The Independent, January 7

"The oil can is mightier than the sword," said the 19th-century US Senator Everett Dirksen. Nowhere does this seem more true than in contemporary Iraq where, despite widespread despair about the war's costs in terms of blood and treasure, US corporations look set to be some of the conflict's few winners. The announcement that the Iraqi government is planning to change its constitution to allow foreign extraction of oil will give Western companies access to the world's third largest oil reserves. Production sharing agreements (PSAs), lasting for up to 30 years, will divert up to 75 per cent of Iraqi oil revenues to Western drilling companies until their initial investment costs have been recouped. The importance of this cannot be overstated for a shattered country still reliant on oil for 95 per cent of its income.

Of course, the Iraqi oil industry, starved through years of sanctions and now under constant insurgent attack, badly needs Western investment. Only a small proportion of Iraq's known oil fields have been developed, and production still languishes below pre-invasion levels. The neo-conservative dream - indulged in by Paul Wolfowitz and Dick Cheney prior to the conflict - that the invasion and reconstruction would be self-financed through a twist of the oil taps, dissipated long ago.

In a country where unemployment has hit 70 per cent, a policy that will quicken the pace of economic reconstruction should be universally welcomed. At face value, the measure is not being imposed by the fiat of a US general: it will be voted on in the Iraqi parliament and, if passed, enacted by a democratically elected government. And objections that foreign companies will steal Iraq's birthright seem faintly anachronistic in the global economy: specialist engineering is an international industry these days, and Iraq's command economy, isolated from the rest of the world, urgently requires liberalisation.

But it doesn't demand the fevered imaginings of a conspiracy theorist to think that this law, struck while the beleaguered Iraqi government is facing opposition from all quarters, protects the interests of oil wealth (which is so well represented in the White House) more than it does the Iraqi people. Production sharing agreements don't apply in most other major Middle Eastern oil producers because they are widely thought to grant greater control to companies than governments. With economies so heavily dependent on oil, it's hard to see how countries can truly be self-governing if they sign away influence over their almost exclusive source of wealth.

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Blood and oil: How the West will profit from Iraq's most precious commodity

Independent, January 7

The 'IoS' today reveals a draft for a new law that would give Western oil companies a massive share in the third largest reserves in the world. To the victors, the oil? That is how some experts view this unprecedented arrangement with a major Middle East oil producer that guarantees investors huge profits for the next 30 years

So was this what the Iraq war was fought for, after all? As the number of US soldiers killed since the invasion rises past the 3,000 mark, and President George Bush gambles on sending in up to 30,000 more troops, The Independent on Sunday has learnt that the Iraqi government is about to push through a law giving Western oil companies the right to exploit the country's massive oil reserves.

And Iraq's oil reserves, the third largest in the world, with an estimated 115 billion barrels waiting to be extracted, are a prize worth having. As Vice-President Dick Cheney noted in 1999, when he was still running Halliburton, an oil services company, the Middle East is the key to preventing the world running out of oil.

Now, unnoticed by most amid the furore over civil war in Iraq and the hanging of Saddam Hussein, the new oil law has quietly been going through several drafts, and is now on the point of being presented to the cabinet and then the parliament in Baghdad. Its provisions are a radical departure from the norm for developing countries: under a system known as "production-sharing agreements", or PSAs, oil majors such as BP and Shell in Britain, and Exxon and Chevron in the US, would be able to sign deals of up to 30 years to extract Iraq's oil.

PSAs allow a country to retain legal ownership of its oil, but gives a share of profits to the international companies that invest in infrastructure and operation of the wells, pipelines and refineries. Their introduction would be a first for a major Middle Eastern oil producer. Saudi Arabia and Iran, the world's number one and two oil exporters, both tightly control their industries through state-owned companies with no appreciable foreign collaboration, as do most members of the Organisation of Petroleum Exporting Countries, Opec.

Critics fear that given Iraq's weak bargaining position, it could get locked in now to deals on bad terms for decades to come. "Iraq would end up with the worst possible outcome," said Greg Muttitt of Platform, a human rights and environmental group that monitors the oil industry. He said the new legislation was drafted with the assistance of BearingPoint, an American consultancy firm hired by the US government, which had a representative working in the American embassy in Baghdad for several months.

"Three outside groups have had far more opportunity to scrutinise this legislation than most Iraqis," said Mr Muttitt. "The draft went to the US government and major oil companies in July, and to the International Monetary Fund in September. Last month I met a group of 20 Iraqi MPs in Jordan, and I asked them how many had seen the legislation. Only one had."

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of all four articles in The Independent series.

Reminiscent of these two posts which preceded the Independent by a few days.

http://thegallopingbeaver.blogspot.com/2006/12/it-was-always-about-oil-dots-part-1.html

http://thegallopingbeaver.blogspot.com/2007/01/it-was-always-about-oil-crossing-lines.html

My part three and four are still in research but will be somewhat different. In fact, completely different.

will be owned by private oil companies just like the oil in the United States, with royalties to its owners, American citizens, being a pittance. This is truly the "americanization" of Iraq. The people of the Niger River Delta in Nigeria are in the same situation. The region is enormously oil rich, but the people who actually live there get virtually nothing from it, except massive oil pollution of the water and air. The dollar value of the resource itself, which they own, is all carted away to the kleptocracy and the western oil companies, who then join forces to suppress with violence the local folks who get nothing. same old same old.

