[Congressional Record (Bound Edition), Volume 153 (2007), Part 5]
[House]
[Pages 6673-6676]
[From the U.S. Government Publishing Office, www.gpo.gov]




                     PETRODOLLARS AND THE IRAQ WAR

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentlewoman from Ohio (Ms. Kaptur) is recognized for 5 minutes.
  Ms. KAPTUR. Mr. Speaker, the Wall Street Journal reported last week 
what most Americans may not realize, that for the first time in 
history, our U.S. military is now guarding the major Iraqi oil pipeline 
that leads to its major refinery in Bayji. Yes, our brave soldiers from 
the 82nd Airborne are now maintaining around-the-clock presence at 
Iraq's largest oil pipeline and refinery to fight the corruption,

[[Page 6674]]

smuggling and sabotage that characterize Iraq's oil industry, its 
premier industry.
  The article talks about the flourishing market in stolen Iraqi oil. 
It says U.S. military officials estimate that as much as 70 percent of 
the fuel processed at the plant is lost to the black market, an amount 
valued at more than $2 billion. Iraq's oil reserves may be the largest 
in the world. Future access to them is now being determined by a group 
of people we generally don't see on the evening news.
  Do you know them? It's important to figure out who those people are 
and who exactly is now involved in writing Iraq's hydrocarbon law. How 
transparent are these oil deliberations?
  Indeed, it is amazing how little we hear about them, as trillions of 
dollars are at stake. Meanwhile, oil smuggling has earned lots of shady 
characters hundreds of millions of dollars since the beginning of the 
war. Why did we let this go on? Until now, we can catch Saddam Hussein 
in the spider hole, and yet somehow we could not figure out who is 
smuggling Iraqi oil?
  Americans deserve answers to so many questions. Who has been earning 
the money from the oil smuggling? Which global oil companies will 
benefit once the U.S. leaves Iraq? What percent of oil resources in 
Iraq will be left for the Iraqi people?
  Traveling to Iraq and Kuwait a few weeks ago, I had the chance to 
witness how technology and power systems transformed endless deserts 
into oil supply lines. It is an awesome sight. Yet I couldn't help but 
ask, what is America doing in these deserts? Who does our oil addiction 
benefit? How have we let ourselves become tied to oil dictatorships? 
Why do we pay nearly $400 billion a year to import petroleum rather 
than become energy-independent ourselves here at home?
  Our able colleague, Congressman Bill Delahunt of Massachusetts, gave 
me a book last week, and I looked on page 96. This is called ``The 
Price of Loyalty,'' by Ron Suskind. It explains how Donald Rumsfeld 
used our Defense Intelligence Agency to map Iraq's oil fields and lists 
companies that might be interested in leveraging the precious asset 
long before the Iraqi war was declared.
  Judicial Watch obtained Mr. Rumsfeld's map through a Freedom of 
Information request because Mr. Rumsfeld and Paul Wolfowitz would not 
share it voluntarily. Imagine that. Our taxpayers footed the bill for 
this map to benefit private firms.
  The book attests Rumsfeld and his cohorts in the Bush administration 
were not concerned with legitimate reasons to go to war; they only 
concerned themselves with how and how quickly to penetrate Iraq's oil 
fields. Mr. Wolfowitz had written as early as 1999 that the United 
States should be committed, should be prepared to commit ground forces 
to protect a sanctuary in southern Iraq where the opposition could 
safely mobilize. As we pay dearly for this violent war, and our 
soldiers die in Iraq, just coincidentally we have to remember the 
world's largest untapped oil reserves are in Iraq.
  Most other nations in the Middle East have guarded their oil reserves 
as national treasures, but I will tell you what: Halliburton, 
ExxonMobil, ConocoPhillips, ChevronTexaco and foreign companies like 
Total, Royal Dutch Shell and British Petroleum have been identified by 
reporters like Antonia Juhasz, who said last week in the New York 
Times, these oil companies would not have to invest their earnings in 
the Iraqi economy, partner with Iraqi companies, hire Iraqi workers or 
share their new technologies. In fact, she says, only 13 of the 80 oil 
wells, oil fields in Iraq would be for the Iraqi people. The other ones 
are being bargained away as the hydrocarbon law is written. Why do we 
hear so little about this on our evening news?
  John Perkins, in his book ``Confessions of an Economic Hit Man,'' 
talks about how Saudi oil money through petrodollars has been 
reinvested in our economy, holding up so many of our equities and 
certainly our U.S. Treasury securities. Why can't America become 
energy-independent at home? Why do we have to be dependent to the 20th 
century view of dependency on foreign oil?
  ``Almost immediately after the [1973 oil] embargo ended,'' Perkins 
writes, ``Washington began negotiating with the Saudis, offering them 
technical support, military hardware and training and an opportunity to 
bring their nation into the twentieth century, in exchange for 
petrodollars and, most importantly, assurances that there would never 
be another oil embargo.'' Congress did not negotiate this--the overall 
management and fiscal responsibility lay with the Department of the 
Treasury, and according to the book, the ensuing agreement, which was 
negotiated in intense secrecy, ``fortif[ied] the concept of mutual 
interdependence.'' The very goal of this agreement was to ``find ways 
that would assure that a large portion of petrodollars found their way 
back to the United States'' so that ``Saudi Arabia would be drawn in, 
its economy would become increasingly intertwined with and dependent 
upon ours'' and, of course, we on them. It is a ridden economy.
  Is this the America you want? Do you want U.S. soldiers risking their 
lives guarding Iraqi oil? I want an America free of counterproductive 
foreign entanglements. I want an America free of support for 
dictatorships, no matter how tempting their treasures. I want an 
America free of foreign oil. I want to invest our dollars here at home 
in energy independence--in solar, wind, hydrogen, clean coal, new 
turbine systems, fuel cells and so much more.
  I think most Americans, if they understood the extent to which we are 
hurting ourselves, would want the same. Some global interests are 
getting so filthy rich year after year, that they would risk a free 
America for the sake of their bloodied oil profits. It's worth changing 
how we do business in order to regain our freedom.

