Iraqi Oil

For more than a century, major powers have tried to control an enormous source of wealth and power in the Middle East. This enormous source is known as oil. Oil is plentiful in the Middle East with the two largest holders, Saudi Arabia and Iraq, managing the oil price time bomb. Iraq has been at the center of a major crisis with many countries wanting to control the flow of oil. Many questions are asked: Why do other countries want to control Iraqi oil? How far will they go? What events has Iraq gone through to try and keep their oil nationalized?

During the World War I era, many major powers viewed controlling oil fields as a crucial military asset, due to many new vehicles(ships, tanks, cars, trucks, planes, etc.) which relied on the use of oil to operate. These major powers also knew that oil would become very popular outside the war community and would become a fundamental aspect in the economic strengthening of those who controlled it. German and British oil companies negotiated joint ownership of the Turkish Petroleum Company which would produce oil in Mesopotamia(now know as Iraq). A little while later the first world war broke out. Britain knew oil would be crucial and the Secretary of the British Cabinet , Sir Maurice Hankey stated: “Control of these oil suppliers becomes a first-class war aim.” This statement was made as British troops attacked Baghdad. But what they did not realize was Britain gave up much of northern Iraq to their French ally in an accord called the Sykes-Picot Accord in 1916. Later in 1924, France wanted to get into producing oil so they developed the Compagnie Francaise des Petroles to develop it’s share of Mesopotamia.

During this period, Germany was stripped of all oil right and the three main super powers, who came out of Word War I victorious, shared out Iraqi oil amongst themselves. These three super powers were France, Britain, and the United States. Iraq was split up with Britain, the colonial suppressor of Iraq, controlling half of the Iraq, then France and the United States controlled a quarter each. With all agreements, there are always disagreements and negotiations. In these negotiations, European countries saw the United States behavior as in consistent and self-centered and the United States saw European behavior as shortsighted and greedy. This slowed talks considerably. But the two sides found ways to peacefully negotiate and bridge their differences. Britain kept the majority control due to a strategy which they had been trying to implement for many years. Britain wanted to control Iraq to pad it’s ever so precious gem: India. While controlling Iraq and Iran, Britain now had seemed to cut off the western world from invading India as easily as it could in the pre-World War I era. The United States moved into Iraq after it learned that more things could be found in Iraq than just oil. The United States found that American business men admired and accommodated themselves to the nationalism found in Iraq. Also the United States wanted to use Iraq as a missionary field to help Iraqi’s find the faith. Along with the business men and missionaries, the United States sent archaeologists into Iraq to try and find many key things like oil.

Since the United States never declared war upon the Ottoman Empire, it had not played a direct role in the negotiations, but would not accept the San Remo division. Consequently, the Foreign Office and the State Department came to and agreement upon the notorious Red Line Agreement. This gave a 23.75 percent share in holdings of the Iraq Petroleum Company to American companies. Even though this agreement was not fair, the United States would chip away towards equality. Many developments which took place in places such as Bahrain, Kuwait and Saudi Arabia happened due to long skirmishes between the British and American governments. Many things would change during the years, but the government still kept their focus on the oil.

Under the 1975 Algiers Agreement, Iraq ceded 518 km2 of oil-rich borderlands along the Shatt al-Arab in exchange for an Iranian agreement to stop supporting Kurdish rebels in Iraq. But after the fall of Muhammad Reza Shah Pahlevi which resulted in a weak Iranian military, Iraq decided to reclaim the Shatt al Arab. By 1979, however, Saddam Hussein had clawed his way to the top of the ruling junta of Iraq and took advantage of the chaos unleashed by the recent Iranian Revolution to shift the disputed border back in Iraq’s favor, with the excuse being that the predominantly Arab population of this region would prefer being part of the predominantly Arab state of Iraq. His armies crossed into Iran in September, 1980. This began the crucial war called the Iran-Iraq War. Hussein wanted to create a super power with Iraq and with a successful invasion of Iran, he could very well reach that goal. Iraq also hoped to seize an Iranian section called Khuzestan, an area known for it’s oil fields. A more important issue than geography was religion. Both nations were Muslim, with the leaders from Iran mainly from the Shiite branch and the leaders of Iraq from the Sunni. Before the Iranian revolution, the distinction between the countries was less religious than ideological. The ruling Ba’ath Party in Iraq was socialist and pro-Soviet, whereas the Iranian shah was anti-socialist and pro-Western. The Iraqi leadership became more of an issue after the Iranian revolution, when Ayatollah Khomeini, who had spent part of his exile in Iraq, encourages colleagues to overthrow Saddam Hussein. Khomeini decided on this because he thought Hussein government was anti-Islamic. But Iran was the weakest out of the two. With the revolution coming to an end, it’s armies were weak and weary, Khomeini was trying to establish a government, and Marxist rebels were still attacking the religious fundamentalists in the region. Hussein decided it was the right time to move upon Iran.

