Private Empire: ExxonMobil and American Power (30 page)

The decisions Browne took at BP were not merely cosmetic. In 2002, the corporation announced that it would no longer fund “any political activity or any political party,” a form of neutrality that ExxonMobil could not claim. Browne eventually extended BP’s corporate benefits to the gay and lesbian partners of its employees; Lee Raymond declined to do so. On climate, however, BP dodged and wove during the first Bush term. “The science of global warming is unproven,” Browne said in 2001, a formulation not much different from Lee Raymond’s. “I question whether it will ever be proven. But there is a risk there,” Browne said. This risk was enough to “begin to take steps to begin to make a difference.” Still, the danger was not large enough to justify the costs and the global bargain contemplated by the Kyoto Protocol: The treaty was a “bridge too far,” Browne said. Only very gradually would BP shift toward acceptance of the cap-and-trade system, a regulated, government-imposed marketplace that emerged in Europe to control carbon dioxide emissions and help governments there attempt to keep their commitments under Kyoto. He searched for “the right level of transparency or openness in order to build rather than to undermine trust in a world of suspicious media and single issue N.G.O.s.”
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There were some public policy matters where not even the most creative corporate policies or public relations campaigns could make much difference, however. The invasion of oil-laden Iraq was one.

Eleven

“The Haifa Pipeline”

O
n February 11, 2003, Douglas Feith, the Bush administration’s under secretary of defense for policy, appeared before the Senate Foreign Relations Committee, where he argued that the Iraq War, if it arrived, would not be a war for oil. “All of Iraq’s oil belongs to all the people of Iraq,” Feith said. The Bush administration had “not yet decided on the organizational mechanisms” through which the Iraqi oil industry might be restructured after the overthrow of Saddam Hussein, but he felt that he should “address head-on the accusation that, in this confrontation with the Iraqi regime, the Administration’s motive is to steal or control Iraq’s oil.” That charge was commonly made, but it was “false and malign.”

By the time of his Senate testimony, Feith had already become a punching bag for opponents of the Bush administration and its foreign policies. He was a tall, extroverted man with a mop of graying hair and round wire-rimmed glasses. His articulate self-confidence was of the type associated with student council vice presidents, and it grated on some people similarly; General Tommy Franks, then in command of all U.S. military forces in the Middle East, told colleagues at the time that he considered Feith “the fucking stupidest guy on the face of the Earth.” (Franks’s Pentagon colleagues debated his own acumen.) A lawyer in private practice before joining the Pentagon at the request of Secretary of Defense Donald Rumsfeld, Feith proved willing, at the least, to argue like a litigator about the rationales for a U.S. invasion of Iraq.

He told the senators that the United States had no historical record of stealing other countries’ resources through war. “We did not pillage Germany or Japan; on the contrary, we helped rebuild them after World War II,” he said. After Desert Storm, the U.S.-led campaign to liberate Kuwait from Iraq, which prevailed in 1991, “we did not use our military power to take or establish control over the oil resource of Iraq or any other country in the Gulf region.”

