Iraq and oil – the good oil

Sweeping away the moribund

Tyranny, in addition to suppressing people’s freedoms, also holds back long-term economic growth and development. When tyrants are overthrown and replaced by something better, an opportunity presents itself for the unleashing of people’s creativity and for the rapid development and exploitation of natural resources as a way of improving living conditions and opening up new opportunities. We see this today, most notably, in Iraq and in Nepal.

In Iraq, the former fascistic regime engaged in devastating military adventures and a nepotistic and bureaucratic centralized control over economic life that held back production. During the decades of Ba’ath dictatorship only 17 oil fields were developed out of a potential 80 fields. Oil production, Iraq’s principal source of revenue, reached at its peak only 3.5 million bpd (barrels per day).

In Nepal, the feudal monarchical system did nothing to develop and exploit nature for the benefit of the people, yet Nepal has incredible hydro-power potential. It could provide cheap and reliable energy from this source for its own people as well as earn vast revenue through the export of power. Nepal’s hydropower potential has been estimated at 84,000 megawatts (84,000 million watts), yet only a tiny fraction has been tapped.

The overthrow of tyranny in both countries, and its replacement with constitutional democracy, is an example of how old realities give rise to new ones, when the old becomes unnecessary and irrational.

“All that is real is rational, all that is rational is real”, asserted Hegel. And Engels explained how this was not meant to be an endorsement by Hegel of the status quo. On the contrary, “For Hegel the attribute of reality belongs only to that which at the same time is necessary”. And, as things develop, they become unreal, irrational – unnecessary – swept away by new realities. This happens through the active intervention of progressive social forces and individuals. Case in point: there are not many voices calling for the restoration of the old Ba’ath regime in Iraq, or for the monarchy in Nepal!

New realities

I think this is relevant to pseudo-left criticisms of the new Iraq’s efforts to expand oil production. The much-vaunted nationalized system of Saddam Hussein achieved little. Its wars against Iran and Kuwait were of its own doing and set production back even more while, more tragically, costing at least a million lives. The way forward for Iraq (and Nepal) rests with recognizing the new realities based on necessity rather than wishful thinking.

Iraq will sooner or later have to open up its oil resources to foreign investment and the best way to do this, the most efficient and least risky way, will be through Production Sharing Agreements with foreign oil companies, including US ‘Big Oil’. These PSAs offer the best prospect for maximum development and optimum revenue share back to government.

The Iraqi government has made a recent move in a direction that at least recognizes a role for the foreigner – the international oil company. The government has indicated that contracts may soon be entered into with Exxon Mobil, Chevron, Shell, BP and Total, and a consortium of smaller oil companies, for short-term consultancy services and, at the same time, the government is about to auction long-term contracts for exploration and development of six significant oil fields (and two gas areas). This move has resulted in predictable howls from what remains of the anti-war movement. Naturally, the opponents of the ‘oil grab’ point to the pre-nationalization (1972) status of Exxon Mobil, BP, Shell and Total in the old Iraq Petroleum Company that lost its exploration, development and production rights under the Saddam regime.

Latest development: Service Agreements, in the absence of a national oil law

The latest development by the Iraqi government involves two elements:

1. Short-term consultancy service contracts with Exxon, et al., for technical and management assistance for the upgrading of infrastructure of some oil fields managed by the Iraqi National Oil Company. The aim, as I understand it, is for the Iraqi government to be able to offer six important oil fields (and two gas fields) for long term redevelopment via service contracts by foreign companies next year. The short-term contracts are, in effect, an interim measure designed to get the fields into some sort of shape for proper redevelopment through the involvement of international oil companies. The Oil Ministry hopes that these short-term consultancies will increase output by 500,000 bpd (by June next year). At the time of writing (6 July 2008), negotiations are proceeding with Shell, BP, Exxon Mobil, Chevron/Total and a consortium of smaller foreign companies.

