True Oil Wars

Reference ID Created Released Classification Origin
07BAGHDAD2453 2007-07-25 05:57 2011-08-30 01:44 CONFIDENTIAL Embassy Baghdad

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DE RUEHGB #2453/01 2060557
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O 250557Z JUL 07
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TO RUCNRAQ/IRAQ COLLECTIVE IMMEDIATE
INFO RUEHC/SECSTATE WASHDC IMMEDIATE 2415

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 002453

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SIPDIS

E.O. 12958: DECL: 07/23/2017
TAGS: ECON ENRG IZ PREL
SUBJECT: CODEL BURGESS MEETING WITH MINISTER OF OIL HUSAYN
AL-SHAHRISTANI

Classified By: ECONOMIC MINISTER CHARLES P. RIES FOR REASONS 1.5 (b) an
d (d)

¶1. (C). SUMMARY. On July 22, Congressmen Michael Burgess
(R-TX), Steve King (R-IA), Jim Jordan (R-OH), John Carter
(R-TX), Kevin Brady (R-TX), and David Davis (R-TN) met with
Minister of Oil Husayn al-Shahristani to discuss issues
related to the state of Iraq,s petroleum infrastructure,
plans to improve the infrastructure and revitalize petroleum
exploration and production. Minister Shahristani
acknowledged the important role of the petroleum industry in
Iraq,s economy and the need for passage of the
hydrocarbon-related laws as signaling Iraq,s emergence as a
dominant petroleum producing country. END SUMMARY.

¶2. (C). Minister Shahristani introduced the topic of the
status of Iraq,s petroleum industry by observing that the
industry provides 93% of the country,s budget; that of the
500 known potential petroleum-bearing geophysical structures,
only about 80 have been evaluated and expected to make up the
majority of the 115 billion barrel reserve; and that of these
80 structures, 10 are “super giants,” 10 are “giants,” and 10
are “very large” structures. He also stated that most of
these 80 structures are currently in production although
perhaps not being optimally produced at this time.
Shahristani also predicted that of the 500 known structures,
300 will eventually produce commercial quantities of oil.

¶3. (C). Shahristani observed that even though private oil
companies have not been willing to work in Iraq as a result
of the security situation, the state-owned oil companies have
been able to drill some new wells. He also noted that while
the level of oil production in the country has not risen as
he desired, the rising price oil has allowed Iraq to more or
less maintain a level income from exports.

¶4. (C). Shahristani noted successes in having new meters
installed in the southern export facilities, but also noted
that if problems occur, it is likely the fault of the
American company that required an extra year to complete the
project. He predicted no interruption in oil exports from
the southern facilities, unless problems arise between Iran
and the United States. He encouraged the United States and
Iran to continue their dialogue to solve issues that impact
Iraq.

¶5. (C). A member of the Congressional delegation, having
toured the Bayji oil refinery yesterday asked what
infrastructure improvements were needed to increase the
refinery,s production potential. Shahristani stated that
while foreign companies were not willing to work in Iraq due
to the current security situation, he has asked that they
supply needed equipment, for example for the hydrocracker.
He also stated that he is attempting to replace trained
workers, originally from the south of the country, who have
fled the sectarian violence of the area.

¶6. (C). When asked about the Ministry of Oil,s budget,
Shahristani stated that he had a budget of $2.2 billion. He
complained that the Ministry of Finance had delayed the
allocation of funds for the first quarter of the year and
those funds were not available until the end of March. In
any event, he noted that by the second quarter, he had been
able to spend 25% of his budget and expects to spend 85% of
his budget by the end of the year.

¶7. (C). Shahristani explained that the Council of Ministers
had approved and sent to the Council of Representatives a law
that would encourage investment in Iraq,s oil refineries; he
expected a third reading of this law to occur soon. He
expressed support for the Framework Hydrocarbon Law stating
that “all the right elements were present in the law” and
promised that he would be in the Council of Representatives
(CoR) to explain the law. He also stated that while he could
not predict what the lawmakers would do, he anticipated its
eventual passage. He noted that he had already prepared a
list of those fields to be drilled and produced first.

¶8. (C). A member of the delegation asked about Chinese
exploration and production contracts. Shahristani answered
by explaining that there was one contract in existence with
the Chinese, which was legitimate and was signed by the
previous regime to develop a small field just south of
Baghdad (Adhab) and would produce no more than 100,000
barrels per day of heavy crude. He explained that under the
current draft of the framework Hydrocarbon law, such
contracts must be reviewed and meet the conditions of the new
law. He also stated that this contract would have to be
amended and that the production from this field was not for
export, but rather to supply crude oil to a refinery planned
to be constructed in the area by the Chinese.

BAGHDAD 00002453 002 OF 002

¶9. (C). A member of the delegation asked if the Iraqi
people understood that they could become rich from the
development of their petroleum resources, if only they would
cooperate with each other. Shahristani responded that the
people will not understand the details of the various
hydrocarbon-related laws, but will follow the impressions
created by others and the media. He proceeded to explain
that several local media stations are supported by members of
Saddam,s regime, living mostly in Jordan now, and by the
Saudis and Emirates. He characterized as more damaging, the
influence of Al-Jazeera. He stated that, in his opinion,
Saudi Arabia feels threatened by the prospect of a
significant Iraqi contribution to the international oil
market; Iraq was not a threat to the Saudis as long as
exports remained no greater than 2 to 3 million barrels.

¶10. (C). When asked about exports in the north, Shahristani
noted that the exports brought in about $400,000 per day and
that the Bayji refinery has limited production capacity.
(Note: In the absence of more explanation that was not
provided to the delegation, this statement appears at odds
with the fact that the export pipeline to Turkey operates
only intermittently. Also, the Bayji refinery capacity is
limited primarily by unreliable electricity supply and
limited heavy fuel oil storage capability. End Note.)
Shahristani also noted that northern exports were at the
mercy of the security situation. He stated that the
Strategic Infrastructure Brigades (SIBs) were established by
a “leader of the insurgency” and that he informed the
multi-national forces of this fact. He also stated that
contrary to the opinion of the multi-national force
commanders, the SIBs cannot be retrained to an effective
status. Shahristani stated his expectation that a new effort
to contract with local tribal leaders for security of the
pipelines will be more effective and lead to a resumption of
northern exports in one to two months.

¶11. (C). Addressing Congressional benchmarks, Shahristani
said that he expected the Framework Hydrocarbon and Revenue
Management Laws to proceed in tandem to the CoR and will be
debated together. He assessed that the refinery investment
law, already in the CoR, will be passed soon. He stated that
the Kurdish Regional Government (KRG) has reservations about
the Revenue Management Law, but that KRG representatives will
be in Baghdad in a week, and that he expected the law will go
to the CoR within the next 2 to 3 weeks. He also stated
that, while no one has objection to the Revenue Management
Law in principle, Sunni factions were attacking it for
political reasons. Shahristani stated that there was also
strong Sunni opposition to the Framework Hydrocarbon Law, but
that he agreed with Ambassador Crocker that some Sunni
support for the law was needed.

¶12. (C). Shahristani was asked what he was doing to secure
the petroleum infrastructure in the event coalition forces
left Iraq. He responded that a withdrawal would not impact
the southern pipelines and other facilities since Coalition
Forces are not now protecting those facilities. As for the
northern facilities, he stated that the Bayji refinery could
be shut down, but that would have consequences equally
adverse for the insurgency.

¶13. (C). Shahristani reiterated that he was working hard to
meet the benchmarks, that half of the benchmarks were met and
that the other half could be met if government,s efforts
were supported by the Sunnis, Saudi Arabia, and other Gulf
states. He requested that the USG pressure these other
entities to stop supporting the groups opposing Iraq,s
efforts to meet the remaining benchmarks.

¶14. (C). Minister Shahristani concluded the meeting with an
expression of determination that Iraq will export to the
world oil market “its fair share of resources.” He stated
that he wanted the American public to know that this conflict
was not about oil, but about Islamic fundamentalism. He also
stated that Al-Qaeda was a long-term problem for the world.

¶15. (C). CODEL Burgess did not have an opportunity to clear
this cable.

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Reference ID Created Released Classification Origin
07BAGHDAD3071 2007-09-12 06:02 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Baghdad

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FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC PRIORITY 3336
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS SECTION 01 OF 03 BAGHDAD 003071

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EPET EINV ENRG IZ
SUBJECT: HUNT OIL SIGNS AGREEMENT WITH KRG UNDER KRG OIL LAW

SENSITIVE BUT UNCLASSIFIED. NOT FOR INTERNET DISRIBUTION. PROTECT
SOURCES.

This is a Kurdistan Regional Reconstruction Team (RRT) cable.

SUMMARY
——-

¶1. (SBU) The Kurdistan Regional Government (KRG) recently signed a
production sharing contract (PSC) with Hunt Oil Company that covers
oil exploration and production in “the Dohuk area.” Comments by
Hunt officials indicate that the block is actually in the Ninewa
Governorate’s northern administrative districts. The PSC marks the
first oil deal signed by the KRG, following enactment of the
Kurdistan Region’s hydrocarbons law on August 6, 2007. Considerable
legal ambiguity surrounds the PSC with Hunt Oil, as the districts in
northern Ninewa to be explored by the company are classified as
“disputed territories” under the Iraqi constitution. A senior Hunt
Oil manager told RRT Erbil’s Team Leader that northern Ninewa
province has significant potential for oil production, and that this
factor trumps the legal ambiguities and risks associated with the
company’s PSC with the KRG. The oil potential of northern Iraq
continues to attract significant investor interest. Several other
international energy companies are expected to announce oil deals
with the KRG during coming weeks. Despite the KRG’s aggressive
pursuit of foreign direct investment to develop the Kurdistan
Region’s hydrocarbons production potential, KRG Prime Minister
Nechirvan reiterated the KRG’s commitment to the federal hydrocarbon
revenue sharing agreement that allocates Iraq’s oil wealth to all
Iraqis on a per capita basis. Meanwhile, senior central government
officials expressed their dismay that the KRG enacted a regional
hydrocarbons law, and that the KRG continues to pursue oil
investment from foreign companies in advance of enactment of
comprehensive national hydrocarbons legislation. [NOTE: The ability
of regional governments to sign contracts has been among the key
issues of contention during negotiation of the national hydrocarbon
law. The KRG has reluctantly agreed, at times. to refrain from
finalizing agreements in advance of a national law, but have
maintained that they would not wait indefinitely for national
legislation to be approved by the Council of Representatives. END
NOTE.]

KRG Contract with Hunt in Disputed Territory
——————————————–

¶2. (SBU) On September 8, 2007, the KRG, Hunt Oil Company, and
Impulse Energy Corporation (IEC) jointly announced they had signed a
PSC covering petroleum exploration activities “in the Dohuk area of
the Kurdistan Region.” Hunt Oil’s General Manager for Europe,
Africa and the Middle East, David McDonald, told RRT Erbil’s Team
Leader on September 5 that the envisioned “Dohuk area” of operations
under the PSC consists of the administrative districts of northern
Ninewa province. McDonald did not disclose the exact areas in
northern Ninewa to be initially targeted for exploration by Hunt Oil
but he mentioned Shekkan and Akra as areas they had visited. While
the land to be explored by Hunt Oil has been behind the Green Line
of KRG control for many years and is occupied by a majority Kurdish
population who considers itself part of Dohuk Governorate, the area
falls within the legal boundaries of Ninewa province. Northern
Ninewa is “disputed territory,” according to the Iraqi federal
constitution, and the legal boundaries of the area are eventually to
be decided by a public referendum pursuant to Article 140 of the
federal constitution.

¶3. (SBU) During discussions with RRT Erbil’s Team Leader, McDonald
seemed less than fully informed about the potential ramifications of
Article 140 on Hunt Oil’s negotiations with the KRG. He did not
express concern about the potential controversy surrounding
signature of a PSC with the KRG that covers areas of operation
currently outside the KRG’s legal control. He said, “This is a
significant opportunity that outweighs the legal ambiguity.” Hunt
Oil CEO Ray Hunt also discounted the fact that the northern Ninewa
districts targeted under the PSC are not yet within the KRG’s
legally defined borders. He expressed satisfaction on September 8
that his company was “actively participating in the establishment of
the petroleum industry in the Kurdistan Region of Iraq.”

¶4. (U) Enactment of the KRG’s new oil law may have spurred
completion of the PSC with Hunt Oil. The PSC was announced shortly
after publication of the English translation of the new oil and gas
law on the KRG’s website. Before the law was enacted, only one PSC
had been signed for the Dohuk area – with DNO of Norway. That PSC
covered operations only within the legal boundaries of Dohuk
Governorate. Enactment of the KRG oil law and the subsequent
announcement of the deal with Hunt Oil may accelerate the signing of
PSCs with other international oil companies. Several are
reportedly on the verge of signing PSCs with the KRG during coming
weeks. Article 19 of the KRG law states that “the Federal
Government must not practice any new Petroleum Operations in the
disputed territories without the approval of [the KRG] until such
time as the referendum required by Article 140 of the Federal
Constitution is conducted.” Article 20, however, allows the KRG to

BAGHDAD 00003071 002 OF 003

sign PSCs with foreign oil companies in disputed territories, based
on articles 112, 115 and 121(3) of the Federal Constitution.

