Saudi Arabia to increase oil supply, Saudi opinion, and the Iraq Security Agreement

Washington Post Foreign Service
Monday, June 23, 2008

JIDDAH, Saudi Arabia, June 22 — Saudi Arabia on Sunday promised to increase oil production as needed while Western countries agreed to improve the transparency and regulation of financial markets, signaling a readiness from oil-producing and oil-consuming nations to make concessions and work together to tackle runaway prices.

“I would like to state that for the remainder of this year Saudi Arabia is prepared and willing to produce additional barrels above and beyond the 9.7 million barrels per day which we plan to produce during the month of July, if demand for such quantities materializes and our customers tell us they are needed,” Saudi Oil Minister Ali al-Naimi said at the meeting, attended by officials from more than 30 countries and 25 oil companies.

It was not immediately clear what effect Sunday’s emergency meeting, called by the kingdom after oil reached nearly $140 a barrel this month, would have on prices. But analysts said the meeting succeeded in spreading responsibility among consumers and producers for bringing down oil prices, which had sparked riots in Europe and Asia and raised fears of a global recession.

“One result of the meeting is that both sides put all the reasons they believe for the price increases on the table and decided to discuss them, instead of trading accusations and blame,” said Abdel Aziz Abu Hamad Aluwaisheg, a Saudi analyst.

Participants also agreed on the need to improve the transparency and regulation of financial markets. Saudi Arabia and other producer nations had blamed the billions of dollars of investments in oil as a hedge against the weakening dollar as a major reason for recent price spikes.

U.S. Energy Secretary Samuel W. Bodman, representing the world’s top oil consumer, called again Sunday on Saudi Arabia to increase production, saying it has not kept pace with demand.

Bodman said that world growth of oil consumption has averaged about 1.8 percent annually since 2003 but that for the past three years global production has remained constant at roughly 85 million barrels a day.

Naimi, the Saudi oil minister, rejected that argument and said at the conference Sunday he was convinced that oil markets were well supplied and that production levels were not the primary reason for the dramatic price increases. Global demand over the past year rose by about 1 million barrels a day, he said, while global supplies rose by around 1.5 million barrels.

Analysts said Saudi Arabia was trying to bring prices down because despite the cash windfall, the kingdom, which sits atop the world’s largest oil reserves, wants to maintain demand over the long run. “The price volatility hurts everyone because it discourages long-term investment in oil exploration and encourages development of viable alternatives and conservation measures,” Aluwaisheg said.

Saudi Arabia and other oil-producing Persian Gulf countries have cited a host of reasons for the price volatility, including pressures affecting major oil-producing countries such as Iran, Iraq and Nigeria. On Sunday, Saudi officials asked that everyone reduce rhetoric to calm prices, a reference to tensions between the United States and Iran. High oil taxes, insufficient refining capacity and the weakening dollar, in which oil is priced, have also been blamed in part for the price hikes.

In a sign of commitment to ease prices, Saudi Aramco on Sunday signed a deal with French energy giant Total to build a refinery in the eastern Saudi city of Jubail with the capacity of refining 400,000 barrels of oil a day.

full article here

On a related note, Nick Mottern, director of Consumers for Peace, expresses this:

“Americans remain optimistic that a last minute deal can be reached,” reported The Wall Street Journal in its June 14-15, 2008 edition, describing an impasse over an extraordinary long-term “security” deal between the United States and Iraqi governments that would keep U.S. troops in Iraq for many, many years.

Gina Chon, reporting from Baghdad, was not referring to the American public. She was referring only to a statement by the State Department’s Iraq coordinator, David Satterfield, who, she said in breezy style, “is in town for the negotiations” on the deal, which is opposed by an increasing number of Iraqis because it would make Iraq a captive state of the United States.

Oil was not mentioned in connection with Satterfield’s negotiations. Nor was oil mentioned in the negotiation reports in The New York Times or Financial Times. In fact, it has been the practice of the major media to avoid mentioning oil in connection with military activity in Iraq; something also common in the Congress, all following the lead of the Bush administration.

