1. THE BATTLE FOR A CASPIAN SEA PIPELINE

2. HOW “BIG OIL” AND BUSH CONSPIRED TO CONTROL IRAQI OIL

3. IT’S THE OIL, STUPID

4. DIVIDING THE OIL BETWEEN THE UNITED STATES AND BRITAIN

5. WHAT PAYS FOR RECONSTRUCTION? IT’A NOT OIL

6. PLANNING TO EXPLOIT IRAQ’S OIL

It made no difference to Big Oil that the amount of oil in the Earth continued to diminish. The petroleum industry continued to extract oil, as it gleefully watched the price of a barrel of oil escalate.

In the spring of 2007, BP’s Statistical Review of World Energy concluded that the world had enough proven” reserves to provide 40 years of consumption at current rates. However, scientists led by the London-based Oil Depletion Analysis Center, said that global production of oil was set to peak by 2011before entering a steepening decline which would have massive consequences for the world economy and the way that people live their lives. (London’s The Independent, June 13, 2007)

1. THE BATTLE FOR A CASPIAN SEA PIPELINE

For two centuries, the goal of the former Soviet Union was to connect central Asia to the high seas by building a pipeline through Iran or Afghanistan and Pakistan. In the 1990s, United States began extending itself to the Caspian Gulf region. The 1991 Gulf War was evidence that the primary goal of the George Herbert Bush administration in the Middle East was to safeguard the oil interests of American corporations.

The unstable republics in the Caspian Gulf contributed to problems for American hegemony in the region. The new autonomous oil-rich republics of the former Soviet Union were struggling for political and economic survival. In the 1990s the Caspian Sea basin experienced four wars, two attempted presidential assassinations, a coup, and countless attempted coups.

The Caspian Sea, roughly the size of California, was the world’s largest landlocked body of water. It sat on approximately 200 billion barrels of oil which would be 16 percent of the Earth’s potential oil reserves. This added up to a net worth of about $3 trillion in oil. Even though the Caspian was protected under the international Convention on the Law of the Sea, the Soviet Union and Iran had treated the Caspian differently. Under their 1921 Treaty of Friendship, they made it a freely navigated lake whose fish were shared by the two bordering countries.

With the breakup of the Soviet Union, the Caspian region quickly developed into a Middle Eastern intramural problem. The Caspian suddenly became the property of the five countries that border it: Russia on the north, Iran on the south, Kazakhstan and Turkmenistan on the east, and Azerbaijan on the west. Thus, the question of ownership immediately became a heated issue.

For Azerbaijan, Kazakhstan and Turkmenistan, with the biggest known fields under their waters, the Caspian Sea would give them maximum control over their own territory. After the collapse of the Soviet Union, Russia and Iran, which had less oil and gas off their own shores, insisted that concern for the environment required joint sovereignty over the Caspian and its resources. This was an absurd position held by Russia, since it had been the Caspian’s largest polluter. Russia also argued that because the economies of the former Soviet republics were developed with Russian financial support, it deserved more.

However, in April 1997, Russia President Yeltsin modified his position after discovering more oil in its sector and tried unsuccessfully with Kazakhstan to divide the seabed and the oil under it into national sectors. Yeltsin also said that the waters above the seabed would remain international, meaning that all five countries would enjoy common use of the sea itself, with freedom of navigation, fishing rights and environmental protections. Additionally, Yeltsin opposed a plan for an undersea pipeline that would bypass Russia.

Because of the position taken by Russia to divide the Caspian into national sectors, Iran lost its claim to the region. Iran insisted that the Caspian be sectioned into “equal shares” which would allow it to control 20 percent of the seabed, whereby the normal division according to international law would give Iran less than 10 percent.

Another key issue revolved around control of the pipeline route. This involved warlords and local chiefs who controlled the remote regions where pipelines could be constructed. Depending on where the lines were laid, power over the West’s energy supply could fall to Chechen rebels, Armenians, Russia, Turkey, Iran, or Kurds. The first flow of oil was sent through an existing pipeline that runs north from Baku through Chechnya to the Russian port of Novorossisk on the Black Sea. Russian leaders hoped to expand this line so it could be used for the far larger flows to come. However, Russia had to cooperate with Chechnya’s secessionist rebels. In 1997, Russian and Chechen leaders finally reached an accord on splitting the transit fees.

Still Russia’s goal was to build an alternative route through North Ossetia which was more stable politically. The only existing alternative pipeline did not run through Russia. It proceeded westward from Baku to the Black Sea port of Supsa in Georgia, but it would have passed through potentially explosive regions. Yet Georgian officials guaranteed the pipeline’s security. Another option was to use tanker ships to transport the oil across the Black Sea, through the Bosporus into the Mediterranean.

One proposal, offered by Turkey, was to build a 650 mile pipeline from Supsa across eastern Turkey to their port of Ceyhan on the Mediterranean. Yet some oil executives were concerned about the time and expense of building such a pipeline, and they could not ignore the risk that Kurdish guerrillas in eastern Turkey might try to attack it.

A second proposal was to ship or pipe oil from Supsa across the Black Sea to Bulgaria or Romania, sending it by pipeline from there to a Greek port. Azerbaijan’s president, Heydar Aliyev, suggested that he would consider a pipeline through Armenia if the two countries can settle their dispute over the occupied Nagorno Karabakh region.

A third proposal was to tie Baku to the existing pipeline network in neighboring Iran and send the oil south to the Persian Gulf. The advantage was that this route led to ports already equipped for shipping oil and avoids the problems of political, ethnic, national, and religious conflicts in the Caucasus. However, the United States adamantly opposed any project which involved Iran against whom the United States refused to lift an embargo.

A fourth proposal was to run a pipeline from Turkmenistan south to the open sea through Afghanistan that was controlled by the fundamentalist and anti Western Taliban sect. Unocal officials held pipeline talks with Taliban officials in efforts to gain more support for that route.

