US v's Iraq
A War About Oil ?

Summary

Opponents of the US claim that a war against Iraq is just about taking Iraq's oil - as if the US were a thief that will steal what it needs.

The USA's argument with Iraq is not a basely motivated grab for Iraqi oil. Control of Iraqi oil, just 5% of present US import needs, and a mere 11% of world oil reserves, is not a threat to the US unless it gives a new owner a 30% share of world reserves.

Gaining control of Iraqi oil will not give the US the 30% share it would need to control oil prices (and thereby protect its future needs to source oil from global markets). Only Saudi Arabia would be in a position to unilaterally act against Iraq and gain a threatening share of world oil.

But an Iraqi dictator who has sought to grab a controlling 30% share of the world's oil reserves (by attacking both Kuwait and Iran) presents threats that the United Nations - not just the USA - should repond to.

US Oil Theft ?

Opponents of the US claim that a war against Iraq is just about Iraq's oil.

Nelson Mandela, speaking on 30th Jan 2002, asserted "They just want the oil. We must expose this as much as possible". As reported by the BBC Mandela Condemns US stance on Iraq:

Former South African president Nelson Mandela has criticised US President George W Bush over Iraq, saying the sole reason for a possible US-led attack would be to gain control of Iraqi oil.

The US stance on Iraq is "arrogant" and would cause "a holocaust", Mr Mandela, a Nobel Peace laureate and one of the world's most respected figures, told a forum in Johannesburg.
He also said UK Prime Minister Tony Blair - who supports Washington over Iraq - was in fact the "US foreign minister".	Mandela met Iraq Defence Minister Tariz Aziz last year in Johannesburg.

 

These grab-for-oil accusations portray the US as if it were a thief that wishes to steal what it needs.

What facts are there to back this up ?

Let's expose the issue as much as possible - and look closely at whether these bad-guy claims have the facts to back them up. Does the US need Iraqi oil badly enough to steal it ? Does their history show similar examples of theft ?

No Oil Stolen in 1991

Anti-US naysayers also claimed the 1991 Gulf War was all about the US taking control of Iraq's oil. The US marched over Kuwait and a vast part of Iraq's oil producing areas.

If the US was hell-bent on stealing oil, it had an excellent opportunity to keep nearly 20% of the world's oil reserves. It certainly had control of those territories. Together with it's own domestic reserves, it would have gained ownership of nearly as much oil as the Saudi's have.

But it pulled up its tent pegs and withdrew. It accepted Saddam Hussein's agreement that Iraq would disarm and pose no further threat. It did not take Iraq's oil

History clearly demonstrates that the US has not behaved like oil thieves should.

Despite claims that Kuwait is a US puppet government, US companies have made virtually no impression in gaining ownership of Kuwaiti oil and the facts show that Kuwait supplies virtually no oil to the US.

The US gained no favours by allowing Iraq to have its oil territory back. Most contracts signed with Iraqi oil producers have gone to Russia and France (mainly), with China recently gaining a foothold. Notably, the US efforts to disarm Iraq are not getting much support from any of these three. Russia, France and China can each individually veto any UN resolution to attack Iraq. Is it likely that at least one of them will use its veto to prevent UN action against Iraq ?

Are US Troops Fools ?

If you were a US soldier, would you put your life on the line to steal oil ? Remember, you will most likely be fighting people desperate to defend their territory because their life depends on the outcome; unlike them, your future economic well being is pretty assured even if your mission fails. Even if they managed to capture Iraq (unlikely given the failure in Afghanistan), how could they hold it for the next 50 or 60 years to make use of the oil ? What kind of fools would the US generals have to be if they believed they could win a war that was just about stealing oil ?

One of the greatest blunder's you can make is underestimating your enemy, and the opponents of the US appear to be doing that in spades. But even if we concede that the US military is little more than a bunch of not real bright professional thieves, attacking Iraq for its oil is not a very rational or professional option...

Stealing Supplies v's Conservation

Do the facts support the accusation that it's a war about Iraq's oil, and by implication, about stealing that country's oil ? Consider what good it would do for the US if it could pull-off such a base theft, compared to other possibly lower cost options it might have.

If it's about the oil, how much oil are we talking about ? And why does the US need it so bad that it's prepared to use military force to take it ?

Iraq provided around 5% of US oil imports in 2000, and 2002, and 3% of its overall consumption. (see Table 1 below, source: US Department of Energy Fact of The Week No. 246 Dec 9, 2002, "U.S. Oil Imports - Top 10 Countries of Origin", and note this was after the lifting of sanctions on oil exports from Iraq)

Canada (16%), Saudi Arabia (14%), Mexico (13%), Venezuela (12%) and Nigeria (5%) all supply a larger proportion of US oil imports.

