Changing My Mind

In the comments of this post reader Duffy asks the following wholly reasonable question:

Can I ask, what was the last Big Thing you changed your mind about after doing some research?

He went on:

I ask because in my experience most people decide first and rationalize afterwards. Whatever facts don’t fit the preconceived idea are discarded in favor of confirmation bias.

I had to think about this for a while, but I thought Duffy deserved a proper answer.  The best example I can think of is the role of the US military around the world, and specifically what changed after the Iraq War.

There were some very reasonable arguments opposing the US and its allies’ decision to launch the Iraq War, and there were some incredibly stupid ones as well.  One of those that fell somewhere in the middle is one I have changed my mind about.  Before the invasion took place there was a school of thought that went something like this:

These brown folk are primitive.  They don’t know how to get along with one another, they need a strongman like Saddam Hussein to keep them in line.  They’re not ready for democracy, it doesn’t work for the likes of them.

The reason why I didn’t subscribe to this view was I thought it would be a massive injustice to an oppressed and brutalised population to just assume that the person who was standing on their necks was doing so for their own good and they’d be worse off without him.  I couldn’t think of anything worse than living under such conditions myself and the people who could do something about it telling me that I was incapable of running my own affairs.

I supported the Iraq War for several reasons, one of which was I thought the Iraqis deserved the chance to be free of Saddam Hussein and run their country without him.  I genuinely thought they would seize the opportunity to demonstrate to the world that Arabic people are not incompatible with democracy and, so thankful that Saddam Hussein is gone, they would make a pretty decent effort to make things work.

Instead they tore each other apart and did everything they could to demonstrate that those who dismissed them as savages that needed a strongman to keep them in line were right all along.  I think this was probably the most depressing aspect of the whole shambolic affair.  I still think the Iraq War should have gone ahead because I believe it solved two security issues which I think the US would have found much harder to manage in future: the security of the Saudi oilfields and finding out for sure whether Saddam Hussein had chemical or biological weapons that could be used in a future conflict.  I’m also certain that had the Iraq War not happened a bloodbath would have occurred at some point anyway: either the Arab Spring would have been tried in Iraq, or it would have been dragged into Syria or another conflict with Iran.  Whatever might have happened, I don’t think an Iraq under another decade or two of Saddam Hussein & Sons would have been a stable, happy place.

But the one issue I changed my mind on was that the US (or British) military should no longer be brought to bear for altruistic or humanitarian reasons.  It is rather depressing, but I am now a firm believer in the premise that a population generally deserves the government it gets.  No longer would I support a war that is not prosecuted for clear strategic reasons that are indisputably in the national interest.  So all those suffering under the jackboot of oppression?  Sorry, you’re on your own.  We tried our best and look where it got us.

Seamus Milne on Iraq’s Oil

There is a good reason why Upstream Online is popular amongst workers in the oil and gas industry as opposed to say, Seamus Milne of the Guardian.  Via Tim Worstall, here is the latter:

[F]our of the western world’s largest oil corporations are due to sign contracts for the renewed exploitation of Iraq’s vast reserves. Initially, these are to be two-year deals to boost production in Iraq’s largest oilfields. But not only did the four energy giants – BP, Exxon Mobil, Shell and Total – write their own contracts with the Iraqi government, an unheard-of practice: they have also reportedly secured rights of first refusal on the far more lucrative 30-year production contracts expected once a new US-sponsored oil law is passed, allowing a wholesale western takeover. Big Oil is back with a vengeance.

Milne offers no source for his assertion that BP, Exxon Mobil, Shell and Total wrote their own contracts, which is odd given that stating as fact something previously unheard-of usually requires evidence of such.  But of more interest is what Milne chose to leave out, and what Upstream Online chose to leave in:

Iraq has published a list of 35 companies that it said are qualified to bid for future oil and gas contracts, a government spokesman said.

“Up to now, 35 companies have been qualified out of 120 companies that presented their documentation to the oil ministry,” government spokesman Ali al-Dabbagh said at a press conference, Reuters reported.

35 companies have qualified?  So not just BP, Exxon Mobil, Shell and Total, then.

