From: michael a. lebowitz (mlebowit@SFU.CA)
Date: Sat Sep 25 2004 - 16:58:49 EDT
> >Crude dudes >By Linda McQuaig >Toronto Star >September 20, 2004 > > >From his corner office in the heart of New York's financial district, Fadel >Gheit keeps close tabs on what goes on inside the boardrooms of the big oil >companies. An oil analyst at the prestigious Wall Street firm Oppenheimer & >Co., the fit, distinguished-looking Gheit has been watching the oil industry >closely for more than 25 years. > >Selling the modern world's most indispensable commodity has never been a bad >business to be in — particularly for the small group of companies that >straddle the top of this privileged world. But never more so than now. > >"Profit-wise, things could not have been better," says Gheit, "In the last >three years, they died and went to heaven .... They are all sitting on the >largest piles of cash in their history." > >But to stay rich they have to keep finding new reserves, and that's getting >tougher. Increasingly it means cutting through permafrost or drilling deep >underwater, at tremendous cost. "The cheap oil has already been found and >developed and produced and consumed," says Gheit. "The low-hanging fruit has >already been picked." > >Well, not all the low-hanging fruit has been picked. > >Nestled into the heart of the area of heaviest oil concentration in the >world is Iraq, overflowing with low-hanging fruit. No permafrost, no deep >water. Just giant pools of oil, right beneath the warm ground. This is fruit >sagging so low, as it were, that it practically touches the ground under the >weight of its ripeness. > >Not only does Iraq have vast quantities of easily accessible oil, but its >oil is almost untouched. "Think of Iraq as virgin territory .... This is >bigger than anything Exxon is involved in currently .... It is the superstar >of the future," says Gheit, "That's why Iraq becomes the most sought-after >real estate on the face of the earth." > >Gheit just smiles at the notion that oil wasn't a factor in the U.S. >invasion of Iraq. He compares Iraq to Russia, which also has large >undeveloped oil reserves. But Russia has nuclear weapons. "We can't just go >over and ... occupy (Russian) oil fields," says Gheit. "It's a different >ballgame." Iraq, however, was defenceless, utterly lacking, ironically, in >weapons of mass destruction. And its location, nestled in between Saudi >Arabia and Iran, made it an ideal place for an ongoing military presence, >from which the U.S. would be able to control the entire Gulf region. Gheit >smiles again: "Think of Iraq as a military base with a very large oil >reserve underneath .... You can't ask for better than that." > >There's something almost obscene about a map that was studied by senior Bush >administration officials and a select group of oil company executives >meeting in secret in the spring of 2001. It doesn't show the kind of detail >normally shown on maps — cities, towns, regions. Rather its detail is all >about Iraq's oil. > >The southwest is neatly divided, for instance, into nine "Exploration >Blocks." Stripped of political trappings, this map shows a naked Iraq, with >only its ample natural assets in view. It's like a supermarket meat chart, >which identifies the various parts of a slab of beef so customers can see >the most desirable cuts .... Block 1 might be the striploin, Block 2 and >Block 3 are perhaps some juicy tenderloin, but Block 8 — ahh, that could be >the filet mignon. > >The map might seem crass, but it was never meant for public consumption. It >was one of the documents studied by the ultra-secretive task force on >energy, headed by U.S. Vice-President Dick Cheney, and it was only released >under court order after a long legal battle waged by the public interest >group Judicial Watch. > >Another interesting task force document, also released under court order >over the opposition of the Bush administration, was a two-page chart titled >"Foreign Suitors for Iraqi Oilfields." It identifies 63 oil companies from >30 countries and specifies which Iraqi oil fields each company is interested >in and the status of the company's negotiations with Saddam Hussein's >regime. Among the companies are Royal Dutch/Shell of the Netherlands, >Russia's Lukoil and France's Total Elf Aquitaine, which was identified as >being interested in the fabulous, 25-billion-barrrel Majnoon oil field. >Baghdad had "agreed in principle" to the French company's plans to develop >this succulent slab of Iraq. There goes the filet mignon into the mouths of >the French! > >The documents have attracted surprisingly little attention, despite their >possible relevance to the question of Washington's motives for its invasion >of Iraq — in many ways the defining