Last updated on: 6/4/2008 8:58:00 AM PST

What is the history of oil in Iraq?

General Reference (not clearly pro or con)

Ahmad Quni, a journalist, stated in an Aug. 10, 2003 article "Iraq Oil - The Target for Years," published on AlJazeera.NET:

"The roots of US ambitions in Iraq go back to the aftermath of World War I (WWI) which put an end to Turkish presence in the region. The the Sykes-Picot agreement, signed by the British and the French, re-carved the Middle East Creating new entities ruled either by the colonialist powers or by puppet regimes.

Despite the underlying differences, Britain and France agreed to divide the Fertile Crescent encompassing Iraq, Syria, Palestine, Lebanon and Jordan, between them as areas of influence...

Faced with the British and French domination over the region's huge resources, the US at first demanded an 'open door' policy allowing US companies to freely negotiate oil contracts with the puppet monarchy of King Faisal whom the British had installed in Iraq...

In 1927, major oil explorations were undertaken and huge oil deposits were discovered in the Mosul province, which fueled the rivalry among competing colonialist oil companies even further.

However, a settlement was arranged and Iraq oil was divided up into five portions, 23.75% for each of several companies from Britain, France, Holland and the United States.

The Iraqi people were left with virtually nothing of their oil wealth, and this unfair situation continued until 1958 when the Hashemite monarchy was toppled in a military coup.

The Iraqi petroleum company, shared by British Petroleum, Shell, Mobil and Standard Oil of New Jersey (Exxon) was established.

Within a few years, this company had a total monopoly of Iraqi oil production...

By July 1958, a military coup overthrew the Iraqi monarchy, a development that the US regarded as detrimental to its vital interests and immediately landed 20,000 marines in Lebanon in the context of what was known as the 'Eisenhower doctrine.'"

Aug. 10, 2003 Ahmad Quni

Donald L. Barlett and James B. Steele, journalists, stated in a May 10, 2003 TIME magazine article titled "Iraq's Crude Awakening":

"In Iraq, restricted production is an old story. It has often been the victim, ever since oil was discovered near Kirkuk in 1927, within miles of the biblical fiery furnace of Nebuchadnezzer. The Iraq Petroleum Co., jointly owned by U.S., British, French and Dutch oil giants, drilled the first well. It gushed at a rate of 100,000 bbl. a day. That much cheap oil was that last thing the international oil companies wanted. They clamped a lid on the well and sat on the field through the 1930s because the world was awash in oil, and prices were already depressed. Texas crude had fallen from $1.30 per bbl. to 5(cent).

Conditions improved in the 1940s and '50s, but only slightly. An October 1964 State Department memo noted that Iraq Petroleum Co. had long fixed production 'in accordance with the overall worldwide interests of the participating companies, and not solely in accordance with the interests of Iraq.' Later, production was curbed because of internal political turmoil during the '70s, the Iran-Iraq war in the '80s and U.N. sanctions from 1990 until today."

May 10, 2003 Donald L. Barlett

James B. Steele

J. Robinson West, JD, Chairman of PFC Energy, on Feb. 11, 2003 stated in a Washington Post Op-Ed titled "The Pipeline To Iraq's Future":

"Nearly every country with an economy dominated by oil is corrupt and dictatorial, whether in Latin America, Africa, the Caspian, Southeast Asia or the Middle east. The notable exception is Norway.

Oil is unique. Great wealth, controlled by the government, is created without the labor or risk. So rulers have no accountability to the people, because they do not need the consent of the governed. Control of the government means control of wealth. This is a predictably repeated formula of political and economic corruption and mismanagement.

Under the current regime, Iraq has been no different. Multiple security systems and the pervading atmosphere of terror have helped Saddam Hussein stay in power, but so too has his ability to distribute the country's oil wealth at will. And without this power, his decisions to go to war and his massive armament drives would not have been possible."