As the war built, allies started to form. Iran received help from Syria and Israel and Iraq received help from mostly the gulf states. This was due to the gulf states feeling Iran was a greater danger to them than Iraq was. Although the Soviets openly supported their traditional client state, Iraq, they covertly assisted Iran in exchange for not meddling in Afghanistan. The U.S. was in a strange position throughout the war, it didn’t know how to react. Policy makers definitely did not want Iran to emerge victorious. The consensus was that Khomeini was a serious threat to the stability of the region and to U.S. vital interests, notably oil supplies and Israeli security. On the other hand, Saddam was viewed as a psychopath backed by the Soviet Union who was less of a threat to American interests, but certainly no friend. Thus, the policy that emerged was to support the pro-Western regimes in the region, bolster their defenses, and hope the combatants weakened each other to the point where neither would emerge from the war as a regional threat to the region. The United States decided to supply the Iraqis with intelligence, and committed the US Navy to safeguarding the flow of oil out of (and the flow of money and arms into) Iraq, but secretly sold arms to Iran in order to fund anti-Communist rebels in Nicaragua, and gain influence with hostage-holding Muslim militias in Lebanon. The Soviet Union and the United States made decision on who to support by each other. With both countries at each other’s throats, these were crucial years for building trust.

During the war, an Iraqi missile hit a U.S. oil ship killing 37 Americans. Hussein apologized and the United State directed it’s anger towards Iran. The United States and their allies began escorting oil ships, to keep the ships safe from air attacks. But the next attack wasn’t from the air, but in the water. Iran had planted mines below the surface, which bobbed unseen. When the U.S. supertanker Bridgeton hit a mine in July 1987, the Iranians exulted at having used undetected mines to defeat the United States. Acting once again after it was too late, the United States began minesweeping operations. Eventually, other nations joined the effort to clear the Gulf after Iran threatened to spread mines throughout the vital shipping lanes. The only relations which came out of the Iran-Iraq war was the support from each side. Many countries helped Iran fight and also helped Iraq fight, in hoping neither country would be victorious and the flow of oil not be dictated by one super power.

With one of the largest military forces in the world, Iraq began to threaten many countries. One of them being Israel. Hussein argued that the land of Israel was stolen from the Arab people and if not given back he would use as much force necessary to regain it. But Hussein had other ideas than his threat against Israel. He decided to invade Kuwait and try to take over it’s oil reserves. Iraqi president Saddam Hussein declared that the invasion was a response to overproduction of oil in Kuwait, which had cost Iraq over $13 million when oil prices fell. Hussein also accused Kuwait of illegally pumping oil from Iraq’s Rumaila oil field.

The invasion of Kuwait began the Persian Gulf War(in the United States known as Operation Desert Storm). With the assistance of the United States and other allies, Kuwait was backed with a lot of power. U.S.-led forces began with a massive aerial attack upon Iraqi forces in Iraq and Kuwait on January 18th, 1991. Iraq called for terrorist attacks against the coalition and launched Scud missiles at Israel and Saudi Arabia. Iraq’s method of thought was to spread out the coalition and over take them one by one. But this did not happen. Meanwhile, the American homeland was uneasy about supporting a war in which they did not need to be involved in. But President George Bush Sr. and other top Administration officials made clear the view that U.S. interests-primarily oil supplies-were threatened by the Iraqi invasion of Kuwait. The response in the United States, to Saddam Hussein’s moves, was first shock, then dismay. The general public quickly came to understand that the United States had significant interests in making certain that Saudi Arabia was not conquered by Hussein’s juggernaut. Having rolled over Kuwait, Hussein already controlled over 20 percent of the world’s oil reserves(Iraq and Kuwait). Saudi Arabia contained an additional 20 percent. Then this therefore led to the decision to move coalition troops into Saudi Arabia to protect Saudi Arabia of attacks from Iraq. This comforted the Americans and they began to support the war effort more. On February 24th, coalition forces invaded Kuwait and southern Iraq. As the coalition invaded, many Iraqi militants set fire to oil wells, to burn off as much oil as possible from Kuwait. In four days, most of the Iraqi military was defeated and Kuwait was reclaimed. But the terror of Hussein’s regime did not stop with the first Gulf war, but lasted until the second Gulf war which began in early 2003.

