Armed Madhouse

by Greg Palast

  A year before the invasion, Cohen laid out his scheme for an OPEC-free world in a report for Kim Holmes, the Heritage chief, who took it inside the Bush Administration when Holmes became an Assistant Secretary of State. It included the neo-cons’ call for a “massive… privatization of State-owned enterprises, especially the restructuring and privatization of the oil sector.” There it is: “especially the oil”—Cohen’s words which would be sucked in, virtually unedited, in the Economy Plan which Defense would attempt to shove down General Garner’s throat.

  Details of Cohen’s talks with Bush insiders remain confidential, but Ari considers his theories too brilliant to keep under wraps. He explained the no-brainer to me in baby steps.

  1. OPEC’s power comes from imposing production limits (“quotas”) on its member states, limiting supply and raising prices.

  2. Iraq’s quota is well below what it can produce. Iraq kept a limit on output through its 100% government-owned oil monopoly (“SOMO,” the State Oil Marketing Organization).

  3. If you sell off Iraq’s oil fields in itty-bitty pieces, dozens of operators will maximize their production from each field, jumping up Iraq’s output to 6 million barrels a day, way above the OPEC quota.

  4. The additional two million barrels of oil a day from Iraq will flood the market, OPEC will dissolve into mass cheating and break apart. With every nation pumping to the max, the price of oil will fall over a cliff, and…

  5. …Saudi Arabia, financially and politically, will fall to its knees.

  And there were additional bonuses to privatizing oil fields in Iraq, Cohen told me. Taking away oil revenues from the Shia clerics who will certainly take over Iraq will deny them “the cash cow for the project of forced Islamization.” There was more. With OPEC smashed, the former Soviet states, including Russia, completely dependent on oil income, will be at America’s mercy.

  But, on the way to Iraq’s new government implementing Cohen’s no-brainer, something went wrong. Bremer had marched through Iraq’s economy like Sherman marching through Georgia, issuing his 100 orders while Iraqis bowed and cowed. Yet, one part of the neo-con Economy Plan seemed forgotten: Page 73, the no-brainer, the privatization, the total sell-off of Iraq’s oil fields.

  So what happened, Ari? Who undermined your plan? I spoke to Cohen in his small, dim office at Heritage. For a man with a plan to shake the economic planet, his station seemed a bit diminished. In a dark Russian accent, Cohen hissed the names of the saboteurs.

  Arab economists hired by the State Department who are supporting the witches’ brew of the Saudi royal family and the Soviet ostblock.

  (“Ostblock” is the Cold War name for the Soviet sphere of influence. Neither the Ostblock nor the Soviet Union still exist—except, in Cohen’s mind, in the machinations of Russia’s President Vladimir Putin.)

  Ari, exactly which Arab economists were in on the conspiracy?

  You know who they are, he answered.

  And I did. One Saudi in the shadows had to be Nawaf Obaid. However, to label Obaid simply “an economist” would be, as our President says, to “misunderestimate” him.

  If your prejudices lead you to expect Saudi princelings to sound like they just fell off a camel, Obaid would take you by surprise. The urbane, savvy graduate of Harvard and MIT jets between homes in Riyadh and London, has a seat at Bob Ebel’s elite think tank in Washington and his post with the Saudi National Security Assessment Project. He’s less a power in his own right than the semaphore holder who signals what the landlords of our oil supply are thinking. “He works for Saudi intelligence,” said a very close associate of his who gave me Obaid’s cell phone number in Saudi Arabia.

  Obaid agreed that Ari Cohen and the neo-cons’ bust-OPEC scheme was a no-brainer. It came, he said, from the other end of their thinking system.

  From the Saudi perspective we’re, like, they’re just crazy talking out of their asses again.

  The Saudi was unimpressed with Ari’s five steps to an end to Saudi Arabia’s authority.

  The neo-cons [say] “you smash OPEC you smash Saudi Arabia’s power,” and yeah, they’re going to use Iraq to do it. Yeah, we were baffled, you know, “Ramp up production! Break all the quota!”… This is crazy.

