by Peter Maass
Big Oil is getting the reward it deserves: after more than a century of power and indecency, it is shrinking.
Until the 1970s, Western companies controlled most of the world’s oil and gas. Today, thanks to nationalism and nationalization, Western firms control less than 15 percent of world reserves, and their grip erodes further every day. The bulk is now in the hands of state-controlled companies like Saudi Aramco, Gazprom, Petróleos de Venezuela, National Iranian Oil Company and China National Petroleum Corporation. Exxon, the largest oil company in America, does not even rank in the top ten globally in terms of the oil and gas reserves it controls. State-owned firms, known as “national oil companies,” now set the rules; once-mighty Western companies are being turned into contractors rather than owners. Unfortunately, this is not necessarily an improvement.
With noble exceptions in Norway, Saudi Arabia and Brazil, state-controlled energy companies, though not obliged to follow the fiduciary logic of Dodge v. Ford Motor Co., tend to do as much or more harm than their profit-seeking counterparts on the New York Stock Exchange. The dirtiest oil facilities I have seen were run by state-owned Petroecuador, a toxic example of how a poor government cuts corners on environmental and worker safety. Even Petróleos de Venezuela, run by Hugo Chávez’s leftist regime, has an unenviable environmental record, because much of its revenues go into the government’s social programs, some of which are useful, others of which are wastes of money. Angola’s state-controlled oil company, Sonangol, has been used as a piggy bank by corrupt officials.
The ethical practices of Exxon and Chevron might even look good when compared with those of Russia’s Gazprom or China’s CNPC, which have become major global players in just the last decade. Although it’s hard to imagine the energy business becoming more competitive, politicized or secretive, that’s happening as global power is defined by control of energy reserves. The U.S. government prohibits American firms from operating in Sudan, whose regime is responsible for genocide in Darfur, but China is delighted to send its companies there. Sudan’s oil is now extracted mainly by Chinese firms that are not restricted by laws like the Foreign Corrupt Practices Act. Although Western firms were hardly transparent about their operations, state-controlled companies tend to be far more opaque. If the profit motive led to unethical behavior by Western firms, imperatives of national glory (or national survival) can be worse incentives for state-controlled ones.
It is comforting to think of history as progress, of life getting better, maybe not every year but over the course of time. If that were so, the future would be dominated by oil and gas companies that shun bribery, that genuinely care about the communities and countries they operate in, that refuse to deal with dictators and thieves. Yet the threat is that the future will belong to state-controlled corporations whose behavior may make us nostalgic for the trifling days of cheating on royalties in West Texas.
In Baghdad, the Ministry of Oil turned into the Ministry of Truth, or so it seemed in the spring of 2003. While most government buildings, including the National Museum, were looted of everything from artwork to computers and light bulbs, after which the remains were often set alight, the Oil Ministry, as I said earlier, was untouched, aside from a bit of vandalism in the hours between the melting away of Saddam Hussein’s regime and the arrival of American soldiers. This was not a matter of luck.
When I visited the cream-colored ministry one morning, a concrete plaza at its entrance was sealed off by coils of barbed wire and scores of marines equipped not only with .50-caliber machine guns but a particular view of current events. There were no roving bands of looters near the ministry, nothing more threatening than echoes of chaos rather than chaos itself, so Corporal Shane Evans had enough time to show off a tattoo that read, “Anyone who sees through death becomes ageless, deathless and immortal.” He also displayed a crafted view of the relationship between oil and invasion, when I asked about it. “There’s a misconception,” he said. “We’re just coming here to give Iraqis freedom.”
His duties seemed at war with his words. He was not defending one of the hospitals or schools being stripped bare, nor stopping the carjackings and shootings, nor chasing down museum thieves or the fugitive Saddam. These were not his orders. The nerve center of Iraq’s oil industry never ceased to receive protection from Americans like Corporal Evans, and this made Iraqis suspicious.
“The Americans will not steal the oil but they will control it; they will pull the strings,” said a ministry official for whom the future remained uncertain enough that he offered only his first name, Mohammed. He was standing with dozens of colleagues who were seeing one another for the first time since shock and awe had morphed into looting and burning. They hugged like the beached but relieved survivors of a sunken vessel of state, and one of them touched my arm to remind me, “It is all about oil.”
