Saturday, March 27, 2004

You're kidding - the invasion of Iraq and oil are related? 

No I'm not kidding. Obviously they are related.

I doubt there are many well informed people in the world who really believe that the U.S. went into Iraq to "make the world safe for democracy". But admittedly the idea that invading Iraq is related to oil is a contentious point and pro-war propaganda machine goes to great lengths to deny any linkage.

The reality is that there is more than one reason why the U.S. invaded Iraq. A few of the reasons are: to support Israel by overthrowing one of its stronger adversaries, to send a message to all potential foes that the U.S. will act forcefully against anyone who opposes it, and yes even for the president of the U.S. to pursue a personal vendetta.

But it is also clear that controlling Iraq's enormous oil reserves was probably the single most important reason for the invasion. Iraq had always been one of the worlds largest producers of light sweet crude (the kind that can most easily be refined into gasoline). However, after the 1991 Gulf War an embargo was placed on Iraq so that only a very limited amount of oil could be exported from Iraq. This served to significantly reduce the amount of oil on the world market.

For a while the impact of this was not noticeable. The reason is that the Soviet Union collapsed in the early 90s and its oil production flooded world markets thereby keeping prices low. However, as worldwide demand increased, and as a revitelized OPEC cut back on production, prices increased significantly. The United States, as the worlds largest importer of oil, was particularly hard hit by rising oil prices.

So how does this all lead back to Iraq? Simple, if OPEC could increase prices so significantly by decreasing oil production then the U.S could decrease prices if it could find a way to increase oil production. So where was there a very large pool of underutilized oil? You guessed it, Iraq. If the U.S could control Iraq's oil it could flood the world market with millions of barrels of oil every day and get prices to drop from $30/barrel to $10/barrel or less. And that would save the U.S. economy hundreds of billions of dollars every year. So now that the U.S. could no longer count on Venezuela to be a quota buster (thanks to Hugo Chavez - see the previous post) it would take over OPEC country and forcibly turn it into a quota buster.

One common retort to this by the pro-war propagandists is: "If all we really wanted was for there to be more oil floating around in the world then we would simply have lifted the sanctions against Saddam Hussein's regime and let him sell more oil - but we didn't do that"

The response to that is the world is never so simple. Yes, the U.S. wanted more oil on world markets but at the same time it did not want more oil revenue going to the existing Iraqi government. The regime of Saddam Hussein was very hostile to the U.S. and Israel and although the U.S. wanted oil it certainly didn't want to do anything that would strengthen or benefit the Hussein regime. Further, Hussein believed in OPEC and certainly would have always followed a policy of restraining production to keep prices high. Hence, letting Hussein export more oil would not have fully resolved the United States problem and it would have created new problems of its own.

Inexorably, the U.S. would driven to try to gain control of Iraq's oil for itself. And so far nearly 600 Americans have given their lives and U.S. taxpayers have shelled out tens of billions of dollars for that oil lust.


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