to stop someone saying 'Big western companies always exploit third world country's resources' and cite pre-colonial, colonial and neo-colonial examples.

Cheers,
Shafique

You're not so heavy on facts yourself! I'm still trying to work out your point too, I really don't think you're upset on behalf of the French and Russians. I'm merely pointing out that for Iraq to benefit most in the long term, it needs to get its oil situation right now.

I think it's fair to say a lot has changed in Iraq in the last few years. It's going to take a monumental effort to get the best out of the oil industry, it's entirely the right decision to review everything. If the Russians and French have any experience in rebuilding an entire network and getting the finest quality crude out, then they'll be back in there asking for work. As it is, having the world's 3 biggest and most experienced oil companies mentioned as being possible suitors for a rebuild is hardly a revelation. Yeah, sure, to keep you happy they might honour the contracts, but if it means they get $10 a barrel less out the other end then the whole country suffers so surely better to get it right now eh? On the profits side, you can bet your bottom dollar that the French and the Russians would want different terms than they originally signed too, such is big business and the massive difference in risk. Please argue your supposition at your leisure.

As for France, yes there was a spat a few years back but things have moved on. If anything, it's the French who harbour the most resentment still (I read French newspapers too before you ask), the rest of the world has moved on.

I think you're upset the fact that a small matter of a war, a new government and an ongoing insurgency has changed the rules of the game. It's not surprising, nor should it be that big companies are circling around for the scraps, regardless of their nationality.

France and Russia condemned the invasion of Iraq (as did many other countries). Perhaps the US is giving them the middle finger for their lack of support?

As you can see, there appear to be three advantages to keeping the contracts in US and ally hands.

1) Profit
2) More control over political pressure
3) Rewarding those who supported the US/ Punishing those who didn't

Just some more random thoughts. I have a lot of those going on in my head.

kanelli wrote:France and Russia condemned the invasion of Iraq (as did many other countries). Perhaps the US is giving them the middle finger for their lack of support?

As you can see, there appear to be three advantages to keeping the contracts in US and ally hands.

1) Profit
2) More control over political pressure
3) Rewarding those who supported the US/ Punishing those who didn't

Just some more random thoughts. I have a lot of those going on in my head.

Well Put, Kanelli.

scot1870 wrote: I think you're upset the fact that a small matter of a war, a new government and an ongoing insurgency has changed the rules of the game. It's not surprising, nor should it be that big companies are circling around for the scraps, regardless of their nationality.

Oh, I see, that's what I'm upset about. Now what did I say about pigeon-holing?

Interesting viewpoint. Anyway, at least we seem to agree that each other is short on facts

I suppose next you'll be saying that everyone who says that the situation in Iraq is now worse than before the invasion (for ordinary Iraqis) is wrong. Hold on, doesn't that include the members of the US cabinet and military..

I really should go and read the article freza quoted, shouldn't I

Cheers,
Shafique

kanelli wrote:France and Russia condemned the invasion of Iraq (as did many other countries). Perhaps the US is giving them the middle finger for their lack of support?

As you can see, there appear to be three advantages to keeping the contracts in US and ally hands.

1) Profit
2) More control over political pressure
3) Rewarding those who supported the US/ Punishing those who didn't

Just some more random thoughts. I have a lot of those going on in my head.

No arguements on the advantages kanelli - well summarised.

Cheers,
Shafique

shafique wrote:Oh, I see, that's what I'm upset about. Now what did I say about pigeon-holing?

Wasn't pigeon holing, just generally didn't understand why you would be so upset about pre-war contracts being cancelled.

My post was about finding a positive way forward for Iraq regardless of political affiliations, given all that's gone on starting from a blank sheet surely makes sense. That's not to say it's how Iraq/ US came to a decision, but I can see many positives from it.

kanelli wrote:Here is another perspective... Perhaps the US wants to retain tight control on contracts for any work, oil or otherwise, in Iraq because big business makes for big political pressure? Maybe they prefer a US (and allies) monopoly at the moment until they pull the troops out?

kanelli wrote:France and Russia condemned the invasion of Iraq (as did many other countries). Perhaps the US is giving them the middle finger for their lack of support?

As you can see, there appear to be three advantages to keeping the contracts in US and ally hands.

1) Profit
2) More control over political pressure
3) Rewarding those who supported the US/ Punishing those who didn't

Just some more random thoughts. I have a lot of those going on in my head.

Bravo kanelli, I need more of such thoughts to keep popping...I will agree with rvp_legend and shafique, it was well put and summarised

Thanks for the praise guys.

scot1870 wrote:Wasn't pigeon holing, just generally didn't understand why you would be so upset about pre-war contracts being cancelled.