In September 1994, foreign oil companies began large scale investments in the Caspian region. Initially the Azerbaijani state oil company signed what was called the “contract of the century,” a $7.4 billion agreement with a consortium of 10 companies from the United States, Britain, Norway, Russia, Turkey, and Saudi Arabia. Four more contracts were later signed, with French, Italian, Japanese, and Iranian companies. In 1996, the Clinton administration first encouraged oil corporations to build a multi billion dollar pipeline in the Caucasus. The White House attempted to persuade American oil corporations to choose a 1,100-mile route. Mobil was the first to jump in and paid $1.1 billion for a stake in Kazakstan’s biggest oil field. Unocal negotiated to build pipelines from Turkmenistan, through Afghanistan, and into Pakistani ports on the Arabian sea.

Unocal’s scheme required an Afghan government that would guarantee safe passage. United States policy towards the Taliban appeared to have been determined principally by Unocal’s interests in Afghanistan, the only route that made both political and economic sense. Unocal invited some of the leaders of the Taliban to Houston, where they were royally entertained. The company suggested paying 15 cents for every thousand cubic feet of gas it pumped through Afghanistan. (The Guardian, October 23, 2001)

A pipeline across other areas of the region had severe political and economic implications. Transporting Caspian fuel through Russia or Azerbaijan would greatly enhance Russia’s political and economic control over the central Asian republics. That was precisely what the United States had spent 10 years trying to prevent. Piping it through Iran would enrich a regime that the United States had sought to isolate. Sending it the long way round through China, besides the strategic considerations, would be vastly expensive.

In their bid to construct an oil pipeline, American oil companies found competition from across the globe. Russia’s state owned oil conglomerate joined in the bidding. Malaysia and China began negotiating for the second largest field. In neighboring Turkmenistan, American and British companies bought permission to search for oil in an 8,000 square mile tract along the Caspian coast. Azerbaijan International Operating Company became the first consortium to drill in the Caspian and began producing oil within a year.

The first proposal was also accepted by five of the Caspian Basin states -- Azerbaijan, Kazakhstan, Uzbekistan and Georgia. The pipeline was set to begin in Baku, the capital of oil rich Azerbaijan, through Turkey to its Mediterranean port of Ceyhan. However, the administration was close to losing its battle because of the enormous expense of the pipeline. BP Amoco favored the United States-backed pipeline route but believed that its projected cost of $2.8 billion made it too costly to build. Others felt that the project could cost over $4 billion.

Instead, the American oil companies preferred a shorter pipeline from Azerbaijan to the port of Supsa and on Georgia’s Black Sea coast. From Georgia, the oil would be loaded into tankers and shipped across the Black Sea toward Europe. In this case, Turkey would be denied billions of dollars in revenue since oil traffic through the narrow Bosporus strait would greatly diminish. However, the White House supported the Baku Ceyhan route because it would pass through only relatively friendly countries Azerbaijan, Georgia, and Turkey and would bind them closer to the West. In addition, this route would give the United States more influence in Azerbaijan and Georgia and take away Russian influence in those two countries. The White House promised Turkey $823,000 for its part in the pipeline.

While American oil companies jostled to get a slice of the oil business, multi-millionaire Lebanese oil magnate Roger Tamraz attempted to influence President Clinton to support construction of a pipeline. However, it was learned that Tamraz was a fugitive and that Lebanese authorities issued a warrant for his arrest, charging him with embezzling $200 million in 1989. Tamraz hoped that the United States would build an expensive 930 mile oil pipeline from the Caspian Sea through the Caucasus Mountains, past a politically vulnerable corner of the former Soviet Union, and through Turkey to the Mediterranean Sea.

Tamraz had connections with the CIA from when he did favors for the agency in Lebanon in the 1980s. He has also provided information to the CIA on an unpaid basis, and he reportedly knew William Lofgren who was in charge of CIA activities in the Caspian region. Tamraz got an appointment to see a National Security Council expert on the region, Sheila Heslin, on June 2, 1995. He hoped that she would be able to set up a meeting with the president and other senior government officials to discuss his project.

Weeks later, Tamraz was invited to a White House Christmas party, and the next year he went to four White House fund raising events sponsored by the DNC. Perhaps Tamraz was able to get access to Clinton, since he personally gave $300,000 to the Democratic Party through one of his oil companies during the 1996 campaign.

In 1998, the Clinton administration received $900 million in foreign aid -- 50 percent higher than that of the year before -- for the Caspian region. Most of the money was earmarked for Azerbaijan which is run by a former hard-line communist, Heydar Aliyev, who is a former KGB officer and was once considered as a possible successor to Leonid Brezhnev in the early 1980s. Despite his background, he regained power four years after the collapse of the Soviet Union. He attempted to stabilize the economy and put together a set of international oil consortiums.

In November 1999, the United States succeeded in obtaining support from several Middle Eastern countries to build the Baku-Ceyhan pipeline. The agreement was signed by the United States, Turkey, Azerbaijan, Kazakhstan, Uzbekistan, and Georgia. The United States insured that Russia would not benefit, making sure that the 1,240 miles circumvented that country.

