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Outlook: All About Oil?

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Steven Mufson
Washington Post Energy Reporter
Monday, March 17, 2008; 12:00 PM

"Five years after the United States invaded Iraq, plenty of people believe that the war was waged chiefly to secure U.S. petroleum supplies and to make Iraq safe -- and lucrative -- for the U.S. oil industry. We may not know the real motivations behind the Iraq war for years, but it remains difficult to distill oil from all the possibilities. That's because our society and economy have been nursed on cheap oil, and the idea that oil security is a right as well as a necessity has become part of our foreign policy DNA, handed down from Franklin D. Roosevelt to Jimmy Carter to George H.W. Bush. And the war and its untidy aftermath have, in fact, swelled the coffers of the world's biggest oil companies. But it hasn't happened in the way anyone might have imagined."

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Washington Post energy reporter Steven Mufson was online Monday, March 17 at noon ET to discuss his Outlook article studying whether and to what extent maintaining U.S. oil security was the goal of the Iraq War.

The transcript follows.

Archive: Transcripts of discussions with Outlook article authors

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Golden, Colo.: If the war was not about oil, but security, why -- short of major-league incompetence -- did we attack Iraq and not Saudi Arabia? Saudi provided the majority of the Sept. 11 hijackers and continues to be tied to terrorism, and is not exactly what we would call a fountain of democracy.

Steven Mufson: If the administration, like pretty much all U.S. administrations, cares about security of oil supplies, there would be no reason to attack Saudi Arabia -- which pumps pretty steadily -- and many reasons not to, because you never know what happens once the shooting starts.

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Lanham, Md.: It seems that the primary concern about Iraqi oil -- or any oil for that matter -- is that it flows; to whom doesn't matter. The more that flows the lower the futures spot price -- and that is what the U.S. and all oil consumers care about. For example, if Saddam had decided to make an exclusive agreement to sell oil to China instead of the U.S., wouldn't that have freed up oil China was buying elsewhere? And wouldn't that therefore be a zero net for the U.S.?

Steven Mufson: From a world supply-and-demand point of view, the important thing is only that the oil flows, so that there is more supply and a lower price than there would have been otherwise. The "to whom" matters to individual companies, however. U.S. sanctions had barred U.S. companies from working in Iraq, and some other nations stepped in under Saddam Hussein -- much to the dismay of U.S. companies, no doubt.

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Arlington, Va.: There is a well-sourced report with links that details much of the energy saga from Carter to present along with links to reports from the GAO, DOE and others on the energy/oil situation that our country has faced here. The problem has been and continues to be that the problem unfolds slowly and has uncertainties as to timing. We, as a country deal pretty well with immediate crisis, but this one required long-term thinking, and I'm afraid we have waited too long to avoid serious disruptions to many systems. People want to blame someone or hope for a white knight in the form of technology, but what we need is some frank and honest discussion, along with a realistic plan. Thank you for writing an article about it.

Steven Mufson: Jimmy Carter certainly was focused on the energy problem, and some of the speeches he gave as president look prescient today. Also, President Ford took action on auto fuel efficiency and that looks wise today. But as you say, the thing about energy development projects or changing the mileage of auto fleets or the efficiency of home appliances is that most of them take a long time. Our energy-based society has been a long time in the making, and will take some time to alter.

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Munich, Germany: I think that it's naive to consider the Iraq War as the result of backslapping agreements between oil men, but priorities regarding oil availability do seem to be part of the DNA of Washington politics. Regarding the politics of concessions, what was the situation in Iraq before the Iraq War, and what is the situation now between Russian, French and American oil companies? Was there room for argument that Russia and France opposed the Iraq War because they feared losing lucrative oil contracts if Saddam Hussein was overthrown?

Also, you mention that the current petroleum law supports long-term production-sharing agreements that are only used in 12 percent of the world. Could the Iraq government ever have the chance of creating and managing, as an alternative, a state-run enterprise like Saudi Aramco, Russia's Gazprom, CNPC of China, NIOC of Iran, Venezuela's PDVSA, Brazil's Petrobras or Petronas of Malaysia?

