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It was done to drive the price of oil down. But it was also done to keep the price of oil up. But mainly it was done to keep the price of oil stable. Confused? Read on.
"There are kooks and cranks and conspiracy nuts out there who think George Bush, from the moment he took office, had some kind of secret plan to invade Iraq and grab control of its oil. They're wrong.
There were two plans. I've got them both. One is 323 pages long, the other 101 pages."
"Plan A:"
In February 2001, a meeting organized by Colin Powell's State Department was held in Walnut Creek, California, in the home of Falah Aljibury, an Iraqi-born consultant on Iraq's oil industry. The "Three-Day Plan" they came up with was "an invasion disguised as a coup," "kind of a Marine-supported Bay of Pigs." Saddam was to be replaced by some Ba'athist general cashiered by him, possibly the exiled General Nizar Khazraji -- "the secret group was already contacting Saddam's generals to switch allegiance. Then, according to their playbook, there would be snap elections, say within 90 days, to put a democratic halo on our chosen generalissimo."
"Crucially, the quickie coup-cum-invasion had friends where it counted. "The petroleum industry, the chemical industry, the banking industry," Aljibury told me. "They'd hoped that Iraq would go for a revolutiojn like other revolutions that have occurred in the past and government was shut down for two or three days" . . .
The idea was that no matter which strongman the Bush team designated, they would "bring him in right away and say that Iraq is being liberated - and everybody stay in office . . . everything as is." And by "everything" he meant, first and foremost, the key thing, the oil ministry and state oil company. While the Walnut Creek committee was busy-busy with many topics, Aljibury said, "It quickly became an oil group."
"Plan B:"
But in November 2001, following the U.S. victory in Afghanistan, the Pentagon, dominated by neoconservative PNAC members Donald Rumsfeld, Paul Wolfowitz and Elliot Abrams, had other and very different ideas:
"It was nothing like State's three-day quickie. The neo-cons' 101-page confidential document goes boldly where no invasion plan had gone before: the complete rewrite of the conquered state's "policies, laws and regulations." Here's a sample:
* Pages 8 & 21: A big income tax cut for Iraq's wealthiest and complete elimination of taxes on business revenues.
* Pages 35 & 73: The quick sale of Iraq's banks, bridges and water companies to foreign operators.
* Page 45: The application for Iraq to join the World Trade Organization, kindly ghostwritten by U.S. government contractors.
* Page 28: A "market-friendly" customs law -- a kind of super-NAFTA -- aiming for complete wipeout of tariffs that had protected Iraq's industry from cheap foreign imports.
* Page 44: New copyright laws protecting foreign (i.e., American) software, music and drug companies.
Odd to attach to an invasion plan. It was more like a corporate takeover, except with Abrams tanks instead of junk bonds. There wasn't a whole lot of thinking going on about strengthening the borders against insurgents, disarming private armies or securing Baghdad from looters; and not a thing about elections or "democracy." . . .
<snip>
. . . Selling off banks and bridges was just the beginning. The would-be conquistadors left nothing to chance -- or to the Iraqis. At page 74, the plan's authors required Iraq to "privatize" (i.e., sell off) "all state-owned companies." . . . "
But it goes deeper than that: The core of the neocons' plan was to use Iraq to break the back of OPEC! Privatize the state-owned oilfields among several small companies, let them compete with each other, and they'll up production and drive down the price of oil and even Saudi Arabia will have to follow suit! That idea was Ari Cohen's baby, and he called it a "no-brainer."
After the invasion, the first American viceroy was General Jay Garner, who was committed to neither plan but inclined strongly towards Plan A. His own view was that Iraq's value to the U.S. was as a "coaling station," a base for projection of American power in the MENA as needed, the role the Philippines once played in the South Pacific. As for the oil, that would be left to the Iraqis to decide. Garner wasn't much committed to democracy in Iraq, for its own sake, but regarded it as an urgent practical necessity:
"In his rush to democracy, Garner had planned what he called a "big tent" meeting of Iraq's tribal leaders to plan national elections. Garner knew these characters well and figured he had only those 90 days to keep the Sunni, Shia and Kurdish factions under the tent from slitting each other's throats. The general planned to seal a deal before a slighted group would launch an "insurgency."