However, the participating oil companies had to negotiate the financing of the pipeline. They had to pledge shipment of specific volumes of oil to obtain the necessary financing. But several months later, the United States ran into another roadblock. In March 2000, oil analysts lowered their estimates of oil production. They dropped their estimate from 6 billion barrels of crude oil -- needed for the $12 billion Baku-Ceyhan route to operate successfully -- to only about 4 billion barrels. Furthermore, OPEC’s sharp reduction in oil production in the spring of 2000 led to a decrease in oil exports. (Los Angeles Times, March 26, 2000)

2. HOW “BIG OIL” AND BUSH CONSPIRED TO CONTROL IRAQI OIL

Even as Baghdad was opened up to looters in April 2003, the Ministry of Oil was secured by United States troops. But no force was put in place to protect the pumps and pipes. (Newsweek, January 30, 2006)

In August 2003, the Americans awarded $40 million to a private security firm for the training of 5,500 Iraqis. But the program was quickly terminated as too expensive. Then the American military took responsibility for the Oil Protection Force, but guards were never deployed to cover 4,350 miles of pipeline. (Newsweek, January 30, 2006)

In the summer of 2005, a new 4,000-man unit called the Strategic Infrastructure Battalions started training. But the SIBs quickly fell into bureaucratic cracks. The United States government allocated $1.7 billion to finance oil projects across Iraq. But only $77 million worth of reconstruction was completed by the end of 2005. (Newsweek, January 30, 2006)

In 2005, there were close to 20 large-scale assaults on Fatah, part of Iraq’s largest oil-production complex in Bayji. In December, the Bayji site shut down completely for two weeks. It re-opened in January 2006. But three days later insurgents attacked a 60-truck fuel convoy. (Newsweek, January 30, 2006)

In order to gain support for his war, Bush promised that Iraq’s oil would pay for the cost of reconstruction. Other high-level administration officials, only when pressed for an answer, indicated that the United States would pay very little for the reconstruction of Iraq.

Bush adamantly denied that oil was a major reason to invade Iraq. A 1997 article in The Oil and Gas Journal expressed the importance of American oil corporations conducting business in the Middle East. Also in April 2001, Strategic Energy Policy Challenges for the 21st Century was commissioned by former Secretary of State James Baker. The study concluded that the United States faced its largest energy crisis in history. It advocated a policy of using military force against Iraq in order to secure United States access to, and control of, Middle Eastern oil fields. The report recommended using United Nations weapons inspectors as a means of controlling Iraqi oil. (The Sunday Herald, London, October 6, 2002)

The Bush administration made plans for war and for Iraq's oil before the 9/11 attacks. An Iraqi-born oil industry consultant, Falah Aljibury, claimed he took part in the secret meetings in California, Washington, and the Middle East. He described a State Department plan for a forced coup d’etat. Aljibury had been President Ronald Reagan’s “back-channel” to Saddam. (Greg Palast, BBC Newsnight, March 17, 2005)

The Aljibury plan was rejected in favor of another secret plan, drafted just before the invasion in 2003. This plan called for the sell-off of all of Iraq’s oil fields. The objective was to use Iraq’s oil to destroy the OPEC cartel through massive increases in production above OPEC quotas. (Greg Palast, BBC Newsnight, March 17, 2005)

According to Robert Ebel, the Aljibury plan was approved at a secret meeting in London headed by Fadhil Chalabi shortly after the United States entered Baghdad. Ebel, a former Energy and CIA oil analyst, attended the meeting while he was a fellow at the Center for Strategic and International Studies in Washington. (Greg Palast, BBC Newsnight, March 17, 2005)

In the fall of 2002, as the Bush administration prepared to invade Iraq -- Deputy Defense Secretary Wolfowitz insisted that oil had nothing to do with the initiative. He said, “I do know, emphatically, that it's not a war for oil.” Wolfowitz told the House Budget Committee that oil exports would pay for the reconstruction of post-invasion Iraq.

He testified, “It’s got already, I believe, on the order of $15 billion to $20 billion a year in oil exports, which can finally -- might finally be turned to a good use instead of building Saddam’s palaces. It has one of the most valuable undeveloped sources of natural resources in the world. And let me emphasize, if we liberate Iraq those resources will belong to the Iraqi people, that they will be able to develop them and borrow against them.”

On March 27, 2003 -- at the time of the invasion -- Wolfowitz again told Congress that oil should pay for Iraq’s reconstruction. “The oil revenues of that country could bring between $50 and $100 billion over the course of the next two or three years. Now, there are a lot of claims on that money, but … We are dealing with a country that can really finance its own reconstruction and relatively soon.”The following day, Wolfowitz tells reporters: “I would say that on the whole, things are happening in some respects faster than we expected. One of the most important ones is that we were able to get substantial control over the southern oil fields before Saddam Hussein was able to create the kind of environmental disaster that he was planning to do.

On April 10, Wolfowitz launched a pressure campaign, trying to get Europe -- particularly France, Russia, and Germany -- to cancel outstanding Iraqi debts. He told a Senate hearing, “I hope … they will think about the very large debts that come from money that was lent to the dictator to buy weapons and build palaces and instruments of repression. I think they ought to consider whether it might not be appropriate to forgive some or all of that debt, so the new Iraqi government is not burdened with it.”

At the same time, Treasury Secretary John Snow tried to enlist World Bank and International Monetary Fund support for aiding Iraq. Snow said he hoped the meetings, which brought together member countries of the International Monetary Fund and World Bank, to direct the two institutions to begin work promptly on assessing Iraq's need for aid and how they might provide it. But World Bank President James Wolfensohn said that in the absence of a United Nations resolution affording legitimacy to a new authority in Baghdad, the bank could not even send a mission to Iraq unless its major shareholder countries give the go-ahead. (Washington Post, April 10, 2003)

The Bush administration quietly set in motion a series of resolutions that insured American oil corporations would have access to Iraq’s oil:

On May 22, under United States pressure, the United Nations Security Council unanimously approved Resolution 1483, which set up a “Development Fund for Iraq,” financed mainly by Iraqi oil exports. This fund was controlled by the United States, with advice from the Washington-dominated World Bank and International Monetary Fund (IMF).

The resolution ended sanctions and endorsed the transfer of more than $1 billion of Iraq’s oil money from the Oil for Food program into the Development Fund. All proceeds from the sale of Iraqi oil and natural gas were also to be placed into the fund. To encourage the flow of oil revenues into the Development Fund, the Security Council declared that Iraqi oil and gas were immunized from legal proceedings until December 31, 2007. The intent was to immunize the oil and gas only “until title passes to the initial purchaser” and further did “not apply to any legal proceeding necessary to satisfy liability to damages assessed in connection with an ecological accident.”