event of the post-9/11 world but one >whose purpose remains shrouded in mystery. Even after the supposed motives >for the invasion — weapons of mass destruction and links to Al Qaeda — have >been thoroughly discredited, talk of oil as a motive is still greeted with >derision. Certainly any suggestion that private oil interests were in any >way involved is hooted down with charges of conspiracy theory. > >Yet the documents suggest that those who took part in the Cheney task >force — including senior oil company executives — were very interested in >Iraq's oil and specifically in the danger of it falling into the hands of >eager foreign oil companies, rather than into the rightful hands of eager >U.S. oil companies. > >As the documents show, prior to the U.S. invasion, foreign oil companies >were nicely positioned for future involvement in Iraq, while the major U.S. >oil companies, after years of U.S.-Iraqi hostilities, were largely out of >the picture. Indeed, the U.S. majors would have been the big losers if U.N. >sanctions against Iraq had simply been lifted. "The U.S. majors stand to >lose if Saddam makes a deal with the U.N. (on lifting sanctions)," noted a >report by Germany's Deutsche Bank in October 2002. > >The disadvantaged position of U.S. oil companies in Saddam Hussein's Iraq >would have presumably been on the minds of senior oil company executives >when they met secretly with Cheney and his task force in early 2001. The >administration refuses to divulge exactly who met with the task force, and >continues to fight legal challenges to force disclosure. However a 2003 >report by the General Accounting Office, the investigative arm of Congress, >concluded that the task force relied on advice from the oil industry, whose >close ties to the Bush administration are legendary. (George W. Bush >received more money from the oil and gas industry in 1999 and 2000 than any >other U.S. federal candidate received over the previous decade.) > >The Cheney task force has been widely criticized for recommending bigger >subsidies for the energy industry, but there's been little focus on its >possible role as a venue for consultations between Big Oil and the >administration about Iraq. One intriguing piece of evidence pointing in this >direction was a National Security Council directive, dated February 2001, >instructing NSC staff to co-operate fully with the task force. The NSC >document, reported in The New Yorker magazine, noted that the task force >would be considering the "melding" of two policy areas: "the review of >operational policies towards rogue states" and "actions regarding the >capture of new and existing oil and gas fields." This certainly implies that >the Cheney task force was considering geopolitical questions about actions >related to the capture of oil and gas reserves in "rogue" states, including >presumably Iraq. > >It seems likely then that Big Oil, through the Cheney task force, was >involved in discussions with the administration about getting control of oil >in Iraq. Since Big Oil has sought to distance itself from the >administration's decision to invade Iraq, this apparent involvement helps >explain the otherwise baffling level of secrecy surrounding the task force. > >It's interesting to note that the Cheney task force deliberations took place >in the first few months after the Bush administration came to office — the >same time period during which the new administration was secretly >formulating plans for toppling Saddam. Those early plans were not publicly >disclosed, but we know about them now due to the publication of several >insider accounts, including that of former Treasury secretary Paul O'Neill. >So, months before the attacks of 9/11, the Bush White House was already >considering toppling Saddam, and at the same time it was also keenly >studying Iraq's oil fields and assessing how far along foreign companies >were in their negotiations with Saddam for a piece of Iraq's oil. > >It's also noteworthy that one person — Dick Cheney — was pivotal both in >advancing the administration's plans for regime change in Iraq and in >formulating U.S. energy policy. > >As CEO of oil services giant Halliburton Company, Cheney had been alert to >the problem of securing new sources of oil. Speaking to the London Petroleum >Institute in 1999, while still heading Halliburton, Cheney had focused on >the difficulty of finding the 50 million extra barrels of oil per day that >he said the world would need by 2010. "Where is it going to come from?" he >asked, and then noted that "the Middle East with two-thirds of the world's >oil and the lowest cost, is still where the prize ultimately lies." > >Cheney's focus on the Middle East and its oil continued after he became >Bush's