Benchmark Boogie: A Guide to the Struggle Over Iraq’s Oil

Photo: Indybay/Greenpeace/Walid Abdelnour

Your guide to the ongoing dance between Bush, the Congress, and the Iraqi government; an update on the current status of the proposed oil laws; and some steps you can take to stop the hijacking of Iraq’s oil.

What does a war for oil look like? American troops going into battle with tanks waving “Exxon Mobil” and “Chevron” flags right behind? Are the flags then planted squarely in the ground and the oil beneath officially declared war bounty? Well, some members of the Bush administration and U.S. oil companies may have favored such an approach. But the device ultimately chosen to win this war for oil is only slightly more subtle: a law, to be passed by the Iraqis themselves, which would turn Iraq’s oil over to foreign oil companies.

The president’s benchmark

The U.S. State Department Iraq Study Group began laying the foundations for the new law prior to the invasion of Iraq. Its recommendations, released only after the invasion, were quickly enshrined in a draft oil law introduced to the interim Iraqi government by the U.S.-appointed interim prime minister of Iraq, Ayad Allawi (a former CIA operative).

The Bush administration has spent four years trying to force successive Iraqi governments to pass the law, referred to as either the “hydrocarbons” or “oil” law. While it has gone through several permutations, the basics have remained the same and have followed the original prescriptions set out by the State Department.

The law would change Iraq’s oil system from a nationalized model — all but closed to U.S. oil companies — to a privatized model open to foreign corporate control. At least two-thirds of Iraq’s oil would be open to foreign oil companies under terms that they usually only dream about, including 30-year-long contracts. (For details of the law, see my March 2007 New York Times Op-Ed, “Whose Oil Is It, Anyway?”)

In January, after four years of trying to get the law passed in Iraq, President Bush went public with this demand when he made his “speech to the nation” announcing the “surge” of 20,000 additional American troops to Iraq.

The president explained that the surge would be successful where other U.S. efforts had failed in Iraq because the Iraqi government would be held to a set of specific “benchmarks.” Those benchmarks were laid out in a White House Fact Sheet released the same day that explained that the Iraq government had committed to several economic and political measures, including to “enact [a] hydrocarbons law to promote investment, national unity, and reconciliation.”

After the speech, the administration increased public pressure on the Iraqi government to pass the law. However, that speech was just about the only time that the president or anyone in the administration would use the word “investment” to describe the law. Instead, the administration would refer generally to the law’s capacity to bring “national unity and reconciliation” by establishing a mechanism to evenly distribute Iraq’s oil revenues among Iraqis on a per capita basis.

With few exceptions, the American press has adopted the administration’s language and continually and virtually exclusively refers to the oil law as a revenue sharing measure — ignoring completely the fact that Iraqis would only be able to share the revenues left over after the foreign oil companies received their very sizable cut.

The pressure worked. In February, the oil law passed what seemed to be the most important hurdle, Iraq’s cabinet. The cabinet signed off on the law and agreed to send it to the parliament. However, resistance in the parliament was too great, and the law was not introduced.

The Kurdistan Regional Government posted the February draft of the oil law on its website (PDF). The law has almost nothing to say about oil revenues. In fact, just three sentences of the law addressed this issue, stating that an additional law — the “federal revenue law” — would be required to ensure a “fair distribution” of oil revenues.

Congress adopts the president’s benchmark

By the time the Congress took up the issue of funding the war in May, public awareness of and opposition to the oil law both in Iraq and the United States had grown substantially. Congress passed and the president signed the Iraq Supplemental War Spending Bill (PDF) to fund the Iraq war through the end of September.

In the Supplemental, Congress deliberately adopted the president’s benchmarks, specifically and continually referencing his January 10, 2007, speech. Congress made clear its desire to hold both Bush and the Iraqi government to the commitment to meet the benchmarks. But, the words “hydrocarbon law” were never used. Instead, Congress referenced the president’s benchmarks but described only the revenue-sharing component.

The Supplemental finds that “it is essential that the sovereign government of Iraq set out measurable and achievable benchmarks and President Bush said, on January 10, 2007, that ‘America will change our approach to help the Iraqi government as it works to meet these benchmarks.'” And, “The president’s January 10, 2007, address had three components: political, military, and economic. The United States strategy in Iraq, hereafter, shall be conditioned on the Iraqi government meeting benchmarks, including: (iii) Enacting and implementing legislation to ensure the equitable distribution of hydrocarbon resources of the people of Iraq without regard to the sect or ethnicity of recipients, and enacting and implementing legislation to ensure that the energy resources of Iraq benefit Sunni Arabs, Shia Arabs, Kurds and other Iraqi citizens in an equitable manner.”

