Friday, November 25, 2005

Why Iraq? Why Now?


(This is a particularly long article. Readers may wish to print or email a copy to themselves)

Why Iraq? Why now? Two questions to ask the proponents of the war in Iraq. Make them answer both as one. If they can answer one but not the other it is proof that they have their heads firmly planted in the dirt. The truth is too hard to bear and the grand strategy is too complex to understand in a single serving.

So… why? Well, everyone leans toward the simple answer: oil. And they’re right, but not in the way most people view it. The elements which came together to ultimately lead the US to invade Iraq have origins further back than the turn of the century. At the risk of going back to the evolution of man (or talking snakes), let’s define the start point: 1973.

October, 1973 – Enter OPEC. The members of OPEC nationalize their respective oil industries which, until that point had been dominated by foreign oil companies in the form of concessions. Host countries take taxes and royalties while all other decisions involving development, production and pricing remain under the absolute control of the oil companies and their shareholders (the Seven Sisters). Under this system the host country receives a portion of the per-barrel posted price of oil; a price determined by the oil companies without input from the host country. OPEC countries, aside from the obvious commercial disadvantage of the arrangement, take a political view of the concession system as a form of colonial rule and foreign domination. When OPEC nations nationalize the Middle East oil industry they politicize the price, raising it based, not on market forces, but political events. The resulting “Arab Oil Embargo” of 1973 causes a rise in prices which sends the world reeling. Oil, at least in the eyes of OPEC, is no longer a commodity; it is a political weapon. The sharp rise in prices in 1973(Arab-Israeli war), 1979(Khomeni take over of Iran) and 1980(Iran-Iraq war) are all centered on events around which OPEC withholds the commodity for political reasons. Unfortunately, and unlike a market arrangement, they never reduce the price once the event wanes. This keeps the price artificially high enough to send consumers (the oil companies) scrambling for other sources of supply while the governments of consumer nations vow to reduce dependence on Arab oil. The result of OPEC’s pricing policy is to reduce the consumption of oil by western nations (to near ½ previous levels in Europe) and to accelerate oil exploration outside the OPEC sphere. Oil companies flee from their now less-than-profitable Mid-East concessions and, because the new world oil price provides huge financial returns, invest in new non-OPEC oil reserves. The result is that by 1986 OPEC is supplying less than ½ of what it had been supplying in 1972. OPEC has become the oil supply of last resort. In 1986, with less demand, too much supply and artificial quotas, the price of oil crashes.

August, 1990 – Enter Saddam Hussein (who entered Kuwait without an invitation). Claiming that Kuwait is a province of Iraq, Saddam invades. Oil from Iraqi fields still flows, but under the OPEC arrangement Saddam now has control of two quotas. Iraq is broke after its war with Iran and needs the revenue additional oil production will bring. Financially, OPEC members are not doing well. Major consumers have reduced the demand for OPEC oil. In order to meet the demands of financial pressures in their own countries many OPEC producers are far exceeding their quotas and selling for “market price”. Where the west had once been dependent on OPEC oil, OPEC countries, having failed to invest revenues into enterprise development, have become dependent on oil dollars. With the world price low and demand reduced, OPEC members, particularly Saudi Arabia, need Iraq brought under control and Kuwait’s supply separated from Iraq’s. The US Defense Secretary, Richard Cheney, produces intelligence photographs which show 1500 Iraqi tanks amassed on the Saudi border. Closer examination will reveal that there were no tanks. In fact there was nothing but desert. The US Secretary of Defense has intentionally lied. The Saudis appeal to the US and ultimately the UN for help. Defend Saudi Arabia and oust Saddam from Kuwait. And… oh yes… find a way to punish him… we have an idea. (And we’re nearing bankruptcy).