If it's a war about oil, why aren't US forces steaming towards each of these five countries ? Would you even bother sending your troops to fight to fill a supply gap you could easily cover with a modest energy saving program ?

Stealing Reserves ?

So, maybe it's not about stealing oil to meet current needs. Could it be that it's about stealing oil reserves because the USA's reserves are going to run out real soon? Are there facts to back this up ?

Take a look at this graphic from BP's World Energy Review's 2002 assessment of world oil reserves:

It's quite clear that the Middle East has the lion's share of the world's oil reserves. Most people have a vague idea that there is a lot of oil at stake in the Middle East, and those running the "its about the oil" line are hooking into this perception.

But it is a mistake to equate Iraq with the whole Middle East, and equally to assume that there is a need for the USA to steal these reserves by attacking Iraq.

Look more closely at BP's breakdown by country of the oil reserves. Iraq has just under 11% of the World's known oil reserves. Saudi Arabia has over double this - virtually 25% of the World's reserves. Kuwait, Iran and the United Arab Emirates all have oil reserves of very similar magnitude to Iraq's (the difference is inconsequential given the inaccuracy of the estimation process).

If it was about grabbing oil for some future need, clearly Saudi Arabia ought to be the target. If Saudi Arabia was too tough a target, why single out Iraq from a number of Middle East neighbours with similar reserves ?

Meeting US Needs

It's also worth checking the presumption that the US really needs Iraqi oil, and hence covets it. The Reserve to Production (R/P) ratio shown in the BP review is an estimate of how long the various oil reserves will last, at present consumption rates. The USA's domestic oil reserves will last another 11 years. Why attack Iraq now, for something you'll not need for another 11 years ? How many soldiers are going to risk their lives for territory that won't be needed for 11 years ?

If you think it's about replacing other oil import sources, look at the R/P ratio for the import sources. It has been added to the DOE's import sources ranking in the table below:

The US's largest import source (Canada) will last another 9 years. Saudi Arabia really has so much oil it could easily replace this, as well a making up for the depletion of the USA's internal reserves in 11 years time. Are you really going to be able to persuade your soldiers to risk their lives fighting for something that they will be able to easily buy in 11 years time (from a number of other sources) ?

Friendly Oil Reserves

Mexico, Venezuela, and Nigeria's reserves are all much closer to the US than Iraq. They have a total of over 120 thousand million barrels - 10% more than Iraq's 112 thousand million barrels, and it's obviously much cheaper to freight to where it's needed in the USA.. These close and friendly suppliers have enough to cover the USA's production for 40 years after its' reserves run out in 10 years time.

If you needed to steal your future oil supplies, why not steal it from them ? Wouldn't your soldier/thieves find it much easier marching into these countries than making the much longer march across the globe to Iraq ?

If you think these three countries are all ruled by puppet governments controlled by the US, then you'd have to think that the USA already has control of it's oil needs for the next 10 years to 50 years.

The Iraqi oil reserves are inconsequential to US immediate or future needs, and there are much more sensible targets to attack if stealing oil by military or other force was your agenda.

Controlling Oil Markets

Even if you still think it's got to be about oil, just where might the need be coming from ?

The USA might have need to worry if it had some reason to believe that its friendly more local sources would become unavailable. For example, a mad dictator who threatened to overthrow the Venezuelan government and jack up oil prices might be a threat to the USA. But with just 7% of the oil reserves, Venezuela's ability to achieve this is limited by its competitors' ability to takeover their relatively small share.

It's difficult to influence prices in a competitive market if your market share is below 20%. Evidence from the 1970's oil price shocks suggests that you might need to control 30% or more of the oil market in order to influence prices (in the way OPEC did prior to development of North Sea oil diluting OPEC's share).

You might have a greater ability to influence price if you could grab hold of 20% of the world's oil reserves. Had Saddam Hussein succeeded in annexing Kuwait (2nd August 1990), he'd have put together a 19.9% share of the world's oil reserves.

It's debatable whether that would be enough to control oil prices. But, what if Saddam should then proceed to steal Iran ? Remember, he'd spent 1980 to 1988 attacking Iran's oil rich border provinces. If Saddam had Iraq, Kuwait and Iran, he'd have over 30% of oil reserves and be in a position to control oil supplies. He could do considerable damage to global economics, as OPEC did in the 70's.