But it is no coincidence that news of negotiations over the “security” agreement comes with news on June 19 that the occupied Iraqi government is getting ready to sign contracts with ExxonMobil, Shell, BP, Chevron and Total to assist in developing Iraq’s vast oil fields, holding the world’s third-largest reserves. Although the contracts are simply for services, not long-term production agreements, the contracts give the major oil companies a foot in the door.

That they are no-bid contracts given to these Western firms over Russian, Chinese and Indian competitors is exceptional and clearly a matter of an occupied government responding to pressure from the occupier.

What the Bush administration and the major oil companies are striving for is a “security” agreement that will be locked into place before the November election, enabling U.S. troops to protect U.S. oil interests in Iraq and to control the Iraqi government for years to come.

The U.S. military-Iraqi oil connection was made surprisingly clear in March 2008 when Gen. David Petraeus, commander of U.S. forces in Iraq, said at a news conference in Iraq, as reported by United Press International, that he had made calls to major “energy” companies, urging them to invest in Iraq. Since it has been obvious the “majors” want back into Iraq, and have been pushing for an Iraq oil law that would result in huge profits for them, his calls could only have been to assure the oil officials their investments will be safe.

The United States is, according to a report by Patrick Cockburn in the newsletter Counterpunch, pushing the Iraqi government to allow the U.S. military total freedom in Iraq to do virtually anything it wants, supposedly to fight terrorists. The real day-to-day reality is that the agreement would provide a “legal” basis for allowing the U.S. military to do whatever it takes to protect the investments of major oil companies in Iraq after the U.N. mandate covering the occupation expires at the end of the year.

The United States will be protecting the oil operations not from invaders of Iraq but from Iraqis who are opposed to the long-term oil deals now being pushed by the United States and resisted by many inside and outside the government. Perhaps the most notable opponents of the long-term deals are members of the Iraqi oil workers union, who also oppose the occupation.

The terms of the proposed agreement have been kept secret by the Bush administration, even from the Congress. The Cockburn report says the terms, some acknowledged by Iraq’s Prime Minister Nouri al-Maliki, include:

— Permanent military bases in Iraq; 50 is reportedly the minimum number.

— Complete control of Iraqi air space below 29,000 feet.

— Complete freedom to conduct military operations as the United States sees fit.

— Immunity from prosecution for U.S. troops and U.S. mercenaries, also known as private contractors.

— Freedom to jail and interrogate Iraqis at will.

It is possible that provisions yet to be made public may also include commercial privileges, such as freedom for the United States from import and export duties, which would likely mean profit-making possibilities for big oil. This is suggested by a draft of the agreement, created by the United States as early as 2003, made available through the work of the National Security Archive and reported by The Public Record on June 14.

The astounding military/detention provisions of the agreement would effectively put all Iraqis under the control of the United States, with perhaps less sovereignty than any supposed nation in the world. The possibility that the United States may back down from some of these terms does not change the fact that these extraordinary demands have been made at all. The only reason anyone is even talking about them is the deadly force being thrown around in Iraq by the United States.

An example of why the Bush administration wants a blank check for the U.S. military in Iraq is the operation under way this week in and around the city of Amarah in southern Iraq, not far from the Halfaya super-giant oil field, which is estimated at 3.8 billion barrels. This field likely holds the equivalent of about 25 percent of the total reserves under control of ExxonMobil worldwide.

The official reason for the offensive, according to the occupied government of Iraq, is to root out “outlaws” and “criminals,” according to Reuters. The area is reportedly under the control of Moqtada Sadr, a Shiite cleric opposed to the occupation.

If the offensive in Amarah, with a population of 250,000, goes like a similar attack in the oil center of Basra in March, following the Petraeus news conference, Iraqi troops will be supported by U.S. helicopter gunships that fire Hellfire missiles. This U.S. air weapon has been responsible for countless horrific civilian deaths as it often has been used in crowded urban neighborhoods.

There is no question that Americans are incensed about high gasoline prices. But it is doubtful that the vast majority of Americans want to be using gasoline in their cars that is being secured at gunpoint.

Certainly one can see the Iraqis getting fed up with US intervention in their nation.  Just as a reminder, the word most mentioned in Congress before the Saudi decision was OIL.  Only foolish US leaders will continue to pursue oil through strong arm tactics to serve US oil corporations.  We have been taken advantage of by big oil corporations since the 70’s and its long since time to develop alternative energy sources.

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