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The Haggling Over Iraqi Oil

More than six years after US forces captured Baghdad, American combat troops have withdrawn  from all Iraqi cities and towns, handing over full control to the 600,000-strong Iraqi army and police and marking a crucial step in Iraq’s return to independence.

Iraqi state television showed a clock with an Iraqi flag marking the time  remaining until the US pull-out with the words: “June 30: National Sovereignty Day”. The Prime Minister Nouri al-Maliki who, although closely allied to the US, nevertheless calls its departure a “great victory”, declared it a national holiday.

The strength of Iraqi nationalism was evident as Iraqis celebrated, with an enthusiasm not seen for years, the departure of US troops from cities and towns. Boats on the Tigris, which flows through Baghdad, sported Iraqi flags. Soldiers shinned up telegraph poles to tie flags to the top. People drove through the streets with flags and plastic flowers attached to their cars as if they were going to a wedding. Thousands of Iraqi soldiers paraded in the Green Zone in celebration.

Even before June 30 US troops had mostly already left the towns and cities where they were once the predominant military force. For months, it has been uncommon to see US patrols on the streets in Baghdad, though they have been more visible in Mosul in northern Iraq where there is more fighting

The Pentagon was intent on avoiding any dramatic television pictures showing Americans in retreat which might stir memories of the fall of Saigon in 1975. It will keep 130,000 soldiers in bases outside urban areas until September and then steadily withdraw all combat troops from Iraq by August 2010 and remaining forces by the end of 2011.

The US  is seeing its power drain away as Iraqis take on board that American troops really are going. Mr Maliki is seeking to burnish his nationalist credentials by claiming it was he who forced the US to accept a timetable for the end of the occupation during lengthy and rancorous negotiations for a US-Iraq “status of forces agreement” signed by George Bush last year. President Barack Obama is sticking rigorously to this timetable.

A small number of US troops will remain behind but their presence will be low key and largely invisible. Convoys from Camp Victory, the US base at Baghdad airport, will travel to the Green Zone in central Baghdad only at night. In Mosul, US vehicles must have signs saying they are not part of a combat force. In rural areas, US combat operations can continue only with the permission of the Iraqi government.

Six years ago, Iraqis generally welcomed the overthrow of Saddam Hussein. But, unlike the US troop presence in Afghanistan, the US occupation was largely unpopular, according to opinion polls. Sectarian and ethnic divisions within Iraq were deepened by the occupation because each of the three big communities responded differently to it: Kurds supported it, Sunni Arabs fought against it and the Shia Arab majority co-operated with it in order to establish their rule. Having taken power, the Shia now want the Americans out, while many Sunni, defeated in the sectarian civil war between 2005 and 2007, are fearful of losing US protection.

The days immediately prior to the pullout saw a sharp increase in violence with some 250 Iraqis killed, mostly by vehicle-borne bombs targeting crowded Shia markets and worshippers leaving mosques. These atrocities have provoked doubts about whether or not the Iraqi security forces are capable of dealing with al-Qa’ida, the presumed perpetrators. Sadly, experience shows that neither Iraqi nor American security can stop bombs aimed at civilians.

Al-Qa’ida’s aim in attacking the Shia is to provoke reprisals by the Shia-dominated security forces against the Sunni community, which might then become frightened enough to turn back to al-Qa’ida gunmen for defense. This could happen, but so far Iraqi government forces have not taken the bait.

Security is much improved in Baghdad and central Iraq compared to two years ago, when 3,000 people were being killed every month. But the improvement is only in contrast to the slaughter of the recent past. Baghdad may now be safer than Mogadishu, but it is still more dangerous than Kabul, The 2.2 million refugees who fled to Jordan and Syria are not returning in large numbers.

The refugees are not coming back because they are still dubious about security and living conditions. Electricity supply is better this year, but is still not permanent. There is a continuing lack of clean water. Iraq now has no fewer than 18 million mobile phones compared to none under Saddam, though the reliability and quality of the service has dropped alarmingly in the last year. Some two million people have jobs with the government and are well paid, but there is little other secure employment.

Iraqi society, infrastructure and economy were shattered by 30 years of war and sanctions. The US occupation failed to rebuild what was destroyed and, in many ways, exacerbated Iraq’s problems.

Iraq is locked in a struggle with the world’s largest oil companies over contracts that would see “Big Oil” return to the Iraqi oilfields for the first time in almost 40 years. The award of contracts began in Baghdad on June 30  and were broadcast live on television to show there were no secret corrupt deals. But the process was immediately in trouble as some of the 32 international oil companies involved balked at the low level of fees they would be paid by Iraq.

The government had hoped they would take risks to become involved once again in Iraq’s oilfields, where reserves at an estimated 115 billion barrels of crude are estimated to be the third largest in the world. Iraq wants to raise its faltering oil production, income from which is desperately needed to reconstruct the country after decades of war.

At stake were six producing oilfields and two undeveloped gas fields, the most important of which is the massive south Rumaila oilfield just north of the Kuwaiti border. The contract finally went to a consortium led by BP and included the China National Petroleum Company, but only after its initial bid, as well as that of a rival consortium led by Exxon Mobil, had been rejected by the Iraqi Oil Ministry as too low. Other fields attracted less interest.

What happens to Iraq’s oil will determine the future shape of the world’s energy supply. Iraq and Iran are the only countries in the world which are believed to have huge reserves of undiscovered crude, but war and sanctions have prevented exploration. Beneath Iraq’s western and southern deserts may be a further 100 billion barrels of recoverable oil. Decades of under-investment, limited expertise and poor management means that Iraq’s oil output is falling and at 2.4 million barrels a day is below what it was in the final days of Saddam Hussein in 2003.

The Iraqi Oil Minister Hussain Shahristani has been hoping to attract international oil companies by asking them to provide investment and technology over 20 years in return for a fixed fee to be paid for every extra barrel of oil they could produce over an agreed minimum which may be higher than current production. This is risky for the companies because neither they nor the Iraqi Oil Ministry know the extent of the damage done to the giant reservoirs by reckless exploitation or how much money it will cost to restore them.

At the opening of bids in Baghdad’s al-Rashid hotel, the start of which was delayed by one day because of sandstorms, the Exxon Mobil-led consortium asked for a fee of $4.80 for each barrel produced above the minimum, while BP wanted $3.99 a barrel, said Mr Shahristani. He said Iraq would pay only $2, a demand which was finally accepted by BP.

Mr Shahristani, a nuclear scientist who was imprisoned and tortured under Saddam Hussein, has to guard his back from criticism that he is selling out Iraq’s only asset. He points out that the companies will not own a single barrel of Iraqi oil and that the country will get an extra $1.7 trillion in revenue over 20 years which will pay for “infrastructural projects across Iraq – schools, roads, airports, housing, hospitals”.

Iraqis are frequently suspicious that the secret purpose of the US invasion of 2003 was to seize their oil reserves which are their country’s only resource. Playing the nationalist card over oil has been frequent as different political parties and factions vie for its control. Mr Shahristani has been under sustained attack in parliament for not stopping a fall in oil production and for bringing in foreign companies. He responds that Iraq has no choice if it is going to more than double its output to five million barrels a day in five years’ time.

PATRICK COCKBURN is the author of ‘The Occupation: War, resistance and daily life in Iraq‘ and ‘Muqtada! Muqtada al-Sadr, the Shia revival and the struggle for Iraq‘.

 

 

 

 

 

 

 

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Patrick Cockburn is the author of  The Rise of Islamic State: ISIS and the New Sunni Revolution.

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