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Occupation without troops

The US and UK governments, the IMF and oil corporations are behind Iraq's proposed Hydrocarbon Law, which would effectively privatise Iraqi oil. Becca Fisher investigates

November 1, 2007
5 min read

It has been 35 years since US and UK multinationals had access to Iraq’s oil reserves, the third largest in the world. For them, the invasion must have seemed like a business opportunity too good to miss. Oil is central to the Iraqi economy, accounting for 95 per cent of all government revenue. Foreign control of Iraq’s oil would deny Iraqis economic sovereignty for generations to come, just as it required the violation of Iraqi sovereignty to achieve it.

The Iraqi council of ministers has approved a draft Hydrocarbon Law, which will radically restructure the oil industry if passed by the Iraqi parliament. It will enable Iraqi oil to be developed by foreign oil companies under long-term exploration and production agreements, a sanitised term for production sharing agreements (PSAs).

These grant companies extremely generous shares of oil profits on terms fixed for up to 30 years, which the Iraqi state will be unable to alter. Over the lifetime of these contracts it is likely to lose a considerable proportion of its potential revenue earnings and its oil resources will be exhausted in a rush by oil companies to exploit the opportunities created by military intervention. Any new domestic laws that might affect the companies’ profits will not apply to them. The key economic decisions will be placed out of the hands of future Iraqi governments and it will be difficult for Iraq to rehabilitate and develop its own national oil industry. An occupation, it is clear, does not always rely on troops.

Most ingeniously, the PSA contracts hide what is essentially a form of privatisation. The state retains ownership of the oil in a formal sense, yet the oil companies control all decisions regarding its production, development and sale. This is particularly useful in Iraq, where hostility to privatisation runs deep. This hostility is why the Iraqi public has been denied any role in making the key decisions about the future of the Iraqi oil industry.

Instead, policy has been engineered by those it will benefit. Making maximum use of the war and occupation, the US and UK governments, nine foreign oil companies, the IMF and powerful Iraqi elites have pushed the PSA contracts onto the occupation-friendly Iraqi government. Former oil company executives have served as advisers in the Coalition Provisional Authority, helping develop the proposals for introducing PSAs. Meanwhile, the International Tax and Investment Centre (a corporate lobby firm whose board of directors conveniently includes representatives from the big oil companies) has been busy promoting the use of PSAs to the Iraqis, with assistance from the British government.

But the occupying powers and the oil companies do not want this to look like an imperialist imposition, which would be open to subsequent international legal challenge. They need an Iraqi Hydrocarbon Law to create the impression that these contracts have been through a sovereign and democratic political process. Such a law has been crafted in secret in consultation with the oil companies, the US and UK governments, and the IMF, since July 2006. The Iraqi parliamentarians saw the law for the first time only after it was leaked earlier this year. They and Iraqi civil society groups had asked to see a draft, but they were told it did not exist.

The pressure hasn’t subsided now that the law needs to be ‘democratically’ voted for. Prime Minister Al-Malaki is reportedly afraid that the US will withdraw its support for his premiership, effectively ousting him from power, if the law is not passed before 30 May. Bush and the US Congress have made passing the law a ‘benchmark’ for their continued support to Al-Maliki. The Iraqi people face the forced loss of political and economic sovereignty over their most precious natural resource. This has been done in the name, but at the expense, of Iraqi democracy and sovereignty.

That sovereignty has not been lost yet, however. Iraqi oil workers have been fiercely resisting the handover of Iraq’s oil to multinational corporations. Ultimately they may stop production, halt exports and trigger a political crisis even inside the current political establishment. At a meeting last December the representatives of the five main union federations in Iraq denounced PSAs, calling the government’s attempts to privatise Iraqi oil through them ‘a red line that may not be crossed’.

Above all, the workers demand proper consultation in a normal atmosphere. They want their vital industry supported rather than run down and made ripe for international corporate handover, and they want the draft law drastically revised and postponed until after occupation troops have left the country and a truly sovereign decision is possible. Oil workers have stopped production before, securing higher wages and better conditions as a result, and they have threatened to take action over the oil law. The repression they will face is likely to be brutal, but the consequences of any such repression will also be incalculable for those who attempt it.Becca Fisher is Iraq researcher at Corporate Watch and a member of the Hands Off Iraqi Oil Coalition, formed to offer solidarity in opposing the proposed law and support Iraqi efforts to secure sovereign control over their oil industry.

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