powerful vice-president. Within weeks of the new administration >taking office, Cheney was pushing forward plans for regime change in Iraq >and also devising a new energy policy which included getting control of oil >reserves in rogue states. His central role in these two apparently urgent >initiatives is certainly suggestive of a possible connection between the >U.S. invasion of Iraq and a desire for the country's ample oil reserves — >the very thing that is vehemently denied. > >One reason that regime change in Iraq was seen as offering significant >benefits for Big Oil was that it promised to open up a treasure chest which >had long been sealed — private ownership of Middle Eastern oil. A small >group of major international oil companies once privately owned the oil >industries of the Middle East. But that changed in the 1970s when most >Middle Eastern countries (and some elsewhere) nationalized their oil >industries. Today, state-owned companies control the vast majority of the >world's oil resources. The major international oil companies control a mere >4 per cent. > >The majors have clearly prospered in the new era, as developers rather than >owners, but there's little doubt that they'd prefer to regain ownership of >the oil world's Garden of Eden. "(O)ne of the goals of the oil companies and >the Western powers is to weaken and/or privatize the world's state oil >companies," observes New York-based economist Michael Tanzer, who advises >Third World governments on energy issues. > >The possibility of Iraq's oil being reopened to private ownership — with the >promise of astonishing profits — attracted considerable interest in the >run-up to the U.S. invasion. In February 2003, as U.S. Secretary of State >Colin Powell held the world's attention with his dramatic efforts to make >the case that Saddam posed an imminent threat to international peace, other >parts of the U.S. government were secretly developing plans to privatize >Iraq's oil (among other assets). A confidential 100-page contracting >document, drawn up by the U.S. Agency for International Development and the >U.S. Treasury Department, laid out a wide-ranging plan for a "Mass >Privatization Program ... especially in the oil and supporting industries." > >The Pentagon was also working on plans to open up Iraq's oil sector. In the >fall of 2002, months before the invasion, the Pentagon retained Philip >Carroll, a former CEO of Shell Oil Co. in Texas, to draft a strategy for >developing Iraqi oil. Carroll's plans apparently became the basis of a >proposed scheme, which became public shortly after the war, to redesign >Iraq's oil industry along the lines of a U.S. corporation, with a chairman, >chief executive and a 15-member board of international advisers. Carroll was >chosen by Washington to serve as chairman, but the plans were shelved after >they encountered stiff opposition inside Iraq. > >Still, the prospect of privatizing Iraq's oil remained of great interest to >U.S. oil companies, according to Robert Ebel, from the influential >Washington-based Center for Strategic and International Studies (CSIS). >Ebel, former vice-president of a Dallas-based oil exploration company, >retains close ties to the industry. In an interview in his Washington >office, Ebel said it was up to Iraq to make its own decisions, but he made >clear that U.S. oil companies would prefer Iraq abandon its nationalization. >"We'd rather not work with national oil companies," Ebel said bluntly, >noting that the major oil companies are prepared to invest the $35 to $40 >billion to develop Iraq's reserves in the coming years. "We're looking for >places to invest around the world. You know, along comes Iraq, and I think a >lot of oil companies would be disappointed if Iraq were to say `we're going >to do it ourselves' " > >Along comes Iraq? > >How fortuitous. U.S. oil companies just happened to have billions of dollars >that they wanted to invest in undeveloped oil reserves when Iraq presented >itself, ready for invasion. > >Along comes Iraq, indeed. > >In the past 14 decades, we've used up roughly half of all the oil that the >planet has to offer. No, we're not about to run out of oil. But long before >the oil runs out, it reaches its production peak. After that, extracting the >remaining oil becomes considerably more difficult and expensive. > >This notion that oil production has a "peak" was first conceived in 1956 by >geophysicist M. King Hubbert. He predicted that U.S. oil production would >peak about 1970 — a notion that was scoffed at at the time. As it turned >out, Hubbert was dead on; U.S. oil production peaked in 1970, and has been >declining ever since. Hubbert's once-radical notion is now generally >accepted. > >For the world as a