  Interestingly, Obaid knew in detail about the initial 2001 State Department plan for a three-day “disguised coup” and the meetings convened in Walnut Creek. He could recite details of the ins and outs of State’s fight against the neo-cons’ OPEC-smashing scheme and, as well, the inside story of Chalabi’s surprise “invasion” at Nasiriyah.

  I asked the Saudi, What’s so crazy about smashing OPEC? Why was he so confident the neo-cons were talking through their blowholes?

  Obaid explained the oil facts of life. In the short term, Iraq’s fields were trashed even before saboteurs torched them. The CIA and the Pentagon knew it no matter what Wolfowitz said to bobble-headed Congressmen. In the long run, however, many years from now, Iraq, with 114 billion barrels of proven reserves, might be able to crank up above its OPEC quota.

  But that won’t happen. The globe is littered with the economic skeletons of nations that flagrantly busted their OPEC quotas. There’s the skeleton of Venezuela. In 1973, Venezuela broke the first Arab oil boycott. But in 1997, when Venezuela again ramped up production, punishment was swift. Saudi Arabia, which can live without big oil revenues for up to a year, opened its spigots and drowned the market. The price of oil dropped to $8 a barrel and Venezuela went bankrupt. Its government fell. The current President of that nation, Hugo Chávez, is now a very good member of OPEC, indeed its most fanatic adherent to the quota system.

  The Soviet Union was also given a price-cut whupping. In the 1980s, the Saudis dropped the price of oil to punish Russia for its wild expansion of oil-pumping capacity and for the Soviets’ invading Muslim Afghanistan. This choking loss of oil income had a lot more to do with the Soviet Union’s collapse than Ronald Reagan’s crooked smile.

  Saudi Arabia has kept its economic knife sharp for Iraq if, under neo-con influence, Iraq were to exceed its OPEC quota. The warstoked jump in oil prices put $120 billion in Saudi Arabia’s treasury in just one year (2004), triple its normal take. This gives the kingdom the cash to hold its breath economically should it need to drop the price of oil for a year to bring Iraq, or any quota-busting nation, to its knees.

  Besides, said Obaid, why should President Bush allow troublemakers at the Pentagon to use Iraq to attack the House of Saud when the Saudi royals were so supportive of Mr. Bush’s goals?

  The Saudis just want to be helpful. In December 2002, for example, Obaid wrote publicly to assure the Bush administration that, while Saudi Arabia could not officially support a U.S. invasion of another Muslim country (Iraq), the Saudis would pump enough oil to hold down prices once U.S. tanks rolled.

  But that was just cheese for the trap. Admittedly, in early 2003, just before the invasion, the Saudis, for the first time in memory, pumped flat out, providing nearly 12 million barrels a day. But once American forces were irreversibly committed and Iraq’s pipelines in flames, the price of oil rose and the Saudis kicked it higher by withholding more than a million barrels a day from the market. The one-year 121% post-invasion jump in the price of crude, from under $30 a barrel to over $60, sucked that $120 billion windfall to the Saudis from SUV drivers and factory owners in the West. The OECD, which measures these things, estimates the U.S. economy lost 1.2% of GDP, costing the USA just over one million jobs. The harm to Africa and Asia was many times higher.

  You’d think our President, as consumer-in-chief of the infidel world, would say something to Crown Prince (now King) Abdullah about the worldwide economic devastation caused by high oil prices when the Saudi monarch visited Mr. Bush at the Crawford ranch in April 2005. The newspapers show they held hands, they scooted around in our President’s golf cart (Mr. Bush seems to have an aversion to horses) and the Prince left with a smile—then kicked up the price of crude another two dollars.

  Maybe Mr. Bu
sh has his own reasons to be grateful to the prince. I wasn’t in the golf cart but I know this: The only other time in the past decade the Saudis have produced flat out to bring down the price of oil was just before the 2004 U.S. presidential election.

  OPEC, Big Oil and the Trillion-Dollar War Bonus

  But neither our President’s affection for Abdullah, Saudi threats, nor the “witches’ brew” of Saudi economists and Russia-lovers at the State Department could have stopped Cohen’s “privatization” plan, i.e., the sale of Iraq’s oil fields, if the U.S. petroleum industry wanted those spoils of war. However, the last thing the oil companies wanted was ownership of Iraq’s reserves, especially if it would lead, as the neo-cons hoped, to the destruction of OPEC.

