SKOPJE, Macedonia, March 19 (UPI) -- The Council of Foreign Relations and the Baker Institute last December estimated that the "costs of repairing existing (Iraqi) oil export installations alone would be around $5 billion, while restoring Iraqi oil production to pre-1990 levels would cost an additional $5 billion, plus $3 billion per year in annual operating costs."
Not to mention the legal quagmire created by the plethora of agreements signed by the soon-to-be-deposed regime with European, Indian, Turkish and Chinese oil behemoths. It would be years before Iraqi crude in meaningful quantities hits the markets and then only after tens of billions of dollars have been literally sunk into the ground. Not a very convincing business plan.
Conspiracy theorists dismiss such contravening facts impatiently. While the costs, they expound wearily, will accrue to the American taxpayer, the benefits will be reaped by the oil giants, the true sponsors of President Bush, his father, his vice president and his secretary of defense. In short, the battle in Iraq has been spun by a cabal of sinister white males out to attain self-enrichment through the spoils of war.
The case for the prosecution is that, cornered by plummeting prices, the oil industry in America has spent the last 10 years defensively merging and acquiring in a frantic pace. America's 22 major energy companies reported overall net income of $7 billion on revenues of $141 billion during the second quarter of last year. Only 45 percent of their profits resulted from domestic upstream oil and natural gas production operations.
Tellingly, foreign upstream oil and natural gas production operations yielded 40 percent of net income and worldwide downstream natural gas and power operations made up the rest. Stagnant domestic refining capacity forces U.S. firms to joint venture with outsiders to refine and market products.
Moreover, according to the energy consultancy, John S. Herold, replacement costs -- of finding new reserves -- have soared in 2001 to more than $5 per barrel. Except in the Gulf where oil is sometimes 1,000 feet deep and swathes of land are immersed in it. In short: American oil majors are looking abroad for their long-term survival. Iraq always featured high on their list.
This stratagem was subverted by the affair between Saddam Hussein and non-American oil companies. American players shudder at the thought of being excluded from Iraq by Saddam and his dynasty and thus rendered second-tier participants.
According to the conspiracy minded, the oil companies coaxed the White House first to apply sanctions to the country in order to freeze its growing amity with foreign competitors -- and, now, to retake by force that which was confiscated from them by law. Development and production contracts with Russian and French companies, signed by Saddam's regime, are likely to be "reviewed" -- i.e., scrapped altogether -- by whoever rules over Baghdad next.
An added bonus: the demise of OPEC. A United States in control of the Iraqi spigot can break the back of any oil cartel and hold sway over impertinent and obdurate polities such as France. How would the ensuing plunge in prices help the alleged instigators of the war -- the oil mafia -- remains unclear. Still, James Paul propounded the following exercise in the Global Policy Forum this past December: "(Assume) the level of Iraqi reserves at 250 billion barrels and recovery rates at 50 percent (both very conservative estimates). Under those conditions, recoverable Iraqi oil would be worth altogether about $3.125 trillion. Assuming production costs of $1.50 a barrel (a high-end figure), total costs would be $188 billion, leaving a balance of $2.937 trillion as the difference between costs and sales revenues. Assuming a 50/50 split with the government and further assuming a production period of 50 years, the company profits per year would run to $29 billion. That huge sum is two-thirds of the $44 billion total profits earned by the world's five major oil companies combined in 2001. If higher assumptions are used, annual profits might soar to as much as $50 billion per year."
The energy behemoths on both sides of the pond are not oblivious to this bonanza. The Financial Times reported a flurry of meetings in recent days between British Petroleum and Shell and Downing Street and Whitehall functionaries. Senior figures in the ramshackle exile Iraqi National Congress opposition have been openly consorting with American oil leviathans and expressly promising to hand postwar production exclusively to them.
But the question is: even if true, so what? What war in human history was not partly motivated by a desire for plunder? What occupier did not seek to commercially leverage its temporary monopoly on power? When were moral causes utterly divorced from realpolitik?
Granted, there is a thin line separating investment from exploitation, order from tyranny, vision from fantasy. The United States should -- having disposed of Saddam and his coterie -- establish a level playing field and refrain from giving Iraq a raw deal.
It should use this tormented country's natural endowments to reconstruct it and make it flourish. It should encourage good governance, including transparent procurement and international tendering and invite the United Nations to oversee Iraq's reconstruction. It should induce other countries of the world to view Iraq as a preferred destination of foreign direct investment and trade.
If, in the process, reasonable profits accrue to business, all for the better. Only the global private sector can guarantee the long-term prosperity of Iraq. Many judge the future conduct of the United States on the basis of speculative scenarios and fears that it is on the verge of attaining global dominance by way of ruthlessly applying its military might. This may possibly be so. But to judge it on this flimsy basis alone is to render verdict both prematurely and unjustly.
(Part 1 of this analysis appeared Wednesday. Send your comments to: [email protected].)
