Iraq is projected to become an oil giant of as much geopolitical influence as Saudi Arabia. And the U.S. government and its corporations are at the center of that trend.

Ben Van Heuvelen has a piece at Foreign Policy describing Iraq’s burgeoning “extractive industry” and how they’re on track to become a “swing producer” within five years. A “swing producer” refers to “the ability to drastically increase production on short notice” (Saudi Arabia is currently the world’s only swing producer, and it affords the monarchy unmatched geopolitical power). These projections are not a certainty, but the U.S. and Western oil companies are doing their best.

In 2009, the government started awarding contracts for the country’s largest fields, and the biggest names in oil have signed up. Companies like ExxonMobil and BP have invested billions of dollars, bringing the latest in technology and engineering expertise. Production has rebounded from just over 1 million barrels per day after the invasion to nearly 3 million today. Baghdad’s 11 international oil contracts promise to deliver a total of more than 13 million barrels per day within seven years — a figure that would make Iraq the largest oil producer, ever.

Interestingly, oil corporations are relying heavily on the undemocratic centralization of political power in a quasi-dictator like Nouri al-Maliki in order to develop Iraq’s oil. Maliki’s regime has resorted to unilaterally approving contracts with oil companies like Exxon and BP, circumventing parliament’s approval in violation of Iraqi law. “Maliki’s Shiite-majority allies have backed centralized control of oil,” Van Heuvelen writes, “while parties representing the minority Kurds and Sunnis say local governments should have more authority. No bill has yet survived parliament.”

That volatility, however, hasn’t dissuaded oil multinationals — there’s simply too much oil under the country’s soil. So, many companies, from BP to ExxonMobil to Shell to Lukoil, have been willing to invest billions of dollars without the stability of a modern oil law. Companies have mitigated their risks by negotiating contracts that rely on international arbitration to settle major disputes, rather than Iraqi courts. But the overarching reason companies can operate with some confidence is that — in the laissez-faire political economy of Iraqi oil — their power rivals that of the divided Iraqi state.

It’s a pet peeve of mine when people use the term “laissez-faire” pejoratively to describe a process that is exactly not “laissez-faire.” But his point is taken: Because of a weakened parliament, sectarian divisions, and a strong-man Iraqi regime eager to use oil production to boost its geopolitical sway, those Western corporations possess inordinate command.

This is all happening alongside political developments that made news this week regarding the Obama administration’s attempts to negotiate a new defense agreement with the Maliki regime that may include an expanded number of U.S. troops based in Iraq. That’s right, after Obama dishonestly took credit for withdrawing from Iraq, he’s now vying to march right back in, using weapons deals and military training programs as lure.

So as ExxonMobil begins to wield gratuitous power in Iraq, the Obama administration plans to gain increased U.S. influence with money and weapons and troops, all while Maliki consolidates dictatorial power and suppresses democracy at every turn. Perhaps this is what Leon Panetta was referring to when he announced the war in Iraq was “worth the price.“


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