In much of the world, people think the US wants to invade Iraq to control Iraqi oil. It doesn't matter to them that US citizens would never support military action undertaken on behalf of oil. It doesn't matter that the US doesn't need control of oil; it just needs oil to be available in trade. And it doesn't matter that any attempt by the US to control Iraqi oil would incur unacceptable costs and risks.
Yet the US can't afford to ignore this unflattering view. The concern should guide its behavior once Iraqi President Saddam Hussein falls from power.
If it leads an invasion of Iraq to oust Saddam, as seems likely, the US will have to keep troops in the country to enforce peace. Oil complicates the challenge.
Power vacuum
The Iraqi government, which now means Saddam, owns reserves estimated at 112 billion bbl. Saddam's exit, however it occurs, will create a power vacuum that human nature will rush to fill. Unless an external force intercedes, competition for power and the associated oil wealth will be bloody. And the likely winner will be someone as ruthless as Saddam. The only possible prevention is a lingering military presence, which if led by the US will look like validation of imperialist suspicion.
Careful postwar handling of Iraqi oil can limit the damage. It will be important to make clear that Iraq owns the oil, maintain production, and ensure that benefits flow to Iraqis. The beleaguered country has no other significant source of revenue.
To those ends, the US and its allies should preserve the Ministry of Oil and state-owned Iraq National Oil Co. Leaving Iraqi technicians in charge of Iraqi oil operations would be efficient. And keeping the institutions intact would show intent to leave decision-making about Iraqi oil with Iraqis. If the ministry and state oil company distastefully symbolize the old regime, Iraqis, not outsiders, should make the decision to change them.
Soon after the war, the international authority administering Iraq until a new government is in place should clearly apportion oil revenue among various national needs. The United Nations oil-for-aid program can be a model. To the extent revenues from oil exports outside that program—or skimmed from it—no longer flow to Saddam and his weapons programs, the Iraqi people should see immediate benefit.
Work should begin promptly on terms of participation for outsiders investing in Iraqi oil projects. This will be tricky. Suspicion will be great that whatever country leads this effort, especially if it's the US, favors its own companies. The only ways to respond are to strictly avoid favoritism and the appearance of it and to involve the oil ministry and state oil company as much as possible.
Iraq needs foreign funds for its oil and gas projects as desperately as it needs revenue from existing production. Equipment in the oil fields needs maintenance and repair. Poor production management has damaged reservoirs. And two thirds of the country's known oil fields haven't been developed. Iraq has no way of making the necessary investment on its own. It will be vitally important to ensure that companies from around the world have fair opportunity to compete for the work.
Companies contemplating investment in Iraq, of course, will be eager for a durable government to take shape. Over this issue, great questions loom.
The US government wants democracy for Iraq. While the principle is sound and honorable, implementing it will be difficult. During its short history as a nation, Iraq has known only monarchy and military rule. How many years might it need to become comfortable with democracy? Can it ever be comfortable with democracy?
Unappealing options
Yet if democracy doesn't follow Saddam, a despot worse than him eventually might. Or Iraq might fracture along ethnic lines, as has happened in the former Yugoslavia but with oil fields intensifying the inevitable boundary disputes. Neither option is appealing.
A hopeful progression would be administration by an international authority with early participation of Iraqis, followed by a transitional Iraqi government answerable to the UN, leading to development of a democratic constitution and the phase-in of self-rule. Judicious management of Iraqi oil will be crucial to success. So will timely departure of the US.
