Geopolitik Energi

May 11, 2007

CONFIDENTIAL DOCUMENT ON IRAQ OIL LOBBYING

http://www.globalpolicy.org/security/oil/2006/0714confidential.htm

Confidential Document on Iraq Oil Lobbying

Commentary by James Paul
Global Policy Forum
July 14, 2006

The governments of the Coalition that overthrew Saddam Hussein announced that they acted because of weapons of mass destruction, terrorist threats, and a desire to install democracy in Iraq. They insisted that their actions had nothing whatsoever to do with oil. A confidential document (klik aja) has now come to light that helps us gain perspective on these official arguments. The document reveals that, in private, the Coalition governments were extremely interested in oil and that intense negotiations were going on, even while the initial fighting was still under way, to parcel out Iraq’s major oil fields. The main decisions were being taken in Washington. Key players – in the UK, Australia, France and elsewhere – saw Washington as the ultimate arbiter of Iraq’s oil resources.

The present document is a diplomatic cable which summarizes a private meeting, held in London in May 2003, just two months after the beginning of hostilities. It was a time when the participants were optimistic that the conflict would soon be over and that rapid progress would soon be made by the occupation authorities to consolidate their hold over the country.

The participants discuss a bid by BHP Billiton, Australia’s largest company, for Halfayah, one of Iraq’s largest undeveloped oil fields. The document, prepared by the Australian Department of Foreign Affairs, summarizes the meeting, held at Stoke Lodge, Australia’s diplomatic headquarters in the UK. The gathering brought together former UK Foreign Secretary Sir Malcolm Rifkind (serving in this case as a BHP lobbyist), Australian Foreign Affairs Minster Alexander Downer, Australia’s High Commissioner to the UK Michael L’Estrange (the equivalent of ambassador), and top managers from BHP Billiton (the world’s largest mining corporation). Copies of these minutes (marked “Confidential”) were sent to the Australian Prime Minister, the Minister for Trade, and officials within the Australian Office of National Assessment – the intelligence services. The main subject of the meeting is described in the heading as “BHP Billiton Rights to Halfayah Oilfield Iraq.”

The document came to light through the work of an Australian Royal Commission, set up in November 2005. The Commission was charged with investigating possible illegal acts by Australian companies during the UN oil for food program. Headed by Terence Cole QC and generally known as the “Cole Inquiry,” the Commission has held extensive hearings and gathered a large cache of private documents which it has posted on its web site.

Since the time of the meeting, as Coalition forces have faced a powerful insurgency, the participants’ expectations of quick deals have proved illusory. Still, the document is extraordinarily valuable as a clue to what is happening at present. It provides indispensable and very precious evidence about how governments and companies have been thinking about the division of Iraqi oil in the post-war period. We see that oil companies and high political figures have been involved in intense secret negotiations, that participation in the Coalition was seen to be a key claim on future oil contracts, and that the United States government – not Iraqis – was seen to be the ultimate arbiter of Iraq’s oil resources.

The document is relatively short, but it is rich in implications and enticing in details. The text below provides comments on each numbered paragraph of the original text.

The opening sections cover matters that are relatively well-known. The company representatives point out that:

1. There are five “strategic” undeveloped oilfields in southern Iraq that are especially interesting to major oil companies because of their exceptionally large size. The Halfayah field, coveted by BHP Billiton, contains five billion barrels of recoverable oil, making it one of the world’s largest. Development of the field would cost, according to BHP, about $2 billion [at then current prices the oil would have been worth over $200 billion].

2. Iraq has extensive additional oil potential, with seventy percent of the country unexplored. Iraq also has extensive undeveloped gas deposits.

3. In the mid 1990s, there had been secret negotiations between a number of foreign companies and the government of Saddam Hussein. In 1996/97, BHP was ready to sign an agreement on Halfayah, while French, Russian and Italian companies were also ready with contracts for other key fields.

4. The contracts were not signed because of UN sanctions. BHP was also in conversations with the Iraqis about oil exploration in the Western desert.

Then the document begins to reveal unknown aspects of the matter:

5. In 2000, BHP had transferred any existing “rights” it had in the Halfayah field to a joint venture led by another company, Tigris Petroleum, incorporated in Gibraltar and headed by senior BHP executives who negotiated the original contract. [Those executives, though no longer active in BHP, had close ties to the company.] Tigris is described by BHP management at the meeting as “responsible for maintaining relationships with Iraq by working on oil for food related projects.” [This is typical of the complex legal structure of oil deals and is probably not a major revelation. However, the ownership structure of Tigris and of the joint venture remains unknown, and we do know that Tigris was involved in kickbacks under the oil for food program. It is possible that some prominent Iraqis now have a financial interest in this mysterious company.]

