On April 3, 2001, the State Department in the new Bush administration sent an unusual letter to about 23 US oil companies and related companies. The letter, sent out over the signature of Alan Larson, undersecretary for economic, business and agricultural affairs at State, began as follows:
"I am writing to you and senior executives of several other US oil companies to urge that you take all necessary steps to ensure that any Iraqi-origin crude you acquire has not been tainted by the payment to Iraq of an illegal surcharge."
Note the wording here; the taint is not dealing with Iraq, and the concern expressed is not over US companies' purchasing oil from Iraq. Rather, the concern is that the companies might be paying too much: "The United States government is very concerned about persistent reports in the oil trade press and elsewhere that the government of Iraq ... are soliciting and receiving illegal surcharges from buyers of Iraqi crude oil."
The letter continues, "The composition of first-line buyers of Iraqi crude has changed from firms that are well known in the oil business to companies that are virtually unknown. The first-line buyers resell the Iraqi crude they buy to traders and others. This raises the possibility that better-known companies with long-standing reputations in the industry may not be fully aware of illegal payments being made in earlier transactions, but are inadvertently supporting such payments with their purchase of Iraqi trade."
"THE UNITED STATES IS THE LARGEST CONSUMER OF IRAQI CRUDE. We have a major responsibility ..." [emphasis added]
Throughout the Bush administration, and to this day, US oil companies have been among Saddam Hussein's best customers, with the full knowledge and encouragement of the White House.
On January 23, 2001 - basically the moment after Bush entered the White House - the London Times reported that BP and ExxonMobil were again buying oil from Iraq, in spite of possible problems with corruption, Iraq's illegal "surcharge" on its oil, "in a move that may indicate a weakening of Western resolve over sanctions against the Iraqi state."
By the beginning of April 2001, the Middle East Economic Survey, an oil industry research periodical, was reporting that Iraq's March oil sales "will surpass the 2mn b/d level [2 million barrels per day], putting them at around their normal average prior to December when exports collapsed because of the surcharges demanded by Iraq." Causes for this rebound? One was "the competitive prices of Kirkuk [Iraqi crude oil] and Basrah Light, providing companies with premiums of around 50-60 cents/B for crudes destined to Europe and the US, over and above the surcharges being paid."
The other was that "most, if not all, international oil companies (IOCs) have withdrawn their reservations about being secondary buyers of Iraqi crude oil. There is now more volume going to Europe than in January and February when OVER 90% OF THE CRUDE WENT TO THE US." [MEES 44:14, 2 April 2001; emphasis added] US companies show all those other cats the way to the dairy.
The closer you look, the more Iraq's early-2001 market resurgence seems to have arrived with the new White House. MEES reported a week later that "The first breakthrough for the new Iraqi export regime came on 28 December when ExxonMobil agreed to buy, through secondary lifters, a Kirkuk cargo destined for Rotterdam, a move that was eventually followed by other major companies." The ink was barely dry on Justice Scalia's key rulings when some of Bush's major campaign donors made their move.
The April 9 article reiterates that "all Iraq's regular customers have now resumed purchasing Iraqi crude. Moreover the main market for Iraqi crude is the US, where over 90% of exports were sold between December and February."
What is useful about oil industry data sources, as opposed to oil industry television commercials, is the neutrality of the data. These April 2001 issues of the Middle East Economic Survey, for instance, list the names of tankers, amounts of Iraqi oil by metric ton, the companies doing the lifting, the companies buying from them, and their destinations; it may not be highly colored ethically, but it's accurate, like getting the Wall Street Journal without the editorial page. Thus we find that cargoes of Iraqi oil bought by companies in several nations ended up in the US Gulf Coast and US West Coast; some of these cargoes were sold to Chevron, BP, and Valero Energy before reaching their destination, but many other cargoes reached their coastal destinations directly - so to speak - from the middlemen.
