TomDispatch.com: Iraq Crisis: It's the Oil, Stupid!

From: Berhane Habtemariam <Berhane.Habtemariam_at_gmx.de_at_dehai.org>
Date: Thu, 26 Jun 2014 00:02:28 +0200

Iraq Crisis: It's the Oil, Stupid!
Insurgency and War on a Sea of Oil
By <http://www.tomdispatch.com/authors/michaelschwartz> Michael Schwartz

By Michael Schwartz

 <http://www.juancole.com/2014/06/iraq-crisis-stupid.html> Jun. 25, 2014 |

Events in Iraq are headline news everywhere, and once again, there is no
mention of the issue that underlies much of the violence: control of Iraqi
oil. Instead, the media
<http://www.reuters.com/article/2014/06/11/us-iraq-security-baghdadi-insight
-idUSKBN0EM1TI20140611> is flooded with debate about, horror over, and
extensive analysis of a not-exactly-brand-new terrorist threat, the Islamic
State of Iraq and Syria (ISIS). There are, in addition, elaborate
discussions about the possibility of a civil war that
<http://www.brookings.edu/blogs/up-front/posts/2014/06/14-iraq-military-situ
ation-pollack> threatens both a new round of ethnic cleansing and the
collapse of the embattled government of Prime Minister Nouri al-Maliki.

Underway are, in fact, "a series of urban revolts against the government,"
as Middle Eastern expert Juan Cole
<http://www.juancole.com/2014/06/myths-radical-advance.html> has called
them. They are currently restricted to Sunni areas of the country and have a
distinctly sectarian character, which is why groups like ISIS can thrive and
even take a leadership role in various locales. These revolts have, however,
neither been created nor are they controlled by ISIS and its several
thousand fighters. They
<http://warincontext.org/2014/06/15/general-military-council-of-the-iraqi-re
volutionaries-we-are-stronger-than-isis/> also involve former Baathists and
Saddam Hussein loyalists, tribal militias, and many others. And at least in
incipient form they may not, in the end, be restricted to Sunni areas. As
the New York Times
<http://www.nytimes.com/2014/06/19/world/middleeast/iraqi-oil-refinery-ablaz
e-as-army-and-militants-clash.html?ref=todayspaper&_r=0> reported last week,
the oil industry is "worried that the unrest could spread" to the southern
Shia-dominated city of Basra, where "Iraq's main oil fields and export
facilities are clustered."

Under the seething ocean of Sunni discontent lies a factor that is being
ignored. The insurgents are not only in a struggle against what they see as
oppression by a largely Shiite government in Baghdad and its security
forces, but also over who will control and benefit from what Maliki -
speaking for most of his constituents - told the Wall Street Journal is
Iraq's "
<http://online.wsj.com/news/articles/SB1000142405270230485480457923429317104
5128> national patrimony."

The Deconstruction of Saddam Hussein's Iraq

Does anyone remember what Iraq
<http://www.amazon.com/dp/193185954X/ref=nosim/?tag=tomdispatch-20> looked
like a dozen years ago, when Saddam Hussein still ruled the country and the
United States was about to invade? On the one hand, Iraqis, especially
Shiites and Kurds, suffered under the iron heel of an oppressive dictator -
who may have killed <http://2001-2009.state.gov/p/nea/rls/19675.htm>
250,000 or more of his own people during his 25-year reign. They also
struggled against the privation caused by U.S.-led sanctions - some
estimates at the time placed the number of sanction-caused infant deaths
alone at <https://www.commondreams.org/headlines/072100-03.htm> 500,000.

On the other hand, the country had a number of successful export-oriented
industries like leather goods and agricultural products like dates that
offered employment to hundreds of thousands of relatively well paid workers
and entrepreneurs. It also had a resilient electrical, water, and highway
infrastructure (though increasingly decrepit thanks to those sanctions). In
addition, it had a best-in-the-region primary and higher educational system,
and the finest (free) health care in the Middle East. In a nation of 27
million people, it also had - in comparison to other countries in the area -
a large, mainly government-employed middle class of three million.

