The War With Iraq Not About Oil?
(The story linked to above is viewable till midnight tonite C.S.T 2-24-2003 after that you will have to subscribe to the Houston Cronicle to read it)

WASHINGTON – Peace protesters are parading through the streets. The United Nations Security Council continues to squabble, and the United States has yet to decide whether to go to war in Iraq.

**While so much about a second Persian Gulf war remains uncertain, the Bush administration is busily planning what Iraq’s oil industry might look like after Saddam Hussein: **

·** The Pentagon already has scoped out Iraq’s oil fields**, hoping to forestall any order from Saddam to torch the nation’s crude wealth.

· The U.S. State Department’s Future of Iraq office has been soliciting input from “Free Iraqis” on a range of economic and social issues.

· And the White House is considering who will be in charge of the second-largest oil reserves in the world.

Whether an American might soon be running Iraq’s oil sector remains unclear.

But this much seems certain: The White House is considering a radical re-creation of Iraq’s government and economy.

Iraqi exiles, opposition leaders, even Westerners of Iraqi descent are being asked to advise the Bush administration on the country’s tax structure,** foreign investment in the oil sector and Iraq’s future membership in the OPEC cartel**.

“If they’re not taking us seriously, the U.S. government is spending a lot of money for nothing,” said John Kanno, a California-based electrical engineer whose family fled Iraq before he was born.

If a U.S.-led invasion proves successful, Gen. Tommy Franks, commander of U.S. forces for that region of the world, initially would assume authority as military governor of the country.

As currently envisioned, Iraq’s government ministries would remain largely intact,** once those “tainted with the crimes and excesses of the current regime” were removed**, Douglas Feith, the Defense Department’s undersecretary for policy, told lawmakers earlier this month.

The administration’s plan calls for staffing the top three tiers of the government ministries with American officers, noted Ahmad Chalabi, head of the opposition group Iraqi National Congress, writing last week in an op-ed piece published in the Wall Street Journal.

**If correct, such a proposal would presumably include Iraq’s all-important oil ministry.

White House officials could not confirm or deny Chalabi’s information.**

**Concerned about repairing any damaged fields and boosting production as quickly as possible, the administration already has been casting about for possible financial help from the private sector. **

Among the Iraqi exiles, attracting foreign investment as a means of helping Iraq boost its oil production is a popular idea. So, too, is the notion of a “flat” tax for a country unaccustomed to income taxes.

But there is much less consensus about whether the country’s national oil company should be privatized or whether Iraq, a founding member of the Organization of Petroleum Exporting Countries, should pull out of the group.

In recent weeks, the industry has been buzzing with rumors about Bill Martin, a former Energy Department official and Washington consultant who has been working with his friend, Deputy Defense Secretary Paul Wolfowitz.

Martin, in an interview, tried to dispel speculation he might be appointed Iraq’s next energy czar. The Washington-based consultant said he has been working with Wolfowitz in a part-time, noncompensated basis on “personnel” issues.
<snip rest of article>

They say that actions speak louder than words and based on this article and one that appeared in the same newspaper a couple of weeks ago concerning the militarys plan to sieze the oilfields early in the war to pay for reparations, these actions say a lot about the present administrations motives.
I open the floor to discussion.

So… then why didn’t we simply take over the oil fields of Iraq and Kuwait in 1991, when we had the chance (and ample troops in place to make it a reality)?

Even if the war was entirely ABOUT oil - what’s so awful about that? Oil is a precious commodity which could, if market economics were allowed to work, bring about an enormous improvement in the quality of life for the Iraqi people.

Hussein’s government has, instead, created a situation where the Iraqi people are deprived of the benefits of this abundant natural resource because of his aggression and failure to disarm.

I just don’t see the problem here!

I don’t see the problem, either. I read the whole article and I didn’t see any secret military plans to take over the oil fields and use their income to pay for war reparations. I did see statements like, “We’re going to go in, stay there for as long as it takes, and get out as fast as we can”, and “we’re consulting with the Iraqis themselves as much as we can, about what to do about the oil fields.”

And so far only Chalabi is the only one who believes this.

And it was an Op-Ed piece, so it’s just his theory. Pardon me if I leave my tinfoil hat on the closet shelf for a while.

And I’m sorry but this part of it is just silly paranoid stuff.

Ivanovich makes it sound like it’s some big secret. I can put “iraq oil fields location” into Google and have their locations in about 5 seconds.

The oil industry knows where they are. So does the U.S. Soil and Geological Survey.

If the Pentagon needed to “scope them out”, maybe they should have checked with the USGS.

I must agree that it shows a lot about the present administration’s motives. Obviously, they intend to help the Iraqi people to get their country under control both politically and fiscally. If the war were about oil, would the US actually care what Iraqis thought about OPEC?

The theory - and I won’t argue it - goes like this: Back in 1991, we didn’t need to. We had no authority from the UN to do anything other than secure the sovereignty of Kuwait - we did that. Iraq’s oil, or proportion of the global market, was of little concern.