January, 1991 – Enter G.H.W. Bush, VII US Corps, a Grand Coalition Army and H. Norman Schwarzkopf. Between January 15 (UN deadline for Iraq withdrawal from Kuwait) and March 5 (return of prisoners) a US led coalition force beats the living daylights out of Saddam’s forces and totally destroys the Iraqi military command and control system. During the first two weeks of March retreating Iraqi troops lead an uprising among the Shiia. They capture Basra, Najaf and Karbala. In the north, the Kurds, instigated by the US, rise against Saddam. At the head of the uprising is one Ahmed Chalabi, a Shiia Muslim. Saddam’s forces put down the rebellions, killing the rebels. Those in the north who escape to the mountains die in the tens of thousands from malnutrition and exposure. The US does nothing to help. Chalabi comfortably escapes to the UK. The under-secretary of defense for policy is a little known neocon (former democrat) idealist named Paul Wolfowitz. On March 6 GHW Bush addresses Congress and announces a “New World Order”. (The official US meaning of this phrase is the sole “righter of wrongs around the world”. Arabs, highly skeptical of this self-assumed mantle, came to view it as “a tyrannical system of rule which the United States imposed after the breakup of the Soviet Union giving it authority over those world powers which endeavor to resist it.") Iraq accepts the conditions of UN resolution 687 which requires the destruction or removal of all long-range ballistic missiles and nuclear, chemical and biological weapons, to be verified by UN weapons inspections. The US, France and Britain establish an enforceable “No Fly” zone in northern Iraq intended to protect the Kurds and will later establish a similar zone in the south to protect the large Shiia population. A full trade embargo, which has existed under UN resolution 661 since Saddam’s invasion of Kuwait, remains in force and is strengthened under resolution 687. OPEC changes its allocations to make up for the loss of 3 million barrels a day of Iraqi oil. Saudi Arabia increases its production from 5 million barrels a day to 8 million barrels a day. Without the UN embargo on Iraq, Saudi Arabia, on the brink of fiscal disaster, would not have been able to survive financially given the low quotas provided by OPEC.

May, 1991 – Enter John Rendon, Ahmed Chalabi and the Iraqi National Congress. During Operation Desert Storm John Rendon (Rendon Group) is employed by the government of Kuwait conducting a multi-million dollar PR campaign denouncing the Iraqi invasion and to mobilize support for the US led coalition action. Given the scope of the job his group performs, it is clear that Rendon is one thing – a propaganda machine. In May, President GHW Bush signs a presidential finding directing the CIA to create conditions which will cause Saddam to be either removed by coup d’etat or assassinated by his own people. The CIA, without the necessary in-house mechanisms to pull off such a feat, hires Rendon. He engages in an intense information campaign, operating mostly out of Kuwait, spending 23 million dollars in the first year of his contract. In contact with Ahmed Chalabi, he names and puts a new organization to work gathering information, distributing propaganda and recruiting dissidents – The Iraqi National Congress (INC). Rendon establishes the Iraqi Broadcasting Corp and Radio Hurriah with signals originating from US transmitters in Kuwait. Rendon also has a transmitter established in the Kurdish Iraq city of Arbil where the INC is active. Saddam’s forces attack Arbil at the end of August, 1996 and execute 12 IBC staffers and 100 INC members. Ahmed Chalabi is not there. Rendon funnels 12 million dollars of CIA money into the INC between 1992 and 1996. Ahmed Chalabi, The INC and John Rendon are inexorably linked.

1992 – Enter Paul Wolfowitz. Wolfowitz prepares and circulates a document known as Defense Planning Guidance. In it, he suggests that the United States maintain a military force beyond challenge and to use it in pre-emptive attacks on “rogue” nations. It also states that the US should, if necessary, be prepared to act alone and without UN concurrence. Two country cases presented as arguments in favour of the policy are North Korea and Iraq. When the document is leaked to the media, GHW Bush has the document rewritten and watered down.

December 1996 – Enter the UN and the Oil-for-Food Program. UN resolution 986 allows Iraq to sell $1 billion worth of oil every 90 days and use the proceeds for humanitarian supplies. OPEC members are not ready for the return of Iraqi oil to the market, nor are they prepared to reduce quota shares, particularly those of Saudi Arabia. When Iraq starts to pump 2.7 million barrels a day, the world price of oil starts to drop dramatically. Multi-national oil companies are also affected by this drop in prices and claim that the pace of new exploration will be reduced until prices rise sufficiently to offset costs. Whether exploration is even required at this time raises a question among western governments. The world oil supply is in a surplus condition. In January 1998, the world price of oil crashes. Oil exploration companies, particularly in the US, are bankrupted. In June 1998, Iraq is permitted to export $300 million worth of additional oil at a time when oil prices are falling through the floor. The additional Iraqi oil drives the world price even lower. OPEC member nations, addicted to high prices and quotas, are once again reeling. When oil prices fall to $10 per barrel OPEC countries are facing doom. The previous years of lavish spending have exhausted any fiscal surplus and many now have debt exceeding 100% of their GDP. All have budget deficits. OPEC is very, very scared. Major oil companies are also panicking. Shareholders are dumping oil company stocks at a horrendous rate. The oil companies view the only solution to their woes as one which will cause the price of oil to rise steadily and substantially.