All that was unacceptable to the Pentagon neocons. Rumsfeld fired Garner on 4/21/03 and replaced him with Paul Bremer, who put off elections indefinitely -- even municipal elections -- while proceeding to implement almost every economic and legal element of Plan B by his own fiat. Order 37: Flat tax on corporations, individual income tax capped at 15%. Order 40: Iraqi banks sold off to three foreign financiers with no bidding process. Order 12: Iraq to become the only country on Earth with no tariff barriers or import quotas at all. Iraqi industry, limping along after 12 years of sanctions, was shattered by this. Agriculture too; Cargill flooded Iraq's market with wheat, driving Iraqi farmers out of business. And "Order 100 ensures that, "the interim government and all subsequent Iraqi goverments inherit full responsibility for these laws, regulations, orders, memoranda, instructions and directives," which effectively locks in the economic rules of occupation."
Hussein's prohibition on public-sector labor union activity, however, remained in place; 12/03, Bremer arrrested the entire board of the Iraqi Workers Federation of Trade Unions.
While this was going on several billion dollars in Iraqi oil revenue and U.S. reconstruction funds simply disappeared, but investigation is hampered by the Coalition Provisional Authority having been, according to some lawyers, neither an Iraqi nor a U.S. government agency -- and later on, it was dissolved. "The perfect getaway car -- one that simply disappears." In fact, some lawyers argue the CPA never had any legal existence in the first place, so there. (See this thread and this one.)
Every element of Plan B was implemented, except privatizing the oil industry. There were two big problems with that plan that had somehow escaped the notice of the neocon ideologues:
1. Saudi Arabia won't allow OPEC to be broken, and has the power to stop it. As Nawaf Obaid, a Saudi-born economist, think-tanker and member of the Saudi National Security Assessment Project, explained it to Palast:
"Obaid explained the oil facts of life. In the short term, Iraq's fields were trashed even before saboteurs torched them. The CIA and the Pentagon knew it no matter what Wolfowitz said to bobble-headed Congressmen. In the long run, however, many years from now, Iraq, with 114 billion barrels of proven reserves, might be able to crank up above its OPEC quota.
But that won't happen. The globe is littered with the economic skeletons of nationsl that flagrantly busted their OPEC quotas. There's the skeleton of Venezuela. In 1973, Venezuela broke the first Arab oil boycott. But in 1997, when Venezuela again ramped up production, punishment was swift. Saudi Arabia, which can live without big oil revenues for up to a year, opened its spigots and drowned the market. The price of oil dropped to $8 a barrel and Venezuela went bankrupt. Its government fell. The current President of that nation, Hugo Chavez, is now a very good member of OPEC, indeed its most frantic adherent to the quota system.
The Soviet Union was also givena price-cut whupping. In the 1980s, the Saudis dropped the price of oil to punish Russia for its wild expansion of oil-pumping capacity and for the Soviets' invading Muslim Afghanistan. This choking loss of oil income had a lot more to do with the Soviet Union's collapse than Ronald Reagan's crooked smile.
Saudi Arabia has kept its economic knife sharp for Iraq if, under neo-con influence, Iraq were to exceed its OPEC quota. The war-stoked jump in oil prices put $120 billion in Saudi Arabia's treasury in just one year (2004), triple its normal take. This gives the kingdom the cash to hold its breath economically should it need to drop the price of oil for a year to bring Iraq, or any quota-busting nation, to its knees.
Besides, said Obaid, why should President Bush allow troublemakers at the Pentagon to use Iraq to attack the House of Saud when the Saudi royals were so supportive of Mr. Bush's goals? "
2. The international oil companies don't want OPEC busted.
The five big international oil companies own some oilfields of their own, but they have to buy most of the oil they refine from the nationalized oil industries of the OPEC nations. You might think they would want to buy it as cheap as they can, so they can pocket the difference, or else charge less at the pump and sell a lot more gasoline, but it's not that simple:
". . . When OPEC raises the price of crude, Big Oil makes out big time. The oil majors are not simply passive resellers of OPEC production. In OPEC nations, they have "profit sharing agreements" (PSAs) that give the companies a direct slice of the higher price charged. More important, the industry has its own reserves whose value is attached, like a suckerfish, to OPEC's price targets. Here's a statistic you won't see on Army recruitment posters: The rise in the price of oil after the first three years of the war boosted the value of the reserves of ExxonMobil alone by just over $666 billion. The devil is in the details."
Maintaining the status quo for the oil companies requires holding down oil production, and Iraq has been assigned that sorry role since it was founded (it has 74 known oil fields and only 15 in production). In 1927, the major oil company execs met at a hotel room in Belgium and signed an agreement: The Anglo-Persian company (now British Petroleum) would pump almost all its oil from Iran; Standard Oil, under the name of the Arabian-American Oil Company (Aramco), would limit almost all its drilling to Saudi Arabia; Anglo-Persian would drill in Iraq’s Kirkuk and Basra fields but it would drill very little.
