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Part 1 of 4
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Oil Companies in Iraq:
A Century of Rivalry and War
By James A. Paul
Global Policy Forum www.globalpolicy.org
November 2003
Conference in Berlin on Corporate Accountability (November 25-26, 2003)
The United States and the United Kingdom did not wage war on Iraq for
the officially stated reasons. That much is obvious. The world’s
superpower and its key ally were not acting because they feared
the Iraqi government’s weapons of mass destruction or its ties
with the terrorist group al-Qaeda. Nor were they fighting to bring
democracy to the Middle East, a region where the two governments
had long supported reactionary monarchs and odious dictators,
including Iraqi president Saddam Hussein himself.
It is time, then, to set aside the sterile discussions about
intelligence failures and to consider a deeper reason for
the conflict. This paper will argue that the war was primarily a
war for oil in which large, multinational oil companies
and their host governments acted in secret concert to gain control
of Iraq's fabulous oil reserves and to gain leverage over other
national oil producers. In arguing for the primacy of oil, we do
not imply that other factors were not at play. The imperial dreams
of the neo-con advisors in Washington contributed to the final
outcome, as did the re-election strategies of the political
operatives in the White House. But the Iraq war did not emerge
solely from the Bush administration. As we shall see, it involved
both London and Washington, through the course of many
governments. And it emerged from a decades-long effort by the
world's largest companies to appropriate the planet's most
lucrative natural resource deposits.
Several elements contribute to make the case for an oil war: the
enormous, long-term political influence of the oil companies, the
close personal ties between the companies and their host
governments, the long history of prior conflicts and wars over
Iraqi oil, and the enormous potential profitability of the Iraqi
fields. To consider the evidence, and answer the questions of
skeptics, we must begin by reviewing the companies’ power and
influence over a period of many decades. Later, we will turn to
the immediate events leading up to the 2003 war itself.
Companies’ Great Size & Global Presence
By the early 20th Century, when most business firms were
relatively small by modern standards and purely national in scope,
Standard Oil and Royal Dutch Shell were already global companies
that controlled a worldwide network of production and
distribution. By 1911, they held rich production fields in the
Dutch East Indies (today’s Indonesia), Romania, Russia, the United
States, Venezuela and Mexico, as well as refineries, pipelines,
rail cars, tankers, storage depots and other facilities in dozens
of countries. Standard Oil alone had a fleet of nearly 100 ships.1
Large as they were a century ago, the oil companies have since
grown mightily, due to worldwide collusion in production and
pricing and to fierce backing by their host governments. For
decades, the so-called Seven Sisters, all of them firms
based in the US or the UK, dominated the industry and ruled the
global oil market through a tightly-knit cartel. Though
nationalizations by producer countries in the 1970s dealt a
serious blow to these firms, they continued to dominate the oil
industry through control over the"downstream" end of the business
-- transport, refining, petrochemicals, and marketing -- while
building new production facilities in more friendly locations.2
Today, a wave of mergers has given the successor companies a new
and unprecedented scale, reducing the major firms to just five. In
2003, annual revenues of the leader, ExxonMobil, were an
astonishing $247 billion.3 By way of comparison, Exxon’s revenue
is vastly greater than such well-known international companies as
Walt Disney ($25 billion) and Coca Cola ($19 billion) and it is
larger than the revenues of 185 national governments, including
Brazil, Canada, Spain, Sweden and the Netherlands. Only the
world’s six richest countries the US, Japan, Germany, France,
Italy and the UK had revenues above this level. 4
Among the world’s fifteen largest corporations listed in the 2002
Fortune Global 500, five were oil companies. After
US-based Exxon came the UK giants Shell and British Petroleum
(BP), the mammoth French firm Total, and the huge US-based
Chevron. Compared to the large automakers, with their anemic
profits, the oil companies stand out among the world’s biggest
corporations for their high profitability. In 2001 (and again in
2003), Exxon earned the world’s highest profits. In 2003, its
earnings reached a record $22 billion, more than General Motors,
Ford, DaimlerChrysler and Toyota taken together.5
Oil, Economy & Warfare
To understand the special national security status enjoyed
by the oil companies, we must first consider oil’s economic
importance and then its central role in war. Oil provides nearly
all the energy for transportation (cars, trucks, buses airplanes,
and many railroad engines). Oil also has an important share of
other energy inputs it heats many buildings and fuels
industrial and farm equipment, for example. Overall, oil has a 40%
share in the US national energy budget. Beyond energy, oil
provides lubrication and it is an essential feedstock for
plastics, paint, fertilizers and pharmaceuticals. Sometime in the
future, the world may switch to renewable energy and other non-oil
inputs, but oil now reigns as the indispensable ingredient of the
modern economy. For this reason, governments are nervous about
their national oil supply.6
Modern warfare particularly depends on oil, because virtually all
weapons systems rely on oil-based fuel tanks, trucks, armored
vehicles, self-propelled artillery pieces, airplanes, and naval
ships. For this reason, the governments and general staffs of
powerful nations seek to ensure a steady supply of oil during
wartime, to fuel oil-hungry military forces in far-flung
operational theaters. Such governments view their companies’
global interests as synonymous with the national interest and they
readily support their companies’ efforts to control new production
sources, to overwhelm foreign rivals, and to gain the most
favorable pipeline routes and other transportation and
distribution channels. One of our greatest helpers has been
the State Department, mused John D. Rockefeller, founder of
Standard Oil in his 1909 book, Random Reminiscences of Men and
Events. Our ambassadors and ministers and consuls have aided
to push our way into new markets in the utmost corners of the
world.7
The oil industry gained its crucial role in military affairs
during World War I. In the run-up to the war, the world’s navies
converted from coal to oil-fired ships, because of significant
advantages in speed and range of operation. The war also marked
the first military uses of the automobile, truck, tank and
airplane. Belligerents on both sides faced severe oil shortages,
but the Allies eventually gained the upper hand with vastly
greater supplies. Lord Curzon, a member of the British War
Cabinet, concluded that the Allied cause has floated to
victory upon a wave of oil.8
Government policy makers give the highest priority to oil matters
during wartime, as many historical studies show. Japanese and
German officials made desperate efforts to gain oil sources during
World War II while US and British leaders did their utmost to deny
them this resource. But even allies could be bitter oil rivals. In
many wartime meetings and cables, President Franklin Roosevelt and
Prime Minister Winston Churchill wrangled over their countries’
respective post-war shares of Middle East oil reserves.9 After the
war, George Kennan, Director of the US State Department’s Policy
Planning Division, reacted with unbridled enthusiasm at US oil
companies’ primacy (to the exclusion of Britain) in the
newly-discovered Saudi Arabia fields. The United States, he wrote,
had just acquired the greatest material prize in world
history.10
Oil Rents, Corruption & Conflict
End Part 1
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