With troops coming home, Obama echoes Bush’s hope that oil will fuel Iraq’s postwar future

By Robert Burns, AP
Friday, August 27, 2010

US points to oil as key to Iraq’s postwar future

WASHINGTON — When the U.S. overthrew Saddam Hussein seven years ago, the Bush administration envisioned a liberated Iraq that was rich, stable, democratic and a shining example to the rest of the Arab world.

Now, with the end of U.S.-led combat operations in Iraq, the Obama administration is predicting more or less the same thing.

Both U.S. presidents pinned their hopes on Iraq’s vast but underdeveloped oil resources, calculating that petroleum-fueled prosperity fed by a wave of foreign investment would give Iraqis the tools and motivation to build a modern, Western-oriented state.

But that goal remains a speck on the horizon.

Today, Iraq pumps less oil than it did under Saddam. Iraqis are stalemated in forming a new government nearly six months after national elections. And the country’s political divisions, aggravated by the struggle for control of Iraq’s oil potential, have led to fears that it could erupt in civil war, revert to a dictatorship or split along religious and ethnic fault lines.

President Barack Obama, whose opposition to the war was a hallmark of his presidential campaign in 2008, is scheduled to give an Iraq speech from the Oval Office on Tuesday, marking the transition of the U.S. military mission from combat to advising the Iraqi armed forces. All U.S. troops are to leave Iraq by the end of 2011.

When the Bush administration launched the invasion of Iraq in March 2003, it was counting on Iraq’s oil wealth to bankroll the country’s reconstruction. Paul Wolfowitz, the deputy secretary of defense at the time, told a House committee just days after the war began that Iraq’s oil wealth would relieve U.S. taxpayers of the rebuilding burden.

“We’re dealing with a country that can really finance its own reconstruction, and relatively soon,” he said on March 27, 2003.

It didn’t work out that way, in part because a fierce and resilient insurgency intruded.

The war’s outcome remains in doubt, yet oil is gaining prominence in the Obama administration’s public rationale for staying by the Iraqis’ side even after the military campaign concludes.

Defense Secretary Robert Gates says Iraq in 10 years could rank among the world’s biggest oil producers, making it fabulously rich and — by implication — a potential success story.

“It will change the entire equation in the Middle East,” Gates said, assuming Iraqi leaders are able to sustain their shaky democracy. In remarks Aug. 12 in San Francisco, Gates was quick to add: “That’s the optimistic scenario. There are all kinds of more pessimistic scenarios.”

One of those less-rosy outlooks is pretty obvious: the departure of U.S. forces in 2011 leads to increased violence and a return to civil war, paralyzing the government and creating chaos. The question in that case would be whether the U.S. would intervene with combat troops.

Another unpleasant possibility: Iraq’s strongest and most developed institution — the military — gets fed up with a lack of political progress in Baghdad and overthrows the civilian government.

Oil will play an important role in Iraq’s future, though not necessarily a positive one.

Nations with huge oil and resource wealth — such as Russia, Saudi Arabia and Venezuela — often fail to develop democratic political systems. It’s not clear why this would be so, but some believe that vast oil resources encourages centralized state control by dictators or oligarchs.

Iraq sits atop an estimated 115 billion barrels of crude, the world’s third-largest proven reserves. Iraq’s oil production, however, has stagnated since the U.S. invasion, hampered by technical problems, looting and insurgent violence.

Production averaged about 2.5 million barrels a day from the late 1990s to the early 2000s before the fall of Saddam, and since then has ranged between 2.1 million and 2.4 million barrels a day, according to the U.S. Energy Information Administration.

Iraq’s oil minister, Hussain al-Shahristani said last month that the country hopes to boost output to 12 million barrels a day in about six years. Some analysts are skeptical, but U.S. officials seem encouraged.

Meghan O’Sullivan, a former top Iraq adviser to Bush who helped lead the president’s war strategy review in 2006, sees Iraq’s oil potential as a mixed blessing.

“It’s an enormous opportunity and it’s something that gives Iraq the potential to regain its status as a regional superpower, but it also brings all kinds of dangers, and there are many hurdles that need to be surmounted before Iraq can realize that potential,” she said in an interview.

O’Sullivan, now a professor of international affairs at Harvard, says Iraq remains in conflict over how to share power and resources among its major sectarian and ethnic groups, and oil is the biggest resource prize in that competition.

Most of the known oil and gas reserves in Iraq form a belt that runs along the eastern edge of the country, centered in the Shiite areas of the south and the Kurdish north. Iraqi politicians have been locked in a bitter dispute over how much control the central government in Baghdad should have over regional oil operations, and how revenues would be shared.

Efforts to pass a national hydrocarbons law that would set a legal framework for oil investment are stalled, although the government has worked out some oil revenue-sharing issues.

When he announced the U.S. invasion on March 19, 2003, President George W. Bush said in nationally television address that his goal was to make Iraq “united, stable and free.” Among critics, some charged that the U.S. was making a grab for Iraq’s oil.

Almost six years later, in a speech announcing his plan for winding down the war, Obama said his objective was an Iraq that is “sovereign, stable and self-reliant.” He mentioned oil just once, noting that declining oil revenues were straining the Iraqi government, which relies on oil sales for more than 90 percent of state revenues.

More recently, the administration has highlighted Iraq’s oil potential, perhaps to help explain why it intends to continue financial, political and diplomatic support to stabilize the country.

The administration has committed itself to nurturing a democracy in Iraq.

“I don’t see any other model for Iraq,” said Christopher Hill, who just completed 16 months as U.S. ambassador in Baghdad.

Gates said Iraq’s future is “open.” He likened it to post-Soviet Russia in 1991.

“No one was sure what would come later, but for the first time in their history the Russian people had a choice and the future was open to them,” Gates said. “I think the same thing is true in Iraq today.”

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