How would this hurt the USA - a country some have supposed to be powerful enough to just march in and take what it needs ?

Mitigating Market Manipulation Risks

It would only hurt the USA if the USA's friendly suppliers were willing to follow Saddam's price leads. If they were independent enough of the USA to follow market forces and divert their USA exports to other higher bidders, the USA could be in trouble.

Of course, this risk could be managed by attacking such feckless countries now, and installing puppet governments. An isolationist theiving USA could best manage it's needs by marching into Venezuela, then maybe Mexico and/or Nigeria. It would then have nothing to worry about the response of market forces to Saddam's control of 30% of oil reserves. It might be a little tricky gaining UN support for this, but maybe Bush isn't bluffing when he says he would act without UN support.

On the other hand, a USA that wasn't motivated by theft would have something to worry about. It, like most other countries with insufficient oil reserves, would be damaged by market manipulation by an out-of-control Saddam Hussein. If Hussein used force to acquire such a large oil position, you should expect force to be used to respond to it. The situation would very quickly create global conflict - that is the alternative to global trade under free and fair market principles.

The threat to the USA then is not it's need for oil. It doesn't need Iraq's oil. The demonstrated threat is the that Hussein seeks to gain control of oil markets using his military force to conquer oil producing neighbours. This will interfere with the USA's and other countries ability to source their oil needs at a fair price in open world markets.

As a dictator, Hussein is certainly intolerant of political competition and doubtless has the ability to interfere tremendously in Iraq's markets. Competition is clearly not a dictator's long suite. In contrast, the wealth of the west is founded on twin principles:

• competition results in the best possible allocation of resources, and
• free global trade improves both the exporting and importing countries wealth relative to a no-trade or one-way trade policy.

The US and its supporters seek to protect competition between oil producers. The western belief in competitive markets is competing against Hussein's beggar-thy-neighbour strategies and military aggression directed at gaining monopolistic control of oil markets.

The US belief in this was so strong that after its 1991 Gulf War victory, it left Iraq's and Kuwait's oil in the hands of the Iraqi and Kuwaiti people respectively - it did not try to take control of world oil markets by building its share to 25%.

Now is defense of a free market for oil something that you can convince your soldiers to die for ? Is it something that you can convince the United Nations that ought to be fought for, and particularly the veto-holding UN security council members now trading strongly with Iraq ? Would you raise your sons to die in the battlefields of Iraq or Afghanistan to defend a free market for oil ? Do you believe in markets that strongly ?

Maybe Saddam thinks not, and believes he can get away with continuing his arms build ups and flouting of UN resolutions. Maybe he has been clever in doing oil deals with Russia and France and China, and they will protect him..

The UN's predecessor, the League of Nations, failed to meet the challenge another dictator, Adolf Hitler, presented to it in the 1930's. Will the UN now fail its challenge ?

Destroying OPEC

Another popular oil argument is that the US agenda is to use Iraqi oil to undermine or destroy OPEC. Given that the purpose of OPEC is to create a cartel that monopolises world oil pricing, that is arguably not a bad thing. But good or bad, could it be done ?

Iraq is one of 11 OPEC members. Together, OPEC members produce around 53% of the world's crude oil (see OPEC's 2001 Annual Statistical Bulletin ). Since 1984, it has varied from a 62% down to 53% - with a clear downward trend occurring with the instability in the Middle East since 1990.

Throughout the last 20 years, Iraq produced less than 5% of the world's crude oil - or under 10% of OPEC's total production. OPEC members lost 10% of the world production due to instability in the Middle East (and the Middle East members lost more if you account for the fact that Venezeula and Nigeria are OPEC members defying this trend).

If anyone is concerned about OPEC losing market share, Iraq's loss (should it occur) would be minor in comparsion to the cost of instability in the region. The clear solution is to provide a more stable investment and production environment in the Middle East. Regime change in Baghdad is more likely to improve sales, boost investment in Iraq and improve OPEC's market share. Even if a US takeover resulted in Iraq's withdrawal from OPEC, the removal of the Iraqi threats to Kuwait, Qatar, Saudi Arabia and Iran will provide improved opportunities for those OPEC members.

Even without Iraq, OPEC has more than enough market share to dictate world oil prices - well over a 30% share.. That it doesn't is possibly due to its inability to maintain compliance amongst its members. Winning or losing Iraq won't change that - unless perhaps Saudi Arabia were to win Iraq and gain a 30% market share that would allow it to force pricing on its own.

Whether it's good or bad, a US takeover of Iraqi oil would not harm OPEC. So that could not be the reason for US interest in Iraq.

