The war in Iraq was all about oil...

...according to Issam al-Chalabi who was Iraq's oil minister under Saddam Hussein from 1987 until the invasion of Kuwait in 1990. While I might speculate on the kind of person who had such close ties to Saddam, I did find today's 2 hour seminar at the Ångström Lab (my place of employment) interesting. The talk was entitled "Past and Future Oil Production in Iraq" and was given to a full lecture hall. It was organized by Kjell Aleklett, president of ASPO, Association for the Study of Peak Oil and Gas, and physics professor down at the other end of the building. al-Chalabi was a great speaker with his London-trained English who also spoke passionately from his heart about Iraq and its future. Iraq's modern history and future go hand in hand with oil. This talk is highly actual because the global rights to Iraqi oil are being decided upon with the major discussions having occurred in the last three weeks.

I have six pages of notes, so it will be hard to try and keep this short. Prof. Aleklett showed numerous graphs on oil reserves and production to give the overview. Essentially, peak production was attained in July of this year due, surprisingly, to Chinese demand in their preparations for the Olympics. This will likely not be repeated again, ever. The giant oil fields are dwindling. While much of Iraq is, surprisingly again, unexplored, the new oil that will be discovered will be more costly to extract. The international oil companies need these reserves if production is to be maintained. The projected stakes: 57 billion barrels of oil produced from now until 2050 with an estimated price of $60/barrel = $3420 billion.

al-Chalabi presented the history of Iraqi oil and indeed a brief history of the great civilizations of Mesopotamia and Babylon. Clearly al-Chalabi is extremely proud of his heritage and of being Iraqi. So here's his story as best as I can re-tell it:

After the fall of the Ottoman Empire, the French and British drew up the maps of the Middle East of which Iraq was the "crown jewel". They didn't bother to take into account the various ethnic groups and their religions. Along with the Dutch, the oil was divided amongst themselves. Then, as now, the oil companies involved were Shell, BP, Chevron/Exxon/Mobil. In 1958 Iraq proclaimed itself a republic. In 1961 land was confiscated from the oil companies. Oil was nationalized in 1972 and the oil companies sued Iraq for "taking their land". The oil boom of 1973 caused the US to start getting involved. The biggest "elephants" (oil term for a giant oil field) had yet to be produced. The country prospered until Saddam Hussein came to power in 1979. War with Iran started in 1980 and lasted 8 years. Facilities were destroyed and oil production dropped from 4 million barrels/day to 600,000. By 1990, production returned to 3.5 million a day, but not the hoped for 6. Then Kuwait was invaded and the US placed an embargo on oil that lasted until 2003.

Today, production is at 2 million barrels of which 1.5 is for export. Iraq remains an occupied country with 150,000 troops, almost entirely American. What about the oil? Was it all about the oil? Here al-Chalabi cites statements by various prominent people. Alan Greenspan: "I'm sorry to acknowledge it was all about oil". Colin Powell and General Sanchez also make similar statements. Wolfowitz, the mastermind of the invasion: "Nothing to do with oil. It was all Rumsfeld". But the Pentagon had been studying how to privatize oil before the invasion began. Here al-Chalabi got a bit worked up as he talked about how lies led to murder. The arbitrary division of Iraq by the US along religious sectarian lines promote the current climate of violence necessary for foreign oil to regain its control. 5000 scientists and engineers have either been assassinated or have emigrated. The US is "unable" to solve the murders. The Kurds in the north are now separatists, further undermining Iraq's ability for national oil control.

Back in 1967, Iraq exploited oil under national efforts. Iraqi oil laws were in place and foreign involvement required separate laws. Saddam broke sanctions in 1997 by signing contracts with Russia and China. As of the last few weeks, an attempt to amend the contract with China is underway such that the Iraqi parliament can be bypassed so as to benefit Shell Oil. But any new contracts that don't go through parliament would be illegal. Right now, service contracts for 25+ years are being awarded "illegally" resulting in foreign control of 95 out of 115 oil fields. Today, Iraqis must queue for hours sometimes to get gasoline.

At the end of the talk, al-Chalabi fielded questions. Here are some responses: The era of cheap oil is gone. There will be no more big discoveries, but there will be continued availability of oil, although mostly in the "troubled" Middle East. Iraq's destiny has been and will continue to be decided by oil. In 1973 it was determined that oil reserves would be consumed within 25 years (Prof. Aleklett disagreed, but I myself remember the news around this. Not coincidentally, I became a photovoltaic researcher in 1981.) Iraq's oil should be developed centrally with regional involvement to ensure Iraqi control such that the Iraqi people may also benefit. Obama is naïve to state that the US will become independant of foreign oil. In addition, it is not likely that he can oppose the wishes of global oil companies with regards to Iraq. Oil is priced in US dollars rather than euros because of US influence.

Issam al-Chalabi has been living in Jordan since 1991.

I wanted to write this today before tomorrow's news articles distorted my view. I'm so susceptible to what's written in the media...