The Reasoned Review

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Iraq Oil Auction – Results

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Iraq has just finished its first round of oil field auctions, and the results are bewildering at first glance. The US made a dismal show, with only Exxon-Mobil securing a whole field. China and Russia, on the other hand, turned out the big winners, each dominating the first and second rounds respectively. The establishment blogs and pundits have taken this bit of evidence and gleefully crowed to those who proclaimed the US went to Iraq to gain control of its oil fields. “See? See?” they exhort, “If this was a war for oil, why the US get beaten out by China in the auctions?”

Such reasoning betrays, I think, a misunderstanding as to what “war for oil” means. It would have been nice to have US companies develop Iraq’s oil fields, but our primary concern in invading the country was to ensure that they would be developed. It is important to realize that Iraq’s oil fields were severely underused throughout the 1990s, leading to increased US interest in getting those fields up and running. We began to do so by the end of the ’90s (as one can see from the tail end of that graph), but in 2000 Saddam began refusing to sell Iraqi oil in US dollars.

Well, this was the real unforgivable sin, and for that he had to go. And now that he’s gone, the oil fields are open to be developed, and their product will duly go on the international, US-driven oil market.  Whichever country secures the development contracts will surely glean some profit, but so long as the oil gets on the market, America wins.

Also, it is best not to draw too many conclusions from this preliminary round of auctioning. Only a small fraction of Iraq’s oil fields were put up for sale this past week, and it’s impossible to say definitively that the US was “shut out” of them based on their results. When all the fields have been divvied up, we’ll see where the US stands.

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Written by pavanvan

December 20, 2009 at 10:33 pm

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