Potential Bonanza Trumps Legal Ambiguity
—————————————-

¶5. (SBU) While McDonald said Hunt Oil must conduct further
assessments about the speed and scope of their operational
activities in northern Ninewa, with decisions regarding the focus of
initial seismic tests to begin “by the end of October,” he was
optimistic about the oil potential of the region. McDonald said
portions of the topography in all three districts of northern Ninewa
bode well for oil exploration. He said, “It’s like shooting fish in
a barrel.” A Hunt Oil company spokesman in Dallas said the company
will begin geological survey and seismic work by the end of 2007,
with plans to be in a position to drill an exploration well in
¶2008.

KRG Boldly Enacts Regional Hydrocarbons Law…
———————————————

¶6. (U) The KRG deal with Hunt Oil marks the first PSC signed with a
foreign oil company following KRG enactment of the Oil and Gas Law
of the Kurdistan Region on August 6, 2007. Speaking of the KRG’s
rationale in passing a controversial regional hydrocarbons law while
a draft national oil and gas law remains intensely debated, KRG
Prime Minister Nechirvan Barzani told reporters on August 7,
“Successive governments in Iraq have deliberately left our oil in
the ground as an effort to keep our people [ethnic Kurds] poor and
to deny our aspirations for a better way of life. Today, with the
passage of this new Kurdistan Law in a federal Iraq, we know that
those days are gone.”
¶7. (U) While espousing the benefits of foreign direct investment in
the Kurdistan Region’s oil producing areas, Nechirvan acknowledged
federal constitution provisions that require any oil revenues
generated under the KRG’s hydrocarbons law to be shared equally with
all Iraqis. He confirmed the KRG intends to limit itself to its
constitutionally mandated share of national oil revenues, regardless
of whether the oil is sourced inside or outside the Kurdistan
Region. He said, “We will receive 17 percent of all revenues from
all oil production in all of Iraq.”
¶8. (U) KRG Minister of Natural Resources Ashti Hawrami echoed those
comments. Hawrami said on September 9, “We believe that the [KRG’s]
production-sharing agreements are the best way to move swiftly
forward and help not just the Kurds but all Iraqis.” He envisions
that the Kurdistan Region will produce one million barrels of oil
per day within five years. To achieve this goal, the KRG intends to
sign PSCs with other large international oil companies. On
September 9, Hawrami told Dow Jones, “I think we’ll be having an
announcement with a blue-chip company soon.”

While Criticizing Central Government Paralysis
——————————————— –

¶9. (SBU) Following passage of the KRG hydrocarbons law, KRG
officials recommitted themselves to the February 2007 national
hydrocarbons framework agreement. Nechirvan told RRT Erbil’s Team
Leader on August 28 that he hoped the new KRG law “would spur
movment in Baghdad” to enact a national hydrocarbons law. During
that meeting, however, Nechirvan expressed disappointment with
political developments in Baghdad and pessimism about “whether the
Sunnis and the Shi’a want to live together.” He said the KRG does
not want Iraq’s central government to “hold up development of
regional resources for another ten years.”

Arab Leaders Critical of KRG Oil Law
————————————
¶10. (U) Senior central government officials in Baghdad condemned the
oil deals signed by the KRG in advance of enactment of national
hydrocarbons legislation. Abdul Hadi al Hasani, Deputy Chairman of
the national parliament’s Energy Committee, said recently that such
contracts may be overturned by the federal government, though he
conceded that such a move could discourage potential foreign
investments in Iraq’s oil sector. Sami al Askari, a parliamentarian
and senior advisor to Prime Minister al Maliki, told reporters on
September 7 that a federal oil and gas council to be formed under
the national hydrocarbons law could decide whether to rescind the
KRG’s handful of oil contracts with foreign investors. In a
concession to the reality that foreign direct investment in Iraq’s
oil infrastructure remains both valuable and scarce, the
parliamentarians said the private firms that signed deals with the
KRG should not be blocked from winning future oil contracts in
Iraq.

COMMENT
¶11. (SBU) USG policy has discouraged companies from signing oil
deals with the KRG until Iraq enacts its national hydrocarbon
framework law, as such regional contracts could act as an impediment
to negotiations toward a comprehensive national settlement that
equitably distributes Iraq’s oil wealth. Such contracts also remain
subject to significant legal ambiguity. This has not deterred Hunt
Oil and the other handful of companies that have signed PSCs with

BAGHDAD 00003071 003 OF 003

the KRG. Their concerns about the nebulous political environment
and possible eventual dissolution of their PSCs have been overridden
by the prospect of huge profits – from getting first access to the
choicest oil exploration fields in northern Iraq, and from
establishing productive relationships with key KRG and central
government officials. The potential pitfalls are especially acute
in cases (e.g. Hunt Oil and its junior partner IEC) where investors
will commence operations in disputed territories. It remains
doubtful that the KRG was legally entitled to enter into a binding
contract with Hunt Oil that covers oil exploration and eventual
hydrocarbons production in an area (i.e. northern Ninewa province)
that the KRG does not legally control. Legal considerations aside,
the KRG’s actions complicates enactment of a national hydrocarbons
law.
BUTENIS

 

WWIII Starts Sept. 25th Says Former State Dept. Veteran

 

Posted by Dominique de Kevelioc de Bailleul on Sep 18, 2012

 

Speaking with Infowars’ Alex Jones, former Assistant Deputy Secretary of State Dr. Steve Pieczenik says Israel plans to attack Iran before the U.S. elections of Nov. 6., and, that an attack on Iran will assuredly kickoff WWIII, according to him.

Moreover, Pieczenik, a man whose career inspired the character Jack Ryan of the Tom Clancy book series, says the ‘October Surprise’ will not take place in October. Instead, the big surprise will come earlier, in late September.

Dr. Pieczenik says the specific date of the strike on Iran is Sept. 25^th or 26^th, Yom Kippur—the Jewish holiday, which commences in the year 2012 at sundown on the 25^th, and ends at nightfall, the following day.

 

“It [an Israeli attack on Iran] could be earlier than October, because we have Yom Kippur. And I predicted on your radio show, and I predicted to our national security people, privately, that Benjamin Bibi Netanyahu would start something on Rosh Hashanah,” says Pieczenick.

“This [prediction] was over a year ago, and I said it on your radio show. He was as predictable as a clock, and the Israelis will be very predictable, on Yom Kippur,” he adds.

Pieczenik says it’s clear to him that Israeli prime minister Bibi Netanyahu has already planned to attack Iran and has been desperately trying to enlist the U.S. to back him up. But, with or without U.S. direct help, Pieczenik is certain that Israel will attack Iran.

Moreover, he says Netanyahu is an extremest, who will “lie” for his personal and selfish cause, a conclusion also drawn by many Israelis who protest his regime.

“Everything Bibi is saying to the Americans and the American Jews is an absolute, unmitigated lie,” Pieczenik, a Jew, himself, says forcefully,

“What we have here is a collusion between Saudi Arabia, neocon Jews of America and Israel, against a president, who, whether I like or dislike, and may have lied about Osama Bin Laden,” he adds, “he [President Obama] is the son . . . a son of a CIA operative, the grandson of a CIA operative, who understands very well what the issues of intelligence are.”

With help from his neocon friends, Netanyahu threatens the entire world with the suicidal notion that Iran must be attacked, and the Israeli prime minister must be stopped, even if it means assassination, according to Pieczenik

“In a couple of weeks, they [Israel, Saudi and neocons] will try to initiate another war, unless their ex-Mossad operatives and their ex-Shin Bet will take out Netanyahu, and do to Netanyahu what happened to Rabin,” exclaims Pieczenik. “They know what I’m talking about. Otherwise he will bring down Israel, the world, and there will be a third world war.”

He also says, “What we are, is [sic] at the brink of war, that is being precipitated by two major countries. That is, Israel, particularly Bibi Netanyahu, who knows his country is failing economically, socially, politically.” And the other country is “Saudi Arabia.”

Pieczenik says the Israelis, Saudis and neocons were behind the 9-11 attacks, an accusation also made some years ago by many researchers of the incident. Once considered a crazy idea forwarded by some ‘conspiracy theorists’, who seek to see a conspiracy in every major world event, the conspiracy theorists have been mostly vilified, though no reinvestigation of the 9-11 incident has been seriously proposed by any member of Congress.

Today, the ‘conspiracy theory’, or ‘inside job’ theory, appears to be much, much closer to ‘fact’ than the account of that day was published through the official Congressional report of 9-11, giving rise to a strong possibility of a Mossad, Saudi and neocon conspiracy to carryout a false-flag attack on the United States and blame the crime on Osama bin Laden, Iraq and Afghanistan.

Given evidence of Mossad’s checkered past and involvement with the attack of the USS Liberty on Jun. 8, 1967, killing 34 American soldiers, Pieczenik comments won’t be received as a big surprise to many Americans.

I want Netanyahu to “begin telling the truth, that the involvement of Israel was, in 9-11” says Pieczenik. “Over 134 Mossad operatives were picked up on 9-11. The FBI picked them up [and] debriefed them. They were clearly involved with the Pakistani ISI and Saudi Arabian intelligence” on 9-11.

MORE HERE

 

Secret documents reveal further Swedish arms cooperation

The shell company set up to carry out Sweden’s secret plans to build a weapons factory in Saudi Arabia was financed with cash borrowed from the country’s military intelligence agency, according to a new report.

The company, Swedish Security Technology and Innovation (SSTI), was reportedly set up by the Swedish Defence Research Agency (Totalförsvarets forskningsinstitut – FOI) in order to oversee the construction of a factory for the maintenance and upgrade of anti-tank missile systems.

In order to keep the company secret, FOI needed cash in order to set it up, according to Svergies Radio (SR), which first reported on the secret plans for the Saudi weapons plant earlier this month.

However, FOI was unable to procure the necessary cash on its own, but instead had to rely on help from the Swedish Military Intelligence and Security Service (Militära underrättelse- och säkerhetstjänsten – MUST).

MUST provided the cash to FOI in the form of a loan, according to SR.
Sweden was in talks with Saudi Arabia about providing a state of the art public security system, according to information in a secret letter sent from the Swedish minister for trade and revealed by daily Expressen.

 

The letter, which was sent from Swedish minister for trade Ewa Björling to Prince Mohammed Nayef, dated September 17th 2009, was revealed and published on Tuesday by the newspaper.

The Saudi dictator, according to the paper, wanted to buy “several million kronor” worth of cameras, digital equipment, and an underground control centre system to watch over his own people.

In the letter, Björling notes the advanced technology of Swedish security systems, and how the two countries can continue to work on their “strategic partnership” in the future.

Swedish government ministers have been keen to pass the buck when confronted by Expressen regarding the claims, with all signs seemingly pointed towards the Ministry for Foreign Affairs and The Swedish Fortifications Agency (Fortifikationsverket).

However, spokespeople for both groups have not confirmed or denied the possible collaborations with Saudi Arabia.

According to the letter, published in full today, Björling wrote:

“The responsible Swedish government agencies are prepared to provide an initial study regarding civil public security utilizing the full knowledge gained from Sweden’s experience along with its advanced and proven technologies”.

Sources close to Expressen have indicated that this co-operation was to involve intense civilian monitoring by the regime, allowing them to be able to “deploy heavily armed domestic troops” if deemed necessary from security monitoring.

An initial workshop has already taken place in June of 2009 relating to the security collaboration, according to Björling’s letter.

The plans were met with heavy criticism from the opposition, including Left Party spokesperson on foreign policy, Hans Linde.

“I think it is unacceptable to be engaged in this type of cooperation with a country like Saudi Arabia. This would be actively providing one of the worst dictatorships with tools to monitor and thereby repress its own people,” he told the paper.

Swedish Armed Forces (Försvarsmakten) spokesperson Erik Lagersten confirmed for the radio station that money was transferred to FOI, but claims that MUST didn’t know that the funds were to be used to set up the shell company.

“That’s something for the preliminary investigation to reveal,” he told SR, referring to the preliminary criminal investigation launched by prosecutors last week in order to determine whether the secret Saudi weapons deal may have violated the law.

FOI’s own investigation has revealed information leading the agency to believe “there are suspicions that a crime may have been committed”, it said in a statement, prompting FOI head Jan-Olof Lind to report the incident to prosecutors.

As FOI is a state agency, it isn’t allowed to start any companies without the approval of the government – something which, according to SR, did not occur in the case of SSTI, which was started in 2009.

The company was launched as part of what is referred to in confidential documents reviewed by SR as Project Simoom, a project started by FOI in 2007 with the aim of helping build an advanced weapons plant in Saudi Arabia.

At the time of SR’s revelations, SSTI CEO Dick Sträng, who is also a high ranking official at FOI, refused to divulge how the company was funded.

“I refuse to answer that question,” he told SR.