1998 – OPEC swing producers reach production capacity. Enter China. With the exception of Saudi Arabia and Iraq, the oil producers of the Gulf States have reached their production capacity. Saudi Arabia, in an attempt to deal with a $5 billion deficit makes a side deal with major oil companies outside the realm of OPEC. The problem facing OPEC is that all the members are cheating on quotas. Venezuela forces OPEC to change the cartel’s production regulations thus limiting production. While OPEC takes credit for this, they in fact, had nothing to do with it. OPEC is in ruins and no longer functions as an effective cartel. China, with an economy growing at an unbelievable pace makes a deal with Saddam to develop two of Iraq’s major oil fields as soon as sanctions are lifted. China’s oil consumption is growing at a rate of 9% per year. It is forecast that China will have a demand of 5.5 million barrels annually by 2020. China lobbies hard to get sanctions lifted from Iraq. The fly in the ointment is Saddam who continually obstructs weapons inspections. The 4 major oil companies, 2 US based and 2 UK based are in favour of continued sanctions on Iraq. They have the effect of keeping competitors at bay. The oil companies see the Chinese effort in Iraq as a major threat to any possible future development in the region and worry that China’s national oil company might gain a long-term advantage in the global oil industry. The governments of the US and UK also view condition of the Gulf States with some concern. As the Gulf OPEC producers slowly start to de-nationalize their oil industries, concern grows that China’s (and France’s and Russia’s) interest will restrict US and UK domination of the region, and bring about a loss of control of a strategic resource. While the four majors and their governments had hoped Saddam would fall, the worst possible scenario occurs: The UN embargo weakens and Saddam is able to cling to power. The 4 majors are worried that they will be shouldered out while China, Russia and France take control of the most productive oil fields in the region. China accelerates talks with Saddam over oilfield development. The sanctions continue to weaken and China has every reason to believe they will have secured a major supply of oil from Iraq by early 2003. China has also made a deal with Pakistan to finance and build a major oil/cargo/naval port at Gwadar facing the Arabian Sea. China is also in negotiations with the Maldives and Bangladesh to acquire additional naval ports.

November 2000 – Enter George W Bush and a whole cast of neocons. He brings with him a lot of names from the past. Richard Cheney is VP and in the defense department, is Deputy Secretary of Defense Paul Wolfowitz reporting to Donald Rumsfeld. Wolfowitz has advocated the invasion of Iraq as a pre-emptive measure since 1992. Idealistically driven, he feels military and political domination of the Gulf region is essential to the preservation of Israel and to US hegemony worldwide. Without something of a reason, however, there is no way to convince the public that such an invasion is justified. The hunt for intelligence begins.

March 2001 – The major oil companies (US and UK) have a date with Cheney’s energy task force. Who knows what was discussed but considering the jitters that were being felt over China’s involvement in Iraqi oil, it is reasonable to assume that it was an important topic. Further, plans which have emerged subsequent to the invasion suggest that the oil companies were very much involved well before 2003.

September 11, 2001 – Terrorist attack on the World Trade Centre and the Pentagon. Al Qaeda does its thing. Most of the terrorists are Saudi or Algerian. Al Qaeda has no relationship with Iraq. Osama bin Laden, leader of Al Qaeda, despises Saddam and while there has been an approach to collaborate against the US, Iraq rejected such an arrangement. Wolfowitz drags out the pre-emption card again. While it is agreed that Afghanistan and the Taliban must be taken out, this is also the time to take on the problem of Iraq.

January 2002 – Bush identifies Axis of Evil. Iraq is definitely on the hit list. Bush starts to link 9/11 with Iraq in a campaign designed to mislead the American public.

April 2002 – Enter Tony Blair. Blair travels to Crawford, Texas to meet Bush. Plans are made to take military action in the Spring or Fall of 2003. Blair requires that UN weapons inspections be allowed to exhaust their search. Bush and Blair hold extensive private talks. No one knows what was discussed. Blair meets with Bush again in September and announces his support. Bush tells Blair then, that war with Iraq is likely.

November 2002 – Enter Hans Blix and UNMOVIC. After years of blocking inspections, with the threat of force, Saddam allows Hans Blix and the UN weapons inspection teams into the country. They make progress and report that they are able to demand and receive compliance.

February 2003 – Enter Colin Powell. Powell briefs the UN using tapes of intercepts and satellite photos of Iraqi weapons disposition. Subsequent information proves the contents of the briefing to be completely erroneous. At this point it becomes obvious that other players are moving in circles trying to promote war with Iraq. John Rendon, the propaganda specialist is under contract to the Pentagon and Ahmed Chalabi is providing “intelligence”, all of which turns out to be false. The INC produces an Iraqi defector, (proclaiming first-hand knowledge of Iraqi WMD and nuclear programs), known as “Curveball”. He turns out to be a complete fraud. British intelligence indicating that Saddam attempted to buy yellowcake from Niger is also subsequently proven to be completely false. A further issue is that factual information on WMD in Iraq is at least 5 years old and some of it dates back to the 1991 Gulf War. There is no new information on Iraq’s weapons programs.