The 35 companies shortlisted are:

  • Marathon Oil (US)
  • BG International (UK)
  • Mitsubushi Corporation (Japan) 
  • BHP Billiton (Australia/UK)
  • Nexen (Canada)
  • BP (UK)
  • Nippon Oil (Japan) 
  • Chevron (US)
  • Occidental Petroleum (US)
  • China National Offshore Oil Corporation (China)
  • Oil & Natural Gas Corporation (India)
  • China National Petroleum Corporation (China)
  • Petronas (Malaysia)
  • ConocoPhillips (US)
  • Pertamina (Indonesia)
  • Edison International (US)
  • Premier (UK)
  • Eni (Italy)
  • Repsol YPF (Spain) 
  • ExxonMobil (US)
  • Shell (UK/Netherlands)
  • Hess (US)
  • Sinochem (China)
  • Inpex (Japan)
  • Sinopec (China)
  • Japex (Japan)
  • StatoilHydro (Norway)
  • Gazprom Neft (Russia)
  • Total (France)
  • Kogas (South Korea)
  • Wintershall BASF (Germany)
  • Lukoil (Russia)
  • Woodside (Australia)
  • Maersk (Denmark)
  • Anadarko (US)

According to Seamus Milne, the above represents a “full imperial package” on the part of the US.  If so, it’s a pretty cack-handed attempt at imperialism if that is the outcome.

PSAs and Ignorance

There is an article in yesterday’s Asia Times by a Pepe Escobar, which has been seized on by a number of left-wing blogs as evidence that the war in Iraq is all about securing reserves for US oil companies.  Mr Escobar vents his anger at the Iraq government’s decision to set up Product Sharing Agreements (PSAs) with foreign oil companies, and being a resident of Sakhalin Island – where it is nigh on impossible to hold a business conversation without reference to a PSA agreement, hence you quickly learn about them – I have come to the conclusion that Mr Escobar has no idea what he is talking about.

On Monday, Prime Minister Nuri al-Maliki’s cabinet in Baghdad approved the draft of the new Iraqi oil law. The government regards it as “a major national project”.  The key point of the law is that Iraq’s immense oil wealth (115 billion barrels of proven reserves, third in the world after Saudi Arabia and Iran) will be under the iron rule of a fuzzy “Federal Oil and Gas Council” boasting “a panel of oil experts from inside and outside Iraq”.

So far, this seems entirely sensible.  It is not unsual for a country rich in natural resources, as is the case with Iraq, to appoint a governmental body to oversee the management of those resources.  The United Arab Emirates has one, called the Supreme Petroleum Council, and Russia has one, called the Ministry of Natural Resources.  I don’t know why Mr Escobar calls Iraq’s version “fuzzy”, because its title and implied job description is crystal clear.  It is also not surprising that Iraq’s Oil and Gas Council should seek outside help in the first few years of managing their resources.

That is, nothing less than predominantly US Big Oil executives.

I have no idea where Mr Escobar has got his information from, but having searched Google for “Federal Oil and Gas Council” iraq members I have not been able to identify a single member of the council, let alone confirm that its advisory board is dominated by “US Big Oil executives”.

The law represents no less than institutionalized raping and pillaging of Iraq’s oil wealth. It represents the death knell of nationalized (from 1972 to 1975) Iraqi resources, now replaced by production sharing agreements (PSAs) – which translate into savage privatization and monster profit rates of up to 75% for (basically US) Big Oil.

Where to begin?

Firstly, PSAs do not represent institutionalised raping and pillaging of a country’s oil wealth, and this is evidenced by the fact that the agreement is between the government of the country in question and an oil company, i.e. it is an unforced contract from which both parties expect to gain benefits.  Unless raping and pillaging involves prior discussion and signed agreement on the part of the one being raped and pillaged, I rather think Mr Escobar has chosen his verbs poorly in this case.

Secondly, PSAs do not represent privatisation, savage or otherwise.  Under the terms of a PSA, all extracted products are the property of the state (as this rather useful document clearly explains).  I have no doubt that those oil companies party to such agreements with the Iraqi government are seeking profits, as that is generally what companies do; and whether these companies will be “basically” American remains to be seen, but unless the law prevents non-American companies from participating I suspect not.

