Friday, November 6, 2009

Big oil's foot is now in Iraq's door. Now what?

This morning's LA Times reports that an Exxon Mobil-led consortium has inked a deal "to develop a  major oil field in southern Iraq,marking the first entry by an American-dominated group into Iraq's oil industry since it was nationalized in 1972."  One expert cites it as a coup for the Iraqi government, as the deal is only a service contract - i.e., fixed fee, with no percentage of the yield.  Big Oil doesn't like that, but seem to feel that they needed to get their foot in the door.

The question now becomes: Might a renewed insurgency blow that foot off?

Perhaps the biggest test that the Iraqi government will face as US troops are withdrawn (assuming that that indeed proceeds on schedule) will be their ability to provide security throughout the country.  Lately they've been failing that test - miserably - in Baghdad, with the two horrific bombings of recent months that killed hundreds.  Even with only a service contract, we can expect that a visible presence of US oil companies (both on-field installations and corporate offices) in southern Iraq is going to be a prime target of groups - both Sunni and Shii - that resent and resist any kind of American presence, that fear the US wants to rob Iraqis of their oil patrimony, and that also want to discredit the central government in Baghdad by showing up the ineffectiveness of its security forces.

There will be blood.  And that's a shame, not only on the obvious loss-of-life level, but also because the people of Iraq need so much in terms of rebuilding infrastructure - sewage systems, clean water, electricity, roads, information-technology infrastructure - and profits from oil and natural gas sales are by far the largest contributor to Iraq's GNP.

Another wrinkle: If Iraqi security forces aren't up to the job of protecting US interests in Iraq, it's likely that, given the US military drawdown, Big Oil will look to provide security on its own dime.  That could be private security contractors, or that could be locals.  Either way, more guns in more hands.  And that could be trouble.

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