In a major diplomatic victory for the US, the United Nations Security Council May 22 voted 14-0 to lift economic sanctions against Iraq, clearing the way for the US to restart oil exports and control the resulting revenue.
That victory comes in sobering contrast to the growing recognition that continuing sabotage of Iraqi oil field facilities—ostensibly by organized elements opposed to the US-led presence—threatens to undermine recovery of postsanctions Iraq.
Diplomatic victory
Resolution 1483, sponsored by the US, UK, and Spain, calls for the existing UN oil-for-aid program to be phased out over 6 months.
The US-controlled Central Bank of Iraq, instead of the UN, will collect and disburse oil export revenue, although the UN will conduct audits with the International Monetary Fund and World Bank.
US officials say they hope to resume exports in early June; close to 9 million bbl of Iraqi oil is now stored at the Turkish Mediterranean port of Ceyhan. Exports from the Iraqi southern port of Mina al-Bakr may take a few weeks longer as US contractors struggle to sort through a maze of logistical and personnel issues.
Some analysts remain skeptical that exports will be flowing within 2 weeks, given that there may be more legal wrangling over how the former Iraqi President Saddam Hussein-era oil sitting in Ceyhan will be marketed. But US officials insist the new resolution gives their interim government the authority to sell existing oil.
Although the exact timetable of when exports will resume is not yet known, what is certain is that the UN and other international groups will be carefully watching how the US spends Iraq's petrodollars.
The same day the UN voted to accept the US resolution on oil revenue, international financier and philanthropist George Soros pledged to form a new watchdog group to track how the US spends the oil money. He has repeated the concerns of some US lawmakers that the Pentagon is giving preferential treatment to politically favored companies for potentially lucrative rebuilding contracts.
Soros also wants the UN and international lenders to forgive much of Iraq's staggering debt as a goodwill gesture and to discourage countries from lending money to rogue governments.
US officials say oil revenue in the coming months will finance critical infrastructure repairs to the water supply, power grid, and other civilian services; oil money also will pay for humanitarian relief.
To restart exports quickly, the resolution gives the US broad powers to streamline the contract process. It also protects the fund from legal claims associated with Iraq's staggering debt through December 2007. Some experts estimate that Iraq may owe Russia, France, China, and private creditors as much as $400 billion.
Security challenges ahead
Even as it savors success on the diplomatic front, however, the administration of President George W. Bush acknowledged May 22 that it faced considerable problems in bringing security to Iraq, including the persistence of organized support for former President Hussein.
Deputy Defense Secretary Paul Wolfowitz underlined the problems facing the US administration, telling Congress that American forces in Iraq still face "several tens of thousands" of fighters who are sufficiently armed and organized to be considered "something close to light infantry."
Defending the Bush administration against charges of being slow in bringing order to Iraq, Wolfowitz said unrealistic expectations had arisen from "a fundamental misunderstanding about the nature of the security problem in Iraq, and, in particular, a failure to appreciate that a regime which has tens of thousands of thugs and war criminals on its payroll does not disappear overnight."
Wolfowitz's testimony followed a change in US policy late last month, implemented by Paul Bremer, the newly appointed civilian administrator of the Coalition Provisional Authority. Bremer issued a two-page order titled De-Baathification of Iraqi Society, saying, "We have and will aggressively move to seek to identify these people and remove them from office" and that "We have hunted down and will continue to deal with those members of the old regime who are sabotaging the country and the coalition's efforts."
To rid the country of potential saboteurs of various stripes, Bremer's order requires immediate termination of all senior officials in government and industry who held membership in Hussein's Arab Baath Socialist Party. Since party membership was a condition of access to advanced education and promotion in government and industry, the order will also have an impact on the oil industry.
"There will be interrogations and investigations of individuals in the upper ranks of the oil ministry to determine what role they played in the Baath Party," said Philip Carroll, the head of the Office of Reconstruction and Humanitarian Assistance (ORHA) effort to revive the oil industry. "Baathists will be dismissed."
Carroll does not think the interim oil minister appointed by the coalition, Thamir Ghadhban, will have a problem, but he said that "the former oil minister and his deputy were removed for obvious reasons. Others have been removed to select the best people for the job."
Carroll also acknowledged that well-organized thieves have tried to sabotage some wells and steal sophisticated equipment from refineries and pumping stations. "They were stealing cranes and trucks, and using that to literally steal other valuable equipment like engines and gauges," Carroll said. "That caused a significant impairment of the system, and (the equipment) will have to be replaced or repaired."
Before the outbreak of the war in March, the US believed that forces loyal to Hussein would destroy Iraq's oil infrastructure. Such destruction, especially if it extended beyond oil wells to pipelines, pumping stations, or other elements of the system, could have resulted in potential loss of $20-30 billion/year in oil revenues, as well as some $30-40 billion to recreate the infrastructure.
