(cross-posted at Deny My Freedom and Daily Kos)
Well, the Office of Management and Budget, has come up come up with a number that’s something under $50 billion for the cost. How much of that would be the U.S. burden, and how much would be other countries, is an open question.
-Secretary of Defense Donald Rumsfeld, January 19, 2003
Such heady times those were. Before we invaded Iraq in March 2003, the Bush administration tried to play down the cost of the future war to American taxpayers, pegging the numbers at fairly low figures. Their main argument was that the oil from Iraq, which was produced at prewar levels of 2.5 million to 3 million barrels a day, would pay for the reconstruction effort. They probably didn’t anticipate being in the country for roughly 3 1/2 years to date, which is just one reason the cost of war is over $300 billion, all at the expense of those of us who pay income taxes to the federal government. Another reason, though, is because Iraqi oil production has severely lagged after the U.S.-led invasion. A few days ago, clammyc brought to light the fact that Iraq is actually importing oil because of the shortages within the country.
So what are the reasons for the problems with Iraq’s oil production? For starters, just take a look at the number of attacks there have been on Iraqi oil pipelines since the invasion. There have been 318 attacks on pipelines, with 33 taking place this year. It but takes a simple Google search to see the number of articles there have been on damage caused to the main mode of transportation of Iraq’s oil to the outside world. Our inability to stop an insurgency that has turned into a civil war has led to a great deal of harm to the economic infrastructure of the country.
The more pressing issue, though, seems to be a ‘brain drain’ that is occurring in Iraq. In a front-page Wall Street Journal article today, it is revealed that there aren’t that many engineers or experienced managers who can run the oil fields (for a non-subscriber link to the article, click here).
But senior Iraqi oil men were getting caught up in bitter political feuds. Other senior oil men were being murdered by insurgents. One of Mr. Jibouri’s aides was gunned down. So instead of lobbying for the important oil post, the 57-year-old industry veteran packed up late last year and moved to Jordan, joining a legion of elite technocrats fleeing the chaos.
Iraq, sitting atop the biggest conventional oil reserves after Saudi Arabia and Iran, is facing what may be the direst threat yet in its eight decades as a petroleum powerhouse: a brain drain. When the Saddam Hussein regime fell in 2003, a large cadre of oil professionals who had stayed on through Mr. Hussein’s wars and purges were seen as the key to expanding Iraqi output. But the ranks of these technocrats are thinning rapidly.
Of the top 100 or so managers running the Iraqi oil ministry and its branches in 2003, about two-thirds are no longer at their jobs, according to current and former Iraqi officials and outside analysts. The ministry says it doesn’t track this but it says about 100 officials and lower-level engineers and technicians have been murdered since the U.S.-led invasion, along with about 150 oil-field security guards. Among recent victims: the head of Iraq’s domestic fuel-distribution company and a high-ranking colonel in the force that protects oil fields.
Aside from the comfort one gets from the fact that we don’t bother tracking how many oil field workers have been killed during our occupation, it seems clear that, just like we did with the Iraqi military, we purged it of any people affiliated with Saddam Hussein after Baghdad fell. Indeed, the author notes that many of the workers were fired shortly after we invaded the country:
Political turmoil contributes to the heavy loss of talent. The oil ministry lost hundreds of managers when U.S. officials fired members of Mr. Hussein’s Baath Party in 2003. Others later were caught up in serial political purges. Still others have taken leaves of absence or stay home because of the violence.
Another problem is that top people within the oil industry at Iraq have gone missing. This hardly gives any impetus for possible replacements to step into a job where their life is on the line.
Work at Iraq’s State Company for Oil Projects, which spearheads big oil-field construction efforts, recently dried up after a series of attacks and threats against executives. Kidnappers snatched Muthanna al-Badri, the director general, in June. He is still missing.
Mr. Badri’s replacement resigned after being threatened. And that man’s successor quit after being abducted and beaten for a night, according to current and former officials. Three other senior executives recently received threats and took leave, says an official still at the agency.
Efforts to restart Iraq’s rich northern fields have been hobbled by the kidnapping last month of Adel Kazzaz, longtime head of state-owned North Oil Co. Iraq was pumping about 2.5 million barrels a day of crude oil before the 2003 invasion. Production remains about 500,000 barrels a day below that level, and outages in the north account for much of the drop. Mr. Kazzaz remains missing.