Some US companies purchased Iraqi oil from third-party middlemen for delivery not only to the United States but also for destinations in Europe, the kind of factoid that might provide context for the next energy crisis. Exxon, for example, bought 141,000 metric tons of crude from middleman company Mastek, on Feb. 10, 2001, for delivery to Europe; Shell bought 80,000 metric tons from Sinochem, on March 31, to deliver to France; BP bought 135,000 metric tons from Bulf Drilling on April 5, for a European destination.
[One of the largest single purchasers - also a middleman for resale to Exxon - was the Indian company Mastek, whose wholly owned US subsidiary, Majesco, is now headquartered in Irving, Texas. The source comments that "The primary lifters (Italtech, Mastek, Alcon and Fenar) are unknown entities to the oil industry," an observation repeated in other articles. Mastek, for instance, is an Information Technology listed on India's stock exchange, and thus a rather unusual oil consumer. Its global subsidiaries are said by the company to be largely independent of the company but include components devoted to offshore outsourcing (a typical service in India's tech sector). It seems to have generated no press in the oil industry aside from the terse accounts of buying, lifting, selling and offloading.]
Indeed, US companies were Iraq's biggest oil customers throughout 2001, a fact not emphasized publicly by the administration. According to statistics provided by the US Department of Energy, America imported 289,998,000 barrels of crude oil from Iraq in 2001, or about 795,000 barrels per day, making Iraq our sixth-largest supplier (after Saudi Arabia, Mexico, Canada, Venezuela and Nigeria). By the way, the DOE also provides annual data on the "costs of imported crude oil by selected country," but unfortunately not for Iraq (figures available at www.eia.doe.gov).
In no way are these items of information mere liberal slant, or somehow unknown to the business press, or even just routine business deals. Arik Hesseldahl reported in Forbes Magazine in April of this year that nearly 70% of Iraq's production in 2001 went to the US, mentioning in particular ChevronTexaco, ExxonMobil, BP and Marathon Oil (April 8, 2002). Bernie Woodall reported for Reuters on Sept. 20 that "In 2001, the US refiners were by far the biggest consumers of Iraqi crude, taking in an average of nearly 800,000 bpd," and naming top customers Valero Energy (55.4 million barrels) and ChevronTexaco (47.7 million barrels) among others.
Despite assertions intermittently linking Iraq with terrorism, by the way, Iraqi sales and US imports of Iraqi oil remained high throughout fall of 2001, with no sign that the White House considered this any sort of security breach.
(Chevron and Texaco, two of the most significant US customers, merged on Oct. 9, 2001, less than a month after Sept. 11.) Iraq's State Oil Marketing Organization (SOMO) released its price list for selling Kirkuk crude and Basrah light to US and other customers, as usual, on Sept. 29, without noticeable reaction from the administration and with Iraq exporting at normal capacity. By mid-November 2001, sales were soaring again.
This is not to imply that the imports stopped, or even slowed down, at the beginning of the new year (2002). According to the American Petroleum Institute - which has yet to be mistaken for Greenpeace - US companies imported an average 611,000 barrels of Iraqi oil per day from January through June of this year, making Iraq America's fifth-largest supplier of oil in the first half of 2002.
And that's in spite of the fact that Saddam Hussein proclaimed a one-month embargo on sales to the US in April of this year, to protest US support of Israel versus the Palestinians. Geopolitics or no geopolitics, the instant the embargo ended, US oil corporations were tapping into Iraq again: On May 13, 2002, MEES revealed that "Iraq's State Oil Marketing Association (SOMO) resumed crude oil exports on 8 May following a decision by the political authorities to suspend [Iraq's] one-month embargo on exports ... MEES soundings indicate that SOMO had already confirmed sales and scheduled liftings for around 850,000 b/d and may be able to export as much as 1.4mn b/d in May, compared to its export target capacity of 2.2mn b/d. The shortfall is due to the loss of exports during the first week of the month, the insecurity of Iraqi oil supplies with recurring disruptions making Iraqi crude the supply of last resort, and retroactive pricing imposed by the sanctions committee ... MEES further understands that most of the exports are destined for the US, with some to Europe, Morocco, South Africa, India and Taiwan." [This particular issue of MEES was unfortunately missing from the collection in the Library of Congress; I am grateful to the editors for filling in the gap for me.]