Steven Mufson: You raise a lot of good questions. Saddam Hussein must have hoped that oil contracts with French and Russian companies would help win support of those countries' governments and help prevent war. The fate of those contracts and companies is still a matter of negotiation, I believe.

The Iraq state oil company and the Iraqi oil ministry are essentially indistinguishable, but part of the conversation about reform of that sector is the possibility that the state oil company might be turned into a more professional, less political enterprise more like Saudi Aramco. But Iraq still would need investment and technology from abroad, and the companies that provide that will expect to be compensated somehow. Production-sharing agreements are one way to do that, but not the only way; the proposed petroleum law does, I believe, make provisions for different kinds of contracts.

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Austin, Texas: I do not know where Steven Mufson got the stupid idea that FDR and Jimmy Carter handed this down. It started with Ronald Reagan (with Col. North a trader), George Bush senior and his deserter son George W. Bush, and now you have the nerve to blame it on two great presidents who were Democrats and not a deserter. How lame you are. How dumb do you think Americans are? You and the likes of you will destroy America and then wonder how it happened.

Steven Mufson: My reference to FDR was that in the 1940s he was involved in negotiations that led to the creation of the Arabian-American oil company, the U.S.-led consortium that ran the Saudi oil industry for many years afterward. It evolved into Saudi Aramco.

My reference to Carter was a reference to the Carter Doctrine. Carter made it clear that the free navigation of the Strait of Hormuz was a vital U.S. interest and would be defended militarily if necessary.

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Chicago: This article does not really contradict the theory that oil played an important role in the U.S. decision to invade Iraq -- it concludes only that American oil-related ambitions have not worked out. Big powers never make policy toward the Middle East without considering oil as an important factor. There were other reasons for the war: to eliminate weapons of mass destruction, to spread democracy, to protect Israel, to ease pressure on Saudi Arabia and to rescue the honor of the Bush family. None has been achieved. Nearly every participant in the war, especially the U.S. and Iraq, has emerged as a loser. The only big winners, other than war and reconstruction contractors, were the Kurds and Iran. American oil companies may still be hoping for benefits, but they have not yet materialized.

Steven Mufson: Thanks for this comment.

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Modesto, Calif.: How important was Saddam Hussein's switch from U.S. petrodollars to Euros in possible (hidden) reasoning for the U.S. invasion of Iraq?

Steven Mufson: I don't think it mattered. The pricing of oil in dollars is a perennial issue. These days Iran and Venezuela are leading voices for switching to a trade-weighted basket of currencies for oil.

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Alexandria, Va.: What exactly is the the status of the pending petroleum law? From your brief description it sounds like the long-term production-sharing agreements contemplated by the law will be very favorable to the purchasers.

Steven Mufson: A production-sharing agreement is a framework. The terms must be negotiated. They could be very favorable to foreign companies, or they could be stingy and more like service contracts. The petroleum law still is awaiting action by the Iraqi parliament.

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San Francisco: Before we invaded Iraq we were told that Iraq's oil revenues would pay for the cost of the war. For example, in March 2003 Paul Wolfowitz said that Iraq would be able to "finance its own reconstruction and relatively soon." That didn't pan out, and now there are estimates that the war will cost us more than $3 trillion. Meanwhile, as the New York Times reported recently, oil money is supporting the war -- it's just supporting the wrong side.

washingtonpost.com: Iraq's Insurgency Runs on Stolen Oil Profits (New York Times, March 16)

Steven Mufson: The administration apparently did not expect or plan for the violence that took hold in postwar Iraq. As a result, its cost estimates were probably a lot lower than the costs turned out to be. Moreover, it probably was reluctant to talk about costs because that might have made Americans and Congress pause and consider them. Larry Lindsey, then a top economic policymaker, was rebuked when he gave an estimate that now looks quite modest. The amount of money flowing to the insurgency may be modest compared to government revenues, but it's cheaper to run an insurgency than it is to run a government or to keep the U.S. military forces there running.

