Another Motive For Iraq War: Stabilizing Oil Market
By Vincent Ferraro

The United States invaded Iraq for a number of reasons. For some members of the Bush administration, it was probably a way to reshape the politics of the Middle East; for others, it was an opportunity to enhance Israeli security. One of the least-discussed reasons was to assure order in the international petroleum market. Perhaps this objective is rarely mentioned because it's obvious, or maybe because no discussion was necessary among decision-makers well versed in petroleum politics.

But one should not believe that the United States would occupy a country with the world's second largest reserves of petroleum without considering the effect of that act on the world's most important commodity. On the other hand, one cannot believe that the United States would ever articulate its objectives in terms that most would regard as vulgar and commercial. We now know that the evidence of an "imminent" attack by Iraq was flimsy, and known to be so at the time by the intelligence community. The threat to the stability of the international petroleum market, however, was real.

Vice President Dick Cheney's energy task force was particularly concerned in March 2001 about non-American suitors for Iraqi oil, according to documents obtained by Judicial Watch. Iraq had signed contracts with a variety of oil companies, including ones from France, China and Russia. That these companies would have access to huge reserves of oil was profoundly unsettling to the largest multinational oil companies (Exxon Mobil, Shell, BP, ChevronTexaco) because these newcomers would more than likely pump as much oil as they could in the shortest amount of time, thereby reducing the price of oil.

Overproduction of oil has long been a fear of the petroleum industry. When confronted with overproduction in the early 20th century, the major petroleum companies agreed to restrict access to areas to any producers who would not agree to restrict production as well. When oil was discovered in Bahrain in 1932 by a company not party to that agreement (Standard Oil of California), every effort was made to bring that company in line. The French exclusion from the major fields in Saudi Arabia in 1947 was partially due to the efforts of the U.S. State Department on behalf of American oil companies.

The Russians and the Chinese are newcomers to the world market, and their willingness to overproduce oil is unrestrained given their needs for energy and export revenues. Many in the United States had worried that support for Iraqi sanctions would erode in the United Nations and that Iraqi contracts with the French, Russians and Chinese would be revived and honored.

This would explain why the United States was so willing to undertake the invasion of Iraq without U.N. sanction, and also why it has been so reluctant to agree to a U.N. mandate, despite the considerable economic and political advantages in doing so. U.N. authorization could activate the Iraqi contracts with non-U.S. or non-British firms.

In May, the administration of the Iraqi petroleum industry was handed over to Philip J. Carroll, a former chief executive of Shell Oil Co., one of the companies committed to maintaining the price stability of petroleum. The French, Chinese and Russian firms will eventually be permitted to produce Iraqi oil, but how much they pump will be regulated by an Iraqi Oil Ministry heavily influenced by an American occupation. Already, oil contracts have been obtained by U.S. firms Exxon Mobil, ChevronTexaco, ConocoPhillips, Marathon and Valero Energy.

The U.S. and British interest in petroleum price stability is clearly self-interest, but one should be cautious about suggesting that the invasion of Iraq was motivated by simple greed. The slogan "No blood for oil" does not capture the complexity of the issue. The world does have an interest in stable oil prices: Very low prices encourage the extravagant use of a finite resource. On the other hand, the American occupation of Iraq favors the interests of American and British oil companies, maintains a higher price for oil than likely would have been the case under a U.N.-sanctioned occupation and seductively promises a more secure and less politically dangerous supply of oil than that offered by Saudi Arabia.

And American control over Iraq gives it the ability to use oil contracts to influence the conduct of other states: The Iraqi oil contract awarded to Mitsubishi the day after the Japanese agreed to send troops to Iraq is a dramatic example of how such power can be used.

The mixing of private and public interests in the Iraqi case raises serious questions. None of this is necessarily inconsistent with the public interest, but many of them satisfy private interests to a considerable extent.