Valero Energy and ChevronTexaco are again named among major buyers.
On May 14 of this year, the United Nations Security Council unanimously (15-0) approved the US-sponsored Resolution 1409, which, according to Secretary of State Colin Powell's congratulatory statement, "effectively lifts [eases] UN controls on Iraq's ability to purchase and import civilian goods." This move by the Security Council, intended unequivocally to ease restrictions on civilian trade with Iraq - and anyone who thinks petroleum was exempted from the resolution has overlooked something - was hailed with approval not only by Secretary of State Powell, but also by the US Ambassador to the UN, John Negroponte, and by Assistant Secretary of State for Nonproliferation John Wolf [both Bush appointees].
As recently as this summer, ABC News.com cited an estimate by the Middle East Economic Survey that "as much as 90% of the actual amount of Iraq's estimated 1.8 million barrels per day (bpd) are going to US Gulf coast refineries" (July 20, 2002). DOE figures put US imports of Iraqi oil at 9,327,000 barrels in July, the most recent month available.
Ironically, the Bush White House, Republicans in the House of Representatives, and the oil companies have opposed ANY effort to curtail US purchases of Iraqi oil. Iraq holds the world's second-largest oil reserves, and Iraqi oil has less sulfur than other oil, reducing the cost of environmental compliance for refineries. When Saddam cut off supplies last May, US companies and the White House tried to get around the embargo - not so much by finding other sources for oil, much less by developing alternative energy, but by buying Iraqi oil through Russia and other middlemen. There was plenty of not-at-all-disguised satisfaction when the embargo didn't work, that is, when US purchases of Iraqi oil could resume at their former levels without serious "market disruption."
It would be hard to overstate the copiousness of US-Iraq oil commerce. Iraq transports millions of barrels of oil openly via pipeline through our ally Turkey, and tankers supplying US companies uplift most of their Iraqi shipments at the Turkish port of Ceyhan. To this day, there has been no sign of inclination from the White House to put a stop to this conveyance. Saudi Arabia is one of our premier allies in the Middle East, but in May Iraq also completed repairs on the Iraq-Saudi Arabia pipeline, which had been out of commission since 1990.
US shipping, be it noted, is regulated at every level by the federal government. Any disruption of transshipments of Iraqi oil, even a slowdown, even to nations other than the US, is noted tensely in the business press and is reflected in world markets including those in the US.
Of course, Iraq also sells huge quantities of oil to our allies, including Jordan, Russia, and Turkey. Such is the closeness of Turkey's alliance with America that Turkey is required by the Iraqi government to pay for Iraqi oil and other products with US dollars, even though it must sell the oil in its own country for Turkish lira. The White House did not opt even to sanction US non-ally Syria, which is massively dependent on Iraqi oil and has also constructed a joint pipeline with Iraq, for buying an illegal excess of Iraq's crude.
Former subsidiaries of Vice President Cheney's Halliburton are also still doing business with Iraqi oil fields, and the oil fields are operating with equipment and facilities provided by Halliburton. Not much new there: Halliburton, a huge oil field equipment and supply company, largely kept Iraq's oil sector going after the damage of the Gulf war.
What all this means is that the administration's suddenly finding Saddam a "Hitler" is fishy. US oil companies are competing to pay billions to "Hitler"?
The administration has been boosting resale of "Hitler"'s oil in this country, at a profit for middlemen, and protesting against any interruption in supplies from "Hitler"? Vice President Cheney's Halliburton has been dealing with "Hitler"?
To call this policy inconsistent, however, would be jumping to conclusions. It is not inconsistent to pay Saddam for all the oil you can get - profiting your business associates, your campaign supporters, and even your relatives - without mentioning that to the American people, and to try to get other Americans to put their lives on the line to war against him at the same time. Not if you have decided that you want Iraq's oil, and that you have a right to get anything you want by force.
Fortunately, the overwhelming majority of Americans do not hold that belief.
Margie Burns is a Texas native who now writes from Washington, D.C. Email margie.burns@verizon.net.