Rising oil prices lie behind the decision to crackdown on Iraq's southern rebellion, writes Salah Hemeid Visiting Al-Amarah to boost the morale of troops fighting Shia rebels on Monday, Iraq's Prime Minister Nuri Al-Maliki vowed that forces loyal to the government would continue their offensive in the southern province until anti-government armed groups are uprooted. The onslaught is an extension of military operations that began in Basra in March to end rebel control of Iraq's second largest city. Al-Maliki has repeatedly said that the onslaught, also taking place in Mosul which lies on a strategic pipeline linking the Kirkuk oilfields in the north to Turkey, is part of his plan to build on recent security gains and restore government authority over Iraq's troublesome provinces. Since the 2003 war that toppled Saddam Hussein's regime, Mosul has been under control of Al-Qaeda and other Sunni armed groups, while Al-Amarah and Basra are dominated by the Mahdi militia of the anti-American Shia cleric Muqtada Al-Sadr. The government's decision to end rebel domination of these key provinces has raised questions about the timing of Al-Maliki's move. The answer seems to lie in oil. The two southern provinces sit on a lake of 150 billion barrels, i.e. 95 per cent of Iraq's oil reserves. The northern province provides Iraq with its only oil export outlet to the Mediterranean. With oil prices nudging $140 per barrel and the US economy on the verge of freefall, Washington seems to have decided that it cannot wait any longer to use Iraq's huge reserve to increase output and lower the prices. On 19 June, The New York Times reported that Shell, BP and Exxon Mobil, Total and Chevron, heirs to the infamous seven sisters cartel that dominated world energy production in the latter half of the 20th century, were close to signing deals with Iraq to develop its oil and gas fields. The report came after Baghdad said it is about to sign agreements with international oil firms to revamp Iraq's oil fields, ravaged by the war and sabotaged by armed groups. Under the deals, worth around $500 million, the five firms will help overhaul Iraq's oil fields to boost the current production by 600,000 barrels a day, an increase of nearly 20 per cent. Iraqi oil exports, most of which come from southern oil fields around Basra, have now moved above two million barrels a day for the first time since the US-led invasion, Iraq's Petroleum Minister Hussein Al-Shahristani said last week. A sharp drop in attacks on pipelines has enabled Iraq to increase oil exports from northern oil fields. Pipeline attacks fell from an average of 30 a month in 2007 to only four last month. The northern pipeline has frequently been shut down for extended periods during the past four years because of sabotage. After five gruelling years of war US and other Western oil companies, shunned following Saddam's nationalisation of the oil industry in 1972, are returning to some of the world's biggest oil fields. The move is intended to give these mammoth corporations a long-term access to proven reserves that are second only to Saudi Arabia's. With some analysts predicting that oil prices could reach $300 by 2015, the motives behind increasing production in the Iraqi oil fields are crystal clear. American oil companies have been busy over the last five years analysing Iraq's oil wealth and offering technical expertise in relentless efforts to secure the favour of the Iraqi government and, by extension, contracts and huge profits at a later date. Representatives of the companies and American officials played a leading role in discussions to write a new Iraqi oil law to give foreign investment a larger share in the industry. As a result the five oil companies have been successful against major competitors from China, Russia and India, raising the question of whether this was the ultimate goal of the US-led invasion of Iraq after all. The Bush administration always promised that Saddam's downfall would open the way for American oil companies to return to Iraq. It was only because of insurgent attacks that American firms stayed away for five years. So great is the demand for oil today, and the concern over rising prices, that now is the perfect time for their project. It will allow the US administration to justify its invasion to an American public opposed to the war but eager for cheaper oil, and to force deals on an Iraqi public debilitated by five years of violence and destruction. Nevertheless, the deals have rekindled suspicions among Iraqis that oil, not freedom and democracy, lay behind Washington's determination to invade their country. Those suspicions have been fanned by the refusal to allow parliament to discuss the terms of contracts, and by the non- competitive bidding process. Deals are being concluded even though Iraq's parliament has yet to adopt the oil and revenue sharing law widely viewed as a critical political benchmark for national reconciliation. The agreements, expected to be signed later this month, also have put the Bush administration at odds with some Democratic legislators who have warned that the deals could fan the perception that US involvement in Iraq was motivated by oil. The Democrats feel that by speeding up the signing of the deals the Bush administration is creating further mess in a crisis-ridden Iraq ahead of the presidential election in order to hamper Barack Obama's way to the White House. But if Al-Maliki believes that clearing the streets of Al-Amarah and Basra from the militias, particularly those of the Mahdi army who have been engaged in massive smuggling operations that siphon off hundreds of thousands of barrels a day, in order to allow American companies to resume operations peacefully and at a lower cost, is going to be easy he is wrong. It could well act to pull the country further apart. There are already deep divisions in Iraq over whether oil should be controlled by central or regional government, whether international oil companies should be involved in development and how the profits should be distributed. A hasty solution like the one envisaged by Al-Maliki could trigger even more distrust and resentment among rival religious and ethnic factions, entrenching the kind of problems that he and his rickety government have been unable to solve by simply sending troops to fight militias in rebellious provinces.