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Kensington, Md.: I found your Outlook piece a mixed bag. On the plus side, it is among the times I can count on one hand that our mainstream media has ventured near this taboo topic since the whole deception campaign started in 2002. On the minus side, it was rife with the usual strawmen that seem to get skillfully shot down every time we see the subject treated.

The central one is that you endorse this childlike conflation of "our" national interests with the interests of those people who actually made the decision to invade. You seem to think that only Bush and Cheney had oil connections, when in fact the administration is infested with oil people, and was bankrolled into office by them (check opensecrets.org -- e.g. Condi Rice was on Chevron's board of directors and had a tanker named after her).

You also completely gloss over the episode in which Cheney fought to the Supreme Court to keep secret the details of his 2002 meetings with oil executives. The question wasn't whether we (the country called the United States, and its people) went there to achieve "oil security," it is whether Chevron-Texaco/Exxon-Mobil and the like went there in our name (and with our tax money and our soldiers' blood) to situate themselves well for the downslope of the oil age. In other words, you didn't even ask the right question. But thanks for the token raising of the issue, I guess.

Steven Mufson: Thanks for your comment. There are many meetings, like the Cheney one you mention, that could be revealing if we knew more details about them. I do not dismiss their importance -- but I do think there were many groups and individuals pushing for the war in Iraq, and many of them had different points of view. What the president and vice president were thinking is critical, of course.

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Steven Mufson: I want to add some comments I received by email from Antonia Juhasz, one of the authors I mention in the article. She has been outspoken about the role of oil companies. Here are some extensive excerpts from her comment to me and some of my thoughts on it.

"First, the war in Iraq is about oil. It is about other things as well, such as security for Israel and regional and global hegemony. The war in Iraq is not, however, an attempt to ensure cheap gasoline for American consumers. It is a war to, among other things, provide oil security for American oil companies.

"According to the U.S. Federal Trade Commission, the largest U.S. oil companies will deplete their own conventional oil reserves within fifteen years. They need new sources of oil and they are spending billions of dollars and taking heretofore unheard of risks in their mad dash to get a hold of the world's remaining sources of oil -- from the deepest reaches of the ocean to the heavily environmentally polluting Canadian tar sands, to the military tinderboxes of Nigeria and, yes, Iraq. Oil companies are demonstrating the world over that their pursuit of oil knows no bounds."

My comment: Yes, oil companies look all over the world for oil. That's what they are supposed to do, and many people criticize them for not spending more on exploration and production while they buy back shares. I also would be cautious about predictions of the companies' reserves running out -- I covered the oil and gas industry in the early 1980s, and similar predictions were made then. Technology helps postpone that day of reckoning, though I agree that it is a challenge for them to replace reserves, and many of the biggest companies had trouble doing that in 2007.

Antonia continues: "U.S. oil companies already have sizable marketing contracts for Iraqi oil. Remarkably, Mr. Mufson dismisses that Iraq's oil has been pumping near, at, and at times above prewar levels since shortly after the invasion. This is a remarkable feat given that the same cannot come close to being said about the provision of Iraq's electricity, water, sanitation services, health care, roads, schools nor any other form of infrastructure rehabilitation. Nor does Mr. Mufson note the more important point in terms of a war being for oil: Iraq's oil is being exported at slightly higher amounts than it had been before the war began, and most expect this number to continue rising while Iraqis face mounting shortages of fuel at home."

My comment: I have interviewed oil industry people, Iraqi oil ministry officials and others, and no one estimated that Iraqi oil output was higher than prewar numbers. Getting closer, but not there yet. I should add that that is quite an achievement, given the poor condition of oil facilities when the war started and the further damage done afterward. And yes, I agree that similar progress has not been achieved in other areas, and that more progress in those areas desperately is needed.

Antonio adds: "ExxonMobil, Chevron, Marathon and ConocoPhillips, among others, already are making millions off of this oil. However, it is the American taxpayer, U.S. and coalition soldiers, and Iraqis who are "footing the bill" in Iraq, not the U.S. oil industry. But U.S. oil companies want much more than this.