And corruption still runs rampant within the industry, something that has given the U.S. and the Iraqi government numerous headaches through the years:
Political parties in Iraq have demanded patronage jobs in the oil ministry for their backers. According to U.S. and Iraqi officials, corruption and smuggling also plague the oil ministry and the several state-owned oil companies under its umbrella.
[…]
Also this month, Iraq’s new oil minister suspended three Somo executives after accusing the agency of corruption. “Bad coins are starting to replace the good coins” throughout Iraq’s oil sector, says Assem Jihad, a spokesman for the oil ministry in Baghdad.
[…]
In the summer of 2004, he returned when a fresh U.S.-brokered government named him Iraq’s trade minister. But Mr. Jibouri says the graft he saw spreading through the bureaucracy around him gradually turned him off government work. “I was engulfed by corruption. The flood was stronger than me,” he says.
[…]
A few months later, Mr. Jibouri packed up and moved his wife and three children to Amman. “I wanted to stay in Baghdad,” Mr. Jibouri said on a recent afternoon over grilled fish at a new Amman restaurant serving Iraqi dishes and filled with exiles. “But it was impossible. If you are honest you will be killed.“
It’s clear that we had no plan for what to do with the oil infrastructure in Iraq should contingencies arise. Aside from the insurgency, we ended up cutting loose people who may have been tied to Saddam’s Ba’ath Party – but when you’re living in under dictatorial rule, one probably feels inclined, for one’s own safety, to be a member as well. Now we don’t have people who speak English (the international language of the oil industry), people who can’t properly account for services, and engineers and managers – those who know the Iraqi oil fields the best – because they don’t want to get killed like some of their peers have.
So what is the administration’s plan for this? Everyone knows about the controversy surrounding Halliburton, the formerly Cheney-run oil giant that received no-bid contracts in Iraq and proceeded to overcharge the government – and therefore taxpaying American citizens – for their work. The people who are being turned to for advice probably won’t give you any comfort, despite their lofty predictions:
Iraq’s oil production is expected to roughly double over the next four years to 4 million barrels a day, the country’s oil minister predicted Wednesday after meeting with U.S. energy officials and executives from nine major oil companies.
[…]
With Iraq’s oil infrastructure frequently targeted by insurgents, the country has struggled to resume oil production to prewar levels of about 2.5 million to 3 million barrels a day. As of last May, production stood at about 1.9 million barrels a day, the U.S. Energy Information Administration says.
Al-Shahristani met with representatives of major oil companies, including Exxon Mobil Corp., Chevron, Shell Oil Co., and BP America Inc., to explore ways that these companies might participate in expanding Iraq’s oil sector and developing new fields.
That’s right – discussions are being held with companies that have made record profits while gasoline prices have soared for American consumers. There seems to be a clear conflict of interest, to say the least. But given the non-existent boundary between the governments and corporations under this administration, it’s hard to be surprised.
Talk of doubling oil production may bring dreams of bigger dollar signs for oil executives, but for Iraqis, who have seen long lines for gasoline, and for us, who were led to believe the war would be cheap, the outlook is bleak:
Iraq still produces less oil than it did under Saddam Hussein, according to the most recent State Department figures. Electricity generation is hovering above prewar levels, but higher demand means that many Iraqis — including the entire population of Baghdad — are worse off than under Hussein.
[…]
The continuing violence, in turn, doomed the Pentagon’s reconstruction strategy: contract out the work of rebuilding to large, mostly American multinationals. Iraq showed that corporations are not designed to operate in the middle of a war zone. Companies like Bechtel, Fluor and Parsons had to hire massive private security forces that drained up to a quarter of the rebuilding budget. Engineers spent weeks trapped in their Green Zone quarters, costing $4 million a day. Sabotage of oil pipelines cut production by a third, costing billions of dollars that could have otherwise helped pay for new schools and water treatment plants.
Our failure to adequately ensure the integrity of Iraqi oil production has not only led to higher gas prices here due to reduced supply, it’s also cost the Iraqis more. And we’re paying engineers millions of dollars a day…to stay in the Green Zone so they don’t get killed. No matter how one arranges the numbers, it all adds up to one massive failure.