The idea that the Bush administration would take on the human and financial costs of overthrowing Saddam Hussein’s regime in Iraq for the sake of grabbing that country’s oil did not make logical sense, Feith continued. “If our motive were cold cash, we would instead downplay the Iraqi regime’s weapons of mass destruction and pander to Saddam in hopes of winning contracts for U.S. companies,” he said. “The major costs of any confrontation with the Iraqi regime would of course be the human ones. But the financial costs would not be small, either. This confrontation is not, and cannot possibly be, a moneymaker for the United States. Only someone ignorant of the easy-to-ascertain realities could think that the United States could profit from such a war, even if we were willing to steal Iraq’s oil, which we emphatically are not going to do.”
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In the weeks to come, Bush administration cabinet officers and independent analysts would endorse Feith’s position that the war had, as Defense Secretary Donald Rumsfeld put it, “literally nothing” to do with oil. The administration published its war aims; these made no mention of energy or economic issues. The invasion’s stated goals were to eliminate Iraq’s weapons of mass destruction, end the threat Saddam posed to neighboring governments, stop his regime’s internal tyranny, cut off his links to terrorism, maintain Iraq’s territorial integrity, liberate Iraq’s people, and create a democracy. It was true that Saddam’s capacity to threaten the world was in part a result of the cash he received from oil sales; in that limited but important sense, the administration’s war aims could be said to be about oil. It could also be argued that the United States would not have incurred all the risks and costs of invading Iraq if the country did not have large oil reserves and therefore an innately important place in the global economy and regional power balances. But that was different from arguing that the United States intended to launch a war
for
the purpose of acquiring Iraq’s reserves.
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What would it mean, in any event, for the United States to “steal” Iraq’s oil? The question itself illuminated America’s dysfunctional search for a national understanding of “energy security.” The United States formally owned oil only to operate government vehicles and aircraft, and to fill a 700-million-barrel strategic petroleum reserve. The government amply met these needs by purchasing oil on the open market. The American economy required about 12 million barrels of imported oil every day in 2003, but these supplies were purchased from private and government-owned oil producers around the world; invading Iraq wouldn’t change that market much, except perhaps unfavorably, from an American perspective, by raising prices through the disruptions caused by war. It was possible to imagine that President Bush might wage war as a conscious or unconscious proxy for the interests of American-headquartered oil companies, notwithstanding the fact that most of these companies were global in scale, employed more foreigners than Americans, and paid more taxes to overseas governments than to the United States Treasury. Yet even if the Bush administration were thoroughly infused by such corporate-inspired perfidy, invading Iraq did not seem like an especially cost-effective way to help ExxonMobil, Chevron, or Conoco expand their booked oil reserves. In an essay published on the Iraq War’s eve, the oil analyst Daniel Yergin argued that even a “liberated” Iraq might be reluctant to allow much direct participation in its oil sector by American firms, because of the prevalence of resource nationalism among Arab populations. He cited the example of Kuwait: “After the 1991 Gulf War, a liberated and grateful Kuwait announced that it would open its oil industry to foreign investment in order to boost production. Eleven years later, that still hasn’t happened, owing to nationalistic opposition.”
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Perhaps, then, the invasion of Iraq would be a war for oil in a geopolitical sense, for the purpose of increasing Iraqi oil production from the moribund levels of the Saddam Hussein era, and by doing so reducing world oil prices and America’s dependence on Saudi Arabia. In the run-up to the invasion, a few conservative thinkers floated versions of this rationale, inflamed in part by evidence of Saudi Arabia’s support for Islamic radicals such as those responsible for the September 11 attacks. But although Iraq had large untapped reserves of 115 billion barrels or more, its daily production amounted to only 2 or 3 percent of the world’s total. After a U.S.-led invasion, even if all went well, it would take a decade or more to double Iraqi production to 6 million barrels per day, and even then Iraq could not hope to challenge Saudi Arabia’s dominance as the world’s most influential “swing producer” and price setter in oil markets, a producer able to raise or lower output as market conditions demanded. Saudi production capacity would still likely be twice that of Iraq’s.
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Nonetheless, as the war befell them, even Iraqis with a sophisticated understanding of the global oil economy remained suspicious about American motives. They did not believe, necessarily, that the United States intended to steal their country’s reserves directly, but they regarded Iraq’s oil as an essential context for the American invasion. History influenced them; without question, oil grabs had shaped Western intervention in the Middle East in the past. “The First World War was not about oil,” said Tariq Shafiq, who would help to draft Iraq’s postinvasion oil law. “But the loot to the victorious winner was the oil concessions in the East. The intention was not there, but that was the obvious outcome. Today with the oil being really the core of our civilization . . . you would expect that oil was a factor.”
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From its thunderous opening salvos in the early hours of March 20, 2003, the American-led invasion of Iraq did unfold in ways that exacerbated such doubts, particularly among Iraqis. On their initial drive to Baghdad, American tanks and Jeeps refueled at depots called Exxon and Shell. The decision to choose those code names might be dismissed as the tone-deaf error of midlevel staff in the Pentagon’s bureaucracy. It proved to be a signal of a deeper and persistent ambiguity.

