Only in the most direct sense is the Bush administration's Iraq policy directed against Saddam Hussein. In contrast to all the loud talk about terrorism, weapons of mass destruction, and human rights violations, very little is being said about oil. The administration has been tight-lipped about its plans for a post-Saddam Iraq and has repeatedly disavowed any interest in the country's oil resources. But press reports indicate that U.S. officials are considering a prolonged occupation of Iraq after their war to topple Saddam Hussein. It is likely that a U.S.-controlled Iraq will be the linchpin of a new order in the world oil industry.
The Bush administration's ties to the oil and gas industry are beyond extensive; they are pervasive. They flow, so to speak, from the top, with a chief executive who grew up steeped in the culture of Texas oil exploration and tried his hand at it himself; and a second-in-command who came to office with a multi-million dollar retirement package in hand from his post of CEO of Halliburton Oil. Once in office, the vice president developed an energy policy under the primary guidance of a cast of oil company executives whose identities he has gone to great lengths to withhold from public view.
The Bush administration's energy policy is predicated on ever-growing consumption of oil, preferably cheap oil. U.S. oil consumption is projected to increase by one-third over the next two decades. The White House is pushing hard for greater domestic drilling and wants to open the Arctic National Wildlife Refuge to the oil industry. Even so, the administration's National Energy Policy Development Group, led by Vice President Cheney, acknowledged in a May 2001 report that U.S. oil production will fall 12% over the next 20 years. As a result, U.S. dependence on imported oil--which has risen from one-third in 1985 to more than half today--is set to climb to two-thirds by 2020.
Saudi Arabia is a pivotal player. With 262 billion barrels, it has a quarter of the world's total proven reserves and is the single largest producer.6 More importantly, the Saudis have demonstrated repeatedly--after the Iranian revolution, and following Iraq's invasion of Kuwait--that they are prepared to compensate for losses from other suppliers, calming markets in times of turmoil.
The pariah state of Iraq, however, is a key prize, with abundant, high-quality oil that can be produced at very low cost (and thus at great profit). At 112 billion barrels, its proven reserves are currently second only to Saudi Arabia's. At present, of course, this is mere potential--the Iraqi oil industry has seriously deteriorated as a result of the 1980-88 Iran-Iraq War, the 1991 Gulf War, and inadequate postwar investment and maintenance. Since 1990, the sanctions regime has effectively frozen plans for putting additional fields into production. But once the facilities are rehabilitated (a lucrative job for the oil service industry, including Vice President Cheney's former employer, Halliburton) and new fields are brought into operation, the spigots could be opened wide. To pay for the massive task of rebuilding, a post-sanctions Iraq would naturally seek to maximize its oil production.
Washington would gain enormous leverage over the world oil market. Opening the Iraqi spigot would flood world markets and drive prices down substantially. OPEC, already struggling with overcapacity and a tendency among its members to produce above allotted quotas (an estimated 3 million barrels per day above the agreed total of 24.7 million b/d), might unravel as individual exporters engage in destructive price wars against each other. A massive flow of Iraqi oil would also limit any influence that other suppliers, such as Russia, Mexico, and Venezuela, have over the oil market.
In the Persian Gulf and adjacent regions, access to oil is usually secured by a pervasive U.S. military presence. From Pakistan to Central Asia to the Caucasus and from the eastern Mediterranean to the Horn of Africa, a dense network of U.S. military facilities has emerged--with many bases established in the name of the "war on terror."
Although the U.S. military presence is not solely about oil, oil is a key reason. In 1999, General Anthony C. Zinni, then the head of the U.S. Central Command, testified to the Senate Armed Services Committee that the Persian Gulf region is of "vital interest" to the U.S. and that the country "must have free access to the region's resources."
Bush administration officials have, however, categorically denied oil is one of the reasons why they are pushing for regime change in Iraq. "Nonsense," Defense Secretary Donald Rumsfeld told 60 Minutes' Steve Kroft in mid-December 2002. "It has nothing to do with oil, literally nothing to do with oil."
In fact, oil company executives have been quietly meeting with
U.S.-backed Iraqi opposition leaders. According to Ahmed Chalabi, head
of the Iraqi National Congress, "The future democratic government in
Iraq will be grateful to the United States for helping the Iraqi people
liberate themselves and getting rid of Saddam." And he added that
"American companies, we expect, will play an important and leading role
in the future oil situation in Iraq."