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Iraq, And Big Oil, And No-bid Contracts ... Oh My

Dear Iraq, sorry the war hasn’t gone well. But now that the surge is wrapping up, we hope you won’t mind that we need several dozen permanent base

Dear Iraq, sorry the war hasn’t gone well. But now that the surge is wrapping up, we hope you won’t mind that we need several dozen permanent bases in your country. Oh, and did we mention that we’ll need you to approve some no-bid contracts for our oil companies, too? After all, what’s a few bases and oilfields among friends?

Four Western oil companies are in the final stages of negotiations this month on contracts that will return them to Iraq, 36 years after losing their oil concession to nationalization as Saddam Hussein rose to power.

Exxon Mobil, Shell, Total and BP — the original partners in the Iraq Petroleum Company — along with Chevron and a number of smaller oil companies, are in talks with Iraq’s Oil Ministry for no-bid contracts to service Iraq’s largest fields, according to ministry officials, oil company officials and an American diplomat.

The deals, expected to be announced on June 30, will lay the foundation for the first commercial work for the major companies in Iraq since the American invasion, and open a new and potentially lucrative country for their operations.

The no-bid contracts are unusual for the industry, and the offers prevailed over others by more than 40 companies, including companies in Russia, China and India. The contracts, which would run for one to two years and are relatively small by industry standards, would nonetheless give the companies an advantage in bidding on future contracts in a country that many experts consider to be the best hope for a large-scale increase in oil production.

Daniel Altman provides some helpful context: “Imagine. At the precise moment when demand for oil was the highest in history, a recently democratized country with enormous reserves had the chance to sell extraction contracts to the highest bidder. This was a country that desperately needed the revenue to help rebuild its schools, power grid and water supply after a long internal conflict. So why did it hand out the contracts with no auction at all?”

And Andrew Sullivan answers the rhetorical question: “Because the US told them so. You don’t get to conquer a new province and not get any spoils, do you? Who needs ANWR or a carbon tax when you can drain Iraq at record high oil prices?”

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