You see, our good friend and ally, Saudi Arabia, has equivalent market power in the oil business. And our relationship with the Saudi government was quite strong, they let us use their country to liberate Kuwait, as well as protect them from invasion.

Then 9/11 happened. Since then, the Saudi royal family has been on shaky ground. Fundamentalist islamists have taken a hard position against the royal family, particularly for their “friendliness” with the infidels. And there is much popular support for their fanaticism. This leads to a general question as to the stability of the Saudi government.

IF the Saudi government were to be overthrown by Islamic fundamentalists, you can be sure that the price of oil just went up, dramatically. If both Iraq and Saudi Arabia no longer supplied the US with oil, the military might of the US is significantly diminished (not sure if you are aware, but the biggest single variable cost in a US military action is fuel). And THAT has national security repercussions.

So, you say, why not wait til that eventuality actually occurs, and then liberate Saudi Arabia? Hopefully, I don’t even need to address this one. But just in case - first off, it wouldn’t be liberation - it is plausible that Saudi Arabia could establish an Islamic theocracy through democracy. Second, Saudi Arabia happens to contain lands holy to Islam, and an occupying US army in Saudi Arabia REALLY wouldn’t play well to muslims around the world.

So, back in 1991, we did not envision that access to the Saudi oil supply was at risk.

—So… then why didn’t we simply take over the oil fields of Iraq and Kuwait in 1991, when we had the chance (and ample troops in place to make it a reality)?—

No approved plans for an occupation regime, like we have this time. And this time around, we have exiled Iraqi bigwigs promising Western access and even ownership to Iraq’s oil supply if they’re put back in power. That doesn’t necessarily do much for the world oil market: but it gives the U.S. and U.S. firms huge control over the world oil market (especially in Europe), and hence the world. Perhaps that’s why the Europeans are waffling so much: they’re scared that this is one big move for the U.S. to acheive unprecedented dominance.

However, even the ultra-liberal Mother Jones admits that most oil companies are actually very worried about the situation in Iraq: worried that it could turn into a huge disaster. So, if it’s really about oil, and the oil companies aren’t pushing for it, exactly who is in it for the oil?

Just a nitpick, but I think you meant supplied the world market with oil. Very little of the oil in the US is supplied by Iraq and Saudi, but OPEC’s actions have a significant effect on the world market.

Look, can we all agree that Iraq’s oil wells are its most valuable asset? Yes? Good, we all agree that Iraq’s oil wells are very valuable. So…if we were going to steal Iraq’s oil, then we’d try to protect the oil wells. But, suppose we were going to try to set up a democratic utopian Iraq, our military going in with Ghandi-like determination to give ordinary Iraqis the best of everything. If we were going to do that, perhaps our sainted troops might be well advised to secure the oil wells, because Saddam has promised to blow them up if we invade. And those oil wells will be vital for the continued prosperity of Iraq.

So you see, under any concievable invasion scheme, for any concievable purpose, under any concievable motivation, the first thing you have to do is secure the Iraqi oil fields. I mean, wouldn’t you be worried if you found out that our military was going to invade Iraq, and hadn’t given one thought about what might happen to the oil fields during the invasion?

And can anyone really believe that back in 1991 we had NO IDEA that instability in the middle east might threaten our oil supply? That is simply ludicrous. The whole point of the first Gulf War was that instability, war, and failed governments threatened the supply of oil.

What people don’t seem to understand is that oil companies don’t neccesarily benefit from low oil prices. In fact, don’t you think most oil companies would rather see HIGH oil prices? And also, don’t you think it is much easier to simply buy middle eastern oil than to go through this whole invasion and conspiracy routine? Yes, we depend on oil from the middle east. But these middle eastern countries also depend on their buyers. They can’t just refuse to sell, or charge anything they want. If they refuse to sell, then they are suddenly bankrupt. The oil is only valuable if other people are willing to buy it. If Europe, America and Japan can’t buy the oil, the economies of ME countries will collapse. We’re hooked on their cheap oil, but they are hooked on our dollars, yen, and euros.

So, no matter who is in charge in Iraq, Iraqi oil will be available to the world market. France is more than happy to deal with Saddam.

Oil is by far the largest sector of the Iraqi economy, and oil revenue will be the most likely source of funds to support the country post-war; on that basis alone its eems sensible to consider how the oilfields will be managed. Also, there appears to be much concern about whether Saddam will emulate his actions during the withdrawal from Kuwait and set the oilfields alight. No matter what the motives of the US may ultimately be, such an action would ultimately hurt the Iraqi population far more than the US.

The upcoming war may or may not be considered unjust, depending on one’s viwepoint, but to not weigh the options for postwar management of the Iraqi oilfields would seem to be extremely shortsighted.

