The history of oil investment in the developing world hints at trouble ahead for the multinationals in Iraqby Daniel Litvin / May 20, 2003 / Leave a comment
Published in May 2003 issue of Prospect Magazine
In the west’s plans for the rebuilding of Iraq?and in particular the likely involvement of western oil companies?it is possible to detect the seeds of some familiar tensions.
Once the American and British soldiers have departed, and once the post-war administration of Iraq is handed over to a new, presumably democratic, local regime, investment by the likes of ExxonMobil, Shell, BP, and (if the French are allowed a share) TotalFinaElf, is likely to be the principal form of western involvement in the country.
America has promised that Iraq’s oil will be utilised for the benefit of the Iraqi people, but that does not preclude foreign oil companies from moving in to help them to extract it. And in the optimistic scenarios of political strategists in Washington and London, the economic benefits brought by the oil companies will help usher in a period of prosperity and stability in Iraq, with local suspicion about the west’s motives being replaced in the long run by peaceful economic co-operation.
This is not wholly fanciful. Initially, a postwar Iraqi regime may well accept the involvement of the oil giants, and not just because of pressure to do so from the US and Britain. The Iraqi oil industry is in serious disrepair after years of sanctions and isolation under Saddam: output before the war started was around 2m barrels a day, some 30 per cent less than its pre-1991 level. Western capital and technology, to which the multinationals hold the key, will allow Iraq to expand its production swiftly and effectively.
For US and British governments, the revival of Iraq’s output will help reduce the country’s dependence on aid, generate cash for the oil companies and increase the security of the west’s energy supplies?in particular, by reducing dependence on oil from Saudi Arabia, whose regime’s alleged links with terrorist groups has made it suspect in American eyes.
For the oil companies themselves, Iraq’s known reser…