2. The long-term service contracts will be for the development of the six oil and two gas fields. From what I can gather, what is being talked about are ‘risk service’ contracts; though the media is using the short-hand ‘technical service contracts’ or ‘service contracts’. Unfortunately, at this stage, in the absence of a new national oil law, the government does not seem to want to consider Production Sharing Agreements. The government’s aim is to redevelop the eight fields, six of which are prinicpal producers of oil (Rumeila, Zubair, Qurna West, Maysan, Kirkuk and Bay Hassan). The winning bids may very well go to the big oil companies that will probably score the short-term consultancy contracts in the first place, though the Iraqi oil ministry denies this will be a factor in awarding the contracts. Under the long-term contracts, the winning company must involve an Iraqi partner and provide at least 25% of the contract value to local firms. These longer-term contracts attracted interest from 120 foreign companies, of which 35 were regarded by the Oil Ministry as qualified. Seven of the 35 are US-based companies, 4 Chinese, 4 Japanese, Russian, German, Italian, French and British. Under the old regime, these kind of deals were made in secret, with little if any public disclosure. In the new Iraq, we can access the details on the official website of the Oil Ministry: .

The winners of the contracts will upgrade existing infrastructure of the six oil fields which are owned by the Iraqi National Oil Company (ie, in the absence of a new national oil law, Iraq’s oil remains nationalized) as ‘contractors’ doing a job for a fee (though this is still being negotiated and some reports say the companies want a product share rather than a fee). I think the Iraqis should – indeed, must – opt for the product-share arrangement, as this links the contracts to actual production, productive output, rather than being based on a set consultancy fee unrelated to output. In a service agreement, the consultant receives the same fee regardless of whether production increases or not. Under the Production Sharing Agreement, the contracting party, the investor, has a direct interest in expanding production and output.

None the less, the positive in all this is that the government is moving ahead, in an improved security environment, to rehabilitate the existing oil industry. The aim is to increase production by 1.5 million bpd through the technological upgrading and imported expertise that will come from the contracts. The Oil Ministry specifically wants to increase production by 400,000 bpd by the end of this year.

The overall goal of the Iraqi government is to increase oil exports to 4.5 million bpd over the next five years. Currently, a mere 2.1 million bpd is exported (though this reaps big rewards given that oil is currently $143 per barrel). Yes, production remains below the peak it reached under Saddam but it’s early days yet – and things are about to improve!

Iraq’s proven reserves are about 115 billion bpd but the vast undeveloped fields could contain more than 250 billion bpd.

Kurds show the way forward

The way ahead for Iraq is to pass a federal oil law based on the principle, enunciated in the draft law, of equitable distribution of revenues. One reason the law has not been put to parliament, as I see it, has been that the Iraqi government does not want to secure narrow parliamentary support for this law but is hoping to develop a larger support base for it. Another issue (for the central government) is that the Kurdish Regional Government passed its own oil law, based on the national draft law, in August last and has entered into 20 contracts with foreign companies. The issue for the federal government is: should the Kurdish Regional Government have authority to sign deals with foreign companies? The KRG maintains that they have acted in accord with the Iraqi constitution.

The Kurds have opted for Production Sharing Agreements on the basis of a 15% share to the foreign oil company and an 85% share going to the KRG (though only 17% of this is retained by the Kurds under their oil law – the rest goes to the federal government, in keeping with the principle of equitable distribution in the national draft law).

Again, I think of the issue raised by Hegel and Engels. The Iraqi government cannot stop the Kurds from producing oil in their region under PSAs; but they can thwart progress by stopping the foreign companies (like the Norwegian DNO) from shipping it out and by threatening to exclude DNO from future bids after a national oil law is passed. Does Iraq as a whole gain from this? DNO has developed new productive fields in the Kurdish region. The central government can either gain or lose the huge slice (83%) of the revenues earned by the KRG. The choice is win:win or lose:lose.

The good news is that the Iraqi government and the KRG have established a committee, which will include Prime Minister al-Maliki, to work through their differences on this issue, with a view to putting the draft law to parliament in a form that they hope will secure greater support. The current draft does not stipulate any contract model, thus leaving open the possibility for PSAs.

Of course, the opponents of Iraqi democracy appreciate none of this and, when not whining from the sidelines about how bad everything is, will find hope in fantasies about the yet-to-be-born “Iraqi National Liberation Front”.

In Iraq – and Nepal – we are seeing the truth in the words: “And in the place of moribund reality comes a new, viable reality”….

Solidarity with Iraq!