  It has been a very good war for Big Oil—courtesy of OPEC price hikes. The five oil giants saw profits rise from $34 billion in 2002 to $81 billion in 2004, year two of Iraq’s “transition to democracy.” But this tsunami of black ink was nothing compared to the wave of $113 billion in profits to come in 2005: $13.6 billion for Conoco, $14.1 billion for Chevron and the Mother of All Earnings, Exxon’s $36.1 billion.

  For these record-busting earnings, the industry could thank General Tommy Franks and the troops in Baghdad, the insurgents and their oil-supply-cutting explosives. But, most of all, they had to thank OPEC and the Saudis for keeping the lid on supply even as the planet screamed in pain for crude.

  And the industry was not going to let neo-con think tank fantasists kill the OPEC goose that laid the golden earnings. When OPEC raises the price of crude, Big Oil makes out big time. The oil majors are not simply passive resellers of OPEC production. In OPEC nations, they have “profit sharing agreements” (PSAs) that give the companies a direct slice of the higher price charged. More important, the industry has its own reserves whose value is attached, like a suckerfish, to OPEC’s price targets. Here’s a statistic you won’t see on Army recruitment posters: The rise in the price of oil after the first three years of the war boosted the value of the reserves of ExxonMobil Oil alone by just over $666 billion. The devil is in the details.

  Smaller Chevron Oil, where Condoleezza Rice had served as a director, gained a quarter trillion dollars in value. Chevron named a tanker after Rice, but given the firm’s change in fortunes once she became National Security Advisor and then Secretary of State, they should rename the whole fleet in her honor. Altogether, I calculate that the top five oil operators saw their reserves rise in value by over $2.363 trillion. There is, however, a threat on the horizon: If the neo-cons get their way in Iraq and use it to smash OPEC, the treasure ships will sink fast.

  The Houston Insurgency

  On May 1, 2003, our President landed on the deck of the aircraft carrier Lincoln and announced “mission accomplished.” But that very week, the Insurgency was about to launch its counterattack. For the powers that be, this was the real insurgency, not the sore-headed Sunnis with their homemade Humvee busters, troublesome yet manageable, but the angry oilmen of Texas rising up against the occupation of the White House by the East Coast neo-con clique.

  As the Heritage Foundation crowd and the Wolfowitz gang were to learn, the Oil Establishment can be toyed with, but never disarmed. In the first week of May, a formidable weapon was loaded aboard a jet in Houston and, after a stop in Washington, transferred to the hold of a C-17 cargo airship for the long haul to Baghdad: Philip Carroll, former CEO of Shell Oil USA, who was deployed immediately. Wheeled off the airship by his military escort, Carroll met new occupation chief Bremer, who was, at that moment, in accordance with the neo-con blueprint, in a frenzy selling off every Iraqi government asset not bolted down (and many that were).

  Carroll is an oil executive cast for an Oliver Stone film. Six foot plus and ramrod straight, with a full head of white hair and a soft Texas drawl that is gracious, ruthless, commanding and final. If there were any questions about his authority, it should be noted that besides heading Shell Oil, he’d also been CEO of Fluor Corporation, the biggest contractor in Iraq after Bechtel and Halliburton.

  The double-CEO laid down the law to Bremer. Carroll told me: Neo-con plan be damned, “I was very clear that there was to be no privatization of Iraqi oil resources or facilities while I was involved. End of statement.” Furthermore, Carroll would permit no “De-Ba’athification” purge in “his” ministry—oil.

  The diminutive Bremer did not have the political testosterone to reply that, on paper, it was Bremer’s ministry and as chieftain of the Provisional Authority, Bremer, not Carroll, was in charge. But Bremer understood that in the Great Game, a well-placed pawn, even one who used to play Kissinger’s game, does not overrule a knight of the oil industry. Carroll’s orders stood.