"When the British Foreign Office fretted that locking up oil would stoke local nationalist anger, BP-IPC agreed privately to pretend to drill lots of wells, but make them absurdly shallow and place them where, wrote a company manager, "there was no danger of striking oil." "
In the early '60s, the frustrated Iraqi government canceled the BP-Shell-Exxon concession and nationalized the oil fields, but that didn’t solve the problem.
". . . The OPEC cartel, controlled by Saudi Arabia, capped Iraq’s production at a sum equal to Iran’s, though the Iranian reserves are far smaller than Iraq’s. The excuse for this quote equality between Iraq and Iran was to prevent war between them. It didn’t.
To keep Iraq’s Ba’athists from complaining about the limits, Saudi Arabia simply bought off the leaders by funding Saddam’s war against Iran and giving the dictator $7 billion for his "Islamic bomb" program. "
When Hussein invaded Kuwait in 1990, he was hoping to increase Iraq’s OPEC production quota by adding Kuwait’s to it.
So why did Hussein -- a secular Ba'athist, no sponsor of Islamist terrorism, possessing no WMDs, contained as a military threat, yet arguably still useful as a counterbalance to Iran -- why did Hussein, finally, have to go?
"The answer was that Saddam was jerking the oil market up and down. One week, without notice, the man in the moustache suddenly announces he’s going to “support the Palestinian intifada” and cuts off all oil shipments. The result: Worldwide oil prices jump up. The next week, Saddam forgets about the Palestinians and pumps to the maximum allowed under the Oil-for-Food Program. The result: Oil prices suddenly dive-bomb. Up, down, up, down. Saddam was out of control.
"Control is what it’s all about," Lapham told me. "It’s not about getting the oil, it’s about controlling oil’s price." "
But neither could zealous neocon ideologues be allowed to upset the oil companies' apple cart. In May 2003, Phillip Carroll, former CEO of Shell Oil USA, former CEO of Fluor corporation, flew to Baghdad and confronted Bremer. Palast interviewed Carroll in March 2005 and got the story:
"The double-CEO laid down the law to Bremer. Carroll told me: Neo-con plan be damned, "I was very clear that there was to be no privatization of Iraqi oil resources or facilities while I was involved. End of statement." Furthermore, Carroll would permit no "De-Ba'athification" purge in "his" ministry -- oil.
The diminutive Bremer did not have the political testosterone to reply that, on paper, it was Bremer's ministry and as chieftain of the Provisional Authority, Bremer, not Carroll, was in charge. But Bremer understood that in the Great Game, a well-placed pawn, even one who used to play Kissinger's game, does not overrule a knight of the oil industry. Carroll's orders stood. "
Top global oil execs, including no Iraqis, met in Houston, 11-12/03, and drafted a 323-page plan, Options for a Sustainable Iraqi Oil Industry. Iraqis were to be offered seven options, all essentially the same: "seven flavors of state-owned oil companies." Privatization was not an option.
Ahmed Chalabi, a University of Chicago-educated neocon who fully supported the privatization plan and whom the neocons intended for Iraq's new president, was purged, and sought for arrest on espionage charges. His "governing council" was replaced by a new government headed by a Ba'athist blessed by the State Department. Bremer was booted out and the new Ambassador John Negroponte arrived to represent the U.S. in Iraq.
But it's not over yet. In February 2005 there was another shift in power, Negroponte was replaced by PNAC favorite Zalmay Khalizad, and Chalabi returned to power with the Shi'ites and became temporary oil minister. He fired Big Oil's favorites in the ministry -- but still did not dare try to privatize.
Where was W in all this? Who knows? But it appears both the Plan A and the Plan B team enjoyed the support of Cheney.
So there you have it. Why the U.S. invaded Iraq, and why we fucked it up: We went in with three incompatible agendas: Plan A, Plan B, and the stated aim of establishing a democratic government -- a promise that had to be honored in some form eventually, and was, with utterly disastrous results. With all that jerking back and forth, plus all that venality and corruption, plus the intractable political, religious and ethnic divisions among the Iraqi people themselves, how was it to be expected any good would come of it? Maybe if Garner had been allowed to do it his way, the situation could have been saved, but it's too late now.
And that's why American troops are still in Iraq and still killing and still getting killed. And that's why the Iraqi people are still suffering from high unemployment, destroyed infrastructure, and insurgent violence.
And that's why we're paying $3.00/gallon for gas at the pump.
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