“I can’t answer it without lying.”

SR has subsequently learned, however, that SSTI was financed by FOI and that the start-up capital came in the form of a cash loan from MUST.

On Tuesday, FOI head Lind is scheduled to appear before a parliamentary committee to answer questions about his agency’s connections to SSTI and its involvements in the Saudi arms plant construction project. Source

BAE army systems: The Corporate Crimes

BAE SYSTEMS has committed an impressive amount of corporate crimes. What follows is merely a selection of some of the more recent ones and is by no means a comprehensive account of the company’s wrong-doings. CAAT have a wealth of information on BAE, and further details of the company’s deplorable record can be obtained from them (see Further Information/Resources).

Indonesia

BAE SYSTEMS’ arms sales to Indonesia are notorious. It has a long history of exporting Hawk Jets to the country, which was ruled by the vicious Suharto regime (and is still governed by a corrupt and undemocratic system, in which the military retains a large portion of power). Arms exports began as early as 1978, but the biggest controversy began in November 1996, when the Conservative government granted an export licence for 16 Hawk-209 aircraft. The purpose of the Hawk aircraft is not ambiguous – BAE themselves describe it as a ‘single-seat, radar equipped, lightweight, multi-role combat aircraft, providing comprehensive air defence and ground attack capability’.[44] Given that in 1996 Indonesia was also trying to purchase US F-16 aircraft (which are air defence fighters), it is likely that the Hawks were intended mainly for ‘ground attack’.

It is clear that these ground attack fighters were being purchased for use in internal repression, especially in East Timor. Despite Conservative denials, East Timorese leaders have frequently asserted that Hawk jets have been used in repressive attacks since 1978,[45] and whilst in opposition Robin Cook believed the same thing. As he stated in 1994, ‘Hawk aircraft have been observed on bombing runs in East Timor in most years since 1984’.[46] Unfortunately, this belief did not carry over into his stint as Foreign Secretary for the Labour Government, which renewed the export licence despite vehement protests. Needless to say, this change of heart had absolutely nothing to do with Lord Hollick (then a member of the BAE SYSTEMS Board of Directors) being a DTI advisor at the time of the decision[47], or BAE SYSTEMS’ massive influence over the Labour Government (see section on Influence/Lobbying). Despite continuing concerns over the use of Hawk jets in East Timor, the only action taken by the UK Government was a brief ban from September 1999 to January 2000. It eventually took UN intervention to stop the occupation of East Timor, and needless to say, BAE have never apologised for accepting contracts from a corrupt and murderous dictatorship.

Saudi Arabia

Before the protests over its exports to Indonesia, BAE (then British Aerospace) had already become involved in one of the biggest trade scandals of the 1980s; the Al-Yamamah deals with Saudia Arabia. In the words of the Financial Times, the arms deal known as Al Yamamah II was ‘the biggest [UK] sale ever of anything to anyone.”[48] The deals were condemned by Amnesty International as a clear endorsement of a country ruled by a repressive regime who displayed a ‘persistent pattern of gross human rights abuses.’[49] BAe was the prime contractor for the entire deal, which included the sale of 48 Tornado bombers, 24 Tornado fighters, 30 Hawk trainer-fighters, and a large number of Rapier missiles. It also involved millions of pounds worth of corrupt commissions paid to Arabian businessmen, which the Conservative government of the time denied, and which eventually led to the downfall of Jonathan Aitken. Bringing in the service side of BAe, the company provided training and advice for the Saudi military. Indeed, this was pursued to such an extent that The Economist suggested that ‘the company not only supplies Saudi Arabia with fighter aircraft, but virtually runs its entire airforce.’[50] The scandal was further added to by a Channel 3 TV documentary. This showed two BAe representatives offering electro-shock batons for sale and claimed that the company had supplied 8,000 of them as part of the Al Yamamah contract. In spite of the compelling nature of the evidence, the Director of Public Prosecutions decided not to charge BAe on public interest grounds.[51]

Turkey

The UK sold £84 million worth of arms to Turkey in 1998, most of which came directly from the BAE SYSTEMS empire. The orders for that year, which was largely typical, included tank turrets, military components and torpedoes. More worrying was the deal struck between Turkey and Matra Marconi Space, worth $110 million, for military satellite terminals, and the deal between a Turkish company and Matra BAE Dynamics for the manufacture of BAE’s Rapier anti-aircraft missiles. 850 of those missiles are to be supplied to Turkey.[52] The problem with all this, of course, is that Turkey is, an oppressive regime with an appalling human rights record. It routinely uses its military equipment to oppress and kill Kurds and other ethnic minorities. It has been accused by the Council of Europe, among other bodies, of having a history of ‘repeated and serious human rights violations’. The same body reported in July 1999 that it could see ‘no significant progress in limiting torture, disappearances, and extra-judicial killings’ in Turkey.[53]

Deliberate inflation of military spending

Selling military equipment to dictatorial and oppressive regimes is not the only corporate crime that BAE SYSTEMS commits (although they do seem to like doing it). Just as serious is its complete lack of scruples when selling weaponry to poverty-stricken and corrupt countries. The old argument ‘if we didn’t do it, someone else would’ is soon deployed when the examples (amongst others) of South Africa, Greece, Tanzania, Zimbabwe and India are raised. According to CAAT, ‘Arms purchases do not merely waste scarce resources, but also aggravate international tensions, generating mutual suspicion and hostility. The essence of this traffic is the alliance between Western arms companies and local military interests, which repeatedly show that they can manipulate even democratic politicians into needless extravagances.’[54]

South Africa
At the time of writing, the government of South Africa has just decided to go ahead with the second phase of a deal with BAE worth £1.5 billion, involving the purchase of 24 Hawk aircraft as well as Gripen aircraft from SAAB (which BAE owns shares in). The deal has been roundly condemned by churches and NGOs across South Africa, as it will inevitably divert much needed resources from health, education and welfare policies. Raenette Taljaard, finance spokesman for the South African Democratic Alliance estimated that the money being spent on the Hawk jets could provide 4.5 million destitute South Africans with a basic living grant of R100 a month for a year, or offer housing subsidies for 337,500 homeless families.[55] Even if South Africa desperately needed new fighter aircraft, questions have been raised over the suitability of the ageing Hawk jets. Despite costing more than the aircraft which came first in the evaluation, BAE manufactured aircraft were chosen. This has lead to accusations of corruption and bribery.

Greece
Arms sales to Greece would seem to be unobjectionable on first examination. After all, the country is a NATO ally of the UK and a European democracy. It is also, however, the poorest country in the European Union. At the same time, it spends a higher proportion of its national income on ‘defence’ than any other European power, except Turkey (Greece’s defence budget was 4.9% of its total budget in 1999). In the year 2000 Greece purchased 60 Typhoon aircraft from BAE SYSTEMS at a cost of £5 billion.[56] It is also looking to purchase additional submarines and attack fighters. This is disgraceful considering that the country cannot afford decent healthcare or housing for its citizens. This, however, is not a consideration for BAE, which will sell to any customer which has the money.

Tanzania
Another case of BAE selling an expensive product to a country unable even to feed its own citizens came to light at the end of 2001, as the Labour Government approved the £28 million sale of a military air traffic control system to Tanzania. The country has an average per capita income of only £200, and the government of Tanzania has had to take out a hefty loan from Barclays to finance the deal. In an indication of the utter unsuitability of the deal, even the World Bank and the IMF refused to fund it, stating that they saw the system as a white elephant which would do nothing to benefit the country, and the Department for International Development rejected the deal on similar grounds before they were over-ruled by the Cabinet and Prime Minister. As Julian Forsyth, Oxfam’s head of policy, pointed out, the deal also makes a mockery of the Government’s supposed commitment to African debt relief. As he put it, ‘It is outrageous that Tanzania’s debt relief will go towards bolstering the profits of BAE and Barclays bank, rather than helping the poor people of Tanzania.’[57]

India

In 2001, BAE SYSTEMS found itself involved in the ‘Hinduja scandal’ that prompted the resignation of Peter Mandelson. A former advisoer to the Indian government claimed that the company had paid a large “commission” to the Indian tycoons to fix a £1bn arms deal with the Indian Air Force for 66 Hawk jets. The ensuing controversy resulted in the resignation of India’s defence minister, George Fernandes, who also stood accused of manipulating procurement of the Hawks. Despite this embarassing setback, BAE continued to aggressively pursue the £1bn deal. This was at a time when India’s dispute with Pakistan over Kasmir threatened to turn into a (potentially nuclear) war, which would futher destabalise the entire region. Furthermore, whilst Tony Blair was expressing hope that the UK “could a calming influence” in the region, Geoff Hoon, the defence secretary, was pressing the Indian Government to make a quick decision on the Hawks. The proposed deal has faced harsh criticism from within India itself, with the UK being accused of “fleecing India over Hawks.” [58]

According to The Guardian, the British government has recently admitted that British jets sold to India could be adapted to carry nuclear weapons or used to train pilots to fly nuclear-capable aircraft. The admission prompted angry reactions by MPs who said the sales flew in the face of the government’s commitment to sustainable development, its guidelines covering arms exports, and its pledge not to encourage nuclear proliferation.[59]

BAE SYSTEMS has already sold Jaguar combat aircraft to India in licensing deals which the Ministry of Defence (MoD) refuses to disclose.[60] Besides breach of contract, ‘client confidentiality’ is the explanation that’s always trotted out to justify the obscurity within which the British Government is allowed to sponsor and subsidise gun-running, a BBC correspondent investigating the world of arms exports explains.[61] With regard to the Jaguar jet deal with India, junior defence minister Lewis Moonie told Tory MP Baldry that information about the end use in the Jaguar licensing deal, and the number of Jaguars involved in the deal, was confidential. Baldry said the deals were not consistent with the government’s publicly stated concern about the impact of arms sales on sustainable development. “What the Indian government would spend on Hawk jets amounts to a decade of UK bilateral development aid,” he said.[62]

Zimbabwe

BAE SYSTEMS was happy to provide spare parts to keep Robert Mugabe’s ageing Hawk jets in operation in Zimbabwe, which were obviously being used to sustain Mugabe’s operations in the Democratic Republic of Congo. Significantly, the Foreign Office had wanted to stop the export of the spare parts but are said to have been over-ruled by the Prime Minister, with whom Sir Richard Evans (Chairman of BAE) has a very close relationship (see section on Influence/Lobbying). BAE only stopped supplying spare-parts to Mugabe in mid-2000, when Mugabe’s behaviour became too outrageous to ignore.

Qatar/Algeria

In 2000, the Sunday Times reported that BAE had made an application to export £5 million worth of military equipment to Qatar, which Qatar intended to gift in full to Algeria. The information was leaked to the Sunday Times by a Qatari officer, and the DTI confirmed that ‘it had received the purchase order and it was being considered.’ Algeria has an ongoing conflict with Islamic groups and an infamous human rights record.[63]

Pressure on the Government and MPs

As the world’s largest arms manufacturer, and owner of a large majority of the UK’s ship-building industry, BAE is able to exert a massive amount of pressure on the Ministry of Defence. It has a history of threatening the Government with relocation and withholding of investment if it does not get the contracts that it desires. For example, in 2001 the company put pressure on the MoD to assign all 12 of the new Type 45 Destroyers to BAE, despite the original plan being to split their manufacture between Vosper Thornycroft and BAE SYSTEMS. It threatened that if it didn’t get the contract in its entirety it would scrap its planned investment of £150 million at Scotstoun on the Clyde, and effectively pull out of shipbuilding altogether, crippling the British manufacturing sector.[64]

BAE also boast close links to Tony Blair and the Government (see section on Influence/Lobbying).

Moving into the educational sector

BAE SYSTEMS has developed its PR machine far in advance of the traditional careers fair stall and occasional brochure. It has formed partnerships with a number of universities in the UK. It also sends many of its young engineers back into secondary schools to extol the benefits of a career with BAE. In addition, the company have sponsored various events and ‘educational’ displays, such as the Mind Zone in the Millennium Dome, further linking its name with scientific and engineering excellence, and avoiding its real business of manufacturing weapons to kill people. Having capital far in excess of any other UK engineering firm (partly because of its size, and partly because of its massive reserves from the Al-Yamamah deal) it offers extremely rewarding packages to the best UK engineering students, ensuring that the arms industry continues to leech off the most promising talents in the sector Source

OpEd: Germany’s Shallow Remorse of Selling Big Guns

Report of major Leopard 2A7+ deal with Saudi Arabia splits German politicians

10:00 GMT, July 5, 2011 defpro.com | If you are a reader from any country outside of Germany, honestly, what was the last news you heard or read about regarding German defence policy? Whatever it was, I will willingly bet that it included at least one aspect that caused you to incredulously shake your head. Be it the German government’s decision to abstain from US Security Council Resolution 1973 on Libya (together with Russia and China), the never-ending reports about inadequate equipment for soldiers deployed to Afghanistan, the head-over-heels decision to end compulsory military service … the list is long and continues to grow day-by-day.