          [From the Wall Street Journal Europe, Mar. 15, 2007]

                   Iraq's Oil Smugglers Are Targeted

                         (By Yochi J. Dreazen)

       Bayji, Iraq--Adding another facet to Washington's new 
     pacification plan for Iraq, U.S. and Iraqi forces have 
     launched an aggressive campaign to curb the oil smuggling 
     that is destabilizing the fragile Baghdad government and 
     helping to fund insurgents.
       In concert with stepped-up military and reconstruction 
     initiatives across Iraq, U.S. troops for the first time are 
     maintaining a round-the-clock presence at the sprawling oil 
     refinery here, Iraq's largest. Soldiers from the Army's 82nd 
     Airborne Division are cracking down on illegal gas stations, 
     arresting refinery workers suspected of corruption and using 
     sophisticated data-sifting methods to identify which senior 
     Iraqi officials might have ties to black-market oil rings.
       The Iraqi government, meanwhile, has begun what it calls 
     Operation Honest Hands, which puts the entire refinery under 
     Iraqi military control. Iraqi Army soldiers are physically 
     monitoring each of the facility's pumps and entrances, 
     assuming many of the responsibilities previously held by a 
     paramilitary security force employed by the Oil Ministry that 
     was widely considered corrupt and ineffectual. Iraqi troops 
     are also escorting many convoys of fuel trucks from the 
     refinery to destinations around the country.
       The move represents another course change for the 
     administration of U.S. President George W. Bush as it 
     struggles to craft a new approach for stabilizing Iraq. U.S. 
     and Iraqi officials have long been aware of the flourishing 
     market in stolen Iraqi oil but largely turned a blind eye 
     because Washington feared that stationing American soldiers 
     in major refineries would spark a nationalist backlash and 
     renew accusations that the U.S. invaded Iraq for its oil. The 
     Iraqi government, meanwhile, felt its modest security 
     resources were better used directly fighting insurgents.
       But officials from both governments have concluded recently 
     that oil smuggling had become too big a problem to ignore any 
     longer. The loss of so much output to the black market is 
     sharply reducing the Iraqi government's main source of 
     revenue: About 94% of Iraq's $32 billion budget last year 
     came from oil revenue. The stolen oil also gives Iraq's 
     insurgent groups a ready source of income, helping to 
     perpetuate the country's civil war.
       ``Disrupting the insurgent funding is our main job,'' said 
     30-year-old Capt. Kwenton Kuhlman, who is leading the 
     antismuggling operation at the Bayji refinery. ``I'm under no 
     illusions--we can't stop it. It's too big. But we can try to 
     disrupt it.''
       Iraq produces some 2 million barrels of oil a day, but U.S. 
     and Iraqi officials believe the figure could rise as high as 
     5 million barrels a day with improved security and new 
     infrastructure.
       Former Iraqi President Saddam Hussein helped create the 
     black market in oil in response to economic sanctions imposed 
     in the wake of the 1990-91 Persian Gulf War. Mr. Hussein used 
     smuggling, as well as kickbacks on oil sold legitimately 
     through the United Nations' oil-for-food program, to generate 
     cash for his regime and to reward allies at home and abroad.