The fund was controlled by Paul Bremer, the United States administrator in Iraq. The fund swelled to $7 billion, primarily due to a $3.1 billion contribution from Congress and as a result of billions of dollars more in seized assets of the Iraqi government. (Steve Ktretzman and Jim Vallette, August 13, 2003)

Hours after the United Nations resolution was ratified, Bush quietly signed Executive Order 13303, which provided absolute legal protection for United States interests in Iraqi oil. Bush prohibited all judicial processes regarding Iraqi oil that was in the possession of United States corporations. He decreed that “any attachment, judgment, decree, lien, execution, garnishment or other judicial process is prohibited, and shall be deemed null and void,” with respect to the Development Fund for Iraq and “all Iraqi petroleum and petroleum products and interests therein.” (Steve Ktretzman and Jim Vallette, August 13, 2003)

On May 22, Wolfowitz told Congress, “One of the keys to getting Iraq up and running as a country is to restore its primary source of revenue: its oil infrastructure. The resolution [1483] envisions the resumption of oil exports, and provides that revenues be deposited in the Development Fund for Iraq, with transparency provided by independent auditors and an international advisory board. Decisions regarding the long-term development of Iraq’s oil resources and its economy will be the responsibility of a stable Iraqi government. The United States is dedicated to ensuring that Iraq's oil resources remain under Iraqi control. Iraq's resources -- including all of its oil -- belong to all of Iraq’s people.” (Steve Ktretzman and Jim Vallette, August 13, 2003)

WHAT BUSH TOLD THE WORLD. Six months before Bush’s war -- in September 2002 -- White House economic advisor Lawrence Lindsey predicted that the cost to rebuild Iraq after Hussein was toppled could be as high as $200 billion. Perhaps realizing that the American people would not buy into Bush’s war, that figure was immediately dismissed by White House officials.

Cheney consistently denied that oil was an issue in attacking Iraq. However, as Halliburton’s CEO in the 1990s, he lobbied extensively to lift sanctions against Iran in order to move ahead with the Iran-Caspian connection. (Village Voice, February 26, 2003)

In February 2003, Assistant Secretary of Defense Richard Perle said, “Allow me to say, I find the accusation that this administration has embarked upon this policy for oil to be an outrageous, scurrilous charge for which, when you asked for the evidence, you will note there was none. … It’s an out-and-out lie.” (Meet the Press, February 23, 2003) Undersecretary of State Wolfowitz said, “This is not a war about oil. This is going to -- if we have to use force, it’s going to be to liberate Iraq, not to occupy Iraq. The oil resources belong to the Iraqi people.” Rumsfeld also proclaimed, “An Iraq war has absolutely nothing to do with oil.” On several occasions, Secretary of State Powell claimed, “The oil of Iraq belongs to the people of Iraq.”

Five years earlier -- on January 26, 1998 -- Perle, Wolfowitz, and Rumsfeld wrote a letter to President Clinton. “It hardly needs to be added that if Saddam does acquire the capability to deliver weapons of mass destruction, as he is almost certain to do if we continue along the present course, the safety of American troops in the region, of our friends and allies like Israel and the moderate Arab states, and a significant portion of the world's supply of oil will all be put at hazard.” (Fox News, February 25, 2003)

One Pentagon official boasted that the American reconstruction team had already spent three weeks planning the postwar Iraq. The Pentagon’s first word was that the essentials of rebuilding the country would take about $10 billion and three months. United Nations estimates were $100 billion a year for a minimum of three years.

In the days after the 2003 invasion, the Bush administration famously predicted the war would pay for itself. Andrew Natsios, head of USAID, remember, told Congress: “In terms of the American taxpayers contribution, ($1.7 billion) is it for the U.S. The rest of the rebuilding of Iraq will be done by other countries and Iraqi oil revenues.” Wolfowitz backed him up, saying Iraq was a country “that can really finance its own reconstruction and relatively soon.” (CBS News, September 9, 2003)

On March 27, 2003, Wolfowitz told Congress, “We’re dealing with a country that can really finance its own reconstruction and relatively soon.” He said Iraqi oil revenues would generate between $50 billion and $100 billion over a couple of years. That would be enough, he said, to pay for reconstruction of the country. (Washington Post, October 31, 2003)

Not only was the cost of the war and reconstruction much higher than the Bush administration had anticipated, but estimates of revenue from Iraqi oil exports were lower than expected. In June, the Energy Information Administration expected Iraqi oil revenue to be $10.6 billion in 2003, down from $12.4 billion in 2002. Then the estimate was lowered to $9.3 billion. In October, Rumsfeld said that oil revenue would be only about $2.5 billion in 2003, before growing to $12 billion in 2004 and as much as $20 billion in 2005. (Washington Post, October 31, 2003)

By early 2004 – after two years of war -- the United States was on track to spend more than $300 billion to maintain our troops. In February 2005, Bush asked Congress for a $82 billion package to fund military operations in Iraq and Afghanistan. This pushed funding for military operations in Iraq and Afghanistan to a record $105 billion for fiscal year 2005 alone, including $25 billion in emergency spending already approved. (Reuters, February 14, 2004)

The $82 billion increased the total bill for Iraq and Afghanistan to nearly $300 billion and the budget deficit to a record high. The emergency request included $74.9 billion for the Defense Department. The rest would be used to boost aid to the Palestinians, to reward war on terrorism allies Pakistan and Poland, and to fund reconstruction efforts in Asian nations devastated by the December tsunami. (Reuters, February 14, 2004)

The major initiatives in the package included:

* $5.7 billion to accelerate the training and equipping of Iraqi security forces to combat a deadly insurgency that continues almost two years after the 2003 invasion. Bush said the extra money is so Iraqis “can assume greater responsibility for their own security and our troops can return home,” though he set no timetable.