The latest national commotion, especially among politicians, was stirred by media reports about a possible export of 200 Krauss-Maffei Wegmann-built Leopard 2A7+ main battle tanks to the Kingdom of Saudi Arabia, after Germany has, reportedly, blocked the sale of weapon systems to the authoritarian desert kingdom for decades. According to the weekly news magazine “Der Spiegel”, the federal security council approved the sale last week. The report continued to explain that Saudi Arabia was negotiating to buy a version of the tank that was developed by the Spanish subsidiary of General Dynamics, yet, that the major portion of the order will land with Krauss-Maffei Wegmann and its partner Rheinmetall Defence. “Der Spiegel” also claims that 44 Leopard 2 tanks have already been sold to Saudi Arabia within the framework of the current agreement.

This report caused a familiar knee-jerk reaction by politicians from almost all political camps, but first and foremost by the socialist, green and left-wing opposition parties. Most critics of the possible multi-billion euro deal pointed to the volatile situation in North Africa and the Middle East and emphasised that Saudi Arabia recently deployed troops and heavy equipment to support its neighbour Bahrain in crushing demonstrations against the small Kingdom’s leadership. According to tagesschau.de, Jürgen Trittin of the Green party said that, as yet, German governments agreed not to sell weapons to countries in crises areas. He explained: “Saudi Arabia was recently involved in crushing the democratic movement in Bahrain. To deliver weapons to such a regime, and in such a manner, is unprecedented in recent years.”

Further, politicians who oppose the possible contract mentioned Saudi Arabia’s questionable human rights record, as well as the possible threat that such a large fleet of tanks could represent to Israel and the general balance of power in the region.

Interestingly, the ranks of those opposing or questioning the sale of tanks to Saudi Arabia have most recently been joined by members of the ruling parties, including Norbert Lammert, the President of the Bundestag and member of the conservative CDU, as well as Liberal-party member Elke Hoff of the Bundestag’s defence committee.

But what are the true motives of German politicians when suddenly crying out loud about such a contract? I will not question that some may have true pangs of conscience. But it is not the first time that German-built weapon systems are being sold to Saudi Arabia. In fact, the country is among the most important customers of German defence goods. According to tagesschau.de, the government approved defence contracts worth €168 million with the Saudi Kingdom in 2009; the same year also saw the export of 147 Leopard MBTs to Chile, Finland, Greece, Singapore, Turkey and Brazil. Furthermore, Saudi Arabia has been the first Eurofighter Typhoon export customer, having ordered 72 aircraft for an estimated €.6.5 billion (the first batch was also delivered in 2009).

But the protests among politicians were far more restrained when these contracts were publicly discussed. And Saudi Arabia’s human rights record is not only being questioned since the start of the spring uprisings in the Arab world.

There are a number of different factors that blend into the outraged statements that could be heard during past days.

First, there is a historical reluctance when it comes to selling ‘big guns’. The large 120mm smoothbore gun and massive impression made by its 60+ tons has often brought the Leopard main battle tanks to the centre of attention of politicians opposing German weapon exports in general, or to a particular country. Its heavy armour recalls difficult memories of those days when Germany was notorious for solid Krupp steel products. But this comprehensible remorse by many Germans can also be exploited to win over certain groups of voters; in particular, at times when the ‘popular parties’ are having difficulties in sustaining their popularity.

Secondly, the so-called “Arab spring movement” makes it a currently most opportune moment for politicians to jump onto the train of shining pro-democratic self-manifestations. But no German politician’s indignation could be heard as loud as today when, for instance, Eurofighter Typhoons were sold to Saudi Arabia or when the United States negotiated and signed multi-billion dollar arms deals last month. In mid-June, the US Defense Security Cooperation Agency (DSCA) announced possible foreign military sales (FMS) of a number of weapon systems, including 404 CBU-105D/B sensor-fuzed weapons or a variety of light armoured vehicles, for an estimated $263 million. In addition to a large number of different weapon systems, more than 370 US-built M1 Abrams main battle tanks have also been ploughing Saudi desert sands for years and provided the US defence industry with manufacturing, service and upgrade contracts worth several billion dollars.

If German politicians did not vividly criticise US defence exports to Saudi Arabia, it is also due to the fact that Germany has had its share of the cake in helping Saudi Arabia to build one of the region’s largest and most state-of-the-art armed forces – often legitimised by Western allies as a significant strategic counter-balance to Iran.

Thus, when a member of the opposition party directly accuses Chancellor Angela Merkel and Foreign Secretary Guido Westerwelle of having only paid a lip service to the democratic movement in the Arab world during the last few months, when so light-heartedly selling tanks to Saudi Arabia, it’s not all that strange when a bad feeling crops up in the gut.

The result of this hypocrisy for the German defence industry, providing work to some 80,000 people, is a very uncomfortable and damaging business environment (one that many foreign country’s industry representatives are observing with amused curiosity), as the same politicians who are eagerly shaking hands and excitedly watching during weapon system displays are far too willing to demonise this same industry, when the tide turns.

Oh, and by the way: According to the German business newspaper “Handelsblatt”, the German federal security council recently gave the green light for the export of German defence equipment worth an estimated €10 billion over the next 10 years to the autocratic military government of Algeria, including Fuchs armoured transport vehicles, trucks and off-road vehicles, as well as frigates. Has anybody heard a word about this from German politicians?
Source

Three Little Words: WikiLeaks, Libya, Oil

‘Libya has some of the biggest and most proven oil reserves — 43.6 billion barrels — outside Saudi Arabia, and some of the best drilling prospects.’

So reported the Washington Post on June 11, in a rare mainstream article which, as we will see, revealed how WikiLeaks exposed the real motives behind the war on Libya.

So what happens when you search UK newspaper archives for the words ‘WikiLeaks’, ‘Libya’ and ‘oil’? We decided to take a look.

From the time prior to the start of Libya’s civil war on February 17, and of Nato’s war on Libya on March 19, we found a couple of comments of this kind in the Sunday Times:

‘Gadaffi’s children plunder the country’s oil revenues, run a kleptocracy and operate a reign of terror that has created simmering hatred and resentment among the people, according to the cables released by WikiLeaks.’ (Michael Sheridan, ‘Libya froths at plundering by junior Gadaffis,’ February 6, 2011, Sunday Times)

The Telegraph described political wrangling over the alleged Lockerbie bomber, Abdelbaset al-Megrahi:

‘The documents, obtained by the WikiLeaks website and passed to this newspaper, provide the first comprehensive picture of the often desperate steps taken by Western governments to court the Libyan regime in the competition for valuable trade and oil contracts.’ (Christopher Hope and Robert Winnett, ‘Ministers gave Libya legal advice on how to free Lockerbie bomber,’ The Daily Telegraph, February 1, 2011)

From the time since Nato launched its war, we found this warning from Jackie Ashley in the Guardian:

‘…cast aside international law, and there is nothing but might is right, arms, oil and profits.

‘Well, you might say, but isn’t that where we are already? Not quite. Many of us may feel great cynicism about some of the west’s war-making and the strange coincidence of military intervention and oil and gas reserves. I do.’ (Ashley, ‘Few would weep for Gaddafi, but targeting him is wrong: In war, international law is all we have. If we cast it aside there’ll be nothing left but might is right, arms, oil and profits,’ The Guardian May 2, 2011)

This hinted in the right direction, but no facts were cited in support of the argument, certainly none from the WikiLeaks diplomatic cables.

The Guardian’s Alexander Chancellor managed to discover a leaked cable revealing that Libya ‘sometimes demands billion-dollar “signing bonuses” for contracts with western oil companies’. (Chancellor, ‘The bonanza of kickbacks and corrupt deals between Libya and the west have helped Gaddafi cling on to power,’ The Guardian, March 25, 2011)

Other cables offer more significant insights, but Chancellor made no mention of them.

George Monbiot’s March 15 Guardian article contained all three search terms – his sole mention of Libya in the past 12 months – but he was writing about Saudi Arabia: ‘We won’t trouble Saudi’s tyrants with calls to reform while we crave their oil.’ The article had nothing to say about the looming assault on Libya, just four days away. Monbiot has had nothing to say since.

Johann Hari wrote about the Libyan war in his sole article on the subject in the Independent on April 8, commenting:

‘Bill Richardson, the former US energy secretary who served as US ambassador to the UN, is probably right when he says: “There’s another interest, and that’s energy… Libya is among the 10 top oil producers in the world. You can almost say that the gas prices in the US going up have probably happened because of a stoppage of Libyan oil production… So this is not an insignificant country, and I think our involvement is justified”.’

This was a rare affirmation of the role of oil as a motive, albeit one that emphasised the specious claim that the US concern is simply to keep the oil flowing (Hari did mention, vaguely, that results were intended to be ‘in our favour’). And again, Hari appeared to be innocent of any relevant information released by WikiLeaks. A lack of awareness which perhaps explains why he had ‘wrestled with’ the alleged moral case for intervention before rejecting it.
Soured Relations – Gaddafi And Big Oil

Remarkably, then, we found nothing in any article in any national UK newspaper reporting the freely-available facts revealed by WikiLeaks on Western oil interests in Libya. And nothing linking these facts to the current war.

By contrast, in his June 11 article for the Washington Post, Steven Mufson focused intensely on WikiLeaks exposés in regard to Libyan oil. In November 2007, a leaked State Department cable reported ‘growing evidence of Libyan resource nationalism’. In his 2006 speech marking the founding of his regime, Gaddafi had said:

‘Oil companies are controlled by foreigners who have made millions from them. Now, Libyans must take their place to profit from this money.’

Gaddafi’s son made similar comments in 2007. As (honest) students of history will know, these are exactly the kind of words that make US generals sit up and listen. The stakes for the West were, and are, high: companies such as ConocoPhillips and Marathon have each invested about $700 million over the past six years.

Even more seriously, in late February 2008, a US State Department cable described how Gaddafi had ‘threatened to dramatically reduce Libya’s oil production and/or expel… U.S. oil and gas companies’. The Post explained how, in early 2008, US Senator Frank R. Lautenberg had enraged the Libyan leader by adding an amendment to a bill that made it easier for families of the victims of the Lockerbie bombing to ‘go after Libya’s commercial assets’.

The Libyan equivalent of the deputy foreign minister told US officials that the Lautenberg amendment was ‘destroying everything the two sides have built since 2003,’ according to a State Department cable. In 2008, Libyan oil minister Shokri Ghanem warned an Exxon Mobil executive that Libya might ‘significantly curtail’ its oil production to ‘penalize the US,’ according to another cable.

The Post concluded: ‘even before armed conflict drove the U.S. companies out of Libya this year, their relations with Gaddafi had soured. The Libyan leader demanded tough contract terms. He sought big bonus payments up front. Moreover, upset that he was not getting more U.S. government respect and recognition for his earlier concessions, he pressured the oil companies to influence U.S. policies’.

Similarly, compare the chasm in rational analysis separating the mainstream UK media and the dissident Real News Network, hosted by Paul Jay. Last month, Jay interviewed Kevin G. Hall, the national economics correspondent for McClatchy Newspapers. Jay concluded with a summary of their conversation discussing oil shenanigans in Libya:

‘So you’ve got the Italian oil companies already at odds with the US over Iran. The Italian oil company is going to, through its deals with Gazprom, allow the Russians to take a big stake in Libyan oil. And then you have the French. As we head towards the Libyan war, the French Total have a small piece of the Libyan oil game, but I suppose they would like a bigger piece of it. And then you wind up having a French-American push to overthrow Gaddafi and essentially shove Gazprom out. I mean, I guess we’re not saying one and one necessarily equals two, but it sure – it makes one think about it.’

Hall responded:

‘Yeah, it’s not necessarily causation, but there’s – you might suggest there’s correlation. And clearly this shows the degree to which oil is kind of the back story to so much that happens. As a matter of fact, we went through 251,000 [leaked] documents – or we have 250,000 documents that we’ve been pouring through. Of those, a full 10 percent of them, a full 10 percent of those documents, reference in some way, shape, or form oil. And I think that tells you how much part of, you know, the global security question, stability, prosperity – you know, take your choice, oil is fundamental.’ (Our emphasis)

Jay replied with a wry smile:

‘And we’ll do more of this. But those who had said it’s not all about oil, they ain’t reading WikiLeaks.’

Hall replied: ‘It is all about oil.’

In March, we drew attention to a cable released by WikiLeaks sent from the US embassy in Tripoli in November 2007. The cable communicated US concerns about the direction being taken by Libya’s leadership:

‘Libya needs to exploit its hydrocarbon resources to provide for its rapidly-growing, relatively young population. To do so, it requires extensive foreign investment and participation by credible IOCs [international oil companies]. Reformist elements in the Libyan government and the small but growing private sector recognize this reality. But those who dominate Libya’s political and economic leadership are pursuing increasingly nationalistic policies in the energy sector that could jeopardize efficient exploitation of Libya’s extensive oil and gas reserves. Effective U.S. engagement on this issue should take the form of demonstrating the clear downsides to the GOL [government of Libya] of pursuing this approach, particularly with respect to attracting participation by credible international oil companies in the oil/gas sector and foreign direct investment.’ (our emphasis)

The US government has certainly been ‘demonstrating the clear downsides’ since March 19.