On the night of March 19, 2003 the world realized what most of us anticipated, a second war against Iraq. The main goal this time, however, was to liberate the Iraqi people from Saddam Hussein’s rule and disarm his collection of weapons of mass destruction. Iraq was failing to abide by the terms of the 1991 cease-fire, which was not to develop and possess weapons of mass destruction and could not refuse to cooperate with UN weapons inspections, and of supporting terrorism, the president and other officials suggested that Iraq would be added to the list for “war on terrorism” and became more forceful in their denunciations of Iraq for resisting UN arms inspections. The UN arms inspectors indicated that Iraq was not actively cooperating with their efforts to determine if previously known or suspected weapons had been destroyed and weapons programs had been ended. After the war began in March, the world saw what was happening to Hussein’s regime. By May 2003, Hussein’s regime was in shambles, Hussein had disappeared and President Bush Jr. had declared the war a victory. This victory was more crucial than any other foreign modern day war the United States has been in due to the ultimate goal of controlling Iraqi oil.

With America at war, we have to realize that oil is a consideration for nations contemplating joining the fight in the Persian Gulf because the day after Saddam Hussein’s regime was removed, the Iraqi oil industry was up for grabs. Similar worries about the world’s oil supply figured heavily in the 1991 Gulf War, and before that, concerns Iran might capture critical oil fields led to support of Iraq in the war between those two countries. And now, oil is a consideration in the continuing drama at the United Nations. France and Russia, both with veto power in the Security Council, have extensive oil interests in Iraq. Oil is such a huge prize, it could be come a consideration as countries decide whether to join the fight. All five permanent members of the U.N. Security Council – Russia, China, France, Britain, and the United States – have oil companies with a stake in who rules Iraq. The first task would be to get the oil production back up to capacity like it compiled in the late 1970’s because these facilities will be damaged by war and poor operating practices. Fixing the immediate problems will take time and a lot of money. But this is something that needs to be done to restart the Iraqi government. The United States and it’s coalition force knew this before they invaded Iraq and it will not be a huge suprise if it take 20 years and billions of dollars to fix these oil fields so they flow rapidly again. But before that could happen, the United States needed sanctions lifted to be able to export Iraqi oil legally and use the proceeds for reconstruction. With using proceeds to reconstruct Iraq, the forces which showed no interest in the war had to agree or they may be viewed as penalizing the Iraqi people. Also, now that Saddam Hussein is out of office the United Nations is becoming more involved. The bulk of UN involvement in Iraq plays out to be a degree of international monitoring, concessions on oil-for-food contracts and the possibility at least of a future role for UN weapons inspectors.

International oil companies, many of which are based in the United States and United Kingdom, have always been fascinated with three elements of Iraqi oil: A huge supply of oil, high caliber of oil, and the ultra low production costs. Iraq’s oil is very plentiful. Iraq’s reserves have been proven to approximately 11% of the world’s oil total, which equals 112.5 billion barrels. But due to very little exploration, because of war and sanctions, Iraq could actually see reserves greater than 400 billion barrels. Iraq’s high caliber, high quality oil is very attractive to international oil companies because of the oil’s chemical properties. These properties include high carbon content and low sulfur content, which makes the oil highly suitable for refining excellent products. One of the last elements is the ultra low production costs of Iraqi oil. Iraqi oil production costs are among the lowest in the world due to giant fields which can be tapped with shallow wells. These giant fields contain a lot of pressure from water, which in turn creates a fast flowing oil bed. Also, with the high levels of pressure, less energy is needed to extract the from the bed, therefore keeping costs of production minimal. The faster the oil flows, the faster it can be refined and sold. With this the faster a profit can be made and reconstruction in Iraq can take place.

Iraq has been involved in many wars concerning oil. Many were under the ultra notorious dictator Saddam Hussein, who wanted to control as much of the Middle East oil fields as possible and retake Israel for the Arab people. His tactics were brilliant but his means were unbearably Hitlerized. But even through Hussein, oil was a crucial tactical and political power that many countries would like to use. The Middle East focuses on the production and sale of oil to keep their countries a float and it is the main source of government income. Therefore, the quicker the reconstruction goes in Iraq, the quicker Iraq can govern itself.

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