[[Page 6675]]

       The stepped-up fight against smuggling has no guarantee of 
     success--and risks triggering more political and economic 
     turmoil. Senior Iraqi officials regularly pressure the 
     Americans to call off specific investigations or release 
     individuals detained for suspected involvement in the black 
     market, feeding Washington's suspicions that oil-related 
     corruption extends deep into the government.
       The enormity of the task facing the soldiers from the 82nd 
     Airborne was evident on recent visits, and underscores the 
     broader challenge Americans face in turning more security 
     over to their Iraqi counterparts. Several tanker drivers said 
     Iraqi soldiers at the plant had already begun asking for 
     bribes. The drivers also said they don't want to be escorted 
     by Iraqi troops for fear of attracting insurgent attacks. ``I 
     want coalition forces to guard this place, not the Iraqi 
     Army,'' driver Suhaib Adil Kareem said. ``The Iraqis don't 
     care about the law.''
       Widespread oil smuggling siphons off as much as $5 billion 
     per year. At the Bayji refinery--one of three in the country 
     [U.S. military officials estimate that as much as 70% of the 
     fuel processed at the plant is lost to the black market, an 
     amount valued at more than $2 billion per year.]
       Iraq's parliament will soon debate a landmark petroleum law 
     that would clear the way for direct foreign investment in the 
     battered oil sector and set out rough guidelines for 
     distributing oil revenue among Iraq's 18 provinces. But U.S. 
     and Iraqi officials warn the new law will have little 
     substantive impact unless the smuggling is brought under 
     control.
       The endemic oil-sector corruption is a financial boon to 
     insurgent operations. A classified U.S. government report in 
     November estimated Iraqi militants earn $25 million to $100 
     million every year by stealing tankers full of fuel, 
     smuggling oil to other countries, carrying out kidnappings 
     for ransom, and charging protection money from truckers and 
     gas station owners.
       ``The fuel that is stolen comes back as bombs, mortar 
     shells and Katyusha rockets,'' said Hamad Hamoud al-Shakti, 
     the governor of the Salahaddin province, home to the Bayji 
     refinery.
       The black market is fueled by three factors. Baghdad 
     heavily subsidizes gasoline and other oil products, and the 
     resulting low prices mean they can be resold at enormous 
     profit in neighboring countries. The government also doesn't 
     verify that gas-station owners--who are entitled to receive 
     100,000 liters of fuel per week--sell to retail customers 
     instead of on the black market.
       The biggest issue, though, is pervasive corruption. U.S. 
     and Iraqi officials say refinery workers routinely allow 
     tankers to pick up fuel without any paperwork, which makes it 
     easy to sell off the books. Police officers demand bribes of 
     as much as $1,000 to let tankers pass through checkpoints or 
     for ``protection'' along routes, the officials say. And some 
     government officials work directly with smugglers or secretly 
     own gas stations and fuel trucks, giving them a share of 
     money earned through illicit sales, U.S. officials say.
       ``You're talking about corruption at basically every 
     level,'' says Maj. Curtis Buzzard, the Harvard-educated 
     executive officer of the brigade conducting the interdiction 
     push. ``And it's deeply entrenched.''
       As part of the campaign, the U.S. in coming months will 
     spend more than $12 million to install video cameras to 
     monitor the refinery's pumps and new digital scales to weigh 
     trucks, making it easier to see if truckers are carrying more 
     fuel than they were meant to receive. The money will also be 
     used to build parking lots designed to protect drivers from 
     extortion and insurgent attack.
       Over the past few months, U.S. and Iraqi forces already 
     have quietly begun arresting officials suspected of playing 
     central roles in black-market rings. As far back as 
     September, Iraqi forces arrested Ibrahim Muslit, who ran the 
     Bayji refinery's oil-distribution operation, after he 
     allegedly allowed 33 tankers in a single day to receive fuel 
     without any paperwork. In January, U.S. troops arrested Ahmed 
     Ibrahim Hamad, a senior transportation official at the 
     refinery, after he allegedly tried to help smuggle out seven 
     tankers of heavy-fuel oil. Both men are in custody and 
     unavailable for comment.
       Now, U.S. commanders say they are conducting investigations 
     of senior officials from the Bayji city council, the local 
     police force and the provincial and national governments. The 
     American officers say they have made about 40 arrests since 
     the crackdown began in earnest in early February, when the 
     Iraqis formally joined the campaign, and they hope to make 
     additional arrests in coming weeks.
       During a surprise inspection of the refinery's gasoline and 
     diesel pumps one afternoon, Sgt. Stephen Truesdale noticed 
     that the analog display on one of the machines showed it had 
     pumped 4,000 liters more than the facility's handwritten 
     records indicated.
       ``He helped steal 4,000 liters of gas,'' Sgt. Truesdale, a 
     former North Carolina police officer, said of the heavy-set 
     Iraqi man who had been manning the pump. ``The pumps don't 
     lie.''
       The refinery worker insisted he was innocent, but Capt. 
     Kuhlman, the brigade leader, told his men they had enough 
     evidence to arrest him.
       On the way back to their base, the U.S. forces saw a large 
     fuel truck parked on the side of the road, surrounded by 
     pickup trucks carrying overflowing oil barrels. The 18 Iraqis 
     at the site freely admitted they had purchased the fuel from 
     a tanker driver who had left the refinery a short time 
     earlier. The men said they made such purchases several times 
     a week and resold the oil to factory owners and other small 
     businesses in neighboring towns.
       The American forces ordered the Iraqis to drive their 
     pickups back to the refinery, where the men were searched, 
     photographed and escorted onto a pair of open-backed military 
     vehicles for transport to holding cells at the U.S. 
     installation.
       The following day, Capt. Kuhlman told a room full of 
     refinery officials and trucking-company executives about the 
     arrests. Shakir Hamid, a businessman who said his partner had 
     been kidnapped from the refinery months earlier, shook his 
     head.
       ``In Saddam's time, oil smugglers were hung,'' he said.
       ``And I release them after two days,'' Capt. Kuhlman 
     replied, shrugging his shoulders. ``But it's a start.''
                                  ____