whole, the peak is fast approaching. Colin Campbell, one >of the world's leading geologists, estimates the world's peak will come as >soon as 2005 — next year. "There is only so much crude oil in the world," >Campbell said in a telephone interview from his home in Ireland, "and the >industry has found about 90 per cent of it." > >All this would be less serious if the world's appetite for oil were >declining in tandem. But even as the discovery of new oil fields slows down, >the world's consumption speeds up — a dilemma Cheney highlighted in his >speech to the London Petroleum Institute in 1999. For every new barrel of >oil we find, we are consuming four already-discovered barrels, according to >Campbell. The arithmetic is not on our side. > >Particularly worrisome is the arithmetic as it applies to the U.S. With its >oil production already long past peak, and yet its oil consumption rising, >the U.S. will inevitably become more reliant on foreign oil. This is >significant not just for Americans, but for the world, since the U.S. has >long characterized its access to energy as a matter of "national security." >With its unrivalled military power, the U.S. will insist on meeting its own >voracious energy needs — and it will be up to the rest of the world to >co-operate with this quest. Period. > >Canada plays a greater role in this "keep-the-U.S.-energy-beast-fed" >scenario than many Canadians may realize. A three-volume report prepared by >a bipartisan Congressional team and CSIS, the Washington think tank, >highlights how important Canada is in the U.S. energy picture of the future. >The report, The Geopolitics of Energy into the 21st Century, notes that >Canada is "the single largest provider of energy to the United States," and >that "Canada is poised to expand sharply its exports of oil to the United >States in the coming years." > >Fine — as long as Canada doesn't want to change its mind about this. Well, >in fact, Canada can't change its mind about this — a point celebrated in the >report. When Canada signed the North American Free Trade Agreement (NAFTA) >in 1993, we gave up our right to cut back the amount of oil we export to the >U.S. (unless we cut our own consumption the same amount). Interestingly, >Mexico, also a party to NAFTA, refused to agree to this section, and was >granted an exemption. > >The U.S. report points out that that, under NAFTA, Canada is not allowed to >reduce its exports of oil (or other energy) to the U.S. in order to redirect >them to Canadian consumers. Redirecting Canadian oil to Canadians isn't >permitted — regardless of how great the Canadian need may be. Some outside >observers, like Colin Campbell over in Ireland, find the situation striking. >"You poor Canadians are going to be left freezing in the dark while they're >running hair dryers in the U.S.," says Campbell. It's a situation that >comforts the U.S. senators, congressmen and think-tank analysts who wrote >the report. With obvious satisfaction, they conclude: "There can be no more >secure supplier to the United States than Canada." > >Alas, for the U.S., not every part of the world is as pliant as Canada. Most >of the world's oil is in the Middle East. And while different oil regions >will reach their production peaks at different times, the Middle East will >peak last, underlying Cheney's point that the region is where "the prize >ultimately lies." Whoever controls the big oil reserves of the Middle East >will then be positioned to, pretty much, control the world. > >But we're supposed to believe that, as the Bush administration assessed its >options just before invading Iraq in the spring of 2003, the advantages of >securing vast, untapped oil fields — in order to guarantee U.S. energy >security in a world of dwindling reserves and to enable U.S. oil companies >to reap untold riches — were far from mind. What really mattered to those in >the White House, we're told, was liberating the people of Iraq. > >(Adapted from It's The Crude, Dude: War Big Oil, And The Fight For The >Planet, by Linda McQuaig, 2004. Published by Doubleday Canada. Reproduced by >arrangement with the Publisher. All rights reserved. Toronto-based political >commentator Linda McQuaig is a past winner of a National Newspaper Award and >an Atkinson Fellowship for journalism in public policy. Her column appears >Sundays on the Star's op-ed page.) > >http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/Artic >le_PrintFriendly&c=Article&cid=1095545411401&call_pageid=971358637177 --------------------- Michael A. Lebowitz Professor Emeritus Economics Department Simon Fraser University Burnaby, B.C., Canada V5A 1S6 Office Fax: (604) 291-5944 Home: Phone (604) 689-9510
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