 <http://www.amazon.com/dp/1608463710/ref=nosim/?tag=tomdispatch-20> These
pluses all flowed from a single source: the 2.5 million barrels of oil that
Iraq produced each day. The daily income from the sale of the "national
patrimony" undergirded the country's economic superstructure. In fact, the
oil-based government budget was so ample that it supported Hussein with
multiple palaces, enriched all his relatives and allies, and financed his
various wars, both on other countries and on Iraq's Kurds and Shiites.

This mixture of oppression and prosperity ended with the U.S. invasion.
Despite denials that it would ever touch the Iraqi "patrimony," the Bush
administration went straight for those oil revenues, diverting them away
from the economy and into "debt payment" and soon enough, a pacification
campaign. Despite
<http://money.cnn.com/2007/11/08/news/international/iraq_oil/index.htm?secti
on=money_latest> promises from Washington that, under an American
occupation, production would soon rise to six million barrels per day, the
struggle to take control of energy production out of Iraqi hands ended up
crippling the industry and
<http://www.brookings.edu/about/centers/saban/iraq-index> reducing
production by 40%.

In fact, the occupation government was a whirlwind of economic destruction.
It quickly began dismantling all government-run (and oil-subsidized)
industrial plants, bankrupting the private industries that depended on them.
It disrupted or destroyed commercial agriculture, again by discontinuing
Saddam-era oil-financed subsidies and by air attacks on insurgents in rural
areas. It imposed both austerity measures and a "de-Baathification" program
on the country's educational and medical systems.

Since most Iraqis holding any position of significance had no choice but to
belong to Saddam's Baath Party, this proved a disaster for middle class
professionals, a majority of whom found themselves jobless or
<http://www.tomdispatch.com:80/post/174892/michael_schwartz_the_iraqi_brain_
drain> in exile in neighboring countries. Since they had managed such
systems, often under increasingly terrible conditions, the effect on the
management of the electrical, water, and highway infrastructure was
devastating. Add in the effects of bombing campaigns and the privatization
of maintenance and you had a lasting disaster.

When, in 2009, the Obama administration first began withdrawing U.S. combat
troops, Iraqis everywhere - but especially in Sunni areas - faced up to 60%
unemployment, sporadic electrical service, poisoned water systems, episodic
education, a dysfunctional medical system, and a lack of viable public or
private transportation. Few Westerners remember that, in 2010, Maliki based
his election campaign on a promise to remedy these problems by - that figure
again - increasing oil production to
<http://www.energytribune.com/1608/does-malikis-election-finally-mean-stabil
ity-for-iraqs-oil-sector#sthash.A1yMRVaF.dpbs> six million barrels per day.
Since the existing production was more than sufficient to operate the
government, virtually all of the increased revenues could be used to
reconstruct the country's infrastructure, revive the government sector, and
rehabilitate all the devastated public services, industries, and
agricultural sectors.

The Corrupt Legacy of the U.S. Occupation

Despite his obvious Shia sectarianism, Sunnis gave Maliki time to fulfill
his campaign promises. For some, hopes were increased when service contracts
were auctioned off to international oil firms with the aim of hiking energy
production to that six million barrel mark by 2020. (Some, however, just saw
this as the selling off of that national patrimony.) Many Iraqis were
initially reassured when oil production
<http://www.brookings.edu/%7E/media/Centers/saban/iraq%20index/index20130726
.pdf> began to rise: in 2011, the Hussein-era mark of 2.5 million barrels
per day was finally reached, and in 2013 production finally exceeded 3.0
million barrels per day.

These increases raised hopes that reconstruction from the invasion and
occupation era would finally begin. With oil prices
<http://www.fool.com/investing/general/2014/01/04/crude-oil-prices-in-2014.a
spx> holding steady at just under $100 per barrel, government oil revenues
<http://www.brookings.edu/%7E/media/Centers/saban/iraq%20index/index20130726
.pdf> more than doubled, from about $50 billion in 2010 to more than $100
billion in 2013. This increase alone, if distributed to the population,
would have constituted a windfall $10,000 subsidy for each of the five
million Iraqi families. It also would have constituted a very promising down
payment on restoring the Iraqi economy and its social services. (The
electrical system in itself required tens of billions of dollars in new
investment simply to restore it to inadequate pre-war levels.)