US analyst Glenn Greenwald, asks:

‘Is there anyone – anywhere – who actually believes that these aren’t the driving considerations in why we’re waging this war in Libya? After almost three months of fighting and bombing – when we’re so far from the original justifications and commitments that they’re barely a distant memory – is there anyone who still believes that humanitarian concerns are what brought us and other Western powers to the war in Libya? Is there anything more obvious – as the world’s oil supplies rapidly diminish – than the fact that our prime objective is to remove Gaddafi and install a regime that is a far more reliable servant to Western oil interests, and that protecting civilians was the justifying pretext for this war, not the purpose?’

‘The Urge To Help’

It does seem extraordinary that anyone could doubt that this is the case. But the fact is that the WikiLeaks cables cited above, the Washington Post’s facts, and Greenwald’s conclusions, have been almost completely blanked by the UK media system. Notice that they have been readily accessible to us, a tiny website supported by public donations.

As though reporting from a different planet, the BBC reported last week:

‘Nato is enforcing a UN resolution to protect civilians in Libya.’

Is this Absolute Truth? Holy writ? In fact, no. But it does reflect the mainstream political consensus and so the BBC feels content to offer it – by way of a service to democracy – as the only view in town. And yet, we need only reflect on three obvious facts: while UN Resolution 1973 did authorise a no-fly zone to protect Libyan civilians, Nato is now openly seeking regime change and rejecting all peace overtures out of hand. The UN did not authorise regime change.

An Observer leader entitled, ‘The west can’t let Gaddafi destroy his people,’ told the same tale in March:

‘the only response that matters now is a common position which brooks no more argument… to pledge, with the honest passion we affect to feel that, whether repulsed in time or not, this particular tyranny will not be allowed to stand’. (Leading article, ‘Libya: The west can’t let Gaddafi destroy his people,’ The Observer, March 13, 2011)

Like a cut and paste from Orwell, the paper insisted:

‘This is a regional uprising of young people seeking freedom, remember? Do you recall all the power of the tweet, as lauded only a fortnight ago?

‘The millions who began this revolution won’t be much impressed by a democracy defined only by inertia. They won’t thank the west – or China, India, Russia, the African Union – for letting this Arab spring die in a field of flowery promises.’

The Guardian also focused on the ‘ethical’ motivation. In a February 24 leading article entitled, ‘Libya: The urge to help,’ the editors simultaneously mocked and reversed the truth:

‘It is hard to escape the conclusion that European leaders are advocating these moves in part because they want to be seen by their electorates at home to be doing something, and in part because they want to be seen by people in the Middle East as being on the right side in the Arab democratic revolution. They may hope that a dramatic line on Libya will go some way toward effacing the memory of the dithering and equivocation with which they greeted its earlier manifestations in Tunisia and Egypt, France being particularly guilty in this regard.’

Compared to the analysis discussed above this reads like a bed-time story for children. The deceptive words ‘dithering and equivocation’ refer to the West’s iron-willed resolve to protect tyrannical clients and to thwart democratic revolution in the region while appearing (the key word) to be ‘on the right side’.

The conclusion: ‘a no-fly zone should become an option. Lord Owen was therefore right to say that military preparations should be made and the necessary diplomatic approaches, above all to the Russians and the Chinese, set in train to secure UN authority for such action’.

The Guardian’s argument was shorn of the political, economic and historical facts that make a nonsense of the idea that Western military action ‘should become an option’. There may indeed have been a moral case for action by someone. But not by Western states with a bitter history of subjugating and killing people in Libya, and elsewhere in the region, for the sake of oil. But then it is a trademark of Guardian liberalism that Britain and its allies are forever Teflon-coated, forever untainted by the evident brutality of ‘our’ actions. This is the perennial, vital service the paper performs for the establishment.

We are asked to believe that the facts sampled in this alert are somehow unknown to the hard-headed corporate executives who write of ‘The urge to help’ and the ‘common position which brooks no more argument’. And yet, the Guardian was one of WikiLeaks’ major ‘media partners’ at the time the cables were published – it is well aware that ‘a full 10 percent of those documents, reference in some way, shape, or form oil’. Like the rest of the corporate media, Britain’s leading liberal newspaper knows but is not telling.Source

Falling Oil Prices Present a Great Opportunity-Interview

World markets appear to be hovering over a precipice as Europe’s sovereign debt crisis, slowdowns in India and China and further bank downgrades threaten to send stocks and commodities down even further. Falling oil and gas prices may offer some respite to consumers but are they enough to help the economy or are they a symptom of deeper problems?

To help us look at these issues and more we are joined by the well known investor, adventurer and author Jim Rogers. Jim is the creator of the Rogers International Commodity Index, he also recently completed a book called: A Gift to my Children – which helps people learn from their triumphs and mistakes in order to achieve a prosperous, well-lived life. Please click on the following link to find out more information on A Gift to my Children.

In the interview Jim talks about the following:

• Why recent oil price falls are a good buying opportunity
• Why oil prices could fall to $40 a barrel
• Investment opportunities with the renewable energy sector
• Why he is optimistic about Nuclear energy
• Why agriculture offers good opportunities to investors
• Why Myanmar is the best investment opportunity in the world right now
• Why there could be further unrest in the Middle East
• Why we should let Greece fail

Interview conducted by. James Stafford of Oilprice.com

Oilprice.com: Jim, thanks for taking the time to join us today.

Jim Rogers: I’m delighted to be here, James. My pleasure.

Oilprice.com: It’s been an interesting period in the energy world as we’ve seen oil prices steadily decline over the past few months and with the problems in Europe and slowdowns in India and China do you expect this trend to continue?

Jim Rogers: Well, there is certainly a correction going on for various reasons. I think Saudi Arabia’s trying to help re-elect Mr. Obama. There are also stories that JP Morgan has problems in its London office with a lot of unauthorized positions they’re having to liquidate. I don’t know what’s going on, but I do know that corrections are normal in the industrial world. There’s nothing unusual about it. If it continues, there’s an opportunity to buy more.

Oilprice.com: I read a report by the Economist Phil Verleger who thinks that the Saudi’s massive increase in oil production along with other economic problems could cause oil prices crash to $40 a barrel oil and $2 a gallon gasoline by November. Do you think this is a reasonable forecast and we could see oil at these levels?

Jim Rogers: We could see anything. We certainly saw lower prices than that back in 2008 when there was a collapse. When things are collapsing, all sorts of strange things happen. We found that out in 2008 and we will probably find out in the future, as well. If oil does go to $40, that means it’ll just be setting up an even more bullish scenario for the duration of the bull market.

Oilprice.com: How do you see the energy markets reacting to the Iranian sanctions, which are going to be coming into effect on the first of July?

Jim Rogers: Oh, I don’t see that having much effect at all. Everybody already knows about that – nothing new to the markets. They have long since adjusted to this news, whether it be stock markets, smuggling, etc. The Iranian sanctions are a non-event as far as I’m concerned.
Now, an attack on Iran would not be a non-event, but this is just more noise.

Oilprice.com: The Middle East Petocracy’s, along with Venezuela and Russia must be nervously watching the price of oil. Can you see potential problems developing in these countries and other oil producing nations if prices continue to fall?

Jim Rogers: That’s part of what I was saying before. The lower prices go for the fundamentals, the price of fundamentals improve, but for these countries the money they have available to buy peace is running out and there are going to be problems, because a lot of people have been lead to believe that the government can solve their problems and if the government runs out of money, it makes people upset.

Oilprice.com: Crude oil has dropped from $108 a barrel in February to $84 today. Do you think low oil prices could provide an economic stimulus?

Jim Rogers: Certainly, it’s an economic stimulus for everybody who buys oil. There’s no question about that. On the other hand, for people who produce oil, it’s a negative. Now obviously more of us buy oil than produce oil, but it’s important to remember it does cut both ways.

 

Oilprice.com: Less than 0.1% of U.S. cars and trucks run on natural gas and with falling natural gas prices and America’s dependence on oil and vulnerability to oil price shocks – I was hoping to get your thoughts on natural gas usage for transportation?

Jim Rogers: Well, If natural gas stays this low compared to oil prices, it does give an incentive to develop natural gas powered vehicles and I think we are going to see more and more developments here. Is it going to end the use of oil, combustion engines? Probably not any time soon. Someday it could, but someday is a long way away.

Oilprice.com: Do you believe natural gas prices are near to a bottom, or do you think they have further to fall?

Jim Rogers: U.S. natural gas is somewhere near its bottom, in my view. The problem is I expect to see serious economic problems in 2013 and 2014 in the U.S. If and when that happens, we’re going to see a final panic in the markets and the economy and everything will have a crescendo and a selling climax.

We’re certainly a lot closer than we were. Although, when you have a selling climax in markets, you go to levels much lower than most people believe possible and that may happen. Whatever that bottom is, it’s not too far from the recent lows in natural gas.
Natural gas in many other places such as the UK are much, much higher than they are in the U.S.

Oilprice.com: The Arab Spring shook energy markets in 2011 – are there any potential geopolitical events taking place apart from the Iranian situation that could cause oil prices to skyrocket?

Jim Rogers: There are always geo-political possibilities. If oil goes down, Saudi Arabia’s going to have more trouble buying peace. Any country’s going to have more problems buying peace.

Iraq is being driven into the arms of Iran. America has spent staggering amounts of money in this region, and what we’re getting for it is a possible alliance between Iran and Iraq.
All sorts of things could happen in the future, especially if Iran and Iraq get closer together. That’s going to put America in a terrible situation, the world in a terrible situation. The good news is the world is always changing dramatically. The bad news is, the world is always changing dramatically.

Oilprice.com: The media has gotten behind shale gas and it’s being promoted as a worldwide energy saviour. What are your thoughts on shale gas? Do you think it’s been oversold or it really is the cheap and plentiful oil extender we have been hoping for?

Jim Rogers: I don’t know how cheap it is. The technology’s getting better, apparently. The cost too because the environmentalists and politicians are getting worried about it. But I don’t know enough about the technology to know for sure. I do have confidence in mankind and someday we will have the technology and expertise to fully exploit these resources.

Someday’s still a long way away though, and in my case, I don’t know how long life the fields are. If these are short-lived fields and short-lived wells this is nothing more than a flash in a pan, which may last for a few years.

 

Oilprice.com: Moving away from fossil fuels – I was hoping to get your opinion on renewable energy. Do you see this as a sector investors should be avoiding – or are there opportunities here in the future?

Jim Rogers: That is your premise, if oil stays high alternatives become more competitive. Most alternative energy is not competitive at this moment in time but that could change.
If oil prices go down and stay down the subsidies for alternatives are going to have to be pretty massive to make it even viable.
However, having said that, if you can find competent companies that can make money in the field, they’ll make a fortune. Find the right companies and you’ll do well.

Oilprice.com: Are there any alternative sectors you’re more bullish on than others? Say solar, wind, geothermal, hydro?

Jim Rogers: No, no. They all have pluses and minuses. I’d be most optimistic about the ones that are economically competitive. I guess atomic energy is most economically competitive.

Oilprice.com: What are your thoughts on nuclear energy? Is there a future for this power source or due to public safety perceptions is it something politicians will feel forced to abandon or sideline?

Jim Rogers: I don’t think people will abandon atomic energy. It is competitive, it is economic, it is very clean if controlled. If it’s not controlled it’s a disaster of course. I suspect you’re going to see another revival of atomic energy. The French, the Koreans, the Chinese, many countries are going forward with their nuclear power development plans.

Oilprice.com: I’ve seen in other interviews that you’ve predicted that 2013 and 2014 will be bad years for the economy. What is an investor to do? Are there any commodities, stock or instrument people can go to for safety and capital preservation?

Jim Rogers: No such thing as safe when you talk about it. Even if you put your money in cash, if you put your money in the wrong cash, you lose a lot of money. As the people in Iceland have found out, as the people in Europe on the Euro have found out. So, no such thing as safe.

What I have done is I own commodities on the theory that if the world economy gets better, I’ll make money because of shortages. If the world economy does not get better, people will print money. The best way to save yourself when money printing is going on is to own commodities.
It does not mean between here and there, they can’t go down in a panic. In the meantime, commodities will be the thing to rally once that happens, but they can go down. Therefore, I have also short stocks as a hedge against myself. If the world economy doesn’t get better, you’re going to be losing a lot of money in stocks.

Oilprice.com: Now are there any commodities you’re particularly bullish on at this moment in time?

Jim Rogers: I’m more optimistic about agriculture than anything else, just because of the price. Most agriculture, I feel very depressed on the risk side basis. Sugar is 75% below where it was 38 years ago. There’s not much in the world that’s as depressed as agricultural current prices. So, I would say agriculture.

Oilprice.com: You’ve owned gold for 11 years now and the price is currently correcting. Do you see this as a buying opportunity or would you wait a little longer?