Bidding opens on oil and gas fields in Iraq

Fact Box: Iraq oil contracts, 30 June 2008

Iraq Ministry of Oil: Announcement

Iraq Oil Report

New panel to discuss differences over national draft oil law

Interview with Iraq’s Oil Minister, 2 July 2008

Competition and Iraq oil deals

Nepal hydropower potential

22 Responses to “Iraq and oil – the good oil”

  1. 1 John Tracey

    What you seem to be missing is that Iraq’s oil does not belong to the Iraqi people but the the multinational oil companies.  Iraq may get 25% of the profit (or is this just 25% of exploration and construction contracts?) just as East Timor gets about the same from the sunrise oil and gas field.  This represents a 75% theft of the assets that Iraq and East Timor needs to reconstruct itself.

    Under Sadam the Iraqi Oil company took 95% of profit.  

    The revolution in Iraq today is no longer against the U.S. constructed Baath empire but against the occupying forces and corporations of the U.S. itself

    The oil infrastructure in Iraq is now protected by massive mercinary armies.  This is the new military operation, one that will protect multinational assetts and let the society degenerate, passing the buck to the government to solve “their own” problems”.

    To somehow suggest that this massive theft of Iraq’s wealth is somehow in the national interest is, as I commented about Patrick’s reflections on Zimbabwe, simply the imposition of an ideological template onto a circumstance that bears no resemblance to the template.

    Your ideological assertions to dismiss the economic and political reality in favour of some pie-in-the-sky payout at the completion of the capitalist epoch, or worse still that the crumbs that fall from the capitalist table can somehow represent prosperity for invaded and colonised societies is as shallow and religious as the leninist sects and their prescriptions.

  2. 2 John Tracey

    In your bio it is said of you…….

    “He promises to join the Labor Party as soon as someone can convince him that we need a capitalist class to own the means of production and rule over us.”

    How is it that such a personal sentiment is not reflected in your political analysis, of Iraq at least?

  3. 3 byork

    From the very first sentence, John Tracey reveals that he speaks from dogma, a formulistic view of the world into which preconceived ‘truths’ are slotted, rather than on the basis of investigation of actual conditions. This is a defining quality of the pseudo-left. His claim that “Iraq’s oil does not belong to the Iraqi people but to the multinational oil companies” is demonstrably false. The most elementary bit of research would reveal to him that, in the absence of a new federal oil law, Iraq’s oil remains nationalized. And, should he bother to take the next step and investigate what the draft federal oil law actually says, he will see that oil will remain in the control of the Iraqi government who, like Saddam before them, will no doubt keep selling it to the US (as did Saddam, until the US rightly embargoed his regime). John is also wrong on his claim that under Saddam’s regime, 95% of the profits went to the Iraqi national oil company. In fact, 100% of the profits went to the Iraqi national company, to the government. John not only admires the social-fascist Mugabe in Zimbabwe but seems to have a nostalgic attachment to the Saddam regime as well. The mechanisms through which Iraq now chooses to develop its oil resource are in the hands of a democratically elected government. No doubt John opposed the processes that resulted in 12 million Iraqis being able to vote in multi-party federal elections too. At any point, a majority of parliamentarians can exercise no confidence in the government and force it to the polls. Sadly, John seems to prefer the nationalized sysytem of a fascist dictatorship (in the days when it was propped up by the US) to the newly emerging bourgeois democracy. This is meant to be leftwing? !Barry

  4. 4 John Tracey

    Do you support the bourgoise revolution in Tibet too?

  5. 5 John Tracey

    Nah, cant let it go although I would like to hear what you say about Tibet.

    You show the weakness of your argument with your emotive innacuracies to demonise me to prove your inherent correctness.  Sadam like Mugabe were creations of foreign capital and I have never indicated even a glimpse of admiration for either of them.

    However your villification does not cloak the basic fact that you try to hide which is  the new oil arrangements, which you herald here as liberatory for the people of Iraq, have just privatised the oil industry and handed it to five foreign oil companies.  This I would suggest somewhat undermines your claims about the Iraqi Oil being nationalised.

