Talking Points about Iraq Reconstruction Contracts and the Occupation (continued):

Oil

[NEW: For more current information see "Crude Designs".]

Q. Before the war, the administration said that Iraq's "oil was for the Iraqi people." Who controls the revenues from Iraq's oil?

A. The U.S. has complete control of the UN-authorized Development Fund for Iraq (DFI) which contains all of the former government's assets as well as past and future revenues from Iraq's oil exports, including leftover funds from the UN Oil for Food Program. Iraq's oil industry has not been privatized. CPA Order # 39 (Privatization) specifically exempted oil, at least temporarily, because of the potential backlash. U.S. rules do allow for the privatization of many of the ancillary businesses that support the oil sector, however, including marketing, distribution and the provision of inputs. Although Halliburton's original contract was to help put out oil fires after the war and repair the infrastructure, Congressman Henry Waxman's office discovered that the company's contract also includes oil production and distribution. See Waxman's letter (5/01) and the response from the Army Corps of Engineers.

Although the Iraqi oil industry is still owned by the people of Iraq, the U.S. controls the country and therefore controls the oil industry. It is determining how oil revenues are spent, the level of production, and who it is being sold to. (Oil is being sold to Chevron, as well as French, Russian and British companies.) Although the Army Corps of engineers repeatedly stated in the early stages of the reconstruction of Iraq's oil sector that the no-bid contract given out to Halliburton, worth up to $7 billion, was a short-term "bridge" contract that would only last until a new contract could be competitively bid, the Corps has indefinitely postponed opening up the work to other bidders. In effect, as Waxman put it in a letter (12/18/03) letter to Admiral Nash of the Program Management Office, "Halliburton has a monopoly on all oil work." for more details, see Congressman Waxman's correspondence with the Corps of Engineers and others.

Meanwhile, through Executive Order 13303, the Bush administration has indemnified U.S. oil companies from any liabilities for environmental and human rights violations that relate to Iraqi oil. (See SEEN)

Iraq has the world’s second largest proven oil reserves. New exploration could raise Iraq’s proven reserves to as high as 300 billion barrels of easily extracted, high-grade crude. U.S. and British firms have been keen to get back into Iraq ever since the country nationalized its oil in 1972. Companies from France, Russia, China, Japan and elsewhere have had major contracts going back years. But under a new government imposed by Washington, the US-UK companies are poised to profit the most. Iraq's massive oil resources are potentially worth hundreds of billions, even trillions of dollars in profits in the coming decades.

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