Iraq's Odious Debts

U.S. firms seek future oil revenues for reconstruction

Warren Vieth
Los Angeles Times, USA
July 12, 2003

The Bush Administration is considering a provocative proposal to pledge a portion of Iraq’s future oil and gas revenue to secure reconstruction loans before a new Iraqi government is in place to approve the idea.

The plan, endorsed by the Export-Import Bank of the United States and some of America’s biggest companies, would help avert a looming cash crunch that has the potential to stall the postwar rebuilding effort. One US official rated its prospects as 50-50. But the proposal is drawing fire from some government officials, politicians, analysts and prominent Iraqis, who say it would mortgage Iraq’s most treasured resource, prevent future leaders from deciding how to spend their oil money and put US taxpayers at risk.

“Iraqis believe their oil should not be touched by foreigners, that it should remain in the hands of the Iraqi government, and that no one has a right to do anything before an elected government is in place,” said Fadhil Chalabi, executive director of the Centre for Global Energy Studies in London and a former Iraqi Oil Ministry official.

“As an economist, I believe in what they are proposing. You couldn’t come up with a better formula,” Mr Chalabi said. “But Iraqi politics and the way they look at these things are not encouraging. Better to wait until a government is formed.”

That may be too late, in the view of the plan’s supporters, the Export-Import Bank and an industry coalition that includes Halliburton Co, Bechtel Group Inc and other major companies. They are warning that unless steps are taken soon to secure new funds, the reconstruction well could run dry.

“Commonsense says, get Iraq running. How do you get the country running? By using its own oil revenue 100 per cent for the benefit of the Iraqi people,” said Export-Import Bank chairman Philip Merrill. “If you want to wait three or four years, be my guest. But that means the country is going to be running on the dole of the United States.”

Many experts agree Iraq is headed for a possible cash flow crisis as reconstruction costs escalate, initial funds are depleted and the resumption of oil exports is delayed by looting and sabotage.

But they part company over whether the US-led occupation has the legal or moral authority to pledge future oil revenue as collateral before the issue can be debated by elected Iraqis.

“Unless a reconstituted Iraqi government or the UN Security Council authorises the plan, it appears to violate international law,” said Democrat congressman Henry Waxman. “We do not have the right, without additional authority, to impose financial obligations on the future government of Iraq.” [PDFver here]

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