If Not Oil, What Else?

If the issue is not oil, what is that is motivating the US position ? Is there a stronger cause that your troops will want to defend ?

In an article on Condoleeza Rice, George W Bush's chief National Security Affairs Adviser, Nicholas Lemann reports (Without a Doubt, The New Yorker, 14th Oct 2002):

I asked her how Iraq had appeared to cross the threshold of preemptive war.

"It's a brutal regime," she said, "All right, so are many others. It's an aggressively brutal regime that has invaded its neighbours, in a region of the world in which the United States has vital interests and vital allies. Not too many in that category. It has perpetrated terrorist acts against our friends in ways that have also taken American life, like paying suicide bombers, like the ones who carried out the Hebrew University attack, killing 5 Americans. Iraq has tried to assassinate an American president - again, not too many in that category. And Saddam has used weapons of mass destruction - nobody else in that category. And continues to acquire them at an incredible pace. We tried containment, and it's clearly broken down.

That's 8 different reasons, and no mention of oil.

Blix's report to the Security Council 27th Jan 2003 on the resumed inspections show clearly that Hussein did not comply with UN Resolution 1441. Sure, the inspectors found almost nothing. But they are inspectors, not detectives. UN Resolution 1441 puts the onus on Iraq to demonstrate how it has complied with its disarmament agreements. Any reading of Blix's report will show Iraq demonstrated nothing, and came up with no satisfactory explanations of the whereabouts of weapons it previously admitted having or was proven to have. Iraq's best effort was to use an unbelievable "the dog ate my homework" claim.

In a subsequent address to the Security Council (Feb 6th 2003), US Secretary of State Colin Powell, presented numerous satellite photographs, audio tapes and other evidence supporting US claims of an prohibited arms concealment in Iraq. The evidence included claims that Al Qaeda cells were operating in Iraq. Given the stranglehold of Hussein's dictatorship, it is difficult to conclude that he is not supporting them.

Blix's Feb 15th report to the Security Council turned up what he sees as slight improvements in cooperation with inspection processes, but not one scintilla of evidence of substance showing Iraq is actually disarming. While Blix states,

In the words of resolution 1441 (2002) - it requires immediate, unconditional and active efforts by Iraq to resolve existing questions of disarmament - either by presenting remaining proscribed items and programmes for elimination or by presenting convincing evidence that they have been eliminated.

he is unable to state that he or Iraq has provided any of this. Why is Blix accepting cheap talks on process as a substitute for the real evidence of disarmament that the resolution specified?

The last paragraph of Blix's report stated:

If Iraq had provided the necessary cooperation in 1991, the phase of disarmament - under resolution 687 (1991) - could have been short and a decade of sanctions could have been avoided. Today, three months after the adoption of resolution 1441 (2002), the period of disarmament through inspection could still be short, if "immediate, active and unconditional cooperation" with UNMOVIC and the IAEA were to be forthcoming.

Up until 27th January, Iraq was using "the dog ate my homework excuse". By 14th February, they were now agreeing to further theoretical lessons on how to disarm, but no disarmament work was yet done.

Blix's team of UN inspectors have found themselves a nice little earner that might go on forever pretending to make improvements on process, talking about process and talking lessons but delivering no substance. Few employers would accept an employee spending all his time talking about the process of doing a job or training for a job without any progress on actually doing the job - yet the UN is buying this from Blix and Iraq.

Saddam has been trying the US and UN's patience since 1991. Optimists and pacifists probably still believe that, given more time, the situation can be resolved peacefully.

How much evidence do you need before you accept that Saddam will comply in no time ?

Blix fails to define what he means by a "short time" - it seems to be something between 3 months and 2 years (12 years since 1991, less a decade - the duration of sanctions he implies could have been avoided).

If, however, Al Qaeda exploits Blix's short time to build a stronghold within Iraq, toppling Saddam may present Al Qaeda a golden opportunity to take over. In the week prior to Feb 15th, Al Qaeda released statements allegedly from Osama Bin Laden calling Iraqi's to fight a jihad against the USA. Can the world afford this opportunity for terrorists to gain access to weapons of mass destruction ?

Conclusion

The USA's argument with Iraq is not a basely motivated grab for Iraqi oil. Control of Iraqi oil, just 5% of present US import needs, and a mere 11% of world oil reserves, is not a threat to the US unless it gives a new owner a 30% share of world reserves. Gaining control of Iraqi oil will not give the US the 30% share it would need to control oil prices (and thereby protect its future needs to source oil from global markets), nor would it harm the OPEC's cartel. Only Saudi Arabia would be in a position to unilaterally act against Iraq and gain a threatening share of world oil.