T
alking points written at the National Security Council and handed out to American officials charged with making contact with Iraq’s oil bureaucrats during the early days of the invasion instructed them to emphasize, “We’re not here for the oil; the oil belongs to the Iraqi people.” Paul Bremer, the head of the Coalition Provisional Authority, or C.P.A., and the de facto regent of the country until 2004, declared that Iraq’s “natural resources should be shared by all Iraqis” and that revenues from the sale of oil should be placed in transparent bank accounts to create a “humane social safety net” for the Iraqi people. In private, however, officials within Bremer’s occupation authority wrestled over the “organizational mechanisms,” as Douglas Feith had put it, that would govern Iraq’s postinvasion oil industry.
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Standard Oil first invested in what became the Iraq Petroleum Company in 1928. By the 1960s, international oil companies, including Esso, the ExxonMobil precursor, still owned a share of Iraq Petroleum. Iraq later nationalized its oil industry and organized state-owned firms, akin to Saudi Arabia’s Aramco. In its heyday, the flagship Iraq National Oil Company and its affiliates were highly professional, led by Iraqi engineers trained in the United Kingdom and the United States. Under Saddam Hussein, however, the state-run oil complex atrophied. By the time of the U.S.-led invasion, a few aging technocrats held Iraq’s oil infrastructure together with proverbial gum and paper clips. The complex’s maintenance problems ran so deep, “you could have brought the whole of ExxonMobil out there and they wouldn’t have been able to operate that thing worth a damn,” said Philip J. Carroll Jr., a former president of Shell U.S.A., who was appointed by Secretary of Defense Donald Rumsfeld to serve as Paul Bremer’s first senior oil adviser.
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Even before the American invasion, it was clear, at least to some Iraqi exiles and American war planners, that a post-Saddam Iraqi government would have to consider whether to invite international oil companies to invest and help solve these deep-seated infrastructure problems. If a “liberated” Iraqi government wanted to draw on large sums of international capital to revitalize oil production, it would probably have to give up at least some equity oil reserves in return, by signing production-sharing contracts with international oil majors or through outright privatization. And yet allowing foreign companies to own Iraqi oil would undermine the Bush administration’s public narrative that the war would not reduce Iraq’s sovereign control of its natural resources. A desperate Saddam Hussein, toward the end of his time in power, had signed production-sharing contracts with Russian and Chinese companies, but those agreements had never been implemented. Otherwise, no Iraqi government had allowed outside oil ownership in four decades. Some financially and politically weak nations elsewhere still accepted production-sharing contracts—Azerbaijan, Indonesia, and Chad were among them—but such deals typically generated controversy, and they had essentially been banished as a contract genre in the Middle East.

Bush administration war planners anticipated this dilemma as they worked in secret before the conflict. The Oil and Energy Working Group of the Future of Iraq Project, a State Department planning body, noted in a paper written early in 2003 that postwar Iraq would require foreign investment “on the terms that best, rapidly and significantly increase [oil and gas] production,” but that Iraqi privatization schemes or production-sharing contracts could “engender opposition from those who see this as selling out to foreign oil companies.”
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Some free-market conservatives within and around the Bush administration saw no reason why a post-Saddam Iraqi government should feel embarrassed about trading some oil reserves for access to foreign capital and technology. In their view, all countries were better off if they privatized their economies to the greatest possible extent. “Privatization works everywhere,” a paper published by the Heritage Foundation in 2002 declared. Its authors urged the Bush administration to work with Iraqi opposition leaders at once to “prepare to privatize government assets” after Saddam’s overthrow.
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In Baghdad, immediately after the invasion, Thomas Foley, a business school classmate of George W. Bush’s, organized a cell of privatization enthusiasts inside Paul Bremer’s C.P.A.; Foley and his colleagues pushed plans for a “broad-based, mass privatization program” even before a transitional Iraqi government could be established. Iraqi technocrats who served as caretakers at the oil ministry in that chaotic spring and early summer of 2003 following Saddam’s fall were stunned by the radicalism of some of the ideas the arriving Americans proposed. Pentagon planners suggested that Iraq should consider withdrawing from O.P.E.C. “This was part of the neoconservative view: Why have Iraq in O.P.E.C.?” recalled one American official involved. “‘Let’s break the cartel!’” The idea seemed preposterous to experienced Middle East hands, as such a proposal would only confirm ordinary Iraqis’ worst fears about American intentions. State Department opponents of the proposal sought to dismiss it “out of hand,” an official involved recalled. And yet, the idea “kept resurfacing.”
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Pentagon officials also suggested that Iraq’s oil ministry look into shipping crude down “the Haifa pipeline,” as they referred to it. The pipeline had been constructed in 1934 to serve territory that eventually became part of the state of Israel. It ran from Iraq’s oil-producing region around Kirkuk through Jordan to modern Israel’s coastal city of Haifa. It ceased operations after Israel’s birth in 1948, but it was marked on old maps.