Dear Iraq, sorry the war hasn’t gone well. But now that the surge is wrapping up, we hope you won’t mind that we need several dozen permanent bases in your country. Oh, and did we mention that we’ll need you to approve some no-bid contracts for our oil companies, too? After all, what’s a few bases and oilfields among friends?
Four Western oil companies are in the final stages of negotiations this month on contracts that will return them to Iraq, 36 years after losing their oil concession to nationalization as Saddam Hussein rose to power.
Exxon Mobil, Shell, Total and BP — the original partners in the Iraq Petroleum Company — along with Chevron and a number of smaller oil companies, are in talks with Iraq’s Oil Ministry for no-bid contracts to service Iraq’s largest fields, according to ministry officials, oil company officials and an American diplomat.
The deals, expected to be announced on June 30, will lay the foundation for the first commercial work for the major companies in Iraq since the American invasion, and open a new and potentially lucrative country for their operations.
The no-bid contracts are unusual for the industry, and the offers prevailed over others by more than 40 companies, including companies in Russia, China and India. The contracts, which would run for one to two years and are relatively small by industry standards, would nonetheless give the companies an advantage in bidding on future contracts in a country that many experts consider to be the best hope for a large-scale increase in oil production.
Daniel Altman provides some helpful context: “Imagine. At the precise moment when demand for oil was the highest in history, a recently democratized country with enormous reserves had the chance to sell extraction contracts to the highest bidder. This was a country that desperately needed the revenue to help rebuild its schools, power grid and water supply after a long internal conflict. So why did it hand out the contracts with no auction at all?”
And Andrew Sullivan answers the rhetorical question: “Because the US told them so. You don’t get to conquer a new province and not get any spoils, do you? Who needs ANWR or a carbon tax when you can drain Iraq at record high oil prices?”
I try to avoid bold predictions, but I’m going to go out on a limb and guess this might lead some to suspect the war in Iraq is about oil. It’s worth noting, as Matt Yglesias does, that this assumption is only part of the story.
I think the evidence is clear that the Bush administration went to war in Iraq because it’s run by crazy people. The oil money more plausibly comes into play in explaining the desire to stay at war forever. After all, these companies (or their corporate ancestors) had oil contracts in Iraq in the past and now they’re getting them back “36 years after losing their oil concession to nationalization as Saddam Hussein rose to power.” Nationalization, you see, is a substantial risk of doing business — especially natural resource business — in unstable countries. But a given government is much, much, much less likely to nationalize western countries’ assets if it’s dependent on external U.S. military support and especially if its security services are nicely enmeshed with the U.S. military.
Our troops can “curb Iranian influence” and provide “stability” all of which is good for business. But don’t call it imperialism, we’re there to help!
This point isn’t lost on the relevant players.
Sensitive to the appearance that they were profiting from the war and already under pressure because of record high oil prices, senior officials of two of the companies, speaking only on the condition that they not be identified, said they were helping Iraq rebuild its decrepit oil industry.
Riiiiight. The no-bid contracts will do wonders for Iraq. What could possibly go wrong?