we OWN iraq oil

The Great Iraq Oil Grab (see full story)
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Former Treasury Secretary Paul O'Neill told author Ron Suskind that Dick Cheney also supported an invasion of Iraq before Sept. 11, and the New Yorker's Jane Mayer reported on a top secret National Security Council document dating back seven months before the terror attacks that gave some insight into the vice president's thinking:

It directed the N.S.C. staff to cooperate fully with [Cheney's secretive] Energy Task Force as it considered the "melding" of two seemingly unrelated areas of policy: "the review of operational policies towards rogue states," such as Iraq, and "actions regarding the capture of new and existing oil and gas fields."

The United States crafted a new oil law for Iraq that provided for production sharing agreements (PSAs), which are contractual terms between a government and a foreign corporation to explore for, produce and market oil. Production sharing agreements are not used by any country in the Middle East or, in fact, by any country that's truly wealthy in oil. They're used to entice investors into an area where the oil is expensive to produce or there isn't a lot of oil.

But Iraq's oil reserves are very easy and cheap to get to. You essentially just stick a pipe in the ground and you get oil. There's absolutely no reason for Iraq to enter into PSAs, but there's every reason for Western oil companies to want them -- they provide the best terms short of full privatization of the oil.

[It's estimated that] Iraq has 80 oil fields. Seventeen of them have been discovered. Under the new oil law -- written into the constitution -- those 17 will be under the control of the Iraqi national oil company.

All undiscovered oil fields are now open to the PSAs. That means, depending on how much oil there is in Iraq, foreign companies will have control over at least 64 percent of Iraq's oil and as much as 84 percent.

PSAs are the worst possible deals for countries; in Latin America some of the worst PSAs gave domestic governments royalties of just one percent of their natural gas revenues.

Iraq's permanent oil law is being written with the help of Bearingpoint Inc. under a contract from USAID. The Virginia-based company (which was KPMG until it changed its name after being embroiled in the Arthur Anderson accounting scandal) prepared a report for the Bush administration in 2003 that concluded "foreign participation [is] the most efficient way of developing the sector," according to Dow Jones. A USAID spokesman said the company "will be providing legal and regulatory advice in drafting the framework of petroleum and other energy-related legislation, including foreign investment."

The principles embedded in the transitional oil law can't be dismissed down the road by Iraq's legislature with a simple vote; they were built into the country's Constitution, a document that Iraqis approved without having a firm grip on its details. (Read more of the interview with Juhasz for some insight into how that happened.)

Under Iraq's new laws, those kinds of policies -- common among oil-producing countries -- are prohibited.

The Coalition Provisional Authority, under L. Paul Bremer (who U.N. envoy Lakhdar Brahimi called the "dictator of Iraq") instituted an infamous set of "100 rules" -- rules that privatized Iraq's state companies, threw open its economy to foreign investment, established a flat tax and instituted a dozen other measures that the big-business right has lobbied for around the world -- largely unsuccessfully -- for decades.

The same company that's helping draft Iraq's permanent oil law, BearingPoint Inc., planned Iraq's entire economy under a previous contract. All of the Bremer rules worked their way into the Iraqi Constitution as well; Chapter 6, Article 126, specifies that although the rest of the orders issued by the Transitional Authority are canceled, the "100 orders" remain on the books.