Editore"s Note
Tilting at Windmills

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June 1, 2004
By: Kevin Drum

OIL POLITICS....Here are the answers to the two questions I posed about Iraqi oil over the weekend:

  1. Who do you think legally owns Iraq's oil presently, and who do you think gets the largest share of revenues from selling Iraqi crude oil to the world's refiners since the invasion?

    Answer: The practical answer is that in May 2003 the UN terminated the oil-for-food program and decided that Iraqi oil sales would be made "consistent with prevailing international market best practices." Proceeds would go into the Development Fund for Iraq, to be controlled by the occupying authorities. (In practice, Iraq's state oil marketing company overseen by U.S. administrators became the controlling authority for oil sales.) The resolution also stated that all oil sales would be immune from legal proceedings through 2007. Bottom line: the CPA controls oil exports and the UN has granted legal immunity from title challenges to the oil they sell. That was close enough to "legal ownership" for ChevronTexaco, and within a month of the passage of the resolution (and the parallel Executive Order 13303 from the United States) they loaded up and exported the first postwar tankerful of Iraqi oil.

    As for who's getting the lion's share of the revenue, it's impossible to say. The CPA keeps a very tight lid on their books, and I'm not sure anyone outside the government truly knows for sure where the oil revenue goes or what it's spent on. However, it is spent on reconstruction, and since the reconstruction contracts are mostly in the hands of large Anglo-American companies, and these companies appear to employ very few Iraqis, it's a pretty good guess that the bulk of the money is going to....Anglo-American companies and the citizens of their respective countries.

  2. Who do you think should legally own, control and benefit from the sale of the Iraqi crude oil after Iraq is stabilized and Iraqi debts are restructured?

    Answer: This is a matter of opinion, of course, but one voice to pay attention to might be Ali Allawi, who last year was the trade minister for Iraq. Here's what he said after "sweeping economic reforms" were announced last year:

    The announcement included new opportunities for foreign investors, allowing them to own 100% of Iraqi enterprises. But natural resources, including oil Iraq's most valuable asset was excluded.

    ....He said that foreign ownership of some Iraqi oil assets is a possibility. But the foreign involvement could also be through technical co-operation or through sharing the revenue of oil remaining under Iraqi ownership.

    In other words, the state owns the oil but might allow "some" foreign ownership of assets. Allawi isn't part of the recently announced interim government, but his cousin Iyad Allawi is now the interim prime minister, so Ali's views might still be considered to carry some weight.

That's it. Further clarifications welcome if anyone has some better answers.

Kevin Drum 11:26 PM Permalink | Trackbacks

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