Jim Rogers: I’ve actually owned gold for longer than 11 years. I’m not buying now. Gold went up 11 years in a row, which is extremely unusual for any asset. I don’t know of any asset in history that’s gone up 11 years in a row without a correction.

Corrections are normal and are the way things should work, the way things do work. Having said that, I don’t know when the correction will stop. It’s normal in my experience for corrections to go down 30 or 40%. It’s just the way markets work.
Gold has not gone down that much. It’s only gone down that much once in the past 11 years, and even then it ended the year up. I’m not buying gold at the moment. If it goes down a lot, I hope I’m smart enough to buy a lot more. I’m certainly not selling my gold, because I suspect gold will be much, much, much higher over the next decade.

To view more discussions with other experts visit our new interview section

Oilprice.com: You’ve mentioned in the past that you’re bullish on Asia. Where do you see the best opportunities for investors in this region at present?

Jim Rogers: Probably the best investment opportunity in the world right now is Myanmar. In 1962, Myanmar was the richest country in Asia. They closed off in 1962, and now it’s the poorest country in Asia. I see enormous opportunities there because they’re now opening up. It’s like when China opened up in 1978. There were unbelievable opportunities going forward. The same is true in Myanmar now in my view. North Korea, I expect to see the same sorts of developments.

Oilprice.com: You’ve mentioned previously that the 21st century belongs to China. But China has some serious internal problems as its political stability depends heavily on rapid economic growth. We are also seeing increasing tensions between the wealthy coastal regions and the poor interior. My question is do you think the internal forces building up in China can be managed as China is held together by money not ideology?

Jim Rogers: What you just said about China’s true of every country in the world, more so in places like America and Europe than in China. China does have internal problems. But their economy’s much stronger than the western economies. You had riots in the streets in the U.K., what, last summer. Terrible instability, and there’s going to be much more in the west. Greece, Spain, Portugal, these countries have staggering instability.

In America in the 1930s we certainly had all sorts of political problems and yet survived, partly because America was a very large credit nation and had the assets to see us through. America came out of that and became the most successful country in the 20th century. China’s going to have plenty of problems. Plenty. I’d still rather invest in China than in other places.

Oilprice.com: You mentioned that with Spain and Greece we should just let them go bankrupt – what do you really see the implications of this being. Will it be as bad as we have been led to believe?

Jim Rogers: Might be worse. The good news is we’ll get their problems behind us. The way the system is supposed to work is when people fail, they fail. Then you come in, you reorganize. Competent people come in, reorganize, and start over with a sound base. This has been going on for thousands of years.

It’s a little bit like a forest fire. When you have a forest fire, it’s terrible, terrible, but it cleans out the underbrush, cleans out the dead wood. The forest, when it’s all over, is much stronger and has much better growth. Same with financial problems and bankruptcies. You start over and things are better.

Oilprice.com: Now, moving away from the markets, I was hoping you could tell us a little bit about your book, “A Gift to my Children,” the inspiration behind writing it and what you hope it achieves.

Jim Rogers: Well, I came into parenthood late and I never wanted to have children. I thought children were a terrible waste of time and money and energy. I felt sorry for friends who had children. Then I had some.

I’ve had some failures in my life, I’ve had a few triumphs. I started writing down the things I learned. I wanted to make sure my children knew all of these things. That turned into a magazine article, and the next thing you know it turned into a little book.
Grownups get a lot more out of it than children do because it’s really a book for grownups.

Oilprice.com: What are lessons within the book? Why would I go out and buy the book? What am I going to learn?

Jim Rogers: I hope you’ll learn to be famous, happy, rich and successful. Being happy, that’s the main thing I’m trying to help with. If you’re happy, not much else matters in life, at least in my experience. There’s various ways to be happy, of course. I’m trying to tell people the things that I have learned. I’m trying to teach them to be curious, independent. It’s very hard to think independently, as you probably know. Extremely hard. Most people are not very curious, If they see it on TV, that’s what they accept instead of thinking, what’s really going on here? I’m teaching readers to be curious, skeptical, independent thinkers.

Oilprice.com: Fantastic. Jim, thank you ever so much for taking the time to speak with us. It’s been a pleasure speaking with you.

Jim Rogers: My pleasure Source

Dependency on Middle East Oil-Middle East unrest

Currently, approximately 35% of the world’s seaborne crude oil extracted from the Earth in the countries of the Middle East is brought to global markets through the Strait of Hormuz between Iran on the Northeastern side of the Strait and the United Arab Emirates with the Omanian enclave of Musandam on the Southwestern side of the Strait, representing about 20% of oil traded worldwide (“Strait of Hormuz,” January 16, 2012). Under pressure from economic sanctions by the U.S. and the European Union, Iran’s government has vowed to block the Strait of Hormuz if the West places additional economic sanctions on their government.

North America is the largest consumer of oil regionally, followed by Asia (primarily Japan), Europe, and then other world regions. Importing over 13.5 million barrels of oil per day, the U.S. is easily the world’s largest oil importer, accounting for over 63% of total U.S. daily consumption. “Oil from the Middle East (specifically, the Persian Gulf) accounts for 17 percent of U.S. oil imports, and this dependence is growing,” wrote Heritage Foundation researcher Ariel Cohen in April of 2006.

Though the U.S. is a top producer of crude oil, its current rate of petroleum consumption is between 18 and 19 million barrels of oil per day, and its domestic production cannot handle the demand, hence its reliance on imported oil. As President George W. Bush stated in his 2006 State of the Union Address to the nation: “Keeping America competitive requires affordable energy. And here we have a serious problem: America is addicted to oil, which is often imported from unstable parts of the world” (January 31, 2006). From the mouth of the nation’s top leader, the U.S. suffers from an addiction. Most modern machinery runs on oil and its utility is seen in everyday products from plastics to cosmetics, from paint to lubricants, and, most especially, as a source of fuel for the modern combustion engine. Over time, to feel “normal”, the addict develops an abnormal psychological dependency on the addictive substance and will utilize any means to obtain the drug in spite of cultural or moral restraints. In the case of oil, this abnormal dependency has led the United States to engage in bribery and corruption to obtain oil, from control of markets to the exclusion of countries from such commerce, from the overthrow of regimes deemed belligerent because of their attempts to take control of their own oil resources to outright murder, assassination, and war. Indeed, few Americans today doubt that the recent eight-year war on Iraq (2003-2011) was conducted primarily to obtain oil. And this is why veteran scholar on the politics of oil, Dr. Michael Klare, concludes in a recent article that: “the Strait of Hormuz will undoubtedly remain the ground zero of potential global conflict in the months ahead” (January 31, 2012).

When a U.S. President refers to the necessity to import oil from “unstable parts of the world,” what he means is that some regions of the world are asserting their sovereign right to control their natural resources, e.g. oil, and they are neither subordinate nor answerable to the U.S. government, especially as regards how much oil is produced and available for purchase on world markets and how much they wish to charge for this oil—hence, the nomenclature of “instability”.

The world’s top oil producers are depicted in the table below [Table I], and it is not coincidental that major areas of U.S. foreign intervention over the past 50 years are focused on these countries.

Table I

RANK

COUNTRY

PRODUCTION (thousands of barrels per day)

1

Saudi Arabia

10,521

2

Russia

10,146

3

United States

9,688

4

China

4,273

5

Iran

4,252

6

Canada

3,483

7

Mexico

2,983

8

United Arab Emirates

2,719

9

Brazil

2,719

10

Nigeria

2,458

11

Kuwait

2,450

12

Iraq

2,408

13

Venezuela

2,375

14

Norway

2,134

15

Algeria

2,078

[“Top World Oil Producers, 2010 (Thousand Barrels per Day).” U.S. Department of Energy, Energy Information Administration]

As well, the following countries [Table II], listed by rank, are estimated by the U.S. Central Intelligence Agency to possess the most proven oil resources still remaining in the ground. These areas are likewise regions of heightened U.S. foreign policy interests and will continue to be so as long as the world economy is carbon-based.

Table II

Rank

COUNTRY

BILLIONS OF BARRELS OF OIL (BBL)

DATE OF INFORMATION

1

Saudi Arabia

262,600,000,000

1 January 2011 est.

2

Venezuela

211,200,000,000

1 January 2011 est.

3

Canada

175,200,000,000

1 January 2011 est.

4

Iran

137,000,000,000

1 January 2011 est.

5

Iraq

115,000,000,000

1 January 2011 est.

6

Kuwait

104,000,000,000

1 January 2011 est.

7

United Arab Emirates

97,800,000,000

1 January 2011 est.

8

Russia

60,000,000,000

1 January 2011 est.

9

Libya

46,420,000,000

1 January 2011 est.

10

Nigeria

37,200,000,000

1 January 2011 est.

11

Kazakhstan

30,000,000,000

1 January 2011 est.

12

Qatar

25,380,000,000

1 January 2011 est.

13

United States

20,680,000,000

1 January 2011 est.

14

China

20,350,000,000

1 January 2011 est.

15

Brasil

12,860,000,000

1 January 2011 est.

[“Country Comparison: Oil – Proved Reserves.” The World Factbook. Washington, DC: Central Intelligence Agency]

With the recent American military “departure” from Iraq, it is becoming evident that the days of kowtowing to U.S. military dictate are over. Hence, there will be many “unstable” areas in the world in the years to come.

Given an ever-increasing demand for oil, because of its “addiction”, and given its limited domestic sources of crude oil, the U.S. will remain dependent on imported oil well into the future. U.S. policymakers, by their past and present actions since the end of WWII in pursuing this addiction, have apparently concluded that the nation’s interest in oil and other ‘strategic’ resources outweighs the nation’s avowed values to support democracy.

This strategic policy is not new, though we refer to it today by the name of ‘neoliberalism’. As Diaz notes in his documentary film The End of Poverty?: “Neoliberalism managed to bankrupt many economies of the [global] south which allowed international capital to take over. This was achieved by imposing a new form of structural violence that was used for decades to maintain these countries in a state of underdevelopment. Such violence was implemented by the dictators of the south and their repressive apparatus which finally brought social unrest that was unkind to the free market economies. The special agents and economic hitmen were born and became the new, less visible means, to maintain such control over the globe’s resources” (2009).

But it is not considered good etiquette to discuss such nasty policies of inflicting structural violence on other peoples within the confines of America’s major media outlets; as a consequence, self-censorship plays a large role in silencing the mainstream U.S. media. As Herman and Chomsky explained in their work Manufacturing Consent: The Political Economy of the Mass Media (1988), the corporate-owned mass communications media are in the business to make money. Hence, it is the profit motive which dictates all successful forms of media in the U.S.—print, radio, television, etc.—to opt for stability, which distorts their editorial bias. As a consequence, the public interest is often subordinated to the interest of the profit motive. Likewise, reporters and the companies they work for will often actively avoid contending with governmental and corporate sources so as to maintain access to news developments and a steady stream of advertisers. Similarly, academics will oftentimes tow or parrot the government line in order to attain jobs, receive funding, promotions, and media relevance.

In the case of Bahrain, mainstream American media sources are well aware of U.S. government support of the embattled regime, as the Al-Khalifas allow the U.S. to park its ships in its harbors, maintain a large naval base in the Juffair section of the country, and utilize its Shaihk Isa Airbase in Sitra. This awareness by reporters and major media conglomerates of Bahrain as a strategic asset of the U.S. acts to restrict open discussion of Bahrain’s undemocratic and repressive government within American society. Moreover, when self-censorship is not sufficient, there are a host of public relations firms hired by the Bahraini royal regime which propagate a sanitized history of the Kingdom while countering any negative voices concerning Bahrain. For example, Bahrain currently has on retainer the Washington, DC-based public relations firm of Qorvis Communications at the tune of $40,000 per month whose first statement to the press was an angry denunciation of Doctors Without Borders for assisting in the treatment of injured protesters in Bahrain (Ditz, August 9, 2011). Other major PR firms on regime retainer include the Washington, DC-based Potomac Square Group, the Washington, DC-based firm of Sorini, Samet & Associates, the DC-based firm of Joe Trippi & Associates, the DC-based firm of Sanitas International, the London, UK-based firm of Bell Pottinger, the London-based firm of Gardant Communications, the Connecticut-based BCB Group, the UK-based intelligence firm Olton, and the Washington, DC-based firm run by former USA Today reporter Tom Squitieri known as TS Navigations LLC (Chan’ad Bahraini, October 2, 2011).

With the mainstream media structurally motivated to echo and support U.S. government and corporate policies as they facilitate America’s addiction to oil, one should note that its reticence to report negatively on the Gulf monarchs has a long history. In fact, if we trace the modern history of U.S. involvement in the Middle East in particular, we find that this fatal decision to embrace the Gulf monarchs is the result of a deal forged between FDR and Ibn Saud back in 1945.