While coalition forces were successful in securing most oil wells and infrastructure before any major damage could occur, no one seems to have anticipated the type of guerrilla campaign that has followed the announced victory in the war by US-led forces. "We didn't anticipate the looting that occurred, to the extent it did," said Bremer's predecessor, Gen. Jay Garner, in early May.
Although looting initially may have appeared as just part of the random chaos in the immediate aftermath of the war, it now seems to be one of several tactics employed by so-called "stay-behind networks" of the Hussein regime as ways of undermining the easy optimism of the early days of the war after the capture of Iraq's relatively undamaged oil fields.
The existence of such networks was underlined in a report by the Kurdish newspaper Hawlati Al-Sulaymaniyah late last month. The paper reported that the Hussein regime had developed plans for stay-behind networks to undermine any post-Saddam government in Iraq.
Effectively a guerrilla operation, such networks include sabotage groups whose tasks include "the destruction of the infrastructure, industrial establishments, state buildings and offices, attacking the American or British forces, the assassination of members of political parties, and bombing and shooting at their headquarters."
US military officers are aware of the enormity of the problem. US Brig. Gen. Robert Crear leads Team RIO (Restore Iraqi Oil), a 370-person task force of the Army Corps of Engineers and Halliburton Co. engineering and construction unit KBR with the mission of putting out oil fires, assessing damage, performing environmental cleanup, and making emergency repairs. RIO is using helicopters to inspect the Strategic Pipeline, a 700,000 b/d line running through central Iraq from Basra to K3, a point northwest of Baghdad.
Responding to criticism of coalition efforts to provide security, Crear said in a recent interview that protecting all the vulnerable points in the Iraqi oil industry would require a force as large as the one massed for the original invasion. "We need to bring back the oil police and arm them," he said. "That process has started."
But it may not be enough. According to one industry observer, "the occupying force will have to contend with some 60,000 Iraqi oil technocrats, who will never accept American hegemony and will sabotage the plan if necessary. Iraq is a nationalist country that is not going to destroy its national resources but that won't hand them over to foreigners either. In this respect the real battle for oil is now on."
Congressional reaction
Both Democrats and Republicans support the UN action, although the Senate voiced concerns over how the US is managing reconstruction.
House Energy and Commerce Committee Chairman Billy Tauzin (R-La.) and Subcommittee on Energy and Air Quality Chairman Joe Barton (R-Tex.) in a joint statement released May 22 said they applaud the UN vote that terminates the oil-funded aid program.
"The (UN) did the right thing in ending the scandal-ridden oil-for-food program. The liberated people of Iraq will not have to suffer from oil sales being made through the poorly designed and badly run program that is rightly called 'Oil For Palaces.' We commend President Bush for successfully negotiating an end to sanctions on Iraq and an end to this ridiculous program," the joint statement said.
"The Energy and Commerce Committee, through its Energy and Air Quality subcommittee, helped expose the flaws of the oil-for-food program and make the case for it to end. The program was not transparent. The public was not given results of any external audits. In many cases, funds went to questionable items or just disappeared, depriving the Iraqi people of the food and medicines they were supposed to get," the statement said.
"International oil markets will work better as a result of the program's termination. The Iraqi energy infrastructure will recover more quickly. Proceeds will not be hidden behind a cloak. And most importantly, the people of Iraq will reap the fruits of their precious resources, without the (UN) taking several cuts at the apple."
The two Republican leaders further indicated that they are dropping their request to the UN to detail how it managed the old aid program.
"We were researching this failed program and were prepared to demand a full accounting of its past. Instead, today we celebrate a victory for the Iraqi people and for free markets in energy," they said.
Congressional Democrats also praised the UN move.
"I applaud today's action by the UN Security Council. It is past time to lift sanctions on free Iraq, and it is an important step forward to use international agencies to help rebuild that country. Coupled with concerted and sustained action to increase security, today's vote can help generate momentum for change in Iraq," Senate Minority Leader Tom Daschle (D-SD) said.
"We must build on this important step by getting greater international support in the necessary security, humanitarian, rebuilding, and administrative missions in Iraq. As many of us have said for months, the best way to achieve our objectives without having America bear the entire burden is to internationalize the efforts to secure and rebuild Iraq. Doing so will decrease the risk to our troops, reduce the resources demanded of America's taxpayers, and increase the legitimacy of the effort."
Contract bidding spotlighted
Meanwhile, in a related Congressional action, the Senate on May 22 passed a nonbinding resolution calling on the Bush administration to make its bidding procedures more open. Democratic lawmakers have called on the General Accounting Office to review the sole-source awards given by the Army Corps of Engineers and the US Agency for International Development before the war began.
The corps has come under fire for giving a sole-source contract to KBR for emergency war repairs and related environmental clean-ups. The scope of that work may be $600 million over a 2-year span and could go possibly higher if the Pentagon asks the firm to expands it scope of work.
A new round of bids to perform more-extensive oil service work was expected to take place by the end of May but has since been delayed by the Pentagon.
