It’s the Oil

By Jim Holt
London Review of Books, October 18, 2007

Edited by Andy Ross

Iraq has 115 billion barrels of known oil reserves, and may have a further 220 billion barrels of undiscovered oil. US forces may now be sitting on one quarter of the world’s oil resources. The value of Iraqi oil would be of the order of $30 trillion at today’s prices. For comparison, the projected total cost of the US invasion/occupation is around $1 trillion.

The draft law that the US has written for the Iraqi congress would cede nearly all the oil to Western companies. The Iraq National Oil Company would retain control of 17 of Iraq’s 80 existing oilfields, leaving the rest under foreign corporate control for 30 years.

The US will maintain hegemony over Iraqi oil by establishing permanent military bases in Iraq. Five self-sufficient ‘super-bases’ are in various stages of completion. All are well away from the urban areas where most casualties have occurred. This summer the Bush administration began to talk openly about stationing American troops in Iraq for years, even decades, to come.

The US will plausibly claim a rationale to stay there for as long as civil conflict simmers, or until every groupuscule that conveniently brands itself as ‘al-Qaida’ is exterminated. The civil war may gradually lose intensity as Shias, Sunnis and Kurds withdraw into separate enclaves. De facto partition will be the result. Presiding over this Balkanised Iraq will be a weak federal government in Baghdad. As for the number of US troops permanently stationed in Iraq, the defence secretary, Robert Gates, saw the long-term force as 35,000 troops at the very minimum. Their main day-to-day function will be to protect the oil infrastructure.

This is the "mess" that Bush-Cheney is going to hand on to the next administration. The three principal Democratic candidates have already hedged their bets, refusing to promise that, if elected, they would remove American forces from Iraq before 2013, the end of their first term.

Among the winners: oil-services companies like Halliburton; the oil companies themselves; US voters, who will be guaranteed price stability at the gas pump; Europe and Japan, which will both benefit from Western control of such a large part of the world’s oil reserves; and Osama bin Laden, who will never again have to worry about US troops profaning the holy places of Mecca and Medina, since the stability of the House of Saud will no longer be paramount among American concerns.

Iran has done quite well out of the Iraq war. But the Iranian regime is precarious. Unpopular mullahs hold onto power by financing internal security services and buying off elites with oil money, which accounts for 70 per cent of government revenues. If the price of oil were suddenly to drop, the repressive regime in Tehran would lose its steady income.

China holds around a trillion dollars’ worth of US denominated debt (including $400 billion in US Treasury bonds). This gives Beijing enormous leverage over Washington. China’s own economy is expanding at something like 10 per cent a year. China’s increasing heft poses a threat to US interests. And the main constraint on China’s growth is its access to energy.

Was the strategy of invading Iraq to take control of its oil resources actually hammered out by Cheney’s 2001 energy task force? The hypothesis is quite powerful when it comes to explaining what has actually happened in Iraq. The Bush administration’s cavalier attitude towards "nation-building" has all but ensured that Iraq will end up as an American protectorate for the next few decades – a necessary condition for the extraction of its oil wealth. The costs are negligible compared to $30 trillion in oil wealth, assured American geopolitical supremacy and cheap gas for voters. In terms of realpolitik, the invasion of Iraq is a resounding success.