The Fateful 1945 Deal Struck by FDR & Ibn Saud

In the closing days of World War II, U.S. President Franklin Delano Roosevelt met Saudi King Abdulaziz Ibn Saud on board the USS Quincy in the Great Bitter Lake in Egypt, north of the Suez Canal and the Red Sea, on February 14, 1945. For Ibn Saud, the founder of Saudi Arabia, the meeting was an opportunity to secure military and technical support in order to consolidate his rule over the Arabian Peninsula. For the tiring Roosevelt, who would soon die two months later and who had guided the nation through the tough battles and harsh lessons of WWII, it was a chance to strike a long-term deal for secure oil resources with an inferior and fledgling state. As Saudi Ambassador to the U.S., Prince Turki Al-Faisal, remarked of the famous meeting in a lecture in 2007: “Oil had been discovered two decades before in our neighboring countries of Bahrain and Kuwait [10]. Soon after, Saudi Arabia was inundated with various British and French interests, seeking concessions in the Kingdom. Ibn Saud, however, chose to deal with the Americans. He knew the United States did not have a history of colonial exploitation [11]. Also, Ibn Saud was familiar with the United States’ constitution, with its guarantees of individual liberties. This appealed to his love of freedom. So he concluded an agreement of exploration for oil with Standard Oil of California, in 1933. He also wanted to get Roosevelt involved in de-colonizing the Arab States, including Palestine, that were still under European colonial rule” (January 26, 2007).

The deal established what was referred to as a “special relationship” between Saudi Arabia and America. ‘Special’ indeed, as the soon-to-be co-victor of the second world war was establishing a position of predominance in the Middle East with access to cheap oil in perpetuity in exchange for a guarantee to maintain the rule of a single family while locking its populations into a straightjacket of undemocratic and dictatorial rule. This equation of maintaining a single family in power in exchange for cheap access to oil would become the model for a subsequent post-WWII U.S. foreign policy in dealing with countries which were naturally blessed with this crucial resource. Former bureau chief for The Washington Post and current scholar at the Washington, DC-based Middle East Institute, Thomas W. Lippman, writes that Ibn Saud received from FDR a promise that the U.S. president would “do nothing to assist the Jews against the Arabs and would make no move hostile to the Arab people” (2005, p. 29).

Subsequent U.S. actions have clearly aided and abetted Israeli expansion and aggression in the region, though not normally to the detriment of Arab rulers, who from Ibn Saud’s perspective constituted “the Arab people.” The masses, from Ibn Saud’s point of view, as well as that of his fellow autocratic rulers in the region, are not considered autonomous agents with free will and self-determination but rather a dangerous rabble to be ruled over with an iron fist and dictated to. FDR and subsequent U.S. administrations have concluded that when it comes to dealing with oil-rich countries, it is not only easier to placate one ruling family, as opposed to a democratic mass, but, as well, it is politically viable—at least for a certain period of time—as negative blowback [12] from dictatorial rule will primarily fall upon the indigenous ruler and not his external military backers. As John Perkins, author of Confessions of an Economic Hitman (2004), describes the process: “If we don’t like what a democratically-elected leader of another country is doing, for example opposing the exploitation of oil in his country, someone who looks like me will walk into that president’s office–I had the job at one time–walks into the office and says: “And now I just want to remind you that I can make you and your family very, very rich if you play my game, our game.

Or I can see to it that you’re thrown out of office or assassinated if you decide to fulfill your campaign promises. And usually it’s still a little more subtly than that, because there may be a tape recorder listening. But they get the message, because every one of those presidents knows what happened to Arbenz of Guatemala and Allende of Chile and Roldós of Equador and Lumumba of The Congo and Torrijos and on and on. The list is very long of presidents that we have had thrown out or assassinated. There’s no question about that. And they all know this. So we perpetuate the system that way. Here you are: From this pocket, you offer a few hundred million dollars of corruption. Or from this pocket, you offer subversives, jackals, to go in and overthrow the government or assassinate the president. And this has happened time and time and time again. Usually, the economic hitmen are successful, so we don’t need to send in the jackals. But on those occasions when we’re not successful—as for me, I failed with Omar Torrijos in Panama and Jaime Roldós in Equador—and, so, the jackals were sent in and assassinated these men” (Diaz, 2009).

Though each of these post-WWII interventions, coup d’états, and assassinations were motivated by various determinants, it has been the centrality of oil that has consistently informed U.S. foreign policy since 1945. This is because WWII highlighted to all sides the centrality of oil to modern economic and military supremacy. Dr. Keith Miller, a speaker with the Organization of American Historians Distinguished Lectureship Series since 1999, provides the following vignette about an incident involving the famous American Army General George S. Patton as he was directing a frontal tank assault across Europe in WWII: “Let me begin with a short story. The great tank commander—George S. Patton—found out the hard way how important oil was (in the form of gasoline) to the war effort. His tanks were moving so fast as they approached the Seigfried Line of Germany, they all ran out of gasoline. To get more fuel to the fiery general, as quickly as possible, it had to be airlifted from Normandy.”

Miller continues: “But, many more stories of a similar kind could be told. The truth is—oil was the indispensable product, in all its forms, to the Allied campaigns around the world. Without it World War Two could never have been won. For oil, once processed or refined in various ways, became the source or indispensable material for laying runways, making toluene (the chief component of TNT) for bombs, the manufacturing of synthetic rubber for tires, and the distilling into gasoline (particularly at 100-octane levels) for use in trucks, tanks, jeeps, and airplanes. And, that is not to mention the need for oil as a lubricant for guns and machinery” (2002).

Ready access to oil on an inexpensive and dependable basis would become the lens through which nearly all major U.S. subsequent foreign policy actions would be assessed. And neither Christian morality nor American democratic values would hinder this quest. Hence, the Faustian bargain between FDR and Ibn Saud in 1945 was truly a pact with the devil from which the U.S. may never be able to extricate itself from.

The Legacy of Iranian Independence

A third factor in restricting the voice of the mainstream American media in its reporting on the Bahraini uprising is the unforgettable legacy of the 1979 Iranian Revolution and the country’s success in achieving its independence which, to many in U.S. government foreign policy circles, was a catastrophe of major proportions, with primary blame attributed to former President Jimmy Carter for allowing this to happen (as if he could have prevented it).

U.S. and British efforts to overthrow democratically-elected Prime Minister Mohammad Mossadegh in 1953 in order to secure access to Iranian oil resources was the primary determinant and motivational source of the successful 1979 revolution which ousted the much-hated Shah and his secret police known as the SAVAK. The success of the 1979 Iranian Revolution sent shockwaves across the western world, as it demonstrated that imperious policies cannot last forever; eventually, suppressed populations will exclaim in unison “Enough!” and rise up, overthrow their puppet rulers, and impose new guides for their future. Chastened by the 1953 overthrow of their government and enduring over 25 years of brutal rule by the U.S.-imposed Shah Mohammad Reza Pahlavi, the Iranian revolutionaries retook control over the sovereignty of their country, including its much-desired oil resources. The fury and impact of the Iranian Revolution and corresponding relatively high oil prices made the average American aware for the first time of the country’s dependence on foreign sources of oil. As well, the frequent pictures broadcasts over American television of a burning U.S. flag and Iranian condemnations of “the Great Satan” incited hatred and revenge in the everyday American citizen who had little to no idea what its government had done to the Iranian people to provoke such animosity. In lockstep, the mainstream U.S. media lined up in virtual total support for whatever bellicose policies were deemed necessary to counter this cornerstone of what would soon-to-be-called the “axis of evil”. While this legacy of the success of the Iranian Revolution caused some to begin to rethink American policy, it likewise hardened the views of many others in the political and corporate establishment. Nonetheless, the naked facts of U.S. interventionary policies in Iran began to come to light, and they were not pretty.

As the late distinguished professor emeritus of the University of California, San Diego, Chalmers Johnson, stated, “It is fact the CIA was the private army of the president, being used for highly dubious, virtually invariably disastrous interventions in other peoples’ countries, starting with the overthrow of the Iranian government in 1953 for the sake of the British Petroleum Company. We declared that the elected Prime Minister of Iran, Mohammad Mossadegh, was a communist. The Pope would have been a better candidate. That is to say that he was simply trying to regain some control over Iranian oil assets, and the British wanted him out and talked Eisenhower into doing the dirty work” (Diaz, 2009). [13]

As heir to the so-called “Peacock Throne”, Mohammad Reza Pahlavi had inherited royal authority from his father in 1941. But the authority of the nation was heard when the Iranian parliament (the Majlis) elected Mohammad Mossadegh as Prime Minister in 1951, and Mossadegh proceeded to nationalize the British-controlled Anglo-Iranian Oil Company (AIOC). The subsequent U.S. and British coup d’état against Mossadegh put the Shah back in power until his downfall in 1979. While Shah Pahlavi attempted some domestic reforms, particularly his 1963 so-called ‘White Revolution,’ his dictatorial, imperious, and sometimes erratic manner alienated much of the nation. The Shah’s arrogance or hubris coupled with the severity of his security apparatus were the major impetuses behind the subsequent successful revolution.

Colin S. Cavell, Ph.D. is a former Assistant Professor at the University of Bahrain. ccavell@gmail.com

Notes

[10] Though Gulf Oil was the first American company to gain an oil concession in the Middle East, their concession lapsed in 1928 before they could act on it. Their concession was taken over by the Standard Oil Company of California (SOCAL) in 1931, and, fortuitously, their subsidiary, the Bahrain Oil Company, successfully struck oil in Bahrain on May 31, 1932. British oil firms, Burmah Oil and Anglo-Persian Oil, were the first oil companies in the Middle East following the discovery of oil in western Persia in 1908.

[11] By 1945, the U.S. had already amassed a very long history of colonial exploitation in many of the countries of Latin America. In fact, even “before the Open Door Policy was proclaimed regarding China in 1899, the U.S. had intervened over 20 times in Latin American countries as far north as Mexico in 1847 and as far south as Chile in 1891” (Cavell, 2001).

[12] Chalmers explains the etymology of the word ‘blowback’ as follows: “But as the agency [i.e. the CIA] developed over time, and as it was made clear to the president, every president since Truman, made clear to them shortly after they were inaugurated, you have at your disposal a private army. It is totally secret. There is no form of oversight. There was no form of congressional oversight until the late 1970s, and it proved to be incompetent in the face of Iran-Contra and things like that. He can do anything you want to with it. You could order assassinations. You could order governments overthrown. You could order economies subverted that seemed to get in our way. …

No president since Truman, once told that he has this power, has ever failed to use it. That became the route of rapid advancement within the CIA, dirty tricks, clandestine activities, the carrying out of the president’s orders to overthrow somebody, starting—the first one was the overthrow of Mohammed Mossadegh in Iran in 1953. It’s from that, the After Action Report, which has only recently been declassified, that the word ‘blowback’ that I used in the first of my three books on American foreign policy, that’s where the word ‘blowback’ comes from. It means retaliation for clandestine activities carried out abroad.

But these clandestine activities also have one other caveat on them: they are kept totally secret from the American public, so that when the retaliation does come, they’re unable ever to put it in context, to see it in cause-and-effect terms. They [i.e. the American public] usually lash out against the alleged perpetrators, usually simply inaugurating another cycle of blowback (Chalmer Johnson in interview with Goodman, February 27, 2007).

[13] Perkins echoes Johnson by recollecting: “We did the same thing in Iraq under Qasim who was a very popular president of Iraq and decided that he wanted to get more of the profits from Iraqi oil to go to the Iraqi people not to the foreign companies. So we decided that he had to go. He had to be assassinated. We sent in an assassination team in the early 60s. It was headed by a young man at the time who failed and got wounded in the process and had to flee the country. That was Saddam Hussein. He was our hired assassin. He failed, so the CIA went in directly and had Qasim publicly executed on Iraqi television and put Saddam’s family in power” (Diaz, 2009).Source

Case Name: Azerbaijan Oil Consortium(BP,Exxon,Saudis,DNKL,Lukoil etc)

1. The Issue

On 20 November 1994 a consortium of oil companies signed a
contract with the nation of Azerbaijan. The consortium, led by
British Petroleum, is to invest $8 billion for oil production over
a period of 30 years. The consortium is made up of the American
companies Amoco Corp., Exxon Corp., McDermott International Inc.,
Pennzoil Co., and Unocal Corp.; British Companies, British
Petroleum PLC and Ramco; Norway’s Statoil; Turkish Petroleum;
Saudi Arabia’s DNKL Oil; Lukoil, the State oil firm of Russia; and
the State Oil Company of Azerbaijan. The consortium believes it
can extract up to 4 billion barrels of oil from three wells in the
Caspian Sea. However, a problem has developed dealing with the
route the oil will take to the world market. At the moment there
are three alternatives to choose from; One which would transport
oil north from the Azerbaijani port of Baku through Russia;
second, which would transport the oil through Georgia; and
finally, a southern route through Armenia and Turkey.(Pope 1994,
1) There are many environmental aspects to the issue. They all
basically deal with the possibility of damage or destruction of
the pipelines. This is due to the fact that this is a politically
volatile region of the world.