"The oil industry spent more money to see the Bush/Cheney team put into office in 2000 than it has spent on any election in at least the last 20 years, according to the Center for Responsive Politics.

"It worked to get Bush/Cheney into office knowing full well of the clearly articulated intentions of the leading members of the Bush administration to seek 'regime change' in Iraq."

My comment: The oil industry did provide a lot of support in the 2000 campaign, but I wonder whether their goals were more modest: opening up more of Alaska for exploration, for one. It would be hard to have imagined in 2000 the circumstances that led to war in Iraq, starting with the Sept. 11, 2001, attacks that the Bush administration used as part of its argument for war.

She continues: "Oil is, of course, about more than oil company profits. Control over oil offers an unparalleled source of regional and global hegemony. As Paul Wolfowitz said in 1991, 'The combination of the enormous resources of the Persian Gulf, the power that those resources represent -- it's power. It's not just that we need gas for our cars, it's that anyone who controls those resources has enormous capability to build up military forces.' The danger, Wolfowitz said, could come either from Iran or from a rebuilt Iraq, perhaps by the end of the decade. The more oil one controls, the more it can be used both to secure alliances and weaken enemies. Threatening leaders are made all the more powerful by their control of oil.

"The desire for oil politics and oil company profits, however, find a unique home within the Bush white house.

"Mufson leaves out of his discussion the key prewar planning that took place in the Bush White House. Just ten days into the Bush administration in March 2000, Cheney began holding meetings that became known as the Cheney Energy Task Force. Thanks to the Freedom of Information Act we now know that meeting participants scanned maps and detailed tables of Iraq's entire oil productive capacity, as well as 'foreign suitors' from other nations seeking to get their hands on Iraqi oil. These maps are posted for all to see on the Web site of Judicial Watch. Thanks to newspapers, including The Washington Post, we know that leading U.S. oil executives and their representatives participated in the Cheney Energy Task Force. Numerous books also have made clear that while the Cheney Energy Task Force was poring over Iraq's oil maps, and that the White House simultaneously had begun its prewar planning for the invasion of Iraq."

My comment: The vast oil fields of Iraq and their enormous reserves were no big secret, and maps of them are published widely. And it was no secret that oil companies from all countries were eager to get involved exploiting them.

I'm running out of time to respond to everything, but I think it's worth posting the rest of her comments. I'll make one more comment at the end.

"Once the invasion was launched, the question then becomes 'how do you "win" a war for oil'? How do you wrest control of the oil away from Saddam Hussein and turn it over to U.S. 'control'? (Hussein was not willing to offer U.S. oil companies access to his oil under the ground, but who was making such deals with other oil companies from other nations, including Russia and China -- locking out U.S. oil companies and denying them the ability to 'trade with devil' as Mr. Mufson implies U.S. oil companies would have preferred.) Does Chevron ride in on a tank behind the U.S. Marine Corps, stick its flag in the sand, and declare 'mission accomplished'? Well, some members of the Bush administration envisioned such a scenario, but others working with the administration and within the U.S. oil industry (through the International Tax and Investment Center, which drew up its own plans for the privatization of Iraq's oil industry) came up with a better scenario: After ousting Hussein, replace his government and rewrite his entire economic and political legal infrastructure, then have the Iraqis turn over the oil themselves in the form of a new national oil law that would turn Iraq from a nationalized to privatized model and grant oil companies the long-term contractual security they only could dream of prior to the invasion.

"This vision became reality in the Iraq oil law. The fact that the law has not passed does not make the law irrelevant, as Mr. Mufson suggests. The law has not passed because the vast majority of Iraqis do not want it. The vast majority of Iraqis also do not want the occupation, but that has not stopped the occupation from continuing.

