Palast, neocons, Iraq oil, and madness

According to Juan Cole, "the story Palast tells is one of crackpotism run wild."  Right.  Greg Palast's article for Harper's, "OPEC on the March:  Why Iraq still sells its oil à la cartel"  (which just came in today's mail, here in west central Texas!), and on which last night's  BBC Newsnight was based, makes it sound as though the neocons' madness may have been somewhat diminished thanks to their failures -- or am I too much of an optimist?    Dick Cheney and his crew seem to have adjusted to reality, if only temporarily.  Palast writes: 

...Today, the old interim oil minister, Uloum, has been replaced by the very men he removed: Muhammad al-Jiburi, now minister of trade, and Thamer Ghadhban, now oil minister. And Dick Cheney, far from "putting the squeeze on OPEC," has taken a de facto seat there, allowing the cartel to maintain its own, suffocating grip on the U.S. economy.

That's after a "two years and $154 billion into the war with Iraq" and countless lives lost:

Two years and $154 billion into the war in Iraq, the United States has at least one significant new asset to show for it: effective membership, through our control of Iraq's energy policy, in the Organization of the Petroleum Exporting Countries (OPEC), the Arab-dominated oil cartel. Just what to do with this proxy power has been, almost since President Bush's first inaugural, the cause of a pitched battle between  neoconservatives at the Pentagon, on the one hand, and the State Department and the oil industry, on the other...

For some excerpts of Palast's article, and a view of the "crackpotism" which took us to war, read on.       

Back to Saddam:

According to insiders and to documents obtained from the State Department, the neocons,        once in command, are now in full retreat. As of today, Iraq's system of oil production, after a year of failed free-market experimentation, is being re-created almost entirely on the lines      originally laid out by Saddam Hussein.

We're now back to Saddam  and then some -- and it's costing us plenty:

The Iraqis have discarded the neocon vision of a laissez-faire, privatized oil operation in favor of one shackled to quotas set by OPEC, which have been key to the 121 percent rise in oil prices since the beginning of 2002....

But the plans of the neocons had been quite different:

...The original scheme for reconstruction, at least the one favored by neoconservatives, was to privatize Iraq's oil entirely and thereby undermine the oil cartel. One intellectual godfather of this strategy was Ariel Cohen of the Heritage Foundation, who in September 2002 published (with Gerald P. Driscoll, Jr.) a post-invasion plan, “The Road to Economic Prosperity for a Post-Saddam Iraq," that put forward the idea of using Iraq to smash OPEC....

Cohen reasoned that if Iraq's fields  were broken up and sold off, a dozen competing operators would quickly crank up production from their individual patches to the maximum possible, swiftly raising Iraq's total output to 6 million barrels a day. This extra crude would flood world petroleum markets, OPEC would devolve into mass cheating and overproduction, oil prices would fall over a cliff, and Saudi Arabia both economically and politically would fall to its knees.

And look at who was involved:

By February 2003, Cohen's position had been enshrined as official policy, in the form of a hundred-page blue-print for the occupied nation titled, “Moving the Iraqi Economy from Re- covery to Sustainable Growth"  –  a plan that generally embodied the principles for postwar Iraq favored by Defense Secretary Donald Rumsfeld, Deputy Secretary Paul Wolfowitz, and the Iran-Contra  figure Elliott Abrams, now Deputy National Security Advisor. Nominally written by a committee of Defense, State, and Treasury officials, the blueprint was in fact the brainchild of a platoon of corporate lobbyists, chief among them the flat-tax fanatic Grover Norquist.

We wonder why they were so secretive about the development of an energy policy. 

They charged ahead:

Following the U.S. military's swift  advance to Baghdad, those skeptical of the neocon plan  were summarily brushed aside. Chief among the castoffs  was General Jay Garner, the short- lived occupation viceroy who on the very night he arrived in Baghdad from  Kuwait received a call from Rumsfeld informing him of his dismissal. When I met with Gamer last March at the Washington offices of SYColeman, the giant security firm he now heads, he told me that he had resisted imposing on Iraqis the plan's sell-off of assets, especially the oil. "That's just one fight you don't have to take on right now," he said. "You don't want to end the day with more enemies than you started with."

A new working group, made up people from the State Department, US oil execs, Iraqi ex-pats.