When oil comes from the ground, as I’ve said, it is filled with impurities that include dirt, water, salt, arsenic and mercury. This is crude in its raw, literal form. The refining process transforms this black swill into a clear fluid without which our civilization would collapse. Quite often a corollary process of political refining occurs to sanitize the truth of what’s done to keep oil in the hands of friendly governments. Just as cars cannot run on unrefined crude, political systems choke at the unfiltered mention of war for oil. It is difficult for states-men to talk honestly about what they do or don’t do for oil, and so the facts are shaded by euphemisms and lies. As a result, everything and nothing are attributed to our desire for this filthy, vital substance.
The Ministry of Oil in Baghdad on the day American troops took control of Iraq’s capital
President George W. Bush insisted before the invasion that it had nothing to do with oil, that it was about weapons of mass destruction and, to a lesser extent, democracy. He was not being honest. I followed American troops into Iraq to learn what I could from actions rather than speeches. It was easy, standing in front of the Oil Ministry, to accept what seemed so obvious, but after several months in Iraq I realized how confounding oil can be.
The marines who surrounded the Oil Ministry waved me inside. Ground-floor windows were sandbagged, bathrooms emitted a stench of clogged dysfunction, floors were littered with papers and fallen tiles, and a flashlight was needed for navigating internal corridors that were darkened in the post-Saddam era of now-you-see-it-now-you-don’t electricity. The ministry was part fortress, part sarcophagus. Computers that hadn’t been stolen had been switched off to avoid ruination by power surge, and the phones didn’t work because the city’s telecom network was an early casualty of American bombs. A few days after the old regime had fallen, a new one had not yet taken its place, even in this center-of-all-things locale. While I waited for the future to arrive, I had time to look the past squarely in the eye—literally.
On the ground floor, just past the glass doors that let you into the ministry, there was a small lobby that spilled into two wide corridors, one on the right, the other on the left. If you walked straight ahead, toward the back of the lobby, you would approach a metal bust of Saddam. It had rested for years in the middle of the lobby on a chest-high pedestal, from which the dictator glared by bronze proxy at all who entered the ministry. The bust, like Saddam, was no longer on a pedestal. It had been taken down and dragged across the marble floor. Its nose nearly touched the wall, so that Saddam, now at knee level, was staring at no one. A soiled carpet had been thrown over his head, bestowing a final insult. Like Iraq’s petroleum, the statue had no voice, though it had a story to tell.
Saddam’s rise to power began in a 1968 coup led by General Ahmed Hassan al-Bakr, who relied on the help of his young and ambitious cousin from Tikrit. In 1979, after shoring up behind-the-scenes powers, Saddam forced al-Bakr to resign and became president of Iraq as well as secretary-general of the Ba’ath Party. In a famous meeting a week later, Saddam read the names of more than sixty-eight party members who, he said, were spies or traitors. One by one they were led out of
the room; twenty-one of them were executed. The event was filmed, so that all of Iraq would know to fear their new leader, who was a natural-born thug from the first day. The Internal Security Services, the Mukhabarat, would execute thousands of Iraqis in the years to come and terrorize the nation as well as its neighbors.
In 1980, Saddam ordered his army to invade Iran, and during the eight-year conflict that ensued, one of the bloodiest since World War II, his troops repeatedly used chemical weapons. This did not bother the great powers. The Reagan administration was officially neutral in the war but tilted toward Iraq’s side in the tradition of the enemy-of-my-enemy-is-my-friend philosophy; Ayatollah Ruholla Khomeini’s Iran was regarded as a greater threat. The United States even supplied Iraq, via intermediaries, with intelligence about Iranian troop locations. Washington did not supply arms but made sure Saddam had what he needed, including cluster bombs the CIA arranged to be sold to Iraq by a Chilean firm. President Reagan even dispatched a special envoy to tell Saddam that America wanted to improve relations. Donald Rumsfeld, a pharmaceutical executive at the time, shook Saddam’s hand and chatted with him for ninety minutes. When Saddam later fired mustard gas and nerve agents at his own people, the Kurds in Halabja, the Reagan administration barely protested and tried to shift blame away from Saddam. “There were indications that Iran may also have used chemical artillery shells in this fighting,” a State Department spokesman said a week after the attack.