  6. 6 byork

    John, please do some research. It’s just wrong to say that “the new oil arrangements… have just privatised the oil industry”. Sorry, but it’s nonsense. The Iraqi Oil Ministry is opening up technical service agreements with ‘Big Oil’ and a consortium of ‘Small Oil’. These kind of service contracts were also practiced under Saddam’s nationalized regime and are common in other oil-rich countries with nationalized industries (eg, Kuwait and Saudi Arabia). They have nothing to do with privatisation but are contracts for the foreign companies to provide technical assistance and advice. In Iraq’s case, this means assistance and advice to the nationalized industry for the rehabilitation and further development of six oil fields that remain owned by the Iraqi government. You are on record at Larvatus Prodeo as saying you would vote for Mugabe’s party – this does not sit well with your claim here that you “have never indicated even a glimpse of admiration” for him. As for Saddam, you are on record at the same site as saying that it would have been best to keep him in power (rather than overthrow him militarily at the cost of so many lives).
    My argument did not rely in any way on what I still regard as your sympathy for both tyrants. The essence of my critique is that you don’t investigate but slot reality into a preconceived formula. As a result, you get the most elementary things wrong. Given that you use ‘anti-imperialist’ rhetoric, this really is characteristic of a pseudo-left approach to politics and it’s very difficult, if not a waste of time, to argue with people who proceed on that basis. Barry

  7. 7 John Tracey


    It seems that you cannot help but to misrepresent and slur me.  This appears to be a modus operandi of both you and Patrick. 

    I assume you read my remarks on the Zimbabwe thread here and you say you have read my comments on Larvatus prodeo but you still for some reason cling to your own illusion that I support Mugabe.

    How is it that you should be taken with any intelectual integrity?

    You are just frothing at the mouth about what you think I am, just fluffing out your condemnations with your own bileous mode of hyperbole.

    I was curious about this site because of its claim to have transcended one dimentional ideological constructions common amongst the left but I now see that you are no different at all, except the leninist sects at least have a level of consistency between their political and economic agendas.  You however embrace the worst of capitalist modes and make lame attempts to reconfigure it as somehow socialist.  Either this is an egoic reaction to some part of your own personal history or you are simply a stooge for the capitalist class.

  8. 8 John Tracey

    An excerpt from the international May Day message from the General Union of Oil Employees in Basra

    “4) We demand that the US government and othersimmediately cease lobbying for the oil law, which would fracture thecountry and hand control over our oil to multinational companies likeExxon, BP and Shell. We demand that all oil companies be prevented fromentering into any long-term agreement concerning oil while Iraq remainsoccupied. We demand that the Iraqi government tear up the current draftof the oil law, and begin to develop a legitimate oil policy based onfull and genuine consultation with the Iraqi people. Only after alloccupation forces are gone should a long term plan for the development ofour oil resources be adopted.”

  9. 9 byork

    John, it’s easy really. When you make a false claim that Iraq’s oil has been privatised and handed to the multinationals, you need to be able to provide at least some evidence, no matter how meagre. You cannot provide evidence, because the oil has not been privatized. Instead of seeking a better understanding, you refuse to even admit your mistake. No point trying to debate with you, I’m sorry to say, and what’s more I can’t see you improving your understanding when you seem to think it’s fine just to believe whatever you like, so long as it fits with your formula for what makes the world tick. The Iraqi union leaders’ opposition to privatization of the oil industry is well documented. The irony is that the statement you have posted from the Basra union shows that the oil has not been privatized at all. Just acknowledge you are wrong in your claim. And then maybe think of the implications (eg, US invades and topples dictator, Iraqis vote in multiparty elections, new government does not hand over oil to the multinationals even under “Occupation”).
    I have not slurred you. I have pointed out that you do not investigate prior to speaking (at least on the Iraq oil issue). On your support for Mugabe, I continue to believe that you support him because you have stated at Larvatus Prodeo that you would vote for his party. Yet you say at this site that you “have never indicated even a glimpse of admiration” for him. Barry

  10. 10 John Tracey

    What is it you believe the oil workers are talking about?

    4) We demand that the US government and othersimmediately cease lobbying for the oil law, which would fracture thecountry and hand control over our oil to multinational companies likeExxon, BP and Shell. We demand that all oil companies be prevented fromentering into any long-term agreement concerning oil while Iraq remainsoccupied. We demand that the Iraqi government tear up the current draftof the oil law, and begin to develop a legitimate oil policy based onfull and genuine consultation with the Iraqi people. Only after alloccupation forces are gone should a long term plan for the development ofour oil resources be adopted.