* $2 billion to combat the drug trade and boost reconstruction efforts in Afghanistan.

* $660 million for construction of a U.S. Embassy complex in Baghdad.

* $950 million to cover the cost of humanitarian relief and reconstruction efforts in Asian nations devastated by December's tsunami, a $600 million increase.

* $400 million in aid to nations that have sent troops to Iraq and Afghanistan, rewarding them for taking “political and economic risks.”

* $200 million in aid for the Palestinians. Bush promised another $150 million in his fiscal 2006 budget. Officials left open the possibility of providing a portion of the aid directly to the Palestinian Authority.

*$60 million to aid Ukraine and its new president. (Reuters, February 14, 2004)

At the time Bush rushed to war, the price of one barrel of crude oil at that time was hovering around the $40 mark. The turmoil created by the Bush administration was the main factor in escalating oil prices. On September 28, 2004, the price of a barrel of oil broke the $50 mark for the first time. By the end of 2004, it was flirting with $60.00.

To help pay for the cost of the Iraqi war, the Bush administration discreetly diverted funds. After 9/11, Congress appropriated $40 billion in anti-terror funding. The money was to finance the cleanup at 9/11 and the hunt for domestic terrorists. The bills instructed the Bush administration to “consult” Congress about specific projects for which the funds would be spent. (Newsweek, May 3, 2004)

By the fall of 2003, oil exports remained relatively low. Before the war, Iraq was exporting 2.8 million barrels of oil per day. Before the 1991 Gulf War, the country’s exports amounted to 3.5 million barrels daily. However, even five months after Bush declared victory in Iraq, the country’s oil exports amounted to only 1.65 million barrels a day. (Newsweek, October 6, 2003)

A Pentagon report released in October 2003 described Iraq’s oil industry as so badly damaged by a decade of trade embargoes that production capacity had fallen by more than 25 percent. In the city of Zalan alone, 2,000 to 2,500 tons of oil were stolen and sold on the black market. Trucks and small boats were used in illicit operations. (Chicago Tribune, October 5, October 6, 2003)

Bush had hoped to wait until after the November 2004 presidential election to ask Congress for more funds. But with the escalation of violence in the spring and summer, Bush had to ask for an extra $25 billion to pay military costs in Iraq and Afghanistan to be approved by October 1. After repeated assurances that no additional resources would be needed at this time, the administration announced it required an additional $25 billion on top of the roughly $120 billion that already had been appropriated. (New York Times, May 6, 2004)

On May 13, Wolfowitz told the Senate Armed Services Committee that the Bush administration would actually need at least $50 billion more. But other military experts said that the number might even reach $80 billion. Senator Hillary Clinton questioned Wolfowitz’s credibility, noting, “You have made numerous predictions, time and time again, that have turned out to be untrue and were based on faulty assumptions. (Seattle Times and New York Times, May 13, 2004)

Iraqi oil revenues brought in just $11 billion in the 14 months after Bush declared victory. The Bush administration promised that the oil revenue belonged to Iraq and that it should be set aside for use when Iraq would be given sovereignty on June 30. (New York Times, June 21, 2004)

However, as soon as Bush declared victory in April 2003, the administration began spending the oil revenue. By the time Iraq was granted sovereignty on June 30, 2004, the United States had spent $2.5 billion of the Iraqis’ money. (New York Times, June 21, 2004)

In October 2004, the Bush administration announced it would ask for another $70 billion in emergency funding for the wars in Iraq and Afghanistan. That pushed total war costs close to $225 billion since the invasion of Iraq in March 2003. The average cost for one month of the war in Iraq increased from $4 billion to $5.8 billion. Bush’s request for an additional $82 billion in the Fall of 2004 exceeded his combined 2006 funding request for the departments of Homeland Security, Justice, and Housing and Urban Development. It equaled nearly five times the savings he is seeking through cuts to those and other domestic programs in the name of spending restraint. Besides the wars in Iraq and Afghanistan and tsunami relief in Asia, the emergency request included money for “revamping” the Army which should have been included in the base budget. (Washington Post, October 26, 2004; CNN, November 20, 2004; Washington Post, February 14, 2005)

One promise to gain support for the invasion was the assertion that Iraqi oil would provide adequate funds for Bush’s war. During the Saddam era, 2.5 million barrels were being pumped daily. But then oil production plummeted.

According to the International Energy Agency, Iraqi oil production continued to plummet. By 2005 – nearly three years into the war – its output dropped by 8 percent to 1.83 million barrels. That was almost half the 3 million barrels envisaged by the Bush administration three years earlier at the outset of the war. (Los Angeles Times, January 25, 2006)

Because of the pipeline attacks, exports to the Turkish port of Ceyhan on the Mediterranean Sea via Iraq’s northern pipeline averaged only 40,000 barrels a day in 2005, compared with an 800,000-barrel-a-day average reached during some months before the war. (Los Angeles Times, January 25, 2006)

In July 2005, Iraqi officials said attacks had cost the nation $11 billion in revenue. Kidnappings and killings of oil officials -- the oil minister barely escaped an assassination attempt in October 2005 -- and of oil field workers slowed down the pace of repairs. In January 2006, two German engineers were kidnapped from the Bayji refining complex 125 miles north of Baghdad. (Los Angeles Times, January 25, 2006)

3. IT’S THE OIL, STUPID

In 2001, the Council on Foreign Relations and the James A. Baker III Institute for Public Policy of Rice University released a study on the importance of Iraqi oil. The report stated: “Tight (oil) markets have increased U.S. and global vulnerability to disruption and provided adversaries undue potential influence over the price of oil. Iraq has become a key 'swing' producer, posing a difficult situation for the U.S. government.” (Time, May 19, 2003)

Yet Bush repeatedly asserted that Iraq's oil belongs to its citizens: “We’ll make sure that Iraq’s natural resources are used for the benefit of their owners, the Iraqi people.” According to Defense Secretary Rumsfeld, “It (Iraq) has nothing to do with oil, literally nothing to do with oil.” (Time, May 19, 2003)

Nothing could have been farther from the truth. The amount of oil that Iraq exported determined the living standards of Iraqis. It affected everything from the Russian economy to the price Americans pay for gasoline, from the stability of Saudi Arabia to Iran’s future.