Congress stipulated that if the benchmarks were not met by September, it would cut off funds being made available to Iraq under the “Economic Support Fund.” These are funds used for, among other things, U.S. reconstruction efforts in Iraq.

Congress required the Bush administration to report back on the status of the benchmarks by July 15. Thus, a flurry of effort erupted between the Bush administration and the Al-Maliki government in recent weeks to try to finally pass the law. Negotiations were rekindled and a new draft of the oil law was agreed to by the Iraqi cabinet on July 3 (only Arabic translations of the law have been released publicly to date).

Four days later, on July 7, Usama al-Nujeyfi, a member of Iraq’s parliamentary energy committee, quit in protest over the oil law, saying that it would cede too much control to global companies and “ruin the country’s future.” He vowed to work to defeat the draft in parliament. His response has been typical of the mood of the parliament. Thus, while the law has been officially presented to the parliament, because of the extreme level of opposition, the parliament has not yet taken the measure up for consideration.

The federal revenue law

At the same time as the new oil law was moving to the parliament, negotiations were also moving forward on the federal revenue law (referred by the Bush administration as the “revenue management law”). Although, the revenue law received far more press attention then the oil law. A limited agreement was reached on the revenue law, but it has yet to approved by the Iraqi cabinet.

As opposed to the conditions set out by Congress in the Supplemental, the draft revenue law does differentiate between Iraqis by sect, while it does not ensure an equitable distribution of revenues to the rest of Iraq’s citizens.

In fact, the current draft of the revenue law (PDF) seems more concerned with overcoming the resistance of the Kurdistan Regional Government to the oil law and to demonstrating movement towards its passage than to actually achieving the goal of equitable and fair distribution of oil revenues.

The draft guarantees that after Iraq’s federal government’s expenses and “strategic projects of benefit to all” are paid for, the Kurdistan Regional Government will receive a set 17 percent of all oil revenues “until a population census is held by the state.” There is no mention of how the rest of the country will fare other than that a newly established commission will “confirm the accuracy and fairness of distribution of revenues.” There is no standard establish for what a “fair” distribution means.

None of these incongruities has dulled the interest of the Bush administration in the revenue law. To the contrary, in its “Initial Benchmark Assessment Report” submitted to Congress on July 12, the Bush administration explains, “The United States has provided technical advice to the Iraqi government and is actively engaged in encouraging both sides to expeditiously approve the draft [revenue] law.”

The revenue and oil laws are two of a package of four laws generally (and confusingly) also referred to as “the oil law” because of the centrality of the law that rewrites Iraq’s entire oil system. The revenue law and two others detailing the roles of the Iraq National Oil Co. and the Ministry of Oil are three small pieces of this larger transformation.

According to the July 12 “Initial Benchmark Assessment Report,” “Prime Minister Maliki intends to submit the revenue management law to the [Iraqi cabinet] soon, for subsequent consideration by the [Iraqi parliament] along with the framework hydrocarbon law.”

As I write, the future of the “framework hydrocarbon law” (the oil law) is very unclear. As U.S. pressure intensifies to pass the law before September 2007, the deadline established by the Supplemental, Iraqi resistance grows.

What must be done

On June 19, five Nobel Peace Prize recipients released a statement publicly denouncing not only the Iraq oil law, but also the pressure being applied by the U.S. Congress and the Bush administration on the Iraqi government to pass it.

The laureates’ statement, which has been circulated by Rep. Jim McDermott, D-Wash., to every member of the U.S. Congress, declares that “the U.S. government should leave the matter of how Iraq will address the future of its oil system to the Iraqi people to be dealt with at a time when they are free from occupation and more able to engage in truly democratic decision making. It is immoral and illegal to use war and invasion as mechanisms for robbing a people of their vital natural resources.” (You too can sign on to this statement. See below for details).

The debate in the U.S. Congress has finally shifted from “whether” to “how” to end the U.S. invasion of Iraq. But the devil may yet be in the details. We must be vigilant and demand not only that the occupation end, but as the details of withdrawal are worked out, that the requirement that Iraqis change their oil system is taken off of the table.

Reflecting the widespread opposition to the oil law among not only Iraq’s people in general, but Iraq’s oil workers in particular, Faleh Abood Umara, general secretary of the Iraqi Federation of Oil Unions, explained, “We reject this kind of agreement absolutely. The law will rob Iraq of its main resource — its oil. It will undermine the sovereignty of Iraq and our people.”