       Beneath the surface was a battle O'Neill had seen brewing 
     since the NSC meeting on January 30. It was Powell and his 
     moderates at the State Department versus hard-liners like 
     Rumsfeld, Cheney, and Wolfowitz, who were already planning 
     the next war in Iraq and the shape of a post-Saddam country.
       Documents were being prepared by the Defense Intelligence 
     Agency, Rumsfeld's intelligence arm, mapping Iraq's oil 
     fields and exploration areas and listing companies that might 
     be interested in leveraging the precious asset.
       One document, headed ``Foreign Suitors for Iraqi Oilfield 
     Contracts,'' lists companies from thirty countries--including 
     France, Germany, Russia, and the United Kingdom--their 
     specialties, bidding histories, and in some cases their 
     particular areas of interest. An attached document maps Iraq 
     with markings for ``supergiant oilfield,'' and ``other 
     oilfield,'' and ``earmarked for production sharing,'' while 
     demarking the largely undeveloped southwest of the country 
     into nine ``blocks'' to designate areas for future 
     exploration. The desire to ``dissuade'' countries from 
     engaging in ``asymmetrical challenges'' to the United 
     States--as Rumsfeld said in his January articulation of the 
     demonstrative value of a preemptive attack--matched with 
     plans for how the world's second largest oil reserve might be 
     divided among the world's contractors made for an 
     irresistible combination, O'Neill later said.
       Already by February, the talk was mostly about logistics. 
     Not the why, but the how and how quickly. Rumsfeld, O'Neill 
     recalled, was focused on how an incident might cause 
     escalated tensions--like the shooting down of an American 
     plane in the regular engagements between U.S. fighters and 
     Iraqi antiaircraft batteries--and what U.S. responses to such 
     an occurrence might be. Wolfowitz was pushing for the arming 
     of Iraqi opposition groups and sending in U.S. troops to 
     support and defend their insurgency. He had written in 
     Foreign Affairs magazine in 1999 that ``the United States 
     should be prepared to commit ground forces to protect a 
     sanctuary in southern Iraq where the opposition could safely 
     mobilize.''
                                  ____


                [From the New York Times, Mar. 13, 2007]

                        Whose Oil Is It, Anyway?