Iraq was home to 11 per cent of international oil reserves, which accounted for more than 112 billion barrels of oil. Studies by the Energy Information Administration put the reserves in excess of 200 billion barrels. An added attraction was that the cost of pumping Iraqi crude is the cheapest worldwide. Iraq never came close to achieving its potential. In 1979, the year before Iraq’s oil fields were devastated by the first of three wars, its wells produced an average of 13,700 barrels each per day. By contrast, each Saudi well averaged 10,200 barrels. United States wells averaged just 17 barrels. (Time, May 19, 2003)

It would take more than 800 United States wells to pump as much oil as a typical Iraqi well. Consequently, production costs in Iraq were much lower. The average cost of bringing a barrel of oil out of the ground in the United States was about $10 -- and $2.50 in Saudi Arabia. However, it was less than $1 per barrel in Iraq, according to the Center for Global Energy Studies in London.

Despite being the world’s largest oil producer, Saudi Arabia wells produced 8.1 million barrels of crude oil a day in 2000. Its high-quality Arabian light sold for an average $26.81. In 16 of the 17 years since 1986, the Saudis operated at a deficit as its oil revenue failed to keep pace with its spending. As a result, the country fell into debt.

Russian President Putin had signed contracts to develop new fields in Iraq and produce an additional 710,000 barrels a day. China signed contracts with Iraq to pump 90,000 barrels a day. But unlike Russia, China needed all that oil, and much more, for its own growth. French oil companies operated in Iraq since the late 1920s. Although no oil contracts were signed, the French and the Hussein government in the early 1990s entered into a memorandum of understanding. It called for French companies to develop oil fields and produce 1 million barrels a day. Like most of Europe, France relied on imported oil and petroleum products to meet its needs, which amounted to about 2 million barrels daily.

When American troops rolled into Baghdad, their first objective was to protect the Iraqi Oil Ministry building. Iraq's oil records were secured. Meanwhile, other government buildings, ranging from the Ministry of Religious Affairs to the National Museum of Antiquities, were looted and pillaged. Hospitals were stripped of medicine and basic equipment.

As Bush declared victory, he immediately called on the Security Council to lift sanctions. But France, Russia, and some other council members argued to keep the sanctions in place and to let the United Nations retain control of Iraq’s oil resources and lucrative contracts to rebuild the nation. They feared that a United States-installed government would cut them out of existing and future deals. President Chirac told Bush that France wanted the United Nations to have a more central role in rebuilding Iraq’s infrastructure and government than Washington would like.

However, Secretary of State Powell earlier had dismissed calls by France, Russia, and Germany for a central United Nations role in Iraq, noting that the American-led coalition had overthrown Hussein, and that the idea that “the Security Council is now going to become responsible for everything is incorrect.” (Los Angeles Times, April 17, 2003)

Iraqi opposition leaders in exiles meeting with senior United States officials in London greed on international oil companies for post-war Iraq. The April 5, 2003 talks in London were hosted by Thomas S. Warrick, special advisor to the United States Assistant Secretary of State for Near Eastern Affairs. (Al Jazerra, April 6, 2003)

Iraq’s Constitution outlawed the privatization of key state assets, and it barred foreigners from owning Iraqi firms. Nevertheless, the Bush administration ignored the international law. On September 19, Bremer enacted Order 39 by privatizing 200 Iraqi state companies. He decreed that foreign firms could retain 100 percent ownership of Iraqi banks, mines, and factories. Bremer allowed these firms to move 100 percent of their profits out of Iraq. (The Nation, November 24, 2003)

In the early years of the war, over $1.5 billion was disbursed to interim Iraqi ministries without any accounting, and more than $1 billion designated for provincial treasuries never made it out of Baghdad. More than $430 million in contracts issued by the Petroleum Ministry were unsupported by any documentation, and $8 billion were given to government ministries that had no financial controls in place. Nearly all of it disappeared, spent on “payroll,” wages for “ghost employees” in the Ministries of the Interior and Defense. (The American Conservative, October 24, 2005)

In one case, an Army brigade received money to support 2,200 men. It was discovered that there were fewer than 300 effectives. In addition, 602 actual guards at the Ministry of the Interior were billed as more than 8,200 for payroll purposes. (The American Conservative, October 24, 2005)

The Bush administration approved over $2.2 billion in United States and Iraqi funds to restore Iraq’s oil infrastructure and boost crude oil production. Contractors drained as much as $8 million a day from the Iraqi treasury. The GAO reported that oil production and export levels dropped below pre-war levels. In March 2003, Iraq produced 2.6 million barrels of oil per day and exported 2.1 million barrels per day. By May 2005, Iraq was producing just 2.1 million barrels of oil per day and exporting only 1.4 to 1.6 million barrels per day. (Committee on Government Reform, July 28, 2005; Los Angeles Times, April 30, 2006)

Considerable “off the books” money included as much as $4 billion from illegal oil exports. The CPA and the Iraqi State Oil Marketing Board, which it controlled, made a deliberate decision not to record or “meter” oil exports. (The American Conservative, October 24, 2005)

Erinys Corporation was contracted to train guards to protect Iraq’s oil system. The United States paid Erinys $104 million to train at least 14,400 guards. But Erinys actually trained only 11,400 guards. Erinys was financed with the help of A. Huda Farouki, a Virginia businessman and close friend of Ahmad Chalabi, the exiled Iraqi who gave false information on WMD to the Bush administration. (Los Angeles Times, April 30, 2006)