March 2003 – Back to the Chinese (and the Russians and the French). The Chinese, Russians and French refuse to back another UN resolution. The US withdraws the draft. If they go to war there is no international support. There is also no support from the Gulf States who, while claiming to object on moral grounds, see the outcome of a US/UK action as leading to the freeing up of Iraq’s oil reserves and severe damage to, if not the total elimination of, OPEC’s ability to control world oil prices.

March 20, 2003 – USA, Britain, Australia and others invade Iraq. The coalition eventually takes Iraq. The Chinese, Russian and French interests in Iraq are eliminated. Iraq’s oil industry falls under the control of the American occupation Coalition Provisional Authority (CPA), however, Iraq remains a member of OPEC. Although against WTO rules, the US has a defacto seat on the cartel. No weapons of mass destruction are found. China, which has focused all its efforts on Gulf oil starts to scour the world for other sources of supply and accelerates the building of port facilities and naval bases in the Arabian Sea area.

May 1, 2003 – Bush declares major combat operations have ended. Enter Jay Garner and Phillip Carroll. Earlier, on April 21, Jay Garner took his seat in Baghdad as head of the Coalition Provisional Authority. Once Baghdad is secure Philip Carroll, the former CEO of Shell Oil USA, takes up his post as the person in charge of the Iraqi oil industry.

With that, the history is complete… to a degree. Weapons of Mass Destruction were never found. Evidence of a nuclear program was never found. Questioning of some of the principals of the former Iraqi government has revealed that sanctions were indeed working to contain Saddam. But that was known all along. Hans Blix has accused western intelligence agencies of withholding information and intentionally leading his team in the wrong direction. Had WMD and/or a nuclear weapons program been discovered by the Americans or British, there would surely have been howls of joy from the precincts of Washington and London power. It would have been a bonus because that is not why they went to war in the first place.

The neocons, the true idealists in Defense and State, had a plan for Iraq. They would crank out a democracy, become bosom buddies with the newly elected government, leave a permanent and powerful US military force on the ground and, oh yes, privatize Iraq’s oil industry. The latter goal would serve to achieve one of the unspoken but primary objectives of the take-over of Iraq: the crushing of OPEC.

The elimination of OPEC would serve two primary purposes. The price of oil would fall since it was intended that the four majors would open up the rich oil fields and, true to their competitive ethos, attempt to undercut and out-produce each other. The second purpose was to remove the single Gulf States oracle with which China could negotiate to secure Middle East oil. China would have to negotiate with each country on an individual basis and with Iraq, Kuwait and Saudi Arabia firmly in the US/UK camp that left smaller producers and a fragmented supply. If Iran got too far out of line, they would get the Iraq treatment – an invasion launched from the permanently established US military command in Iraq. But there were problems…

The four major oil companies are not populated by neocons. When Phillip Carroll took over Iraq’s oil industry he was expected to immediately start the process of selling off the equipment and awarding long-term licenses to the major oil companies. He didn’t do it. When Ariel Cohen of the Heritage Foundation, a neocon think-tank, described the act of privatization as a “No-brainer”, Carroll responded with, "I would agree with that statement. To privatize would be a no-brainer. It would only be thought about by someone with no brain." Carroll had no intention of privatizing the oil industry and although he was working for the US government, he was “oil company” to the core of his soul. The majors were dead-set against privatization. In fact, over the previous three decades they had adapted their industry to exploit OPEC. The presence of OPEC, particularly the powerful Gulf States segment, had the effect of keeping prices high. Unfortunately, with little influence over OPEC until after the invasion of Iraq, that same group had been the cause of wild price fluctuations. The majors wanted price stability and they wanted the price of oil to remain high. By keeping OPEC intact and having control of Iraq’s reserves through a national oil company, they could achieve both. The majors also have an ally – Vice President Dick Cheney. Cheney, despite having participated in such efforts as the Project for the New American Century (PNAC), is no idealistic neocon. He is on the side of the oil companies and his only theology: wealth and power.

Carroll held his ground until after the CPA had turned over visible control of Iraq to the interim government. After that the opportunity was lost to privatize the oil fields of Iraq. OPEC remains intact and Iraq, with the second largest oil reserve in the region, still under US occupation, has a seat; China has effectively been shut out of any exclusive arrangement in the Gulf and the US has the start of a military and political lodgment from which to control the region.

Mission accomplished! Just not the one we were told about.

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