"The fact that the oil law has not passed also does not mean that the Bush administration or the oil companies have given up. Just this past Valentines Day, ExxonMobil Corporate Vice President Daniel Nelson, speaking in Houston, said: 'My guess is every international oil company in the world, knowing Iraq is blessed with terrific god-given natural resources, is interested in Iraq. I'm not giving any competitive secrets away there.' While noting that security is crucial, Nelson added, 'more important is you have confidence you have a system of laws and a system of fiscal stability that's going to be together for not only the six, seven, eight, nine years that it takes from the time you start up working in a venture to the time you have significant production, and through that 30-year period you really need to get the returns back.'

"It is the Iraq oil law that grants the 30-year protection ExxonMobil is seeking.

"A confidential U.S. intelligence report on the Iraq oil law that leaked to ABC News concluded that if 'major foreign oil companies' were going to go to work in Iraq, they would need to be 'heavily underwritten by the U.S. government.' I take this to mean the U.S. military.

"As Gen. John Abizaid, retired head of U.S. Central Command and military operations in Iraq said at Stanford in 2007 about the Iraq war, 'of course it's about oil -- we can't really deny that.'

"Apparently Mr. Mufson knows something about the war in Iraq that Gen. Abizaid, former Federal Reserve Chairman Alan Greenspan, myself and millions of others do not. I hope that one day he will share that information with us."

One last comment from me: It's important to distinguish between oil companies' undeniable and perfectly reasonable interest in getting access to the world's biggest oil reserves outside Saudi Arabia, and a decision by the administration to alter U.S. foreign policy to help corporate interests. Some of the things cited here -- Nelson's comments for example -- may not be sinister, but simply a function of the business he's in. Of more interest to me (and more difficult to be certain about) is the thinking at the top levels of the Bush administration. What Antonia has written brushes aside a lot of other topics: WMD, democracy, the long list of chemical weapons that the United Nations Special Commission's Ekeus (no hawk) said were unaccounted for, etc., etc. Going to war is a complicated thing, but I do agree that it is important to consider the role of oil too -- and that's why I wrote the piece, and that's why I've posted these extensive comments from someone critical of the war.

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Chicago: As the Iraqi oil starts flowing more and more per day, how will that effect the Iraqi dinar? Will they revalue to compete with the dollar? Is Iraq planning to become Dubai Part 2? Does the U.S. have a master plan for Iraq?

Steven Mufson: Iraq has many many priorities in basic needs -- electricity, water, etc., not to mention basic security -- before it starts to think about being Dubai. Iraq is in many ways an undeveloped country and needs to make progress in many areas, from literacy to industry.

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Baltimore: Would an investment the size of this war's costs in other energy sources (renewables, clean coal, etc.) sink world oil prices more then opening up Iraq's oil fields? Does that negate the geopolitical, oil-price-tanking theory of how oil was behind the reasoning for the war?

Steven Mufson: There are, as I said, other factors that have driven up oil prices -- but more supply definitely would help drive prices substantially lower than they are today. One caution: Renewables such as wind and solar help cut electricity use, not petroleum use. That only will help cut petroleum use when we start hooking electric cars into wall sockets.

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Deer Trail, Colo.: Seems to me the slant of the question skews the analysis. The question is not whether the Iraq war was intended to be advantageous for the U.S. and other Western oil companies. The question is whether the war was intended as "strategic denial" to competitors like China -- which was the most important of the dozens of "potential suitors" to Iraq's oil so far identified as Saddam's mortal sin against the West (that is, he was willing to sell oil to the "most-likely enemy" on the horizon). So, my question is whether the war can be explained as a simple balance-of-power equation -- a post-Cold War battlefield where the United States takes over the key pawns in a game that is expected to develop through the coming decades, as China emerges as a global rival? What do you think?

Steven Mufson: I don't think that China was a key issues. Yes, China was seeking access to Iraq's oil, as it has sought access elsewhere, but I believe the Bush administration had other priorities in Iraq. There were many people in the administration concerned about the rise of China, but that issue took a back seat after Sept. 11, I believe.

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Steven Mufson: I need to stop now, but thank you very much for your comments. I still believe that this is an important topic to examine, and that different people involved in prewar planning had different agendas. It's important to think more -- and report more -- about the role of oil, and I hope to write about it again in the future.

Thanks again for reading The Washington Post.

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