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To the Victors Go the Spoils of War

British Petroleum, Shell and Chevron Win Iraqi Oil Contracts
by Pratap Chatterjee and Oula Al FarawatiCorpWatch
August 8th, 2003

BP-Shell-IraqOil

In the hours and days before the United States and Britain invaded Iraq, a team of British Petroleum (BP) engineers in Kuwait taught combat troops from the 516 Specialist Team Royal Engineers how to run the oil fields in southern Iraq. As soon as the troops had secured southern Iraq, Robert Spears, a Scottish manager from BP, was drafted by the British government to help direct the effort to rebuild the refineries.

In mid-July BP took possession of its reward -- one of the first tankers of oil from Southern Iraq, having won 25% of the initial sale of 8 million barrels of the existing stockpiles of Iraqi oil. The previous month California-based Chevron shipped back an equal quantity of oil from southern Iraq.

Retired engineers from Royal Dutch/Shell Group also helped in training the troops in Nottingham, England. Once the oilfields had been seized by the invaders, company workers were drafted by the British army and sent into southern Iraq to help with the reconstruction.

"We leveraged the private sector," US Brigadier General Robert Crear commented to the Wall Street Journal. Crear commands the Southwestern Division of the United States Army Corps of Engineers, which is in charge of reconstruction efforts in Iraq.

While the Bush Administration is under fire for failing to produce a single Iraqi weapon of mass destruction three months after the official close of the war, critics claim that the motive for the invasion all along was control of Iraqi oil. And if the bonanza in oil contracts won by giant oil companies is any indication, Washington is moving swiftly to secure access to Iraq's oil wealth once and for all.

To the Victors Go the Spoils

Shell along with Chevron, BP and seven other oil giants, have won contracts to buy Iraq's new oil production of Basra Light crude. The contracts cover production from the Mina Al-Bakr port in southern Iraq from August to December of this year. Under the deal, Iraq will supply 645,000 barrels per day (bpd) for export, an increase on the 450,000 bpd produced in July but still just a third of pre-war levels.

BP and Shell will each send one very large tanker every month to Iraq to pick up their two million barrels. Among the other companies that have signed deals to buy the oil are ConocoPhillips, Valero Energy and Marathon Oil, Total of France, Sinochem of China and a company from the Mitsubishi group, which is buying for Japanese refineries.

Iraq's northern export pipeline from the Kirkuk fields through Turkey has remained closed since the US occupation because of sabotage bombings and war damage.

The main job of overseeing the repair work of Iraq's oil infrastructure was discreetly awarded to Halliburton, a company formerly headed by United States Vice President Dick Cheney, just after the invasion of Iraq was completed. The company is the favorite to win the two contracts for reconstruction of the oil industry, one for the oil industry in northern Iraq and the other for the south. A total of 220 projects are planned which must be completed for Iraq's oil production to reach prewar levels. The projects are divided into three phases, with a total estimated cost of $1.14 billion.

Working in Iraq has helped bolster Halliburton's finances. The company made a profit of $26 million, in contrast to a loss of $498 million over the same time period a year earlier. The company stated that 9 percent, or $324 million, of its second-quarter revenue of $3.6 billion came from its work in Iraq.

Meanwhile the reaction to this news in the streets of the Arab world has been one of anger. Radwan Aziz, an Emirati citizen in Dubai, said: "Oil is what the US was after from all this."

Russia Left Out in the Cold?

The sales contrast sharply with contracts signed by the previous regime of Saddam Hussein with Russia and France. "Unfortunately, not a single Russian company managed to clinch a contract, as we went for the best price," says acting oil minister Thamer Ghadhban.

But Russian companies are worried that they are being shut out of new contracts and may even lose previous agreements. For example, in 1997 Russia's Lukoil signed a 23-year contract for the West Qurna field as the head of a consortium. The project is expected to produce 600,000 barrels of oil per day.

Shortly after the invasion in March Leonid Fedoun, vice president of Lukoil, told the Russian daily Kommersant that his company would sue any rival for Iraq's huge West Qurna oil field for at least $20 billion.

"Nobody can develop this field without us in the next eight years. If somebody decides to squeeze Lukoil out, we are going to appeal in the Geneva arbitration court [the International Commercial and Industrial Arbitration Court], which will immediately arrest this field," said Fedoun. The case could last up to eight years. Fedoun also threatened to have tankers of Iraqi crude halted to keep from losing the $3.7 billion investment in West Qurna.

Bush Makes Sure US Companies Go Unchallenged

But legally there is not much that the Iraqis or Russians can do to contest this in the United States because of an executive order signed by president George Bush in late May. Executive order number 13303 states "any attachment, judgment, decree, lien, execution, garnishment, or other judicial process is prohibited, and shall be deemed null and void", with respect to "all Iraqi petroleum and petroleum products, and interests therein."

With this, Bush granted Iraqi oil a lifetime exemption provided US companies are involved in the oil's production, transport, or distribution. This order applies to Iraqi oil products that are "in the United States, hereafter come within the United States, or that are or hereafter come within the possession or control of United States persons." (Under US law, corporations are "persons.")

"In other words, if ExxonMobil or ChevronTexaco touch Iraqi oil, anything they or anyone else does with it is immune from legal proceedings in the US," explained Jim Vallette, an analyst with the Sustainable Energy & Economy Network of the Institute for Policy Studies in Washington DC.

"Anything that has happened before with oil companies around the world -- a massive tanker accident; an explosion at an oil refinery; the employment of slave labor to build a pipeline; murder of locals by corporate security; the release of billions of tons of carbon dioxide into the atmosphere; or lawsuits by Iraq's current creditors or the next true Iraqi government demanding compensation -- anything at all, is immune from judicial accountability," he says.

"Effectively Bush has unilaterally declared Iraqi oil to be the unassailable province of US oil corporations," Vallette added.

Pratap Chatterjee is Program Director/Managing Editor of CorpWatch. Oula Al Farawati is a reporter for Pratts News Service based in Jordan.