Oil is slippery stuff but not as slippery as the figures now being peddled by Iraq‘s American occupiers. Up around Kirkuk, the authorities are keeping the sabotage figures secret – because they can’t stop their pipelines to Turkey blowing up. And down in Baghdad, where the men who produce Iraq‘s oil production figures are beginning to look like the occupants of Plato’s cave – drawing conclusions from shadows on their wall – the statistics are being cooked. Paul Bremer, the US proconsul who wears combat boots, is “sexing up” the figures to a point where even the oilmen are shaking their heads.
Take Kirkuk. Only when the television cameras capture a blown pipe, flames billowing, do the occupation powers report sabotage. This they did, for example, on 18 August. But the same Turkish pipeline has been hit before and since. It was blown on 17 September and four times the following day. US patrols and helicopters move along the pipeline but, in the huge ravines and tribal areas through which it passes, long sections are indefensible.
European oilmen in Baghdad realise now that Iraqi officials in the oil ministry – one of only two government institutions that the Americans defended from the looters – knew very well that the sabotage was going to occur. “They told me in June that there would be no oil exports from the north,” one of them said to me this week. “They knew it was going to be sabotaged – and it had obviously been planned long before the invasion in March.”
Early in their occupation, the Americans took the quiet – and unwise – decision to re-hire many Baathist oil technocrats, which means that a large proportion of ministry officials are still ambivalent towards the Americans. The only oil revenues the US can get are from the south. In the middle of August, Mr Bremer gave the impression that production stood at about 1.5 million barrels a day. But the real figure at that time was 780,000 barrels and rarely does production reach a million. In the words of an oil analyst visiting Iraq, this is “an inexcusable catastrophe”.
When the US attacked Iraq in March, the country was producing 2.7 million barrels a day. It transpires that in the very first hours after they entered Baghdad on 9 April, American troops allowed looters into the oil ministry. By the time senior officers arrived to order them out, they had destroyed billions of dollars of irreplaceable seismic and drilling data.
While the major oil companies in the US stand to cream off billions of dollars if oil production resumes in earnest, many of their executives were demanding to know from the Bush administration – long before the war – how it intended to prevent sabotage. In fact, Saddam had no plans to destroy the oil fields themselves, plenty for blowing up the export pipes. The Pentagon got it the wrong way round, racing its troops to protect the fields but ignoring the vulnerable pipelines.
Anarchy is now so widespread in post-war Iraq that it is almost impossible for international investors to work there. There is no insurance for them – which is why Mr Bremer’s occupation administrators have secretly decided that well over half the $20bn (£12bn) earmarked for Iraq will go towards security for its production infrastructure.
During the war, a detailed analysis by Yahya Sadowski, a professor at the American University of Beirut, suggested that repairing wells and pipes would cost $1bn, that raising oil production to 3.5 million barrels a day would take three years and cost another $8bn investment and another $20bn for repairs to the electrical grid which powers the pumps and refineries. Bringing production up to six million barrels a day would cost a further $30bn, some say up $100bn.
In other words – assuming only $8bn of the $20bn can be used on industry – the Bush overall budget of $87bn which now horrifies Congress is likely to rise towards a figure of $200bn. Ouch.
Since the 1920s, only about 2,300 wells have been drilled in Iraq and those are in the valleys of the Tigris and Euphrates. Its deserts are almost totally unexplored. Officially, Iraq contains 12 per cent of the world’s oil reserves – two-thirds of the world’s reserves are in just four other countries, Saudi Arabia, Iran, Kuwait and the Emirates – but it could contain 20 per cent, even 25 per cent.
It’s possible to argue that it was Saddam’s decision to switch from the dollar to the euro in November 2000 that made “regime change” so important to the US. When Iran threatened to do the same, it was added to the “axis of evil”. The defence of the dollar is almost as important as oil.
But the real irony lies in the nature of America‘s new power in Iraq. US oil deposits are increasingly depleted and by 2025, its oil imports will account for perhaps 70 per cent of total domestic demand. It needs to control the world’s reserves – and don’t tell me the US would have invaded Iraq if its chief export was beetroot – and it now has control of perhaps 25 per cent of world reserves.
But it can’t make the oil flow. The cost of making it flow could produce an economic crisis in the US. And it is this – rather than the daily killing of young American soldiers – that lies behind the Bush administration’s growing panic. Washington has got its hands on the biggest treasure chest in the world – but it can’t open the lid. No wonder they are cooking the books in Baghdad.