Feb. 11, 2003 - J. Robinson West, JD

James A. Paul, Executive Director of Global Policy Forum, stated in his article "Iraq: the Struggle for Oil," published in Global Policy Forum in Dec. 2003:

"US and UK companies long held a three-quarter share in Iraq's oil production, but they lost their position with the 1972 nationalisation of the Iraq Petroleum Company. The nationalization, following ten years of increasingly rancorous relations between the government, rocked the international oil industry as Iraq sought to gain greater control of its oil resources. After the nationalization, Iraq turned to French companies and the Russian (Soviet) government for funds and partnerships."

Dec. 2003 James A. Paul

James A. Paul, Executive Director of Global Policy Forum, stated in an Oct. 2003 Global Policy Forum article titled "Great Power Conflict over Iraqi Oil: the World War I Era":

"Just before war broke out in 1914 [WWI], British and German companies had negotiated joint participation in the newly-founded Turkish Petroleum Company that held prospecting rights in Mesopotamia. The war ended the Anglo-German oil partnership and it exposed the territories of the German-allied Ottoman Empire to direct British attack.

As war continued, oil seemed ever more important and shortages ever more menacing to the imperial planners. Sir Maurice Hankey, powerful Secretary of the British War Cabinet, wrote to Foreign Secretary Arthur Balfour during the war's final stage, to argue that oil had become absolutely vital to Britain and that oil resources in Mesopotamia would be crucial in the future. 'Control of these oil supplies becomes a first-class war aim' Hankey said enthusiastically, as British troops closed in on Baghdad.

Unfortunately for the British, they had ceded much of he oil-producing area in northern Iraq to their French ally in the secret Sykes-Picot Accord of early 1916, carving up the soon-to-be defeated Ottoman Empire. British diplomacy and military plans changed course to recoup what had already been given away. In August 1918, Balfour told assembled Prime Ministers of the British Dominions that Britain must be the 'guiding spirit' in Mesopotamia, so as to provide a key resource that the British Empire lacked.

British forces raced to capture the key northern city of Mosul several days after the armistice was signed. Britain thus outmaneuvered the French, establishing a military fait accompli in the oil zone of Northern Mesopotamia.

During the Versailles Peace Conference, British Prime Minister David Lloyd George and his French counterpart Georges Clemenceau nearly came to blows over Mesopotamia (Iraqi) oil, according to eyewitness accounts. U.S. President Woodrow Wilson apparently intervened and only barely restrained them. Finally, in the secret San Remo Agreement of 1920, the two rivals agreed to give Britain political control over all Mesopotamia, in return for France taking over the German quarter share in the Turkish Petroleum Company. All this before a drop of oil had been discovered in the disputed territory!

The United States Government and U.S. oil companies were furious at the Anglo-French agreement, which left nothing for them! Before the end of 1920, following the companies' strategic prompting, the U.S. press began to denounce the Anglo-French accord as 'old-fashioned imperialism.'

Relations between Washington and London cooled swiftly and a young State Department legal advisor named Allen Dulles drew up a memorandum insisting that the Turkish Petroleum Company (TPC) concession agreement with the dismembered Ottoman Empire was now legally invalid and would no longer be recognized by the United States.

Soon London bowed to this transatlantic pressure and signaled that it was ready for a deal that would give the U.S. a 'fair' share. In response, Washington told its major oil companies that they should act as a consortium in future negotiations. Walter Teagle, Chairman of Jersey Standard (later Exxon), the biggest U.S. company, took the lead role as negotiator for the consortium. Thus began lengthy secret talks in London. No oil had yet been found, but prospects had brightened.

In July 1928, the quarreling parties finally reached a famous accord, known as the 'Red Line Agreement,' which brought the U.S. consortium into the picture with just under a quarter of the shares and an agreement to jointly develop fields in many other Middle East countries falling within the red line marked on the map by negotiators.

