It's the Oil by Jim Holt, London Review of Books

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It’s the Oil
Jim Holt

Iraq is ‘unwinnable’, a ‘quagmire’, a ‘fiasco’: so goes the received opinion. But there is good reason to think that, from the Bush-Cheney perspective, it is none of these things. Indeed, the US may be ‘stuck’ precisely where Bush et al want it to be, which is why there is no ‘exit strategy’.

Iraq has 115 billion barrels of known oil reserves. That is more than five times the total in the United States. And, because of its long isolation, it is the least explored of the world’s oil-rich nations. A mere two thousand wells have been drilled across the entire country; in Texas alone there are a million. It has been estimated, by the Council on Foreign Relations, that Iraq may have a further 220 billion barrels of undiscovered oil; another study puts the figure at 300 billion. If these estimates are anywhere close to the mark, US forces are now sitting on one quarter of the world’s oil resources. The value of Iraqi oil, largely light crude with low production costs, would be of the order of $30 trillion at today’s prices. For purposes of comparison, the projected total cost of the US invasion/occupation is around $1 trillion.

Who will get Iraq’s oil? One of the Bush administration’s ‘benchmarks’ for the Iraqi government is the passage of a law to distribute oil revenues. The draft law that the US has written for the Iraqi congress would cede nearly all the oil to Western companies. The Iraq National Oil Company would retain control of 17 of Iraq’s 80 existing oilfields, leaving the rest – including all yet to be discovered oil – under foreign corporate control for 30 years. ‘The foreign companies would not have to invest their earnings in the Iraqi economy,’ the analyst Antonia Juhasz wrote in the New York Times in March, after the draft law was leaked. ‘They could even ride out Iraq’s current “instability” by signing contracts now, while the Iraqi government is at its weakest, and then wait at least two years before even setting foot in the country.’ As negotiations over the oil law stalled in September, the provincial government in Kurdistan simply signed a separate deal with the Dallas-based Hunt Oil Company, headed by a close political ally of President Bush.

How will the US maintain hegemony over Iraqi oil? By establishing permanent military bases in Iraq. Five self-sufficient ‘super-bases’ are in various stages of completion. All are well away from the urban areas where most casualties have occurred. There has been precious little reporting on these bases in the American press, whose dwindling corps of correspondents in Iraq cannot move around freely because of the dangerous conditions. (It takes a brave reporter to leave the Green Zone without a military escort.) In February last year, the Washington Post reporter Thomas Ricks described one such facility, the Balad Air Base, forty miles north of Baghdad. A piece of (well-fortified) American suburbia in the middle of the Iraqi desert, Balad has fast-food joints, a miniature golf course, a football field, a cinema and distinct neighbourhoods – among them, ‘KBR-land’, named after the Halliburton subsidiary that has done most of the construction work at the base. Although few of the 20,000 American troops stationed there have ever had any contact with an Iraqi, the runway at the base is one of the world’s busiest. ‘We are behind only Heathrow right now,’ an air force commander told Ricks.

The Defense Department was initially coy about these bases. In 2003, Donald Rumsfeld said: ‘I have never, that I can recall, heard the subject of a permanent base in Iraq discussed in any meeting.’ But this summer the Bush administration began to talk openly about stationing American troops in Iraq for years, even decades, to come. Several visitors to the White House have told the New York Times that the president himself has become fond of referring to the ‘Korea model’. When the House of Representatives voted to bar funding for ‘permanent bases’ in Iraq, the new term of choice became ‘enduring bases’, as if three or four decades wasn’t effectively an eternity.

But will the US be able to maintain an indefinite military presence in Iraq? It will plausibly claim a rationale to stay there for as long as civil conflict simmers, or until every groupuscule that conveniently brands itself as ‘al-Qaida’ is exterminated. The civil war may gradually lose intensity as Shias, Sunnis and Kurds withdraw into separate enclaves, reducing the surface area for sectarian friction, and as warlords consolidate local authority. De facto partition will be the result. But this partition can never become de jure. (An independent Kurdistan in the north might upset Turkey, an independent Shia region in the east might become a satellite of Iran, and an independent Sunni region in the west might harbour al-Qaida.) Presiding over this Balkanised Iraq will be a weak federal government in Baghdad, propped up and overseen by the Pentagon-scale US embassy that has just been constructed – a green zone within the Green Zone. As for the number of US troops permanently stationed in Iraq, the defence secretary, Robert Gates, told Congress at the end of September that ‘in his head’ he saw the long-term force as consisting of five combat brigades, a quarter of the current number, which, with support personnel, would mean 35,000 troops at the very minimum, probably accompanied by an equal number of mercenary contractors. (He may have been erring on the side of modesty, since the five super-bases can accommodate between ten and twenty thousand troops each.) These forces will occasionally leave their bases to tamp down civil skirmishes, at a declining cost in casualties. As a senior Bush administration official told the New York Times in June, the long-term bases ‘are all places we could fly in and out of without putting Americans on every street corner’. But their main day-to-day function will be to protect the oil infrastructure.

