What Happened To Iraq’s Oil?

A history of weaponising oil

Last week I interviewed John Browne, former CEO of BP. During the interview, he mentioned that he had been invited to the Pentagon around the time of the invasion of Iraq to estimate how much oil the country had. 

Whilst UK ministers have never admitted to invading Iraq for oil, United States officials have since come clean on the reason for causing one of the worst humanitarian crises in the Middle East. In 2007, Alan Greenspan, the former chairman of the Federal Reserve said: "Everyone knows: the Iraq war is largely about oil."

655,000 Iraqis were killed so the West could get its hands on their oil.

Iraq is the second-largest crude oil producer after Saudi Arabia, sitting on the fifth-largest crude oil reserves in the world. But prior to the war, Iraq wasn’t maximising its output. Why?

Because in 1979, then Vice-President Saddam Hussein nationalised Iraq’s oil industry.

Iraq’s Oil

Browne has claimed that BP “did actually discover all the oil in Iraq”, alluding to the West’s oil grab in the Middle East in the early 20th century. From 1925 to 1961, licences to explore and develop Iraq’s fossil fuel reserves were held by Iraq Petroleum Company. Despite the name, though, this company was not Iraqi, but a consortium of US, British, Dutch and French energy companies. In 1961, Iraq passed Law 80 which withdrew all these concessions which were not actively being developed by the company—amounting to 99% of the total area. The Western alliance refused to acknowledge the law and tensions between the supermajors and Iraq grew, with IPC revoking Iraq’s royalties. All negotiations became bitter in the following decade as IPC demanded compensation for loss of North Rumaila, the third-largest oil field in the world. On June 1, 1972, Iraq suddenly nationalised all the assets of the IPC. Syria followed suit, seizing their portion of the IPC pipeline which runs from Northern Iraq to the eastern Mediterranean. 

Overnight, Iraq took control of the 2% of the world’s global oil supply flowing out of its land. But who would buy it? 

A 1972 CIA Intelligence Memorandum details that the companies comprising IPC, having just lost out on access to some of the earth’s most oil-rich lands, could sink Iraq’s ability to sell its oil on the global market unless Iraq agreed to pay them compensation. It states they would also discourage other Western companies to take Iraqi oil, before detailing how successful legal campaigns by oil companies in recent history have punished former colonies for nationalising their energy industry:

“Legal action by the French firms, CFP and Entreprise des Recherches et d’Activities Petrolieres (ERAP), in their nationalization dispute with Algeria in 1971 and by British Petroleum after it had been nationalized in Libya proved successful in preventing Algeria and Libya from marketing much of their nationalized oil.”

The Memorandum goes on to note how Iraq turned to the USSR for help, offering payment in the form of oil in exchange for marketing it globally. They quickly became firm allies, with the USSR helping develop the Rumaila oil field. Despite Western disapproval, Iraq managed to produce as much as 3.5 million barrels of oil a day in the seventies, lifting much of the population out of poverty, until it was slapped with sanctions for its 1990 invasion of Kuwait, crippling its sector.

Sanctions are often used as weapons of economic war by Western countries. What is discussed less, though, is using oil as a weapon of war—a tactic used by Arab countries against Western alliances over the past decade.

Weaponising Oil

In 1956, the United Kingdom, France and Israel invaded Egypt, triggering the SuezCrisis. During the conflict the Syrians sabotaged both the Trans-Arabian Pipeline and the Iraq–Baniyas pipeline, which disrupted the supply of oil to Western Europe. Andreas Malm also details in his book, How To Blow Up a Pipeline, sabotaging fossil fuel infrastructure has also been at the heart of numerous resistance campaigns, including the ANC’s fight against apartheid.

Oil was weaponised during the Six Day War in 1967 between Israel and a coalition of Arab countries,  namely Egypt, Jordan and Syria, with Arab countries placing an oil embargo on countries supporting Israel. Some targeted just the USA or UK, while others banned all oil exports. The embargo only lasted a few months, and did not significantly impact Western oil imports. 

However, the next oil embargo was so effective it was named “the oil crisis”. 

In October 1973, the members of the Organization of Arab Petroleum Exporting Countries (OAPEC) proclaimed an oil embargo targeted at nations that had supported Israel during the 1973 Yom Kippur War. The initial nations targeted were Canada, Japan, the Netherlands, the United Kingdom and the United States, though the embargo also later extended to Portugal, Rhodesia and South Africa. 

By the end of the embargo in March 1974, the price of oil had risen nearly 300% to $12 per barrel. US prices were significantly higher. The embargo sent shockwaves around the world, repeated just 5 years later in the 1979 oil crisis, triggered by the Iranian revolution. Prices reached $39.50 per barrel, and the world suffered fuel shortages. The effects worsened in 1980 when Iraq invaded Iran and dramatically reduced its oil production, triggering the economic recession of the early 80s.