But none of this oil wealth trickled down to the grassroots, especially in
Sunni areas of the country where signs of reconstruction, economic
development, restored services, or jobs were hard to discern. Instead, the
vast new revenues disappeared into the recesses of a government
<http://www.brookings.edu/%7E/media/Centers/saban/iraq%20index/index20130726
.pdf> ranked by Transparency International as the seventh most corrupt on
the planet.

Demanding a Share of the National Patrimony

So here's where Iraqi oil, or the lack of its revenues at least, comes into
play. Communities across Iraq, especially in embittered Sunni areas,
<http://www.al-monitor.com/pulse/originals/2013/10/iraq-sunni-protesters-gov
ernment-negotiations.html> began demanding funding for reconstruction, often
backed by local and provincial governments. In response, the Maliki
government relentlessly refused to allocate any oil revenues for such
projects, choosing instead to denounce such demands as efforts to divert
funds from more urgent budgetary imperatives. That included tens of billions
of dollars needed to
<http://www.defenseindustrydaily.com/iraq-seeks-f-16-fighters-05057/>
purchase military supplies including, in 2011, 18 F-16 jets from the United
States for $4 billion. In a rare moment of ironic insight, Time magazine
concluded its coverage of the F-16 purchase with this
<http://nation.time.com/2011/09/28/sticker-shock-iraqi-f-16s-165-million-eac
h/> comment: "The good news is the deal will likely keep Lockheed's F-16
plant in Fort Worth running perhaps a year longer. The bad news is that only
70% of Iraqis have access to clean water, and only 25% have clean
sanitation."

In all fairness to Maliki, his government did use some of the new oil
revenues to
<http://musingsoniraq.blogspot.com/2011/01/government-employees-grow-and-dra
in.html> begin restaffing wrecked government agencies and social service
institutions, but virtually all of the new employment went to Shia citizens
in Shia areas, while Sunnis continued to be fired from government jobs. This
lack of employment - which meant, of course, the lack of oil money - has
been key to the Sunni uprising. As Patrick Cockburn of the British
newspaper, the Independent,
<http://www.independent.co.uk/voices/comment/iraq-crisis-west-must-take-up-t
ehrans-offer-to-block-an-isis-victory-9537866.html> wrote,

"Sunni men were alienated by not having a job because government funds were
spent elsewhere and, on occasion, suddenly sacked without a pension for
obligatory membership of the Ba'ath party decades earlier. One Sunni teacher
with 30 years' experience one day got a crumpled note under his door telling
him not to come to work at his school any more because he had been fired for
this reason. 'What am I to do? How am I going to feed my family?' he asked."

With conditions worsening, Sunni communities only became more insistent,
supplementing their petitions and demonstrations with sit-ins at government
offices, road blockades, and Tahrir Square-type occupations of public
spaces. Maliki's responses also escalated to arresting the political
messengers, dispersing demonstrations, and, in a key moment in 2013, "
<http://www.nytimes.com/2014/06/19/world/middleeast/former-loyalists-of-sadd
am-hussein-crucial-in-helping-isis.html> killing dozens" of protestors when
his "security forces opened fire on a Sunni protest camp." This repression
and the continued frustration of local demands helped regenerate the
insurgencies that had been the backbone of the Sunni resistance during the
American occupation. Once lethal violence began to be applied by government
forces, guerrilla attacks became common in the areas north and west of
Baghdad that the U.S. occupiers had labeled "the Sunni triangle."