6. BHP and Tigris had been “in discussions” with Shell, the Anglo-Dutch oil major, to bring Shell into the Halfayah development scheme. Shell was being offered a 40% share of the joint venture consortium, while BHP was to keep 40%. Shell was seen by BHP as bringing not only technical and financial benefit but also “political” support. [Evidently Shell was seen to bring support from both the UK and the US governments. The choice of Shell as a partner is interesting, since Billiton, now part of BHP Billiton, was formerly a subsidiary of Shell, giving the two companies especially close working relations.]

7. BHP emphasizes that its previous oilfield studies at Halfayah, its plans for developing the field and its existing agreements with the Iraqis would allow a very fast startup for the project. BHP also emphasizes that the participation of Shell (said to be “another multinational from a Coalition country”) would lend to the political success of the venture.

8. Sir Malcolm urges BHP to “register” its interest with the “US administration,” noting that the United States “would seek to protect its commercial interest in Iraq” and reminding BHP that “existing consortia are being encouraged to take on US partners.” The claim “required lobbying – including from the Australian government – in Washington.” Sir Malcolm said nothing about consulting with or persuading Iraqis about the BHP bid. But he did reveal that the French [who had led the opposition to the war in the Security Council] were already proposing to share the Iraqi fields they had formerly acquired through new negotiations with Chevron [the second largest US oil company].

9. Sir Malcolm had already been very active as a lobbyist. He had had conversations with the UK Foreign Office on May 19 about the BHP matter. BHP had also “briefed” the Australian Prime Minister’s office and other ministries. And there was a plan (presumably by Sir Malcolm) to lobby Downing Street (the office of the UK Prime Minister). The lobbying effort would also go to Washington “next week,” where “the consortium” would brief the Australian embassy and the State Department. Sir Malcolm would also meet with Vice President Cheney “when the opportunity arose.” – Another revelation at this point shows that BHP and its partner, Shell, are worried that US administrators in Iraq were not “aware” of their bid for Halfayah! So BHP is counting on Phil Carroll, a former Shell executive hired by the US as an advisor to the Iraqi Oil Ministry, to “influence Pentagon planners on the ground in Iraq of the consortium’s claims.” The document also reveals that Washington had “told the UK ‘not to behave like the English’ but rather tell the [US] administration if it has particular interests.” This suggests that the senior partner is warning its ally not to act secretly and privately but to be open about UK oil aspirations and dealings. At the very least, this suggests that there are tensions between Washington and London over the postwar disposition of Iraqi oil.

10. At this point, the minutes refer to the comments of Mr. Downer, the Australian Foreign Minister, who warns that “the question of oilfields would be a sensitive one in Iraq,” because it “played into sensitivities over the war.” Downer also insists that the Australian government “has said sincerely that it had not joined the Coalition forces on the basis of oil” and he says that it is “the Iraqis themselves who should be awarding the contracts.” [Downers comments are ironic, given the context of the secret meeting in London that he is attending, but we can assume that the comments are stated grandiosely for the record, since he soon agrees to do his part in the scheme.]

11. Downer goes on to agree that he will lobby for the company’s Halfayah interest, both in Washington and with US proconsul Paul Bremer in Baghdad. He does not refer further to the Iraqi interest, though he does say of BHP’s bid that he “would have it raised” (presumably by others) “with the Oil Ministry in Baghdad.”

At this point, the discussion about Iraq ends. The players have agreed to their lobbying strategy and assignments. After brief reference to other matters, the meeting adjourns.

The document suggests that many other discussions of the same type were being held then (and have been held since) – particularly in London and Washington, involving Exxon, Chevron, Shell, BP and other players. In fact, we specifically learn about negotiations between “the French” (presumably the company Total) and the US company Chevron. It would be extraordinarily interesting to see reports of those other meetings and to learn about what was decided and when.

The Iraqi insurgency has seriously set back the timetable of these companies and changed the political equation. The eventual outcome is more in doubt than the players in this document originally imagined. But it’s likely that the Coalition companies still expect to take over Iraq’s huge oilfields. And Washington doubtless has already decided which company will get what. When Sir Malcolm said that Washington “would seek to protect its commercial interests in Iraq” he was speaking in a subtle code. But given the hundreds of billions of dollars in oil company profits at stake, he certainly was not exaggerating.

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