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Iraq Oil Rush


Iraq Oil Rush

Published: June 22, 2008

So great is the demand for oil today — and so great the concern over rising prices — that it would be tempting to uncritically embrace plans by major Western oil companies to return to Iraq.

Unfortunately, the evolving deals could well rekindle understandable suspicions in the Arab world about oil being America’s real reason for invading Iraq and fan even more distrust and resentment among Iraq’s competing religious and ethnic factions.

As reported by Andrew Kramer in The Times, Exxon Mobil, Shell, Total and BP — original partners in the Iraq Petroleum Company — are in the final stages of discussions that will let them formally re-enter Iraq’s oil market, which expelled them 36 years ago. The contracts also include Chevron.

Iraq can certainly use the modern technology and skills these oil giants offer. Although Iraq’s oil reserves are among the world’s largest, years of United Nations sanctions and war have badly eroded the industry. Government officials say they aim to increase production from 2.5 million barrels of oil a day to 3 million barrels. That is a minor increase in global terms, but with oil at $140 a barrel, it is good news for Iraqis, who need the money to rebuild their war-torn country.

We cannot blame Baghdad for wanting to get on with exploiting the country’s lucrative oil deposits, especially when Kurds in northern Iraq are rapidly signing contracts to develop oil fields in their own semiautonomous region. Still, the negotiating process pursued by Baghdad is flawed and troubling.

The contracts are being let without competitive bidding to companies that since the American invasion have been quietly advising Iraq’s oil ministry how to increase production. While the contracts are limited to refurbishing equipment and technical support and last only two years, they would give these companies an inside track on vastly more lucrative long-term deals.

Given that corruption is an acknowledged problem in Iraq’s government, the contracts would have more legitimacy if the bidding were open to all and the process more transparent. Iraqis must apply that standard when they let contracts for long-term oil field development.

Also troubling is that the deals were made even though Iraq’s parliament has failed to adopt oil and revenue sharing laws — critical political benchmarks set by the Bush administration. That is evidence of continued deep divisions in Iraq over whether oil should be controlled by central or regional government, whether international oil companies should be involved in development and how the profits should be distributed.

The United States and the oil companies must encourage Iraqi officials to make the political compromises needed to establish in law the rules for managing Iraq’s abundant natural resources with as much transparency as possible. Otherwise, oil will just become one more centripetal force pulling the country apart. and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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