But an Iraqi dictator who has sought to grab a controlling share of the world's oil reserves (by attacking both Kuwait and Iran) presents threats that the whole world - not just the USA - should repond to. If Saudi Arabia were to develop expansionist plans, it could take Iraq and gain more than 35% of world oil reserves. That mightn't seem too credible now, but might just have been the reason that George Bush didn't crush Baghdad in 1992.

It's not about Iraqi oil, but rather about Hussein's expansionist plans to build a controlling share of global oil markets by military conquest of his oil-producing neighbours. The really serious challenge for the US and other world leaders is how to defuse the Iraqi situation, without creating a reaction that would see Saudi Arabia take control of Iraqi oil. The goal is to protect adequate competition amongst oil producers, not to crush Iraq.

It's not a war about taking Iraq's oil, but rather about protecting competition for the benefit of the every country with a stake in fair pricing and marketing of oil. The US had ample opportunity in 1991 to take control of 20% of the world's oil reserves, and clearly passed it up.

But how many countries are prepared to send their sons to fight for this remains an open question, and getting past the veto rights of the 3 permananent members of the security council with now large commercial interests in Iraqi oil will be extremely difficult.

Nevertheless, the possibilities of Al Qaeda or similar extremists gaining a powerbase in Iraq should be a great concern to the free world. Each of Russia, France and China have experienced terrorism closely, and should look at the pain beyond their short term commercial objectives in Iraq. Terrorists are a long-term threat and need to be dealt with sooner - not later.

Addressing the National Press Club on 13th March 2003, Australia's Prime Minister John Howard described Saddam Hussein's record of human rights abuses:

Perhaps it's become unpalatable or unfashionable to be reminded that the Iraqi people are oppressed by this current regime.

There is no chance of normalcy in a nation where torture and rape and genocide and killing are standard practice.

Former United Nations rapporteur for humanitarian rights in Iraq, Max Van der Stoel, has spoken of the brutality of regime and let me quote: "The evidence I have in my possession shows that human rights violations in Iraq have been so consistent, have been on such a massive scale, and have been so serious, that there are very few examples of similar repression since the World War II."

Now that is about as comprehensive and damning a critique of the scale of the horror of that regime as one could find.

The language is clear but perhaps it's too diplomatic, it's too clinical.

Perhaps it sanitises what we're talking about.

We're talking about a regime that will gouge out the eyes of a child to force a confession from the child's parents.

This is a regime that will burn a person's limbs in order to force a confession or compliance.

This is a regime that in 2000 decreed the crime of criticising it would be punished by the amputation of tongues.

Since Saddam Hussein's regime came to power in 1979 he has attacked his neighbours and he's ruthlessly oppressed ethnic and religious groups in Iraq - more than one million people have died in internal conflicts and wars.

Some four million Iraqis have chosen exile. (Ed. Note - 20% of the population)

Two hundred thousand have disappeared from his jails never to be seen again.

He has cruelly and cynically manipulated the United Nations oil-for-food program.

He's rorted it to buy weapons to support his designs at the expense of the well-being of his people.

Since the Gulf War the people of Iraq have not only endured a cruel and despotic regime but they've had to suffer economic deprivation, hunger and sickness.

In his March 8th 2003 report, Hans Blix turned to the quetion of Iraqi compliance with Resolution 1441 - the 17th UN resolution on Iraq...

the question is now asked whether Iraq has cooperated "immediately, unconditionally and actively" with UNMOVIC, as is required under paragraph 9 of resolution 1441 (2002). The answers can be seen from the factual descriptions that I have provided. However, if more direct answers are desired, I would say the following...

It is obvious that, while the numerous initiatives, which are now taken by the Iraqi side with a view to resolving some long-standing open disarmament issues, can be seen as "active", or even "proactive", these initiatives 3-4 months into the new resolution cannot be said to constitute "immediate" cooperation"

It is clear from this that Iraq has failed to comply with the resolution. Most of the preceding parts of Blix is a littany of Iraq's imposition of conditions throughout the inspection processes. They have neither complied unconditionally nor immediately.

Blix continued to evade putting a time-line on the inspection process, calling yet again for more personnel. Nevertheless he suggested "It would not take years, nor weeks, but months". But military force on the scale required to produce the minimalist compliance to date can not be maintained indefinitiely - the longer it is there without real progress the more Hussein is encouraged to believe he has gotten away with his strategy of defiance.