Many of these guerrilla actions were aimed at assassinating government
officials, police, and - as their presence increased - soldiers sent by
Maliki to suppress the protests. It is notable, however, that the most
determined, well planned, and dangerous of these armed responses targeted
oil facilities. Though the Sunni areas of Iraq are not major centers of oil
production - <http://en.wikipedia.org/wiki/Petroleum_industry_in_Iraq> more
than 90% of the country's energy is extracted in the Shia areas in the south
and the Kirkuk region controlled by the Kurds - there are
<http://www.nytimes.com/2014/06/19/world/middleeast/iraqi-oil-refinery-ablaz
e-as-army-and-militants-clash.html?ref=todayspaper&_r=0> ample oil targets
there. In addition to a number of small oil fields, the "Sunni triangle" has
almost the entire length of the only substantial pipeline that exits the
country (to Turkey), a significant refinery in Haditha, and the Baiji
petroleum complex, which contains an electrical power plant serving the
northern provinces and a 310,000 barrel per day oil refinery producing a
third of the country's refined petroleum.

There was nothing new about local guerrillas attacking oil facilities. In
late 2003, soon after the U.S. occupation cut off the flow of oil revenues
to Sunni areas, residents resorted to various strategies to stop production
or export until they received what they felt was their fair share of the
proceeds. The vulnerable pipeline to Turkey was rendered useless, thanks to
more than 600 attacks. The Baiji and Haditha facilities held insurgents at
bay by allowing local tribal leaders to siphon off a share - often as much
as 20% - of the oil flowing through them. After the U.S. military took
control of the facilities in early 2007 and ended this arrangement, the two
refineries were regularly subjected to crippling attacks.

The pipeline and refineries returned to continuous operation only after the
U.S. left Anbar Province and Maliki once again promised local tribal leaders
and insurgents (often the same people) a share of the oil in exchange for
"protecting" the facilities from theft or attack. This deal lasted for
almost two years, but when the government began cracking down on Sunni
protest, the "protection" was withdrawn. Looking at these developments from
a petroleum perspective, Iraq Oil Report, an online industry newsletter that
offers the most detailed coverage of oil developments in Iraq, marked this
as a key moment of "deteriorating security," commenting that the "forces
guarding energy facilities. have historically relied on alliances with
locals to help provide protection."

Fighting for Oil

Iraq Oil Report has conscientiously covered the consequences of this
"deteriorating security" situation. "Since last year when attacks on the
[Turkish] pipeline began to increase," the North Oil Company, in charge of
production in Sunni areas, registered a 50% drop in production. The pipeline
was definitively cut on March 2nd and since then, repair crews have been
"prevented from accessing" the site of the break. The feeder pipeline for
the Baiji complex was bombed on April 16th, causing a huge spill that
rendered water from the Tigris River undrinkable for several days.

After "numerous" attacks in late 2013, the Sonangol Oil Company, the
national oil company of Angola, invoked the "force majeure" clause in its
contract with the Iraqi government,
<http://www.iraq-businessnews.com/tag/sonangol/> abandoning four years of
development work on the the Qaiyarah and Najmah fields in Nineveh Province.
This April, insurgents kidnapped the head of the Haditha refinery. In June,
they took possession of the idle plant after government military forces
abandoned it in the wake of the collapse of the Iraqi army in the country's
second largest city, Mosul.

In response to this rising tide of guerrilla attacks, the Maliki regime
escalated its repression of Sunni communities, punishing them for
"harboring" the insurgents. More and more soldiers were sent to cities
deemed to be centers of "terrorism," with orders to suppress all forms of
protest. In December 2013, when government troops began using lethal force
to clear protest camps that were blocking roads and commerce in several
cities, armed guerrilla attacks on the military rose precipitously. In
January, government
<http://www.telegraph.co.uk/news/worldnews/middleeast/iraq/10550563/Fallujah
-falls-under-Al-Qaeda-control-in-blow-for-Iraq-security.html> officials and
troops abandoned parts of Ramadi and all of Falluja, two key cities in the
Sunni triangle.

This month, faced with what Patrick Cockburn called a "
<http://www.independent.co.uk/voices/comment/iraq-crisis-west-must-take-up-t
ehrans-offer-to-block-an-isis-victory-9537866.html> general uprising,"
50,000 troops abandoned their weapons to the guerrillas, and fled Mosul as
well as several smaller cities. This development hit as if out of nowhere
and was treated accordingly by much of the U.S. media, but Cockburn
expressed the view of many informed observers when he termed the collapse of
the army in Sunni areas "unsurprising." As he and others pointed out, the
soldiers of that corruption-ridden force "were not prepared to fight and die
in their posts. since their jobs were always primarily about making money
for their families."