Insurgent attacks also contributed to the inept oil industry. Attacks on oil pipelines drained as much as $8 million a day from the Iraqi treasury. Strikes against electrical towers were among the primary reasons that power production remained below prewar levels. (Los Angeles Times, April 30, 2006)

4. DIVIDING THE OIL BETWEEN THE U.S. AND BRITAIN

On November 22, 2005, a report was published by American and British pressure groups that included War on Want and the New Economics Foundation (NEF). It warned that the American plan -- to transfer the development of Iraq’s oil fields to the United States and British in 2006 -- would cost approximately $200 billion. (The Independent, November 22, 2005)

The report said that Iraq would be caught in an “old colonial trap” if it allowed foreign companies to take a share of its vast energy reserves. According to the report, from groups the new Iraqi constitution opened the way for greater foreign investment. (The Independent, November 22, 2005)

The groups said they had details of high-level pressure from the United States and British governments on Iraq to look to foreign companies to rebuild its oil industry. It said a Foreign Office code of practice issued in summer last year said at least $4 billion would be needed to restore production to the levels before the 1990-91 Gulf War. (The Independent, November 22, 2005)

The report said: “Given Iraq’s needs it is not realistic to cut government spending in other areas and Iraq would need to engage with the international oil companies to provide appropriate levels of foreign direct investment to do this.” (The Independent, November 22, 2005)

The report also said that the use of production sharing agreements (PSAs) was proposed by the State Department before the invasion and adopted by the Coalition Provisional Authority. The report read: “The current government is fast-tracking the process. It is already negotiating contracts with oil companies in parallel with the constitutional process, elections and passage of a Petroleum Law.” (The Independent, November 22, 2005)

5. WHAT PAYS FOR RECONSTRUCTION? IT’S NOT IRAQI OIL

When Bush was asked which source funds would come to pay for reconstruction, he answered, “Iraqi oil revenues … coupled with private investments should make up the difference.” (The Nation, November 2003)

That never happened. Bremer conceded that in the near-term oil industry revenues would cover only the industry’s costs -- far short of the cost for reconstruction. (The Nation, November 2003)

From the time Bush proclaimed “major combat operations over,” he waited over four months before he officially addressed the spiraling cost for reconstruction. In September 2003, he asked Congress for $87 billion. $20.3 billion of that was earmarked for the reconstruction of Iraq. (Washington Post, September 26, 2003)

However, a large chunk of that amount included numerous questionable and expensive items:

1. A new curriculum for training an Iraqi army for $164 million.

2. Five hundred experts, at $200,000 each, to investigate crimes against humanity.

3. A witness protection program for $200,000 per Iraqi participant.

4. A computer study for the Iraqi postal service at a cost of $54 million.

5. $100 million to build seven planned communities with a total of 3,258 houses, plus roads, an elementary school, two high schools, a clinic, a place of worship, and a market for each.

6. $10 million to finance 100 prison-building experts for six months.

7. $100,000 to finance 100 prison-building experts.

8. 40 garbage trucks at $50,000 each.

9. $900 million to import petroleum products such as kerosene and diesel to a country with the World’s second largest oil reserves.

10. $20 million for a four-week business course, at $10,000 per student.

11. $400 million to build two 4,000-bed prisons at $50,000 a bed. The cement needed to be imported to make concrete. (Washington Post, September 26, 2003)

The Bush administration could well have saved millions of dollars.

*United States engineers estimated it would cost $15 million to repair a cement plant in northern Iraq. Instead, the job was given to local Iraqis at a cost of only $80,000.

*The Bush administration paid $25 million to refurbish 20 police stations in Basra. An Iraqi official said that a local company could have done the work for $5 million.

*The homes of 10 Iraqi officials were renovated at a cost of $700,000. Local companies could have built entirely new homes for the same price. (Washington Post, September 26, 2003)

6. PLANNING TO EXPLOIT IRAQ’S OIL

In February 2007, the Iraqi cabinet approved a draft that would set guidelines for countrywide distribution of oil revenues and foreign investment in the country’s immense oil industry. The draft approved allowed the central government to distribute oil revenues to the provinces or regions by population. This would help alleviate the friction with the Sunnis who virtually had no oil. (New York Times, February 26, 2007)

The draft also granted regional oil companies the power to sign contracts with foreign companies for exploration and development of fields. This opened the door for investment by foreign oil companies in a country whose oil reserves ranked among the world’s top three in size. Iraq had 80 known fields, 65 of which will be offered up for bids for development contracts once the bill was approved by the Iraqi Parliament. (New York Times, February 26, 2007)

The draft oil law said that all revenues from current and future oil fields would be collected by the central government and redistributed to regional or provincial governments by population. This would ensure an equitable distribution of oil. (New York Times, February 26, 2007)

The draft law contained a compromise. Regions could enter into contracts, but a powerful new central body called the Federal Oil and Gas Council would have the power to “prevent” the contracts from going forward if they do not meet certain prescribed standards. (New York Times, February 26, 2007)

The Bush administration set May 2007 as the deadline for the Iraqi government to decide how to divide the country’s oil reserves among its Shi’ite, Kurdish, and Sunni regions, and how much foreign investment to allow. This involved the country with some of the world’s largest oil reserves, about 115 billion barrels. Iraq’s 2007 budget was based on predictions that oil proceeds would reach $31 billion, 93 percent of the government’s revenue. (Los Angeles Times, May 13, 2007)

But oil production since the outbreak of the war in March 2003 was just 2.6 million barrels per day. Bush administration officials predicted a rapid rise to 3 million barrels. Instead, Iraq often has struggled to push the daily total to 2 million barrels because of obsolete equipment and security problems. (Los Angeles Times, May 13, 2007)

The objections by Iraq’s legislators included regional distrust of the Shi’ite-led central government; wariness of foreign interest; and anger toward the United States, which many Iraqis believed invaded Iraq solely to get its hands on the oil. (Los Angeles Times, May 13, 2007)