  11. 11 byork

    John still hasn’t provided suporting evidence for his false claim that Iraqi oil has been privatised. What he has done represents a pattern of behaviour that I endured from certain people for about four years at the old lastsuperpower site. It works like this:1. Start by making a claim that is false but necessary to one’s world view (usually a claim that would be unchallenged in one’s own circle of friends and blogs). (E.g: Iraq’s oil has been privatised under the Occupation). 2. When the false claim is exposed, and the implications for the wider analysis revealed, then send in a post with a link to some article that is meant to provide a rejoinder. Do not directly relate your post to the aspect of the article that is meant to salavage you, but just let the reader work it out for themselves. 3. When this fails, due to your opponents not accepting the tactic but exposing it, and continuing to demand evidence or repuditation of it, then either: (a) change tact, pretend that the preceding embarrassment did not happen, and raise a new aspect of the issue, or: (b) complain about being slurred or abused, or: (c) fall back on both (a) and (b). 4. Under no circumstances admit that you are wrong in the original claim and definitely do not engage in the self-critical reflection that might enable you to start to develop an understanding of the issue. 5. Having failed to divert attentions on to the new aspect of the issue, just persist. (E.g: “What is it you believe the oil workers are talking about?”)Barry

  12. 12 John Tracey


    But I ask again, what do you think the Oil workers are talking about?

    While it is technically correct to say oil and gas belongs to the Iraqi people, or at least thats what the Iraqi legislation says, these agreements and the upcoming hydrocarbon laws license these assetts out  to multinationals, thereby privatising them for up to 30 years.

    The service agreements have to be understood in the context of the upcoming hydrocarbon laws which you have conveniently ignored
    “The technical support agreements, as the service agreements are known, may open the door to Iraq for the majors. Mr Shahristani has said that Iraq will open up the same fields for bidding for long-term development projects soon. “We’re going to announce the first licensing round by the end of this month or early next month,” he said.”

    If you are a student of Iraq as you claim you will be aware of the long industrial campaign against privatisation not just of the oil industry but all Iraq national assetts.  You seem to be in complete denial of this despite the local strikes,  world speaking tours and  international communique’s seeking support for union campaigns against privatisation.

    “The hydrocarbon law reflects the process of readying Iraq’s oil for privatisation,” said Jasiewicz. “Drafted in secret, shaped by foreign powers, untransparent, undemocratic and forced through under military occupation.”

    The service agreements are just a part of the new oil laws which have been on the table since February, sparking the strikes etc.  The government will move to further privatise infrastructure including oil later this year.

    As well as approving the privatisation process the iraq government is also repressing union activists who oppose privatisation

    I guess in the end it comes down to whether we believe the Iraqi oil workers or U.S. rhetoric so loyally reproduced by Strange Times.

    A U.S. union perspective on the laws (probably pseudo-leftists too)

  13. 13 John Tracey

    Just sent a post with a few links in it.  might be caught in moderation or spam?

  14. 14 John Tracey


    As with my comments to you on the Zimbabwe thread, instead of denying the obvious, why don’t you have the courage of your convictions and argue that privatisation and multinational domination is, by your own obscure ideological frameworks, the path to socialism?