Saddam was a menace of the first order, but he picked his fights with America’s principal enemy and sold his oil to Washington, so there was no need to punish him and there were several reasons to reward him. That is why nearly everyone was surprised when Iraqi tanks moved into Kuwait on August 2, 1990; in the classic political configuration, Saddam was our guy and was not supposed to obliterate one of our other guys. The U.S. ambassador to Iraq, who had met with Saddam a few days before the invasion, was on vacation, and President George H. W. Bush got the news while receiving heat treatment for his sore shoulders after golfing in Kennebunkport. But everyone realized immediately what was at stake.
Kuwait possesses 100 billion barrels of oil, nearly 10 percent of the world’s reserves. With Kuwait’s reserves added to Iraq’s, Saddam would control one-quarter of the world’s oil and become the most powerful Arab leader of modern times. More tempting, his army could move from Kuwait into eastern Saudi Arabia and seize its fields. Even the implicit threat of invasion might compel the Saudi royal family to heed Iraqi wishes. Saddam did not need actual control of Saudi fields to become the master of nearly one-half of the world’s oil. His invasion of Kuwait proved the substance’s allure: at the risk of ruin, even countries with an abundance of oil desire more.
In his memoir, the first President Bush recalled that his initial reaction was for “our vulnerable friend Saudi Arabia.” British prime minister Margaret Thatcher had similar fears. “They won’t stop here,” she advised Bush. “They see a chance to take a major share of oil. It’s got to be stopped.” Dick Cheney, the secretary of defense at the time, had oil on his mind, too. “[Saddam] has clearly done what he has to do to dominate OPEC, the Gulf and the Arab world,” he told Bush. “He is forty kilometers from Saudi Arabia and its oil production is only a couple of hundred kilometers away. If he doesn’t take it physically, with his new wealth he will still have an impact and will be able to acquire new weapons.”
On both sides of the front line, this was a war for oil.
There are lots of ways to fill up your car, a multiplicity of service stations to choose from. Similarly, there are lots of ways the American government gets the oil its people require. War is a last resort, when other tactics have failed; in a way, war is gasoline by other means.
The American government does not buy or transport the foreign oil we consume. That work is left to oil companies. The government has a set of far tougher tasks. First, it tries to ensure that oil reserves are controlled by friendly governments and friendly companies that will extract and transport steady supplies of oil to us. The government prefers that American companies be the ones—this creates profits and jobs for America itself and lowers the pulse rate of national security officials who worry about cutoffs by foreign companies, including European ones, that might be persuaded, for economic or political reasons, to ship their product to other countries or not ship it at all. As a result, the government lobbies intensively for extraction contracts to be awarded to American firms (as the British government does for BP, and the French for Total).
Second, the government tries to ensure that the infrastructure exists for getting the stuff from there to here. In particular, the construction of multibillion-dollar transnational pipelines that determine whether, for example, landlocked Kazakhstan has the ability to send its billions of barrels of oil to America or to China. And of course the U.S. Navy patrols the Persian Gulf and other sea-lanes to ensure the safe passage of supertankers that deliver much of the oil we consume. That’s why the U.S. military has been called an oil-protection service.
The only oil the U.S. government buys and holds, apart from the prodigious amounts used by the armed forces every day (if the Department of Defense were a country, its daily consumption of oil would be roughly equal to Sweden’s), is for the Strategic Petroleum Reserve. To soften the blow of interruptions due to war, boycotts or natural disasters, the government decided to set up the SPR in 1975. The SPR, which consists of four giant salt caverns turned into reservoirs near the Gulf of Mexico, contains more than 700 million barrels of oil—enough for about thirty-four days of U.S. consumption.