Independent

Stephen Foley reports from New York

Published: 14 January 2007

The American company appointed to advise the US government on the economic reconstruction of Iraq has paid hundreds of thousands of dollars into Republican Party coffers and has admitted that its own finances are in chaos because of accounting errors and bad management.

BearingPoint is fighting to restore its reputation in the US after falling more than a year behind in reporting its own financial results, prompting legal actions from its creditors and shareholders.

According to the Center for Responsive Politics, BearingPoint employees gave $117,000 (£60,000) to the 2000 and 2004 Bush election campaigns, more than any other Iraq contractor. Other recipients include three prominent Congressmen on the House of Representatives' defence sub-committee, which oversees defence department contracts.

One of the biggest single contributors to BearingPoint's in-house political fund was James Horner, who heads the company's emerging markets business which is working in Iraq and Afghanistan. He donated $5,000 in August 2005.

The company's shares have collapsed to a third of their value when the firm listed in 2001, and it faces being thrown out of the New York Stock Exchange altogether. Despite annual revenues of $3.4bn, the company made a loss of $722m in 2005. Those figures were released only last month, nine months late, and the company has not yet been able to report any fully audited figures at all for 2006.

Analysts in the US claim the reason is a culture of poor management controls stretching back to before the company was carved out of KPMG, the global accounting giant, at the start of the decade. A litany of failings included invoices going astray, poorly trained accounting staff and a failure to work out the tax implications of having so many employees working in foreign countries.

The chaos is not the result of malfeasance, but is "embarrassing and inexcusable" none the less, according to Harry You, a former computer company finance chief brought in to head BearingPoint in 2005 after it fired its long-standing previous chief executive, the former US army captain Randolph Blazer. BearingPoint did not return calls asking for comment yesterday.

BearingPoint is being paid $240m for its work in Iraq, winning an initial contract from the US Agency for International Development (USAid) within weeks of the fall of Saddam Hussein in 2003. It was charged with supporting the then Coalition Provisional Authority to introduce policies "which are designed to create a competitive private sector". Its role is to examine laws, regulations and institutions that regulate trade, commerce and investment, and to advise ministries and the central bank.

Last week The Independent on Sunday revealed that a BearingPoint employee, based in the US embassy in Baghdad, had been tasked with advising the Iraqi Ministry of Oil on drawing up a new hydrocarbon law. The legislation, which is due to be presented to Iraq's parliament within days, will give Western oil companies a large slice of profits from the country's oil fields in exchange for investing in new oil infrastructure.

BearingPoint's first task in Iraq in 2003 was to help to plan the introduction of a new currency, and it was hoped that it would eventually organise small loans to Iraqi entrepreneurs to stimulate a significant market economy. The contract award was immediately criticised by public integrity watchdogs and by the company's rivals, because BearingPoint advisers to USAid had a hand in drafting the requirements set out in the tender. It spent five months helping USAid to write the job specifications and even sent some employees to Iraq to begin work before the contract was awarded, while its competitors had only a week to read the specifications and submit their own bids after final revisions were made.

USAid's independent inspector ruled that "BearingPoint's extensive involvement in the development of the Iraq economic reform program creates the appearance of unfair competitive advantage in the contract award process". The company said it was selected through a transparent and competitive bidding process.

Across the world, BearingPoint has become, thanks to USAid funding, a part of the US government's strategy of spreading free-market reforms to developing countries and America's allies. Elsewhere in the Middle East it is advising the government of Jordan on how to minimise the regulation of business and reform its tax policies in order to attract foreign investment; in Egypt it is advising on customs reform and respect for international companies' patents.

It has won more than $100m of business in Afghanistan since American troops invaded in 2002, and has been helping to build a banking system, training civil servants in the finance ministry and offering advice on economic policy.

Its economic reconstruction work grew out of early work in eastern Europe after the fall of communism, and became a significant contributor to the business after it won contracts in the former Yugoslavia following US intervention there.

The company changed its name to BearingPoint from KPMG Consulting in 2002, shortly after separating from its parent company. In the years since, contracts with the US government have proved the highlight of the business, while its work for private company clients has failed to live up to hopes. In part because of its reliance on the US federal government - which accounts for about 30 per cent of revenues - BearingPoint has dramatically stepped up its attempts to buy influence in Washington. Its contracts in Iraq and Afghanistan coincide with a big increase in its lobbying efforts on Capitol Hill. In 2005, the latest year for which figures have been collated, BearingPoint paid $1m to lobbyists, equalling the record total it paid in 2003. That is five times its average annual bill for lobbyists prior to the war in Iraq.

It also dramatically increased its political contributions in the run-up to the midterm elections, distributing $120,000 to candidates and campaign groups from its employee-sponsored political fund. That compares with $61,000 in the 2004 elections.

Big OIL plan to rip off Iraq for 30 years cited on floor of House

http://www.dailykos.com/storyonly/2007/1/15/3503/18360

here