I'm not upset - it is quite normal for a victor in a war to avail themselves of the spoils of said war.

Kanelli quite rightly points out this is what the US is doing.

What upsets me is the spin that is put on this - 'we are doing this for the Iraqis/Freedom/Liberty/Democracy etc'. This upsets a large number of my countrymen who take issue with us taking part in an illegal war - many of us marched against the war/invasion and warned that the quagmire of sectarian violence would ensue.

scot1870 wrote:My post was about finding a positive way forward for Iraq regardless of political affiliations, given all that's gone on starting from a blank sheet surely makes sense. That's not to say it's how Iraq/ US came to a decision, but I can see many positives from it.

Bravo on your motives. What pains me is that in the meantime Iraqis die, the economy is shattered and laws are being drafted that syphon off profits outside of Iraq. Why not spend a fraction of what is being spent militarily and provide subsidies to companies to come and drill/prospect for oil for a lower share of the profit - the oil, after all, belongs to Iraq.

And, come to think of it, why not let the so-called sovereign government decide on whether to honour contracts or not. Does that not make a mockery of the 'democractization' arguement for the invasion?

Cheers,
Shafique

shafique wrote:Kanelli quite rightly points out this is what the US is doing.

It's a theory to what the US is doing, but again given the the shortlist mentioned says one British, one Dutch and one American company are in the running it's not clear if that's true. Hey, maybe they'll just give it all to Exxon and prove me wrong.

What's happening here happens in every country, it shouldn't be seen as siphoning off money as there is a benefit to it - the higher oil price from a good quality product. Getting upset about global business practices is one thing, just because the word "Iraq" is in the article doesn't make this a special case. I could point to a lot of examples where the UK has lost out to foreign investment (the demise of its banking and energy capabilities especially), yet fundamentally we've benefited from this free market approach (i.e. the best people should do it, regardless of nationality) and that's why I've argued the case for it here.

Does anyone recall what happened when Dubai Ports bought P&O and along with it control of some ports in the USA?

Cheers,
Shafique

Ha ha very good. There are many examples of foreign companies buying in the US, not least the aforementioned BP buying Amaco a few years back, homeland security just too hot a topic for them. I don't agree with that particular decision tho.

Well done guys, Freza, a true anti-west poster has been completely blocked by your discussions which is going on a business need, not the political fall-out she was hoping for.

she will be sulking now.

Yorky, one of the imminent brains and one of the most cool-headed and rational people in DF. I'm not anti-West, it's useless to make someone like you understand this, I won't even bother. There was no point in me contributing further to this thread when we have someone like Shafique state what I would have stated but in a more comprehensible manner than I would ever get at (I admit it, I let my immaturity get in the way of discussions, oh yea). My hat off to Shafique, for another great contribution and great posts. And you Yorky, so grown yet so baseless...so pathetic.

Sorry Freza,

Complete BS. You were hoping for yet another anti-west discussion and you did not get one.

Change the record, yours is stuck.

sorry Yorky, but if I had wanted a slug fest, I would have started one - nothing would have stopped me from trying...

You're much too old to be acting like a school kid and to be coming up with such banalities. Go pick on someone your own age - Sage or Concord or Arnie. Don't mess with this thread, it was civil until you got here. I actually do enjoy civility from time to time, you know.

EDIT: Exactly my point, I chose not to get involved! Duh. Wasn't it obvious? My dear, try not to embarrass yourself this way...

**Back on topic**

freza wrote:sorry Yorky, but if I had wanted a slug fest, I would have started one - nothing would have stopped me from trying...

You're much too old to be acting like a school kid and to be coming up with such banalities. Go pick on someone your own age - Sage or Concord or Arnie. Don't mess with this thread, it was civil until you got here. I actually do enjoy civility from time to time, you know.

**Back on topic**

My last comment on your topic, I agree it was civil, reason being: you were not involved!

kanelli wrote:France and Russia condemned the invasion of Iraq (as did many other countries). Perhaps the US is giving them the middle finger for their lack of support?

And why not? Although that is not exactly what is taking place. At the end of the day you can't please everyone. The US can't do "right" by some people no matter what anyways... Nothing wrong with recovering your costs and then making a small profit (even the British and Ductch as Scot points out). Otherwise more will be lost and then the arguments would be that things were ruined becuase the US let them get ruined so they could profit and so on....



P.S. Freza, Please don't group me with Arnie, S&G and Yorky these guys are old Geezers. I'm a kid - don't believe everything you hear (believe not of what you hear or read and only half of what you see).

My apologies Concord. I just couldn't think of anyone else, I imagine that you're just a youngster...
I was actually not criticizing older men, but older men that can act as silly as me.