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The President's New Clothes
The nuclear issue isn't the problem -- it's the oil, stupid!
Chris Cook (ChrisCook)     Print Article 
Published 2006-04-14 11:30 (KST)   
Upon reading the recent wave of stories concerning U.S. readiness to bomb Iran back to the Stone Age unless they give up preparations for nuclear weapons, my first reaction was one of "shock and awe."

But then I realized that, like the emperor in the Hans Christian Andersen fairy tale, President Bush is not wearing any clothes.

What? Well, to paraphrase the president's predecessor, "It's the oil, stupid."

As a former Director of the UK's International Petroleum Exchange with recent experience of Iran and the oil market -- due to my involvement in a proposed Iranian Oil Bourse -- it has been clear for some time that the nuclear issue is really not the problem, although it suits both the U.S. and Iran to hype it up.

But I confess that it had puzzled me for some time why it is that everything except oil is going to be privatized in Iraq.

"Good for the U.S.," I thought.

Well, I did until I recently read an analysis last year by Greg Muttitt of the plans by big oil to enter into 40-year Production-Sharing Agreements ("PSA's") with Iraq.

The deal is this: the U.S. develops Iraqi fields and in return gets for 40 years a major share of Iraq's crude oil production at favorable "cost" prices. The outcome will be profits beyond the dreams of avarice for the "Usual Suspects."

Once these contracts are signed, then global institutions (backed by U.S. policing) will ensure that they are honored, whatever happens subsequently in Iraq, and regardless of which countries are able to influence policy in Iraq. The fact that there are still U.S. bases in Cuba, for instance, illustrates how rigorously the rule of law may apply, despite differences in ideology.

All this noise concerning Iranian nuclear preparations is, as Shakespeare had it in "Macbeth" -- "a tale ... full of sound and fury, signifying nothing."

Does anyone seriously believe that decision-makers in the U.S. would really countenance a bombing campaign, which would almost inevitably lead to crude oil at US$150 per barrel, whether or not that suited so-called "Big Oil?"

While the business community at large in the U.S. may be quite content to consume Iraqi oil whatever the enterprise model, they would certainly not risk an oil crisis of an order that massively increased their energy costs and would see John Doe having to fill his SUV at $6 dollars a gallon, or worse.

In order to enter into credible PSA's, there has to be a legitimate government in Iraq. By no stretch of the imagination are we there yet. Who is the only power capable of upsetting the PSA apple-cart? That's right, it's Iran.

Simply put, President Bush's chance of pulling off the sale of the century runs out with his term of office in 2008, and that is why we are hearing all about the need to sort out Iran's "nuclear ambitions" before then.

I concede that this is a cynical critique, but I believe that Iran has in her power the potential for a constructive solution in the region, which would demonstrate the shortcomings of the "Western" form of enterprise model exemplified by the proposed "investment" through PSA's.

As an alternative, Iran and her Arab neighbors in the Gulf Cooperation Council might pool some of the proceeds of recent energy sales and utilize them by investing as "capital partners" in Iraqi crude oil production.

To do this they simply create a quasi-partnership as an "open" corporation. New legal forms exist enabling this, where Iraq is the "capital user" member and the capital provider members/investors receive back their capital not in cash, but in crude oil at the current price -- ie: a forward sale of Iraqi crude oil.

So in order to raise the $2.5 billion per year investment they need, Iraq would simply sell each year sufficient amounts of their future production at the prevailing price per barrel (at $50 per barrel, they would sell 50 million barrels).

This mechanism is far more equitable than the typical PSA, and in fact such revenue-sharing "capital partnerships" have been in use for thousands of years and remain at the heart of Islamic finance, notwithstanding the best efforts of the global banking system to subvert them.

It's not rocket science, but you won't hear about such an enterprise model from a financial establishment accustomed to using the current combination of debt-deficit-based funding and equity in the form of the joint stock corporation.

So, I'm sorry, Mr. President, the clothes Mr. Cheney has given you we can see right through.
©2006 OhmyNews
Other articles by reporter Chris Cook

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