—What people don’t seem to understand is that oil companies don’t neccesarily benefit from low oil prices. In fact, don’t you think most oil companies would rather see HIGH oil prices?—

there is no way in theory to say what price level they would prefer: you’d have to know something about how the market is structured. However, that is not the point. The point isn’t the price. The point is who owns the oil. Whatever happens to the price, ownership of that oil supply is immensely valuable, and it is inevitable that most of the contracts for setting up and running those oil fields, as well as trading them and their value, in the aftermath of the war will go to U.S. firms. They do stand to make considerable profit: it’s new bussiness. However, it seems that many oil firms are, contrary to the conspiracy, very wary of this whole deal.

—And also, don’t you think it is much easier to simply buy middle eastern oil than to go through this whole invasion and conspiracy routine?—

Tell that to those confused armed robbers! Isn’t is much easier to buy all the money in the cash register rather than just take it? (Note, I’m not calling the U.S. robbers here, but the principle is the same: why buy a product for resale when you can simply own it before reselling it: or get paid for helping deliver it?)

I’m just waiting for someone to explain how the oil, divided among a rebuilt Iraq and various allies (not to mention France and Russia, if they show up waving their existing contracts), will amount to more than the $200 billion the war is supposed to cost. I mean, the Bushies may be crazy and all, but even so surely they can add.

In any case, I’m slightly sceptical that oil is Iraq’s biggest asset. I agree that there are huge amounts of money to be made from the oil but think of the tourism that a peaceful democratic Iraq could attract (since Iraq is the cradle of civilisation - Babylon, Sumer, Arcadia, the Garden of Eden etc).

The oil would make big bucks for the oil companies and the Iraqi government over the course of many years but a huge influx of tourists would spread money around to the ordinary people of Iraq in a much quicker and more direct way.

Also I agree with this comment by Lemur866

Even if Saudi were to fall into the hands of the fundamentalists, so what? Even fundamentalists need money, and the US is the worlds biggest buyer. So they would still have to sell their oil to the world, just the same as they do now.

I suppose they could stop selling the oil and deliberately make themselves poor just to piss off the US, but I can’t see it happening. They may be fundamentalists but they aren’t stupid.

Yes, NurseCarmen, I did intend to reference the world market. However, as I understand it, Saudi Arabia is the single largest supplier of US crude oil (at least they were in 1999, according to this clearly biased source).

I also agree with Lemur866’s post, with one quibble. In 1991, we were concerned that Iraq may try to overrun Saudi Arabia. We definitely wanted to prevent that (and not because we wanted to make sure the breeding ground for islamic terrorists was nice and fertile).

And for those that don’t believe that having both Iraq and Saudi Arabia oil supply controlled by fascists and fundies would hurt US strategic interests because of free markets, you need a quick lesson in the assumptions of a free market.


Don’t just drop coy hints, how about you go right ahead and give me your “lesson in the assumptions of a free market”?

In what way do fascists and fundies not need money?

Ah, a cite: Big Oil not so hot on the war:

I don’t think the coming war is about one thing. Oil is a part of the picture, probably a bigger part than the administration or most pundits acknowledge. But Israel, elections, and the military-industrial complex are also near the top of the list. The exact order is hard to figure out, but not terribly important anyway.

Terrorism and WMD are relatively low on the list, but they make convenient pretexts – they’re good for keeping the populace scared and compliant. It’s highly likely that the war will increase the threat of terrorism and serve as an impetus for other nations to develop WMD (after all, look at how differently North Korea is being treated).

Yes, I guess I am a cynic. But understanding this administration requires vast reservoirs of cynicism. Hell, now they’re even trying to intimidate the weaker members of the Security Council into supporting their position. Even Vincente Fox refuses to give Bush his full support.

If you support the war, you have to ask how high a price you’re willing to pay in terms of dollars, lives and damaged international relations. Even after (inevitably) losing the war, Saddam might still have the last laugh.

If we wanted the oil, it would be FAR cheaper, and FAR, FAR, easier to just pony up the cash, and buy it from Saddam. Problem is, the money that flows into Iraq, stops with him, the buck truly stops there. And with one cat controlling the bulk of the coin, he gets to make the rules, and his rules kill people, they imprison people (for failing to be able to read, of all things) and they keep the terror-mad death mongers in weapons and training sites, and while I have no direct cite for this, I’m sure my leaders do, and that’s why I pay their freight.

Of course they need money. And they can make much more by colluding together in the market. It’s called oligopoly. For a high level overview of the concept, see this.

But it gets worse from here. There are very few substitute products for crude oil, which makes the violation from free market theory even more substantive. Add to that the dependence of most other markets of material goods reliance on fuel to get to market, not to mention the reliance of the military machine on fuel oil, the performance of western economies and global influence are extremely susceptible to swings in oil prices.

Also note that free markets presuppose an underlying system of production - and crude oil is not produced - it is extracted from reserves. This violation is a natural affect which will eventually impact supply.

For a much more indepth look at the economic theories of oil markets, take a look here and here.

In particular, in the first link, take a look at the graph titled World Endowment, and see:

Be sure to understand the 2010 problem before you leave the page.

On the second link, note:

So, for various reasons, the oil market doesn’t fit free market models all that well. Yet it is an extremely critical market to understand, and particularly relevent to the US economy and its potential for hegemony.