                          (By Antonia Judasz)

       Today more than three-quarters of the world's oil is owned 
     and controlled by governments. It wasn't always this way.
       Until about 35 years ago, the world's oil was largely in 
     the hands of seven corporations based in the United States 
     and Europe. Those seven have since merged into four: 
     ExxonMobil, Chevron, Shell and BP. They are among the world's 
     largest and most powerful financial empires. But ever since 
     they lost their exclusive control of the oil to the 
     governments, the companies have been trying to get it back.
       Iraq's oil reserves--thought to be the second largest in 
     the world--have always been high on the corporate wish list. 
     In 1998, Kenneth Derr, then chief executive of Chevron, told 
     a San Francisco audience, ``Iraq possesses huge reserves of 
     oil and gas--reserves I'd love Chevron to have access to.''
       A new oil law set to go before the Iraqi Parliament this 
     month would, if passed, go a long way toward helping the oil 
     companies achieve their goal. The Iraq hydrocarbon law would 
     take the majority of Iraq's oil out of the exclusive hands of 
     the Iraqi government and open it to international oil 
     companies for a generation or more.
       In March 2001, the National Energy Policy Development Group 
     (better known as Vice President Dick Cheney's energy task 
     force), which included executives of America's largest energy 
     companies, recommended that the United States government 
     support initiatives by Middle Eastern countries ``to open up 
     areas of their energy sectors to foreign investment.'' One 
     invasion and a great deal of political engineering by the 
     Bush administration later, this is exactly what the proposed 
     Iraq oil law would achieve. It does so

[[Page 6676]]

     to the benefit of the companies, but to the great detriment 
     of Iraq's economy, democracy and sovereignty.
       Since the invasion of Iraq, the Bush administration has 
     been aggressive in shepherding the oil law toward passage. It 
     is one of the president's benchmarks for the government of 
     Prime Minister Nuri Kamal al-Maliki, a fact that Mr. Bush, 
     Secretary of State Condoleezza Rice, Gen. William Casey, 
     Ambassador Zalmay Khalilzad and other administration 
     officials are publicly emphasizing with increasing urgency.
       The administration has highlighted the law's revenue 
     sharing plan, under which the central government would 
     distribute oil revenues throughout the nation on a per capita 
     basis. But the benefits of this excellent proposal are 
     radically undercut by the law's many other provisions--these 
     allow much (if not most) of Iraq's oil revenues to flow out 
     of the country and into the pockets of international oil 
     companies.
       The law would transform Iraq's oil industry from a 
     nationalized model closed to American oil companies except 
     for limited (although highly lucrative) marketing contracts, 
     into a commercial industry, all-but-privatized, that is fully 
     open to all international oil companies.
       The Iraq National Oil Company would have exclusive control 
     of just 17 of Iraq's 80 known oil fields, leaving two-thirds 
     of known--and all of its as yet undiscovered--fields open to 
     foreign control.
       The foreign companies would not have to invest their 
     earnings in the Iraqi economy, partner with Iraqi companies, 
     hire Iraqi workers or share new technologies. They could even 
     ride out Iraq's current ``instability'' by signing contracts 
     now, while the Iraqi government is at its weakest, and then 
     wait at least two years before even setting foot in the 
     country. The vast majority of Iraq's oil would then be left 
     underground for at least two years rather than being used for 
     the country's economic development.
       The international oil companies could also be offered some 
     of the most corporate-friendly contracts in the world, 
     including what are called production sharing agreements. 
     These agreements are the oil industry's preferred model, but 
     are roundly rejected by all the top oil producing countries 
     in the Middle East because they grant long-term contracts (20 
     to 35 years in the case of Iraq's draft law) and greater 
     control, ownership and profits to the companies than other 
     models. In fact, they are used for only approximately 12 
     percent of the world's oil.
       Iraq's neighbors Iran, Kuwait and Saudi Arabia maintain 
     nationalized oil systems and have outlawed foreign control 
     over oil development. They all hire international oil 
     companies as contractors to provide specific services as 
     needed, for a limited duration, and without giving the 
     foreign company any direct interest in the oil produced.
       Iraqis may very well choose to use the expertise and 
     experience of international oil companies. They are most 
     likely to do so in a manner that best serves their own needs 
     if they are freed from the tremendous external pressure being 
     exercised by the Bush administration, the oil corporations--
     and the presence of 140,000 members of the American military.
       Iraq's five trade union federations, representing hundreds 
     of thousands of workers, released a statement opposing the 
     law and rejecting ``the handing of control over oil to 
     foreign companies, which would undermine the sovereignty of 
     the state and the dignity of the Iraqi people.'' They ask for 
     more time, less pressure and a chance at the democracy they 
     have been promised.

                          ____________________