Oil and the Continuation of the Iraq War

ByNathan Lean

With the deadline for removing U.S. troops from Iraq fast approaching, American boots are mired in a sticky, or oily, situation.

After outlining an exit strategy that would remove all forces by the end of 2011 and promising Iraq that the United States would “pursue no claims on your territory or your resources,” the Obama administration recently urged the Iraqi government to request a U.S. troop extension.  Lo and behold, CIA Director Leon Panetta announced last week that indeed Iraq would soon appeal for a new pullout deadline.

This is a political inducement if there ever was one.

Iraqi Prime Minister Nouri al-Maliki has long said that he would stand by the initial deal to redeploy American forces by December 31, and even promised prominent Iraqi firebrands like Moqtada al-Sadr (famous for his flag-burning, anti-American protests) that the troops, viewed by most Iraqis as an occupying force, would leave. Just last year, Maliki vehemently insisted on the withdrawal, saying to The Wall Street Journal, "I do not care about what’s being said. I care about what’s on paper and what has been agreed to. The withdrawal of forces agreement [Status of Forces Agreement or SOFA] expires on Dec. 31, 2011. The last American soldier will leave Iraq … This agreement is not subject to extension, not subject to alteration, it is sealed, it expires on Dec. 31 [2011]." 

Why then the sudden about face? With both U.S. and Iraqi officials initially impatient to end this eight-year debacle, what could suddenly convince both sides that a prolongation of occupation is necessary?

In three letters: Oil.

The New York Times revealed on Thursday that Lukoil, a Russian petroleum company that won rights to help Iraq rebuild its oil program, has subcontracted the work to four largely American oil service companies: Halliburton, Baker Hughes, Weatherford International, and Schlumberger. These companies are set to make tens of billions of dollars from Iraq’s new petroleum activity with some estimates suggesting that more than half of the $150 billion investment would be paid to the aforementioned operators, all of which have ties to the Texas oil industry (They have been lobbying for access to the Iraqi oil market since early January).

For the U.S., the economic incentive is clear. As the American military makes plans to eventually move out, American oil companies make plans to move in. The operation shifts from a military endeavor to a big money oil bonanza. Andrei Kuzyaev, president of Lukoil overseas, noted that, “It is not important that we did not take part in the [military] coalition. For America, the important thing is open access to reserves. And that is what is happening in Iraq … The strategic interest of the United States is in new oil supplies arriving on the world market, to lower prices.”

In a presidential election season where the stagnant economy is likely to be the deciding factor among voters, this is particularly true. People who vote with their wallets and pocket books are likely to be wooed by lower prices at the pumps — an event that will surely be spun by pundits on the Left as an indication of economic recovery.

Still, why would Iraq’s government backtrack on the withdrawal deadline? As it turns out, the deal is pretty sweet for them too.

The deal that the Iraqi government signed with eleven oil majors would increase their petroleum output from 2.5 million barrels per day now to 12 million barrels a day in 2017. It also promised the reparation of Iraqi oil infrastructure damaged over the past eight years. 

Joost Hilsterman of the International Crisis Group suggests that, “Iraq has little choice.” He notes that the country is desperate to increase revenues, almost all of which derive from safe oil, and that “the government has little capacity to monitor the many companies that will be involved in rehabilitating its ailing oil industry, or indeed its own operations. This is a recipe for massive corruption, but for Iraqi policy makers the cost will be worth it, given the expected massive returns.”

A recent attack in Basra, the strategic OPEC hub that has been relatively calm as of late, underscores the sensitivity of the oil issue and reveals the underlying reasons for a continued U.S. presence in the region. A militant group fired seven rockets at American and Iraqi forces outside the Basra airport, prompting fears that the vital oil-rich town would be targeted. Just days earlier, a storage facility in Zubair was bombed — one of the main export facilities for Iraq’s southern oil fields.

Thus, it would seem quite useful to allow American troops to remain in the country to protect Iraqi and American oil interests; Iraq needs the money and America needs the oil. Meanwhile, U.S. military deaths in Iraq reached 4,460 on Tuesday, another war deadline drowns in the thick of bubbling crude, and the lessons of The Beverly Hillbillies seem all the more relevant. 

Photo Credit: Wikimedia Commons