As if this were not enough, the law reduces in practice the role of Baghdad to a minimum. Oil wealth, in theory, will be distributed directly to Kurds in the north, Shi’ites in the south and Sunnis in the center. For all practical purposes, Iraq will be partitioned into three statelets. Most of the country’s reserves are in the Shi’ite-dominated south, while the Kurdish north holds the best prospects for future drilling.

I have no idea why Mr Escobar considers distributing the oil wealth amongst the three main ethnic groups rather than centralising the whole lot in the Sunni-dominated capital to be a bad thing, as he doesn’t say.  But consider it a bad thing he does.  Personally, I think it is an inherently sensible idea.

Scandalously, Iraqi public opinion had absolute no knowledge of it – not to mention the overwhelming majority of Parliament members. Were this to be a truly representative Iraqi government, any change to the legislation concerning the highly sensitive question of oil wealth would have to be approved by a popular referendum.

Sorry?  In what other country is the management of the nation’s natural resources decided by popular referendum? Answer: none.  In a truly representative government, the elected representatives of the people are entrusted to form a government which then makes decisions on behalf of its population regarding such issues as monetary policy, defence, foreign policy, and resource management.  This is what is happening in Iraq.

In real life, Iraq’s vital national interests are in the hands of a small bunch of highly impressionable (or downright corrupt) technocrats. Ministries are no more than political party feuds; the national interest is never considered, only private, ethnic and sectarian interests. Corruption and theft are endemic.

This could adequately describe politics in any country; Iraq is no exception here.

Big Oil will profit handsomely – and long-term, 30 years minimum, with fabulous rates of return – from a former developing-world stalwart methodically devastated into failed-state status.

Pre-war Iraq was hardly a developing world stalwart.  Saddam Hussein bankrupted the country by fighting an 8-year war with Iran, and tried to balance the budget by annexing Kuwait.  A further 12 years of crippling sanctions rendered Iraq a failed-state long before the Americans had crossed the border.

But the crucial point remains: nobody will sign anything unless the “advisers” at the US-manipulated Federal Oil and Gas Council say so.

Again, Mr Escobar provides no evidence of the veto-wielding powers of these advisers, nor of the Federal Oil and Gas Council being US-manipulated.  As far as this article is concerned, it is pure speculation on his part.

Nobody wants to colonial-style PSAs forced down their throat anymore.

PSAs being an agreement by definition, it is hard to understand why he would think they were ever forced down anyone’s throat.

According to the International Energy Agency, PSAs apply to only 12% of global oil reserves, in cases where costs are very high and nobody knows what will be found (certainly not the Iraqi case).

Without trawling through all the IEA’s publications to check this, I will hazard a guess that they are saying PSAs apply in countries where the risks of investment are high, i.e. somewhere where costs are high and reserves are uncertain (I’m sure the IEA did not use the words “nobody knows what will be found”).  However, a PSA would equally apply in a country where the risks were high for other reasons, such as high levels of sectarian fighting and risk of civil war, i.e. Iraq.

No big Middle Eastern oil producer works with PSAs.

That is because PSAs are a vehicle to get foreign companies to invest in an undeveloped oil and gas market, namely by paying for the production and processing infrastructure in return for a share of the production.  No big Middle Eastern oil producer works with PSAs because they have the infrastructure in place already, the risks of investment are low, and they don’t need to attract enormous amounts of foreign investment to kick-start their oil industry.

Russia and Venezuela are renegotiating all of them.

Which isn’t true: the Sakhalin I project is not being renegotiated, probably because the Russian government – via its company Rosneft – already has a slice of the action.  But that’s beside point: Russia and Venezuela are “renegotiating” the PSA contracts because the foreign investments have already been made and they don’t see why a trivial matter like a prior agreement should prevent them from forcing a better deal for themselves halfway through.  It is a bit like borrowing some money from your younger brother to buy some sweets, then duffing him up when he later asks for repayment.

Bolivia nationalized its gas.

I think we’d better see how well the Bolivian economy performs over the next few years before we judge that to be a good thing.

Algeria and Indonesia have new rules for future contracts.