Ideally, the government’s tasks are accomplished behind the scenes and without warfare. But if persuasion and intimidation fail, the brass knuckles must be used. This has been true for some time, and it was confirmed explicitly by President Jimmy Carter in 1980, in response to concerns about Soviet inroads in the Persian Gulf. “Let our position be absolutely clear,” he said in his State of the Union address. “An attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force.” The Gulf War of 1990-91 would not be the first time America employed violence to secure its oxygen of oil from the Middle East.
Mohammed Mossadegh, the prime minister of Iran a half century ago, was doomed.
His rise and fall began in 1951, when Iran’s parliament nationalized the Anglo-Iranian Oil Company, a precursor to British Petroleum that was owned by the British government and paid more in taxes to London than to Tehran, even though the entirety of its oil was extracted from Iranian fields. In the annals of developed nations stealing from undeveloped nations, Britain’s conduct in Iran during the first half of the twentieth century might be second only to the infamous rape of the Congo by King Leopold’s Belgium. As the writer Stephen Kinzer noted, “The wealth that flowed from beneath Iran’s soil played a decisive role in maintaining Britain at the pinnacle of world power while most Iranians lived in poverty.” Even British foreign secretary Ernest Bevin admitted that without Iranian oil there would be “no hope of our being able to achieve the standard of living at which we are aiming in Great Britain.”
Mossadegh, who became prime minister after the nationalization vote, quickly enforced it. Iranian troops and officials seized Anglo-American facilities, including the massive refinery in Abadan. The British government, astounded at the temerity of its former vassal, imposed a blockade and persuaded major oil firms to boycott Iranian crude. Iran might now control its oil, but it could not sell any. London was motivated by a fading empire’ unfortunate mixture of vanity and vulnerability. As Hugh Thomas wrote in the droll fashion of twentieth-century British historians, “Ever since Churchill converted the Navy to the use of oil in 1911, British politicians have seemed to have had a feeling about oil supplies comparable to the fear of castration.”
Mossadegh did not give in. In 1952, he severed relations with Bri
tain and closed its embassy in Iran, forcing the withdrawal of Her Majesty’s diplomats and spies. The British felt that only America could get rid of Mossadegh, but President Harry Truman, believing the problem wasn’t Iranian impertinence but British pride, would not back a coup. The calculus shifted when Dwight Eisenhower became president and his administration fell under the spell of British claims that Mossadegh would let Iran slip into the Soviet orbit. Iran’s Cold War importance was hard to exaggerate. In addition to having a lengthy border with the Soviet Union and possessing the world’s second-largest reserves of oil, it sat along the Strait of Hormuz, through which much of the Middle East’s oil was shipped. Although it was greatly implausible that Mossadegh, a die-hard nationalist, would turn pro-Soviet or join hands with Iran’s pro-Communist Tudeh Party, Eisenhower, at the dawn of the Cold War, did not want to risk “losing” Iran. He green-lighted a coup that would be overseen by a CIA agent who was a grandson of Teddy Roosevelt’s.
Mossadegh was, in many ways, an easy target. He had an erratic personality, laughing uncontrollably at times, crying and fainting, often communicating in whispers with the foreign envoys he received in his bedroom, where he conducted affairs of state while dressed in pajamas. It was not hard for Kermit Roosevelt Jr., with hundreds of thousands of dollars at his disposal, to bribe military officers, politicians and editors. Most of Tehran’s newspapers, which accused Mossadegh of being a Communist and a Jew, came under CIA influence, and most of the anti-Mossadegh protests that preceded the coup were stirred up by these bribed politicians and journalists.
The coup began on the night of August 15, 1953. John le Carré could not have invented a better plot. Roosevelt waited at a CIA safe-house, sipping vodka with colleagues and singing show tunes, including “Luck Be a Lady Tonight.” Shah Reza Pahlavi, the timid monarch who was a figurehead but whose status would be vastly enhanced by the coup, waited at a seaside villa. Partial to race cars and nightclubs, the reluctant shah had had to be flattered, bribed and cajoled by Roosevelt before agreeing to join the coup. The plan was for a group of pro-shah soldiers to arrest Mossadegh, and for the shah to take charge of the country.