United States plans for oil industry after Saddam

Peace protesters are parading through the streets. The United Nations Security Council continues to squabble, and the United States has yet to decide whether to go to war in Iraq.
While so much about a second Persian Gulf war remains uncertain, the Bush administration is busily planning what Iraq's oil industry might look like after Saddam Hussein:
--The Pentagon already has scoped out Iraq's oil fields, hoping to forestall any order from Saddam to torch the nation's crude wealth.
--The US State Department's Future of Iraq office has been soliciting input from "Free Iraqis" on a range of economic and social issues.
--And the White House is considering who will be in charge of the second-largest oil reserves in the world.

Whether an American might soon be running Iraq's oil sector remains unclear. But this much seems certain: The White House is considering a radical re-creation of Iraq's government and economy. Iraqi exiles, opposition leaders, even Westerners of Iraqi descent arebeing asked to advise the Bush administration on the country's tax structure, foreign investment in the oil sector and Iraq's future membership in the OPEC cartel.
"If they're not taking us seriously, the US government is spending a lot of money for nothing," said John Kanno, a California-based electrical engineer whose family fled Iraq before he was born. If a US-led invasion proves successful, Gen. Tommy Franks, commander of US forces for that region of the world, initially would assume authority as military governor of the country.

Eventually, US officials would want to turn over power to an Iraqi-led government. Iraqi legal experts already have been crafting a constitution, but administration officials have said they expect a transition could take years. As currently envisioned, Iraq's government ministries would remain largely intact, once those "tainted with the crimes and excesses of the current regime" were removed, Douglas Feith, the Defence Department's undersecretary for policy, told lawmakers earlier this month.
The administration's plan calls for staffing the top three tiers of the government ministries with American officers, noted Ahmad Chalabi, head of the opposition group Iraqi National Congress. If correct, such a proposal would presumably include Iraq's all-important oil ministry. White House officials could not confirm or deny Chalabi's information.
"Our guiding principle is clear," said White House spokesman Taylor Gross. "We will stay as long as it takes but leave as soon as possible."

Part of any invasion strategy would involve a plan to safeguard Iraq's oil fields from Saddam-ordered sabotage. Oil sales represent Iraq's chief source of revenue and are key to any reconstruction plan. And about 60 % of Iraqis currently depend on Iraqi oil sales under the UN-supervised oil-for-food program to survive.
Pentagon officials estimate extensive damage to the fields could cost more than $ 50 bn. Twelve years of economic sanctions have taken their toll on Iraq's oil fields. Iraq's oil production capacity is no more than about 2.8 mm bpd, down 25 % from the levels seen before Operation Desert Storm, according to a report prepared by the James A. Baker III Institute for Public Policy at Rice University and the Council on Foreign Relations.

Concerned about repairing any damaged fields and boosting production as quickly as possible, the administration already has been casting about for possible financial help from the private sector. "We're studying the various ways of handling the issue of oil and what kind of support there might be in the world markets for investing in Iraqi oil after a conflict," Feith said.
Under international law, the US government could use the oil revenues to help pay for the cost of occupation, noted R. Dobie Langenkamp, director of the National Energy-Environment Law and Policy Institute at the University of Tulsa's College of Law. But as the occupying power, the United States also would be responsible for reconstruction and running of the country during the occupation.

Among the Iraqi exiles, attracting foreign investment as a means of helping Iraq boost its oil production is a popular idea. So, too, is the notion of a "flat" tax for a country unaccustomed to income taxes. But there is much less consensus about whether the country's national oil company should be privatised or whether Iraq, a founding member of OPEC, should pull out of the group.
Fadhil Chalabi, once Iraq's undersecretary of oil and now a member of the Future of Iraq project's Oil and Energy working group, argues that OPEC membership need not be addressed now. Assuming no major destruction of the oil fields, Iraq would still need two years or so to crank up production to the levels seen prior to the 1991 war, said Chalabi, a former acting secretary-general of OPEC and now executive director of the London-based Centre for Global Energy Studies.

In recent weeks, the industry has been buzzing with rumours about Bill Martin, a former Energy Department official and Washington consultant who has been working with his friend, Deputy Defence Secretary Paul Wolfowitz. Martin tried to dispel speculation he might be appointed Iraq's next energy czar. The Washington-based consultant said he has been working with Wolfowitz in a part-time, non-compensated basis on "personnel" issues.
Martin said he is helping Wolfowitz find ways to attract managers from the private sector into the Pentagon, and that his work "is not in any way related to oil." Talk of an American being appointed to run Iraq's oil sector has sparked concern among oil industry and foreign policy experts.
Edward Djerejian, director of the Baker Institute, said such a move would lend credence to the critics who say the war is being initiated because of oil: "And that's simply not true. The United States does not have to go to war over oil."

Iraq's oil industry has long had a reputation for professionalism and technical expertise, and corruption has been far less of a problem than in many other oil-producing nations. Iraq's oil industry workers are also highly nationalistic, experts say. Any decision to appoint an American to head the industry would smack of imperialism.