As does Iraq, remember?

Big Oil is obviously ecstatic – not only ExxonMobil, but also ConocoPhillips, Chevron, BP and Shell (which have collected invaluable info on two of Iraq’s biggest oilfields), TotalFinaElf, Lukoil from Russia and the Chinese majors.

Hang on!  What happened to the Federal Oil and Gas Council being dominated by US Big Oil executives?  Didn’t these have veto rights over all agreements a few paragraphs back?  So how did the bloody French, Russians, and Chinese get a slice of the action?  Didn’t they oppose the war?

Gargantuan profits under the PSA arrangement are in a class by themselves. Iraqi oil costs only US$1 a barrel to extract. With a barrel worth $60 and up, happy days are here again.

Iraqi oil only costs a dollar to extract once you have built a rather large and expensive facility with which to extract and process it.  Building this requires a huge up-front capital expenditure, which Iraq can ill-afford.  Therefore, the Iraqi government hopes to entice foreign companies to build this infrastructure for them in return for a share of the subsequent production for a limited period of time.  Sound sensible?  It should: it’s called a PSA.  As has already been noted, the oil company does not own the rights to the extracted product, but the state grants it product in return for building and operating the production facilities and infrastructure.  Whatever profit the oil companies can make by selling their share, the Iraq government can make a greater profit by selling its own share (which, under the PSA, it spent no money obtaining).

What revenue the regions do get will be distributed to all 18 provinces based on population size – an apparent concession to the Sunnis, whose central areas have relatively few proven reserves.

Again, it is left unexplained as to why Mr Escobar thinks this is a bad thing.  But there is one thing which requires no further explanation, and that is the suitability of Mr Escobar to comment on oil and gas affairs.

Terry Lloyd

A UK coroner has ruled that ITN journalist Terry Lloyd was unlawfully killed by US forces in the opening days of the Iraq War.  Not content with the ruling, and clearly with the authority to make such statements, National Union of Journalists’ broadcasting organiser Paul McLaughlin has ruled thusly:

“Terry Lloyd was the victim not just of an unlawful killing, but also of a war crime.”

Odd, then, that the coroner failed to mention it.

I recall the death of Terry Lloyd well, as it was in my mind the result of an act of wartime stupidity surpassed only by that of the UN observers in Lebanon.  As CNN reported things at the time:

London-based ITN said Lloyd, 51, and his team apparently were fired on by forces from the U.S.-led coalition while driving toward coalition lines, accompanied by vehicles driven by Iraqis, including a truck filled with soldiers. ITN said the Iraqis might have been intending to surrender.

From what I could gather from the initial reports which came out at the time, Lloyd and his crew had disappeared into the battlefield area well ahead of coalition lines, unescorted and without telling the coalition soldiers of their plans.  They came across a small convoy of Iraqi soldiers, most of whom were bearing arms, and decided in their wisdom to join them as they headed towards American lines.  There is speculation as to whether the Iraqis were planning to surrender, but it seems that no white flag was raised or armaments abandoned to indicate such intentions.  Nevertheless, Lloyd and his hapless crew stuck with the Iraqi column as it sped towards American lines.  Unsurprisingly, the Americans believed the armed Iraqi soldiers to be attacking and opened fire, and somehow Lloyd was hit by either an American or Iraqi bullet.  Lloyd was then transferred to an unmarked minibus which was being used as an ambulance, along with four Iraqi soldiers.  The Americans then opened fire on the vehicle, killing Lloyd and the other passengers.

Far from being a deliberate murder of a journalist on the part of the Americans, those responsible for the killing were more likely dumbstruck at the stupidity of a civilian press crew accompanying an Iraqi military convoy which was, in the absence of evidence to the contrary, carrying out an attack.

So rather than making baseless accusations of war crimes, perhaps Paul McLaughlin should further his members’ interests in the future by providing courses in basic common sense.   Indeed, there is a case to argue that the journalists themselves were criminally negligent resulting in the deaths of some of their number.  The principal witness to the attack, and the only survivor from the group, was cameraman Daniel Demoustier.  As the BBC reported at the time of the incident:

Two Iraqi vehicles followed them, the occupants making “thumbs up” signs, which Mr Demoustier took to mean they wanted to surrender using them as cover.