  15. 15 byork

    Now that John has actually done some research (albeit at lightning speed) he is no longer making the false claim that “Iraq’s oil does not belong to the Iraqi people but the the multinational oil companies”. He is now sending in links that show that the oil union leaders in Iraq oppose Iraq’s draft oil law because they fear it will privatize the oil. In other words, the links he posted prove the opposite of his original contention: Iraq’s oil has not been privatised. But does he now acknowledge that the claim was and is false? No, he doesn’t. I do see this as a lack of integrity on his part and can only repeat what I said some posts ago: there’s no point trying to debate with someone who seems to think it’s okay just to make things up, so long as they fit his world view. Iraq’s oil is not privatized and the oil union leaders know that for a fact, even if John doesn’t. The big question is how can Iraq best rehabilitate infrastructure with a view to further developing the oil resource, greatly expanding output, and maximizing earnings at least risk. This is where it is necessary, as a starting point, to at least look at what the draft national oil law says. At the old lastsuperpower site, there was extended debate about it and I will endeavour to rework some of it, and update it, for this site soon. In that debate, incidentally, I made it very clear that I support Production Sharing Agreements as the best way for Iraq to proceed (though the draf law does not specify a contract model) and, yes, of course that will involve foreign oil companies, including ‘Big Oil’ and those based in the US. People such as John feel no need to know what the draft law says, or what the PSA contracts would actually do for Iraq. Fortunately, there are non-contributing readers of this site who do see the need to investigate as a requirement for analysis and it is for them that I continue to make comments here. The text of Iraq’s draft oil law can be read here: yes, the first Article of its ‘fundamental principles’ is that “Ownership of oil and natural gas is vested in the entire Federal Oil and Gas Council in all provinces and regions”.  Aaaah, but they would say that, wouldn’t they?!!! John knows best – the oil has already been handed over to “the multinational oil companies”.
    John will now reply with reliance on any one or combination of the five tactics listed in my comment of 8 July. I won’t be responding any more, but I do intend to blog about the draft oil law and the Production Sharing Agreements.
    Solidarity with Iraq!

  16. 16 John Tracey

    Iraq oil and infrastructure has been and is being given to the multinationls – privatised.  The big companies are not just “involved, the big 5 have total control.  Their license agreement says they must pass crumbs on to local companies, but there is no review of legal challenge in Iraq law to anything they do – total control.   

    This has been on the table since Feb and there has been mass opposition from Iraq, – no new revelations.

    Stop squirming.

  17. 17 John Tracey

    since the Invasion the U.S. has seized all Iraq oil and assetts.  The pre-privatisation regime did not allow Iraqis to own their own oil either.

    The oil workers are not talking about some hypothetical possibility but of the reality of an occupied country and economy.

    And the research was not last minute, I republished and distributed the Oil workers Mayday message in May, the situation was very clear then.

  18. 18 byork

    Just for those who don’t make things up: there’s a difference between multinational companies’ involvement in infrastructure development on one hand and oil ownership on the other. The idea of international companies being contracted to work on things like port projects, compressors, terminal refurbishment, etc. does not stand in the way of the oil industry itself being and remaining nationalized. Just look at the old regime’s cosy relationship with Halliburton for proof. It all happened under conditions of nationalization. Iraq’s oil remains nationalized because no new federal oil law has been passed to alter the old situation. This is how prominent international anti-war activists and opponents of the draft oil law, Antonia Juhasz and Raed Jarrar, put it last year: “A new Iraqi law proposes to open the country’s currently nationalized oil system to foreign corporate control”. Full article, against the draft law, here:
    Why do I have to waste time proving this point?!!! Barry

  19. 19 John Tracey

    I don’t know Byork, I wonder that myself.  You seem more interested in proving your ideological point that accepting historical fact.  Why?  I thought the idea of ST was to challenge this kind of group-think.

    As far as I can see you are either just silly or an agent of multinational capital.  The synchronicity between your own position and propaganda  coming from the U.S. government suggests the latter, but I am willing to give you the benefit of the doubt and accept that you are just silly.

    As for your assertion that since the law hasn’t changed therefore oil is still nationalised, this is in denial of the fact that the U.S. seized all oil and infrastructure after the invasion (their first priority in fact).  The default position pre-legislation is not Sadam’s nationalised oil regime but absolute U.S. military control.  The new legislation which proclaims the oil to belong to Iraq is the very mechanism to license this ownership back to the big 5.

    As much as you insist on interpreting the service contracts as somehow seperate from the hydrocarbon laws and the government’s general drive towards privatisation, they are not. To try and isolate the service contracts as you do is simply dishonest (or perhaps just unresearched stupidity).

  20. 20 byork

    “The new legislation which proclaims the oil to belong to Iraq is the very mechanism to license this ownership back to the big 5”.      Oh boy!    “License the ownership back” to those who, according to the reports from planet Tracey, already own it?!!!  Are my tears from laughing or crying?Barry

  21. 21 John Tracey

    What do you think license means?
     What do you think licensees are licensed to do?

    You are digging yourself out of a hole.  accept the facts and argue that capitalist development is the way forward for socialism if there is any integrity in your position.

    Otherwise you are just chattering.

  22. 22 byork

    But according to you, they already own it!lol,Barry

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