2. Description

In 1990 the government of Azerbaijan began negotiating a
possible oil deal with the British oil giant British Petroleum.
Both sides saw that there was chance to earn large profit from the
deal. Azerbaijan needed desperately to redevelop its obsolete oil
drilling and refinery equipment (production had fallen to 1900
levels and was declining at a rate of 6 percent per year.) As for
British Petroleum, this was a chance to enter into a vastly
underdeveloped market. In addition, Azerbaijan no doubt
recognized the political benefits to come from an agreement,
namely independence and hard currency, which mattered greatly in
the early post-Cold War. Finally, after three years of
negotiation a deal was struck.(Pope 1994, 3)

A consortium of oil companies led by British Petroleum, known
as the Azerbaijan International Operating Company, signed a $8
billion 30 year contract with the nation of Azerbaijan.(Pope,
1994, 2.) The consortium was between what grew to be twelve
companies from England, Norway, Turkey, Saudi Arabia and the
United States, as well as the state oil companies of both Armenia
and Russia. The agreement calls for the development of three
Azerbaijani oil fields in the Caspian Sea. Oil production will be
phased in in increasing increments starting in 1996. By the end
of 1997, it is hoped that the peak sustained output of 700,000
barrels per day will have been reached.(Pope 1994, 4) In all,
there is believed to be a reserve of 4 billion barrels of oil.
These fields are thought to hold enough oil to be “a bonanza that
rivals Kuwait.”(Southerland 1995, A11)

While the consortium finally have the agreement signed, there
was a problem that required immediate attention. Their plan is to
sell the oil on the world market. As such, the oil must be
transported from Baku, the Azerbaijani port of origin to potential
world clients by way of the Turkish port of Ceyhan. There were 3
possible routes to be taken. The first involves constructing a
pipe line from Baku to the west in neighboring Georgia. From
there it would be shipped to Ceyhan. A second would involve
constructing a pipeline that would travel south through Armenia
into Turkey to Ceyhan. Finally, an existing pipeline could be
used by sending the oil north to the Russian port of Novorossiysk,
from there it would be shipped to Ceyhan.(Daniloff 1995, C2)

All the nations involved stand to earn a great deal from the
agreement, particularly Russia. For one thing, Russia wants to
retain a ‘special’ (influential) relationship with those states
that were former members of the Soviet Union. It would lose this
opportunity, it feels, if a distribution route that bypasses
Russia is chosen. In addition, there is a great deal of money to
be made from this agreement through sales, profits and tariffs
from oil crossing the Russian border. . . hard currency that the
nation is in dire need of. Lastly, and perhaps most importantly,
there is the issue of Russian security. Russia is fearful that it
will be in a negative position if it did not have a hand in oil
distribution because the deal is between a former member of the
Union and current members of NATO. In addition, if the
Azerbaijani consortium turns out to be successful, there is
another former republic, Kazakhstan, that is in a position to be
as successful as, if not more so than Azerbaijan. This is due to
the large reserves of oil it holds in the Caspian Sea.

For Azerbaijan, the issue also relates to security.
Azerbaijan will gain both physical and financial stability. The
chances of increasing its per capita income are much greater due
to its contract with the consortium. This increased financial
stability will allow it to have greater control over its dometic
and international affairs. In addition, it will be provided with
perhaps true and final independence from its former overlord,
Russia. The West also can gain security from the consortium. It
would be a chance to reduce its reliance on the Persian Gulf as a
source of oil.

The choices to be made are thus influenced by a myriad of
details. However, there is one rather important issue which has
not been discussed, the environment. The environment serves to be
severely damaged if any number of very likely events occur.
Firstly, the threat of terrorism on every possible pipeline route
is very high. The first route is through Georgia, which has not
yet rid itself of the horrors of civil war. Thus there is the
possibility of the pipeline being targeted by the combatants. The
second route, through Armenia, is the sight of an almost 7 year
clash with Azerbaijan over the disputed Ngorno-Karabakh region.
The final route through Russia directly traverses the Chechen war
zone. In addition, the Russian oil pipelines are in a horrendous
state of upkeep, with over 700 spills per year.(BBC Monitoring
Service 1995, 2) There is also the likely possibility that the
Caspian Sea itself will be polluted by any number of possible
mishaps. Finally, if one of the first two oil routes were chosen,
oil would have to be shipped to Turkey through the already
overcrowded Bosporus Sea channel. Thus animal or fish life, the
very ecosystem itself, could be adversely affected by pipeline or
shipping spills. For other relevant TED Cases, see Ecuador Case,
Norwoil Case, and Shetland Case.

The decision on which route to use faced a lengthy debate.
Finally, on October 9 1995, in a show of compromise, the twelve
member consortium agreed to have 2 pipelines. The first will be
the Russian route. The 1400 kilometer route will traverse Chechnya
and end at the Black Sea port of Novorossisk. The construction of
27 km of new pipeline is required. The second route will be
through Georgia to its Black Sea port of Batumi. This 920 km
pipeline requires the construction of 140 km of new pipeline.
This decision reflects, in part, geo-political influences. In one
sense, the consortium was influenced by the Western governments to
accept a Russian route, this was done so Russia would not feel
alienated. Secondly, selecting 2 routes disallows Russia from
having a strangle-hold over oil distribution.(Clark and Levine
1995, 1) Though a decision has been finally reached, it leaves
much to be desired environmentally.

3. Related Cases

See BOSPORUS Case
See EXXON Case
See ECUADOR Case
See SHETLAND Case
See SHELLRIG Case
See OGONI Case

KEY WORDS

(1) Trade Product= Oil

(2) Geography= Azerbaijan

(3) Environmental Problem =oil spill

4. Draft Author

Michael Goulet

Legal Cluster

5. Discourse and Status: AGR and INPROG

The consortium has recently agreed on a pipeline route, however,
there is still work to be done concearning construction of new
areas of pipeline, as well as security for the line running
through Georgia.

6. Forum and Scope: NGO and 3-Regional

7. Decision Breadth

Number of Parties Involved: 12 – United States, England,
Norway,
Azerbaijan, Russia, Saudi Arabia, Iran ,Turkmenistan, Kazakhstan,
Ukraine, Romania, Bulgaria

These are the nations which are involved in the consortium, as
well as those nations which surround the Caspian and Black Seas.

8. Legal Standing: NGO

This is a nongovernmental agreement between several oil companies,
albeit that 2 of these companies are state owned.

Geographic Filters

9. Geography

a) Geographic Species Domain: Asia

b) Geographic Conflict Site: West Asia

c) Geographic Impact: Azerbaijan

10. Sub-National Factors: No

This is a non-governmental agreement between oil companies that
was approved by the government of Azerbaijan and corresponds to
the laws regulating business agreements of the other signatories.

11. Type of Habitat: Ocean

The environmental impact of this agreement will be felt in and
around the Caspian and Black Seas.

Trade Filters

12. Type of Measures: NAPP

13. Direct vs. Indirect Impact: NAPP

14. Relations of Measure to Impact

a.Directly Related to Product: No

b.Indirectly Related to Product: No

c.Not Related to Product: No

d.Related to Process: No

15. Trade Product Identification: Oil

Indirectly related to this issue are the petrochemical and plastic
industries.

16. Economic Data

Industry Output: Varies with price per unit, measured in
barrels
of oil which was $17.31 as of 19 October 1995.

Employment:

17. Degree of Competitive Impact: High

18. Industry Sector

PETROLeum

19. Exporters and Importers

Case Exporter: Azerbaijan

Case Importer: Many

Leading Exporters: Various-Persian Gulf Nations

Leading Importer: Various-Europe

Environmental Cluster

20. Environmental Problem Type: POLL

21. Species Information: Many

If an environmental accident were to occur, there would be a
large number of species, including both land, air, and sea life.

22. Impact and Effect

Resource Impact: HIGH

Resource Effect: STRUCTure and SCALE

The outcome of an accident such as an oil spill in the area of
the
Caspian or Black Sea, or in the pipeline system on land would
undoubtedly have a high impact on and effect both the composition
and scale of the wildlife and its habitat.

23. Urgency and Lifetime: NAPP

An environmental problem has not occurred. The possibility of an
incident warrants concern for many species, but a determination of
the urgency for species protection is not applicable (yet?).

24. Substitutes: CONSV

There are a number of alternatives to the use of oil as an energy
source. If there was a serious attempt made at using these
alternatives then this could alleviate the dangers of oil spills.
However, considering that this is not very likely, then the next
best alternative would be using energy substitutes.

Other Factors

25. Culture

No

26. Human Rights

No

27. Trans-Boundary Rights: Yes

The conflicts between Azerbaijan and Armenia and between Russia
and Chehnya (also less obvious is that between Russia and the
former republics of the Soviet Union) serve to raise caution
against terrorist incidents against the pipelines/drilling
equipment or outright conflict between members.

Read

 

Turkey, Libya ink deal after Iran oil woes: WW3 or just oil biz

Turkey to cut purchases of Iran oil by 10 percent: energy minister

Turkey will reduce the amount of oil it buys from Iran by around 10 percent, Energy Minister Taner Yildiz said Friday, a week after Washington warned Iran’s customers they could be subject to U.S. sanctions unless they significantly cut purchases.

Turkey will partly replace the oil with 1 million tons it expects to buy from Libya, Yildiz told reporters. The country is also in talks with Saudi Arabia on spot oil purchases and longer term contacts, Yildiz added.

“We plan to increase the number and the route of countries we buy oil from,” Yildiz said.

Turkey imports around 200,000 barrels per day of oil from Iran, representing 30 percent of its total imports and more than 7 percent of Iran’s oil exports.

Having been omitted from a list of countries granted exemptions by Washington, Turkey remained hopeful of obtaining a waiver to avoid U.S. financial sanctions.

The United States exempted Japan and 10 EU nations from sanctions because they have significantly cut purchases of Iranian crude oil, but left Iran’s top customers China and India exposed to the possibility of such steps.

Turkey’s sole refiner Tupras, a unit of Koc Holding, said in a statement to the Istanbul stock exchange that it would cut its purchases of Iranian crude by 20 percent.

Tupras is the main Turkish customer, currently buying some 30 percent of its crude oil from the Islamic Republic, and it has a 9 million ton annual purchase contract.

Koc Energy Group chairman Erol Memioglu told reporters last month that the existing Tupras oil contract with Iran would end in August.

He said that he expected more clarity on the details of the sanctions in May, before Washington’s measures on oil-related transactions take effect on June 28.

Both the United States and the European Union have imposed unilateral sanctions against Iran’s financial and energy sectors over its nuclear program, whereas Turkey has said it is only compelled to observe the softer U.N. sanctions.

Trade between Turkey and Iran has risen sharply over the past decade, leading to Turkey being regarded as a possible weak link in the international sanctions against Iran.

Turkey has struck a new contract to buy oil from Libya, and has held talks with Saudi Arabia about possible supplies over the past few months.

Iran says its nuclear program is solely for civilian purposes, and denies that it is building weapons. A meeting between Iranian nuclear negotiators and representatives of six major powers is expected on April 13, with Istanbul a possible venue for the talks.

Libya’s Economy Minister Ahmed al-Koshli said yesterday that his country wants to benefit from the technology Turkey possesses, speaking in the “Energy, Economy and Sustainable Development” session of the Eurasian Economic Summit.

“The know-how and experience Turkey has is very important for us. We want Turkey to share its experiences with Libya,” he said, adding that his country is working on integrating with the global economy. Al-Koshli also said Libya’s bourse is now open. “Free Libya wants to learn about environmentally friendly technologies, especially solar and wind energy, so that we will have the opportunity to export clean energy to Europe and other countries.”

Meanwhile, Mohammad Reza Farzin, Iran’s deputy minister of economy and finance, said Iran’s government has decided to initiate reforms in the areas of energy prices and economic development.

Unfair distribution

Iran is the 17th largest economy in the world, with its $930 billion GDP, according to data from the International Monetary Fund, Farzin said. The country has the second largest oil and natural gas reserves in the world.

Keeping energy prices artificially low leads to unfair income distribution, energy smuggling and higher energy consumption, Farzin said, adding that if the current rate of increase in energy consumption in Iran continues for the next 20 years, the country will consume all the oil it produces.

Turkey has struck a 1 million ton oil supply deal with Libya after reducing imports of Iranian crude under pressure from the United States and the international community, the Turkish energy minister said yesterday.

Turkey’s oil refiner Tüpraş agreed to the deal with Libya and has also started negotiations with Saudi Arabia for a long-term contract, Yıldız said.

The move comes after the United States said earlier that it would exempt seven emerging economies, including Turkey, from tough new sanctions after they cut oil supplies from Iran. U.S. Secretary of State Hillary Clinton added India, Malaysia, South Africa, South Korea, Sri Lanka and Taiwan to the list of those exempt from the sanctions.

However, Reuters quoted a U.S. diplomat as saying that Turkey’s position did not stem from an exemption but was an exception. Tüpraş may pay 180 days more to the Iranian central bank over Turkey’s Halkbank, the diplomat said. The U.S. was observing whether Turkey would renew an oil contract with the Islamic republic by the end of August, the agency also quoted him as saying.

Source