The Kurdish regional government voiced its opposition to the measure in April 2007 after seeing lists drawn up by the Iraqi central government that categorized the oil fields according to levels of development and geographical boundaries. Those factors would determine who would manage the fields and the contracts involving them -- regional authorities or the state-run Iraq National Oil Co., which has yet to be established. Kurdish authorities said the lists gave 93 percent of fields to the national oil company, including some they say are at least partially in Kurdish territory. (Los Angeles Times, May 13, 2007)

Other points of contention involved the mechanism for distributing oil profit and the degree of foreign participation in a committee that would set policy on contracts and other industry issues. The question of how to divide the money was especially troublesome because of Sunni Arab and Kurdish distrust of the Shi’ite-led government. Under the proposed law, the central government would control a bank account used for distributing oil proceeds. (Los Angeles Times, May 13, 2007)

Between 2003 and 2007, between 100,000 and 300,000 barrels a day of Iraq’s declared oil production was unaccounted for and could have been siphoned off through corruption or smuggling. (New York Times, May 12, 2007)

Using an average of $50 a barrel, a report by the United States Government Accountability Office said the discrepancy was valued at $5 million to $15 million. The report also covered alternative explanations for the billions of dollars worth of discrepancies, including the possibility that Iraq has been consistently overstating its oil production. (New York Times, May 12, 2007)

In reports to Congress before the 2003 invasion, the GAO used techniques similar to those in the May 2007 report. The GAO determined that in early 2002, 325,000 to 480,000 barrels of crude oil a day were being smuggled out of Iraq, the majority through a pipeline to Syria. Substantial amounts also left Iraq through Jordan and Turkey, and by ship in the Persian Gulf. (New York Times, May 12, 2007)

In mid-2007, an Iraqi opinion poll found:

*Two-thirds of Iraqis opposed plans to open the country’s oilfields to foreign companies.

*A majority of every Iraqi ethnic and religious group believe their oil should remain nationalized.

*Sixty-six percent of Shi’ites and 62 percent of Sunnis support government control of the oil sector, along with 52 percent of Kurds. (OneWorldNet, August 8, 2007)

Meanwhile, the Bush administration worked behind the scenes to ensure Western access to Iraqi oil fields even as most other oil-exporting countries had sharply limiting roles in developing international oil companies. (Agence France Presses, June 30, 2008)

The State Department played a prominent role in drawing up contracts with the Iraqi government to gain a monopoly on the country’s oil industry. The five major Western oil companies included Exxon Mobil, Shell, BP, Total, and Chevron, as well several smaller oil companies. Meanwhile, Iraq continued to negotiate with Shell, BP, ExxonMobil, Chevron, and Total, and a consortium of other smaller oil companies. (Agence France Presses, June 30, 2008)

In their role as advisers to the Iraqi Oil Ministry, State Department lawyers and private-sector consultants provided potential contracts and detailed suggestions. The State Department advisors hoped the “understaffed Iraqi ministry” would accept the details of the contracts. (Agence France Presses, June 30, 2008)

As expected, the Bush administration repeatedly denied steering the Iraqis toward decisions. Dana Perino, the White House spokeswoman, said, “Iraq is a sovereign country, and it can make decisions based on how it feels that it wants to move forward in its development of its oil resources.” (Agence France Presses, June 30, 2008)

In mid-summer, a congressional committee concluded that the Bush administration officials knew that a Texas oil company with close ties to Bush was planning to sign an oil deal with the regional Kurdistan government that ran counter to American policy and undercut Iraq’s central government. The conclusions were based on e-mail messages and other documents that the committee received. (Washington Post, July 1, 2008)

United States policy was to warn companies that they incurred risks in signing contracts until Iraq passed an oil law and to strengthen Iraq’s central government. The Kurdistan deal, by ceding responsibility for writing contracts directly to a regional government, infuriated Iraqi officials. But State Department officials did nothing to discourage the deal and in some cases appeared to welcome it, the documents show. (Washington Post, July 1, 2008)

The company, Hunt Oil of Dallas, signed the deal with Kurdistan’s semi-autonomous government in September 2007. Its chief executive, Ray Hunt, a close political ally of Bush, briefed an advisory board to Bush on his contacts with Kurdish officials before the deal was signed. (Washington Post, July 1, 2008)

In an e-mail message, the Kurdistan Regional Government, wrote: “Many thanks for the heads up; getting an American company to sign a deal with the K.R.G. will make big news back here. Please keep us posted.” (Washington Post, July 1, 2008)

In August 2007, Hunt informed State Department officials directly of his intentions in Kurdistan, and on September 5, three days before the deal was signed, numerous e-mail messages among Hunt and State Department officials made clear that the department was aware of what was in the works. (Washington Post, July 1, 2008)

In a message to a colleague with the subject line “Hunt Oil to Sign Contract With K.R.G.,” one State Department official gave a highly detailed summary of the agreement. Hunt, the official wrote, “is expecting to sign an exploration contract with the K.R.G. for a field located in the Shakkan district, an area under K.R.G. control (inside the Green Line) but technically in Nineveh Governorate.” (Washington Post, July 1, 2008)

The official wrote, “Hunt would be the first U.S. company to sign such a deal. He suggested that the news should be rushed onto the State Department’s internal distribution network as quickly as possible. (Washington Post, July 1, 2008)

Finally in the summer of 2008, four Western oil companies negotiated oil contracts in Iraq. Exxon Mobil, Shell, Total and BP -- the original partners in the Iraq Petroleum Company -- along with Chevron and a number of smaller oil companies, participated in no-bid contracts with the Iraq Oil Ministry to service the country’s largest fields. (New York Times, June 19, 2008)

Zoriah Miller, a freelance photographer in Iraq, was barred from covering the Marines after he posted photos on the Internet of several of them dead. This underscored a growing effort by the American military to control graphic images from the war. (New York Times, July 26, 2008)