The Magazine

Iraq's Oil Progress

It's impressive, but U.S. lawmakers aren't helping.

Aug 25, 2008, Vol. 13, No. 46 • By MICHAEL MAKOVSKY
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Shahristani remains a key obstacle to future development of the oil sector. He came into the job without any oil experience--as his mis-structuring of the technical security agreements showed. He has alienated many of the technocrats in the oil ministry, hurting morale and accelerating a decline in its expertise. A notable example was his recent removal of the highly regarded director general of the South Oil Company, Abdul Jabbar Lauby. Shahristani's inability to spend beyond a small percentage of his budget is partly the result of the oil ministry's declining technical competence. He also has been insensitive to U.S. concerns. For instance, he said at an energy summit in April about $120 oil, "It's not really so high that it's beyond the capacity of most countries to cope with it."

On the American side, opposition by publications such as the New York Times and Democratic senators such as Charles Schumer and John Kerry to the agreements encouraged the Iraqi opposition to them. They claimed these deals resulted from American meddling, should not be done absent passage of comprehensive hydrocarbon legislation, would lead to more sectarian fighting over oil, contribute to the perception of corruption and--in the words of the Times--the "understandable suspicions" especially in the Arab world that the United States went to war for oil. The Times also claimed the projected 500,000 barrels per day increase in production was "minor" in "global terms."

It is important to address the views expressed by these senators and the Times collectively in order to make progress in the Iraqi oil sector and the country in general. American influence in Iraqi oil policy has been vastly overstated, as even a quick look at events would show. Also, this emphasis on Iraqi hydrocarbon legislation at the expense of other operational progress in the oil sector has been a mistake, one that the White House began and perpetuated. (See my "Oil's Not Well in Iraq" in THE WEEKLY STANDARD, February 19, 2007.) However noble the objective of using oil to help unite the country, the proposed cocktail of oil legislation has so far actually had the effect of pulling the country further apart, and the oft-criticized Kurdish deals are actually pressuring Shahristani to make progress.

Further, the idea that more oil production will lead to more sectarian fighting is belied by the facts: There has been more oil output in the last year as sectarian fighting declined, while the pre-surge period was marked by rising sectarian conflict and stagnating oil production. The no-bid nature of the process is debatable but not necessarily condemnable. It is rather curious why American politicians object to American and Western oil companies' getting contracts, as if Iraqi agreements with less competent Russian or Chinese oil companies would serve Iraqi or U.S. commercial and national security interests.

One must wonder, moreover, why so much credibility should be given to the unproven conspiracy theory that five years ago the United States went to war over oil? Indeed, the fear of giving any credence to this conspiracy theory contributed to the insufficient U.S. effort in the Iraqi oil sector from the very beginning.

Finally, no one should scoff at the further possible near-term increase of 500,000 barrels per day in Iraqi oil production and exports that these contracts promised. That figure represents about 20 percent of total global spare, or unused, oil production. Iraqi progress comes at a time when there is little significant growth in oil production anywhere in the world outside of Saudi Arabia. Russian oil production, for instance, is declining after years of tremendous growth, and Venezuelan and Mexican oil production has been in decline for years.

The surge has given new life to Iraq's oil sector. This offers promise in Iraq of a stronger central government, reduced unemployment, greater economic development and resources, more stability, and more barrels of oil in a very tight market that badly needs them. Politicians in the United States and Iraq should be encouraging, not constraining, this progress.

Michael Makovsky, foreign policy director of the Bipartisan Policy Center, was a special assistant for Iraqi oil policy in the office of the secretary of defense from 2002 to 2006. He is author of Churchill's Promised Land.