The working group's ideas about the war had been far less starry-eyed than those of the neocons. "The petroleum industry, the chemical industry, the banking industry – they'd  hoped that Iraq would go for a revolution like in the past and government was shut down for two or three days," Aljibury told me. "You have a martial law... and say Iraq is being liberated and everybody stay where they are ... Everything as is." On this plan, Hussein would simply have been replaced by some former Baathist general. One candidate was General Nizar Khazraji, Saddam's former army chief of staff, who at the time was under house arrest in Denmark pending charges for war crimes. (Khazraji was seen in Iraq a month after the U.S. invasion, but he soon disappeared and has not been heard from since.)

The tenacity of the insurgency forced changes of plan. 

With pipelines exploding daily, the fantasy of remaking Iraq's oil industry also went up in flames. Carroll [Philip Carroll, Bush Administratian designated advisor to the Iraqi Oil Ministry]was replaced by another Houston oil chieftain, Rob McKee, a former executive vice-president of ConocoPhillips and currently the chairman – even during  his tenure in Baghdad – of Enventure,  an oil-drilling supply subsidiary of the  Halliburton Corporation. McKee had little tolerance for the neocons' threat to privatize the oil fields. A close associate ofMcKee's and the executive adviser to Hess's trading arm, Ed Morse, told me that "Rob was very promotive of putting in place a really strong oil company," even if he had to act over the objections of the Iraqi Governing Council. Morse, who says he takes as many as six calls a day from the Bush Administration regarding Iraq, is one of  the men to whom Washington turns to obtain the views of Big Oil....

...In November 2003, McKee quietly ordered up a new plan for Iraq's oil....  The plan, nominally written by State Department contractor BearingPoint was guided, says Jaffe, by a handful of oil industry consultants and executives...

Palast was able to get hold of a copy:

For months, the State Department officially denied the existence of this 323-page plan for Iraq's oil, but when I identified the document's title from my sources and threatened legal action, I was able to obtain the complete report, dated December 2003 and entitled Options for  Developing a Long Term Sustainable Iraqi Oil Industry. The multi-volume document describes seven possible models of oil production for Iraq, each one merely a different flavor of a single option:  the creation of a state-owned oil company....

...Given how easily the interests of OPEC and those of the IOCs [International Oil Companies]can be aligned, it is certainly understandable why smashing the oil cartel would not strike oilmen as a good idea. In  2004, with oil approaching the $50- a-barrel mark all year, the major U.S. oil companies posted record or near- record profits. ConocoPhillips, Rob McKee's company, this February reported a doubling of its quarterly profits from the previous year, which  itself had been a company record; Carroll's former employer, Shell, posted a record-breaking $4.48 bil lion in fourth-quarter earnings.  ExxonMobil last year reported the largest one-year operating profit of any corporation in U.S. history.

And so the neocons' plans were defeated.

When I talked to Ariel Cohen at Heritage, his dream of smashing OPEC in shambles, he blamed the State Department for acquiescing to the Saudis and to Russia, which also benefits from selling oil at high OPEC prices. The poisonous policies were influenced, he said, by "Arab economists hired by the State Department who are basically supporting the witches' brew of the Saudi royal family and the Soviet ostblock... because the Saudis are interested in maximizing their market share and they're not interested in fast growth of the Iraqi output."

According to Morse, the switch to an OPEC-friendly policy for Iraq was driven by Dick Cheney himself. "The person who is most influential in running American energy policy is the Vice President," who, says Morse, "thinks that security begins by ... letting prices follow wherever they may." Even, I asked, if those are artificially high prices, set by OPEC? "The VP's office [has] not pursued a policy in Iraq that would lead to a rapid opening of the Iraqi energy sector... so they have not done anything, either with producers or energy policy, that would put us on a track to say, 'We're going to put a squeeze on OPEC.'"

These excerpts come from the print version of the April Harper's.  Harper's usually posts articles like this months later if at all.  It's worth laying out the price of two lattes for the whole issue, Palast's entire article, an adjoining article by Nir Rosen, "After the Election:  Iraq's democratic preamble to civil war," and what looks to be a pretty scary article by economist Michael Hudson, "The $4.7 Trillion Pyramid:  Why Social Security won't be enough to save Wall Street" on Bush's desperate attempt to put over a scam in which a failing market is revitalized temporarily by the investment of retirement funds.  Perhaps more on that later...