Throughout this phase, as in all phases of Iraq's oil history, major international powers combined national military force, government pressure and private corporate might to win and hold consessions for Iraq's oil. The defeated and dismembered Ottoman Empire and its defeated ally Germany lost all oil rights they might otherwise have claimed. At the same time, three victors of the war — Britain, France and the United States — shared out Iraqi oil among themselves on a basis of relative power. The dominant colonial power, Britain, came out with nearly a half share, while the two lesser powers on the regional stage — the U.S. and France — each won close to a quarter share.

The people of Iraq were not consulted, nor did they derive any benefit from these arrangements."

Oct. 2003 James A. Paul

Peter Sluglett, DPhil, MA, stated in his 1976 book Britain in Iraq: 1914-1932:

"The Anglo-Persian Oil Company had been formed by W.K.D'Arcy in 1909 to exploit a concession which he had been granted by the Shah in 1901, and the Abadan refinery produced 273,000 tons of oil in 1914, its first year of operation. It should be remembered that Anglo-Persian remained the sole oil producing undertaking in the Middle East until 1927; its operations were first confined to Persia itself and them extended to the Naft-Khana fields on the former Persian territories transferred to the Ottoman Government as a result of the Perso-Turkish Frontier Commission of 1913.

In the Ottoman Empire, numerous rival international groups made bids for oil concessions between 1900 and 1914.

Eventually, in 1912, a group consisting of British, Dutch and German interests managed to combine to form the Turkish Petroleum Company which was given, in rather obscure circumstances, a concession to prospect for oil in the Baghdad and Mosum wilayets just before the outbreak of the war.

Inevitably, all problems surrounding the development of Iraqi oil depended on the permanent inclusions of Mosul within Iraq. Oil and the frontier award are so inextricably mixed that it is difficult to discuss one except in terms of the other; in spite of all the denials, the Lausanne Conference was as concerned about oil as it was about Mosul.

However, while the Conference [Lausanne] was still in session, the British Government began to put pressure on Iraq in the hope of facilitating the bargaining with Turkey. It had been agreed at San Remo that the Iraq Government should be allowed an option of 20% equity participation in the Turkish Petroleum Company. It was now suggested, early in 1923, that this option should be surrendered to the Turkish (or Turkish and Italian) Government, in exchange for Turkish recognition of Iraqi sovereignty over the Mosul wilayet.

[In 1924] the negotiations between the Iraq Government and the T.C.P. reached a serious impasse on the same question, of whether Iraq should be allowed the promised participation, or simply be given royalties. Payment on a royalty basis left the Government far more dependent on the Company, over whose affairs it would have no control, and meant that the country's oil income would be determined by the amount of production which the Company considered to be in its own, rather that Iraq's, best interests.

For its part the Iraq Government wanted, apart from equity participation, a gold rather than sterling basis for its royalties. It wanted to retain for its disposal all lands outside the plots selected for exploration by the Company. It wanted a sliding scale introduced so that more production would bring higher percentage of royalties. Finally it was not prepared to waive import duties on materials for the company's exploratory operations for fear of massive abuses.

Nearly nine years after the end of the war [W.W.I.], in April 1927, exploratory work began in earnest in the most promising area, and on 15 October of that year oil was found in enormous quantity at Baba Gurgur near Kirkuk. In spite of this important discovery, the general surplus of oil to world requirements ensured that development would process for the next few years at a leisurely pace, a fact of less concern to the Company (renamed the Iraq Petroleum Company in 1929) than to the Iraq Government; with very little production the Government received correspondingly little revenue, while the value of the Company as a major potential supplier gradually increased. To compensate for all this lack of revenue, the Iraq Petroleum Company agreed to lend the Government (pounds)400,000 in 1931, in form of an advance against royalties, which saved the country from serious financial difficulties, but initiated the Governments's almost permanent dependence on the Company for ordinary revenue. It was not until the early 1950's that oil receipts began to make a substantial contribution to the economy of Iraq."

1976 - Peter Sluglett, DPhil, MA

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