OPEC, Organization of the Petroleum Exporting Countries, wields great power. Two weeks into Israel’s latest war on Gaza, Iran’s foreign minister called on members of the Organisation of Islamic Cooperation (OIC) to impose an oil embargo on Israel. OPEC did not follow up on the call.

The Invasion

The seventies and eighties showed not only how inextricably linked the world had become, but how much power Arab coalitions could wield. Energy insecurity is caused by both dependence on other nations for fuel and tense relations with those same nations. With most of the world’s untapped oil in the Middle East, the West was surely keen to get their hands on it once more to shore up their own supplies, benefit from the spoils, and break up the coalition that controlled the majority of the world’s flow of oil. 

In 2000, Big Oil threw money at Bush and Cheney’s Presidential bid, with Exxon alone spending almost $700,000 to get their fellow oil boys into power. Bush began his career by founding an oil exploration company and Cheney was an executive of Haliburton, the world's second largest oil service company. Days into their first term, Bush’s administration formed the National Energy Policy Development Group, chaired by Cheney. The group brought the administration and oil companies together to plot their collective energy future. Soon, they were reviewing Iraq’s entire oil productive capacity and arguing that Middle Eastern companies should open up their oil reserves to foreign investment. 

In 2002, oil companies began lobbying Washington and London for access to potential war spoils. Browne, Chief Executive of BP at the time, warned against the USA favouring its own companies, saying: “...the thing we would like to make sure, if Iraq changes regime, is that there should be a level playing field for the selection of oil companies to go in there if they're needed to do the work there."

The Washington Post reported a meeting between Cheney’s staff and Exxon Mobil, Chevron, ConocoPhilips and Halliburton in October 2002. Both the White House and the companies say such a meeting never took place. Yet, industry insiders said Bush’s administration was meeting regularly with oil experts to figure out how to navigate the spoils of a war in Iraq, including the billions of dollars of contracts which would be handed out to “rebuild” the nation. 

The “Oil and Energy” working group of the United States’ government was also meeting with Iraqi exiles, members of the opposition, who agreed opening up the nation’s oil industry to foreign participation would be helpful. 

At the same time, Baroness Symons agreed to lobby the Bush administration on BP's behalf because the oil giant feared it was being "locked out" of deals that Washington was quietly striking with US, French and Russian governments and their energy firms. Leaked memos almost ten years after the invasion showed that BP told the Foreign Office that Iraq was "more important than anything we've seen for a long time".

In January 2003, UK government officials called in a team from BP (sometimes dubbed Blair Petroleum due to the company’s close ties with Tony Blair’s government) for a briefing about the prospects for the Iraq energy sector. Around that time, Browne was invited to the Pentagon. 

In March 2003, the USA and the UK invaded Iraq. With Saddam Hussein gone, the international community lifted the sanctions that had seen Iraq’s oil production drop by 85%. Oil supermajors entered the scene in 2009. Declassified reported that BP has extracted $15 billion in oil from Iraq since the invasion.

Government Invasion

The invasion wasn’t just of ground and air, of course, with Western oil executives allegedly running the Oil Ministry in the months after the war began, before eventually serving as advisers to Iraq’s new government. Western oil giants even helped draft the Iraq Hydrocarbons Law which insisted on private foreign investment. The bill stalled in parliament for so long that the supermajors eventually bypassed the Iraqi government using contracts drafted by the US State department. Some Iraqi lawmakers said these contracts were contrary to existing law, but the Big Oil’s grip on Iraq was too strong.

The Financial Times reported: 

“After the invasion, former executives of big multinationals acted as consultants to the new Iraqi oil ministry. The US then hand- picked oil ministry officials under the coalition provisional authority, which eventually handed over to the interim government of Iyad Allawi. This in turn advocated partly privatising Iraq’s oil industry. When a transitional government came into place, the US backed Ahmad Chalabi – a man who famously said in 2002 that “US oil companies will have a big shot at Iraqi oil” – to chair Iraq’s Energy Council.”

The Iraqi administration never quite decided what to do about the oil, even though the 2005 constitution states that Iraq’s oil belongs to Iraqis, and the Western media spent years reporting on the cultural and sectarian tensions between Iraq’s “factions” which impeded any progress. Funnily enough, of course, the Oil supermajors got the deals they wanted.

Oil is 99% of the Iraqi government’s revenue, producing 4.5 million barrels per day. In 2021, Iraq was generating $264 million per day. The estimated $88 billion to rebuild the nation could be raised in just one year. Yet, 25% of Iraqis live in poverty and President Barham Salih claims $150 billion has been stolen from its land since the invasion.

Looks like Weapons of Mass Destruction were found in Iraq after all.

© Rachel Donald