Firstly, on what grounds and with what authority did Mr Demoustier interpret a “thumbs up” sign from Iraqi soldiers to unescorted reporters as an intention to surrender?  And secondly, whose decision was it that the reporters should be used as cover for surrendering Iraqis?  Indeed, do the rules of war allow journalists to act as cover for soldiers under any circumstances? 

Were these questions asked in the inquest and the answers considered by the coroner in his ruling?  Or are the media protecting one of their own by not telling us, hoping to deflect such questions by making accusations of deliberate murder?

“After-the-Event Predictions” from the BBC

How predictions for Iraq came true

is the headline for John Simpson’s column on the BBC website.

It was a few weeks before the invasion of Iraq, three years ago. I was interviewing the Saudi Foreign Minister, Prince Saud al-Faisal, in the ballroom of a big hotel in Cairo.

Shrewd, amusing, bulky in his superb white robes, he described to me all the disasters he was certain would follow the invasion.

The US and British troops would be bogged down in Iraq for years. There would be civil war between Sunnis and Shias. The real beneficiary would be the government in Iran.

Yeah?  Is this part of the interview actually published anywhere, or we just going to have to take your word for it John?  Trouble is, I think you’re talking shite.  Take your next sentence for example:

Over the last three years, from a ringside seat here in Baghdad, I have watched his predictions come true, stage by stage.

Yeah?  Knew it all along, eh?  Then how come in March last year you wrote:

Iraq is not splitting up, and does not seem to be heading that way. When a government is finally agreed, it should cement the union further.

So, from a ringside seat in Baghdad you watch the predictions of the Saudi Foreign Minister come true, but chose to report the opposite?  Or is the prediction itself a figment of your imagination?

Thanks to Google, we can find plenty of articles on this interview, but alas no transcript.  But interestingly, not one of the articles actually reports Saud al-Faisal predicting a civil war in Iraq, nor him saying anything about Iran.  The BBC’s own initial report reveals the Saudis to be more concerned about their own safety than anything else:

“If change of regime comes with the destruction of Iraq, then you are solving one problem and creating five more problems.

That is the consideration that we have to make, because we are living in the region. We will suffer the consequences of any military action.”

Sure, he mentions the possibility of Iraq destructing into five (five?) separate entities.  But it is worth pointing out that this is nowhere near happening, and the statement itself is somewhat different from Saud al-Faisal telling John Simpson that “there would be civil war between Sunnis and Shias”.  Tellingly, there is also no mention of Iran.

Given Simpson’s fawning over Saud al-Faisal (“shrewd, amusing, bulky in his superb white robes” – FFS!) I’m not content to give Simpson the benefit of the doubt here.  It looks to me as though Saud al-Faisal made no such explicit prediction, and Simpson is simply making it up in order to sensationalise a column which contains little by way of news or analysis.

Stop Sulking!

It looks as though at least one Russian company has been forced to adopt a stance of economic reality over political posturing.

Russian producer Lukoil has said it is sending $5 million worth of aid to Iraq’s Oil Ministry this year, as the Iraqi government warned Russia to change its policies or be frozen out of new exploration deals.

The Moscow-based company’s units will spend the $5 million to supply excavators, Mercedes ambulances, carrier trucks and other equipment to Iraq under a contract signed in March 2004, Lukoil said.

Lukoil is seeking to regain rights to the 15 billion-barrel West Qurna oil field in southern Iraq. Saddam Hussein’s regime revoked Lukoil’s contract shortly before the US-led invasion in 2003 because Lukoil had delayed development.

If this goes ahead, I think it will be the first entry of a Russian oil company into Iraq since the removal of Saddam Hussein. But they key to what is driving this is contained in the 7th and 8th paragraphs:

Lukoil has said it will invite ConocoPhillips to join the West Qurna project. ConocoPhillips has an 11.3% stake in Lukoil, a holding it plans to boost to 20%.

It is likely that ConocoPhillips were the ones pushing for this entry into Iraq. If not, they will certainly have a major role to play in any developments there.