Academic journal article Arab Studies Quarterly (ASQ)

Oil, Sanctions, Debt and the Future

Academic journal article Arab Studies Quarterly (ASQ)

Oil, Sanctions, Debt and the Future

Article excerpt

LOOKING AT THE WORLD MAP of oil we find certain facts to have shaped the history of Iraq and its regional context and will continue to do so for a long time to come. At the end of 1999 world oil reserves amounted to 1033 billion barrels of oil with two thirds of these reserves to be found in five countries (Saudi Arabia, Iraq, Iran, Kuwait and the United Arab Emirates). Similarly in that year these countries were responsible for nearly one third of the world oil production of 72 million barrels per day (MBD) and over 40 percent of the world's oil exports of 41 MBD. In relation to the Organization of Petroleum Exporting Countries (OPEC) these countries command more than four fifths of the organization's reserves and two thirds of its output and exports. Therefore, what happens to the oil industry in any one of these countries will affect the fortunes of its neighboring countries. Moreover, the high degree of concentration of oil reserves, output and exports in these five countries made them a constant target o f outside power machination and interference. And it is a well-known fact that the oil sectors in these five countries have been until recently been under the direct control of a handful of multinational oil corporations (BP, Exxon, Shell, Texaco, Gulf, etc.).

This essay will attempt to deal with six topics: (1) historical background; (2) oil and the Iraqi economy; (3) the Iraq-Iran war; (4) the invasion of Kuwait; (5) the United Nations sanctions regime; and (6) Iraq's foreign debt. I will conclude with some speculative thoughts on the future of the Iraqi economy.


It is a historical fact that the home governments of multinational oil corporations (US, UK, France) have all played significant roles in enabling their companies to acquire oil concessions, to penetrate markets and to deal with the governments of oil producing countries. Depending on the situation and the historical context, these governments have at times cooperated with each other and at times opposed one another. In the case of the United States evidence of the close relationship between the U.S.-based oil Multi-National Corporations (MNCs) and the U.S. government is abundant and goes way back to the early part of the last century. Few examples will illustrate the point.

During World War II and because of the war conditions oil companies could not produce enough oil to provide the funds promised the Saudi government. Instead, these companies were able to persuade the Roosevelt administration to provide such funds in order to not jeopardize the oil concession. The American President solved the problem in 1943 by stating to the administrator of the Lend-Lease program that: "in order to enable you to arrange Lend-Lease aid to the government of Saudi Arabia, I hereby find that the defense of Saudi Arabia is vital to the defense of the United States." (1)

Following World War II Secretary of State Dean Acheson instructed the Economic Cooperation Administration or the Marshal Plan "in every petroleum transaction an American company must be involved" and "deliveries [of oil] from sources other than the United States and possessions will be eligible only if made by American owned and operated companies." (2)

The policy of insisting that American companies be the ones to sell oil to Europe was most conducive to MNC's plans to expand oil output in the Middle East for their operations in Europe. Again following the nationalization of BP operations in Iran the State Department, in cooperation with the British government (following the 1953 overthrow of Iranian Prime Minister Dr. Mohammed Mossadegh), was instrumental in finding the solution which introduced American companies to Iran's oil and reintroduced that oil to the world market.

In 1958, when the monarchy in Iraq was overthrown, the U.S. government gave strong consideration to military intervention to undo the revolution. …

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