This is the ‘mess’ that Bush-Cheney is going to hand on to the next administration. What if that administration is a Democratic one? Will it dismantle the bases and withdraw US forces entirely? That seems unlikely, considering the many beneficiaries of the continued occupation of Iraq and the exploitation of its oil resources. The three principal Democratic candidates – Hillary Clinton, Barack Obama and John Edwards – have already hedged their bets, refusing to promise that, if elected, they would remove American forces from Iraq before 2013, the end of their first term.

Among the winners: oil-services companies like Halliburton; the oil companies themselves (the profits will be unimaginable, and even Democrats can be bought); US voters, who will be guaranteed price stability at the gas pump (which sometimes seems to be all they care about); Europe and Japan, which will both benefit from Western control of such a large part of the world’s oil reserves, and whose leaders will therefore wink at the permanent occupation; and, oddly enough, Osama bin Laden, who will never again have to worry about US troops profaning the holy places of Mecca and Medina, since the stability of the House of Saud will no longer be paramount among American concerns. Among the losers is Russia, which will no longer be able to lord its own energy resources over Europe. Another big loser is Opec, and especially Saudi Arabia, whose power to keep oil prices high by enforcing production quotas will be seriously compromised.

Then there is the case of Iran, which is more complicated. In the short term, Iran has done quite well out of the Iraq war. Iraq’s ruling Shia coalition is now dominated by a faction friendly to Tehran, and the US has willy-nilly armed and trained the most pro-Iranian elements in the Iraqi military. As for Iran’s nuclear programme, neither air strikes nor negotiations seem likely to derail it at the moment. But the Iranian regime is precarious. Unpopular mullahs hold onto power by financing internal security services and buying off elites with oil money, which accounts for 70 per cent of government revenues. If the price of oil were suddenly to drop to, say, $40 a barrel (from a current price just north of $80), the repressive regime in Tehran would lose its steady income. And that is an outcome the US could easily achieve by opening the Iraqi oil spigot for as long as necessary (perhaps taking down Venezuela’s oil-cocky Hugo Chávez into the bargain).

And think of the United States vis-à-vis China. As a consequence of our trade deficit, around a trillion dollars’ worth of US denominated debt (including $400 billion in US Treasury bonds) is held by China. This gives Beijing enormous leverage over Washington: by offloading big chunks of US debt, China could bring the American economy to its knees. China’s own economy is, according to official figures, expanding at something like 10 per cent a year. Even if the actual figure is closer to 4 or 5 per cent, as some believe, China’s increasing heft poses a threat to US interests. (One fact: China is acquiring new submarines five times faster than the US.) And the main constraint on China’s growth is its access to energy – which, with the US in control of the biggest share of world oil, would largely be at Washington’s sufferance. Thus is the Chinese threat neutralised.

Many people are still perplexed by exactly what moved Bush-Cheney to invade and occupy Iraq. In the 27 September issue of the New York Review of Books, Thomas Powers, one of the most astute watchers of the intelligence world, admitted to a degree of bafflement. ‘What’s particularly odd,’ he wrote, ‘is that there seems to be no sophisticated, professional, insiders’ version of the thinking that drove events.’ Alan Greenspan, in his just published memoir, is clearer on the matter. ‘I am saddened,’ he writes, ‘that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil.’

Was the strategy of invading Iraq to take control of its oil resources actually hammered out by Cheney’s 2001 energy task force? One can’t know for sure, since the deliberations of that task force, made up largely of oil and energy company executives, have been kept secret by the administration on the grounds of ‘executive privilege’. One can’t say for certain that oil supplied the prime motive. But the hypothesis is quite powerful when it comes to explaining what has actually happened in Iraq. The occupation may seem horribly botched on the face of it, but the Bush administration’s cavalier attitude towards ‘nation-building’ has all but ensured that Iraq will end up as an American protectorate for the next few decades – a necessary condition for the extraction of its oil wealth. If the US had managed to create a strong, democratic government in an Iraq effectively secured by its own army and police force, and had then departed, what would have stopped that government from taking control of its own oil, like every other regime in the Middle East? On the assumption that the Bush-Cheney strategy is oil-centred, the tactics – dissolving the army, de-Baathification, a final ‘surge’ that has hastened internal migration – could scarcely have been more effective. The costs – a few billion dollars a month plus a few dozen American fatalities (a figure which will probably diminish, and which is in any case comparable to the number of US motorcyclists killed because of repealed helmet laws) – are negligible compared to $30 trillion in oil wealth, assured American geopolitical supremacy and cheap gas for voters. In terms of realpolitik, the invasion of Iraq is not a fiasco; it is a resounding success.

Still, there is reason to be sceptical of the picture I have drawn: it implies that a secret and highly ambitious plan turned out just the way its devisers foresaw, and that almost never happens.

Jim Holt writes for the New York Times Magazine and the New Yorker.