BP’s secret Iraqi oil deals

Posted on 7 August 2011


The Observer broke the story last week of how it was revealed that BP had secret renegotiations of its oil contracts in Iraq, describing the result as a stranglehold on the Iraqi economy.

The February 15, 2003 anti-war protest in London.

Of course, the idea that the actual motivation for the war in Iraq is based on the West’s economic interest is nothing new. People had been using slogans like “no blood for oil” in the massive demonstrations that took place before the Iraq war. What’s new is that now we’re looking at an actual leaked contract between BP and Iraq, one that lets us see how the imperialist agenda and “blood for oil” in Iraq work out in minute detail.

What’s revealed in a report by London-based group Platform called “From Glass Box to Smoke Filled Room – How BP secretly renegotiated its Iraqi oil contract, and how Iraqis will pay the price” is the following:

The first contract awarded, for the Rumaila field in southern Iraq, was privately renegotiated between the Iraqi government and the winning BP/CNPC consortium for more than three months after the auction. PLATFORM has obtained the renegotiated Rumaila contract, and can reveal its contents for the first time. We find that the terms changed significantly from the published model contract on which the auction was based.

The most important changes [between the original and the renegotiated contract] are:

  1. If Iraqi oil production is restrained by a future OPEC quota, the Iraqi government would pay BP/CNPC as much for not producing oil as they would for producing it. Under the model contract, the cost of complying with any quota had been shared between government and company.
  2. If Iraq’s transport and export infrastructure is not expanded sufficiently in time for production, the Iraqi government would again pay BP/CNPC for not producing oil. Again, the model contract had shared these risks between the two sides.
  3. The threshold for requiring the Iraqi South Oil Company’s (SOC’s) approval of expenditures – vital to prevent corruption and cost-inflation for the purpose of tax avoidance – is increased from $50 million to $100 million; SOC’s ability to reject or challenge expenditures is restricted; and its approval is automatically assumed after 45 days.
  4. If a natural disaster, industrial action, war or terrorist incident (“force majeure”) prevented oil production for more than 90 days, the Iraqi government would compensate BP/CNPC for their lost income, rather than the costs being shared as in the model contract.
  5. BP/CNPC are not held liable for any geological damage to Iraq’s oil reservoirs as a result of producing oil too quickly or inefficiently.

The boldness of these particular conditions are remarkable: Not only do we occupy your land and pump your oil. We will do so under conditions where if we don’t get our return, you will compensate for it, so there’s zero risk for us.

It’s even more obvious now why the retrofitted rationale given for the Iraq war, which is to bring democracy to the country, is nothing more than a sham. If Iraqis were to have a say, they surely wouldn’t agree with these adhesion contracts. In fact, in a poll from August 2007, 63% of Iraqis said they would prefer Iraq’s oil to be developed and produced by Iraqi public sector companies rather than foreign companies, while only 4% of respondents said that they had been given “totally adequate” information on oil deals.

In a related recent article called “Desperate for Democracy in Iraq”, Julie Hollar lays open how Western media avoids the subject of a real democracy movement and its suppression in Iraq, in what can only be described as media complicity.

Posted in: All posts, Iraq