  His veto of Bremer’s “De-Ba’athification” diktat at the oil ministry was an industry demand. In particular, Carroll energized a political-protection force field around Thamir Ghadbhan, oil minister, and Mohammad al-Jiburi, head of the State Oil Marketing Organization, SOMO. They both had unparalleled experience drilling and selling Iraq’s oil, albeit for Saddam, and in those posts had made good friends with all the right Texans. Furthermore, they’d been anointed to take charge of Iraq’s oil operations by the State Department’s “Walnut Creek” invasion-planning crew as far back as 2001. True, they had been Ba’athists, but they knew how to move crude. Shell Oil and the rest of the industry were comfortable with these technicians who could serve democrats or dictators alike with cold efficiency. Bremer and the neo-cons would not be allowed to mess with the order determined by the industry.

  I heard about Carroll’s ultimatums to Bremer from Carroll himself. I flew to meet the super-executive in March 2005 at his private office, a simple suite that topped a dull building looking out on the mindless Houston skyline. (I suppose God’s punishment for men with too much oil is that they have to live in Texas.) Carroll chatted propped against a tastefully modest desk decorated with one unshowy photo of the Shell chief with Prime Minister Margaret Thatcher.

  What about privatization, Ari Cohen’s “no-brainer”—couldn’t that ultimately bring down OPEC? He said:

  I would agree with that statement, that privatization is a no-brainer. It would only be thought about by someone with no brain.

  What about the neo-con think-tankers with their plan to use Iraq to bust OPEC?

  I guess if you’re in a think tank you have to think sometimes, not always clearly.

  You could get to like this guy.

  But I thought it worth noting to him that oil companies are, after all, capitalist enterprises. Don’t they have an affinity for private ownership over government?

  “Many neo-conservatives have certain ideological beliefs about markets and democracy and this, that and the other. International oil companies,” he explained coolly, “without exception, don’t have a theology, they don’t have a doctrine.”

  There’s a certain attractiveness to amoral avarice: In war zones, the greedy are the peacemakers.

  After six months in Baghdad, Carroll, his main task done—defending the ministry’s Ba’athists from neo-cons, repairing the pipes and cutting the heart out of “privatization”—returned to America. Staying would have meant the loss of the lucrative corporate board seats he’d taken leave of. First things first.

  Bremer, it seems, couldn’t wait to wave good-bye. The CPA chieftain may have saluted Carroll to his face, but as soon as Carroll turned his back, Bremer stuck in the knife. As Carroll’s exit jet pulled up its wheels, Bremer allowed Ahmad Chalabi to demote Carroll’s man Ghadbhan and to fire al-Jiburi. Al-Jiburi went into exile in Westchester, New York.

  (Bremer must have grinned. But his turn would come. Within months, Bremer himself would be fired and his favored Iraqi, Chalabi, ordered arrested. But let’s not get ahead of the story.)

  Carroll had turned over his oil ministry babysitting job to a Houston buddy, Rob McKee, who’d been with ConocoPhillips Petroleum. Conoco gave him an unforgettable good-bye kiss: McKee picked up a $26 million paycheck in his depar
ting year. That wasn’t, it seems, quite enough for McKee. Unlike Carroll, he wasn’t going to jeopardize his corporate ties over silly conflict-of-interest concerns: All through his tenure in Baghdad as shadow minister of Iraq’s oil, McKee maintained his post as Chairman of Enventure, a subsidiary of Halliburton Corporation.

  Ahab of Arabia

  But while the cats were away, Chalabi could play. As Carroll departed and before McKee landed, Chalabi turned the oil ministry over to Ibrahim Bahr al-Ulum, a small-time petroleum engineer trained in New Mexico. A puzzled Wall Street Journal headlined, “Iraq Council Taps Obscure Engineer As Oil Minister.” Obscure to the Journal maybe, but not to those on the inside of the game. A “nothing” in the industry, Falah Aljibury told me, but Bahr al-Ulum’s daddy was a big “something”: Muhammed Bahr al-Ulum, one of the rotating presidents of the Governing Council and a Shia cleric with powers not to be messed with. Even more important, the younger Bahr al-Ulum, you may recall, was the quiet one sitting at Fadhil Chalabi’s knee in the pre-war London meeting with Bush emissary Bob Ebel, the ex-CIA man.