The military withdrawal from the cities immediately led to at least a
partial withdrawal from oil facilities. On June 13th, two days after the
fall of Mosul, Iraq Oil Report noted that the power station and other
buildings in the Baiji complex were already "under the control of local
tribes." After a counterattack by government reinforcements, the complex
became a
<http://www.nytimes.com/2014/06/19/world/middleeast/iraqi-oil-refinery-ablaz
e-as-army-and-militants-clash.html?ref=todayspaper&_r=0> contested area.

Iraq Oil Report characterized the attack on Baiji by insurgents as "what
could be an attempt to hijack a portion of Iraq's oil revenue stream." If
the occupation of Baiji is consolidated, the "zone of control" would also
include the Haditha refinery, the Qaiyarah and Hamrah oil fields, and "key
infrastructure corridors such as the Iraq-Turkey Pipeline and al-Fatha,
where a collection of pipelines and other facilities deliver oil, gas and
fuel to the center and north of the country."

Further proof of this intention to control "a portion of Iraq's oil revenue
stream" can be found in the first actions taken by tribal guerrillas once
they captured the power station at Baiji: "Militants have caused no damage
and instructed workers to keep the facility online" in preparation for
restarting the facility as soon as possible. Similar policies were
instituted in the captured oil fields and at the Haditha refinery. Though
the current situation is too uncertain to permit actual operation of the
facilities, the overarching goal of the militants is clear. They are
attempting to accomplish by force what could not be accomplished through the
political process and protest: taking possession of a significant portion of
the proceeds from the country's oil exports.

And the insurgents appear determined to begin the reconstruction process
that Maliki refused to fund. Only a few days after these victories, the
Associated Press reported that
<http://bigstory.ap.org/article/only-days-after-mosul-fell-iraqis-start-retu
rning> insurgents were promising Mosul citizens and returning refugees
"cheap gas and food," and that they would soon restore power and water, and
remove traffic barricades. Assumedly, this will be funded by upwards of $450
million (of oil money), as well as gold bullion,
<http://www.ibtimes.co.uk/mosul-seized-jihadis-loot-429m-citys-central-bank-
make-isis-worlds-richest-terror-force-1452190> reportedly looted from a
branch of the Central Bank of Iraq and assorted other banks in the Mosul
area.

The oppressive regime of Saddam Hussein was racked with insurgency, and when
vicious repression failed, it delivered a portion of the vast oil revenues
to the people in the form of government jobs, social services, and
subsidized industries and agriculture. The oppressive United States
occupation was racked with insurgency precisely because it tried to harness
the country's vast oil revenues to its imperial designs in the Middle East.
The oppressive Maliki regime is now racked with insurgency, because the
prime minister refused to share those same vast oil revenues with his Sunni
constituents.

It has always been about the oil, stupid!

Michael Schwartz is a Distinguished Teaching Professor, Emeritus, of
sociology at Stony Brook State University. Long a TomDispatch regular, he is
the author of many books and articles on popular protest and insurgency,
corporate dynamics, and political policy, including
<http://www.amazon.com/dp/193185954X/ref=nosim/?tag=tomdispatch-20> War
Without End: The Iraq War in Context. His email address is
<mailto:Michael.Schwartz_at_stonybrook.edu> Michael.Schwartz_at_stonybrook.edu.

[Note on Sources: This commentary rests, in part, on the reporting of Ben
Lando and the staff of <http://www.iraqoilreport.com/> Iraq Oil Report,
which is the best English language source for information about politics,
economics, and social protest in Iraq. Because its articles cannot be
accessed without a subscription, no links to its work are provided in the
text. Unlinked evidence about oil and the U.S. occupation is also taken from
<http://www.amazon.com/dp/193185954X/ref=nosim/?tag=tomdispatch-20> War
Without End: The Iraq War in Context.]

 
Received on Wed Jun 25 2014 - 18:02:37 EDT