Mark Gobell
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Palast on How (and Thanks to Whom) We Got into Iraq
Excerpt from Greg Palast's "Armed Madhouse," Dutton, Penguin, 2006
CHAPTER 2
THE FLOW
Trillion Dollar Babies
The secret plans for Operation Iraqi Liberation that turned a three-day military fling into Vietnam on the Tigris / A five-and-a-half- part tale including Nose-Twist's Hidden Hand, Kissinger's man in the dream palace, the No-Brainer vs. The Witches' Brew, the other Downing Street memos, the Houston Insurgency, Amy's alligator boots, Mr. 5%, a call to Riyadh, Wolfowitz Dammerung and "especially the oil."
There are kooks and cranks and conspiracy nuts out there who think George Bush, from the moment he took office, had some kind of secret plan to invade Iraq and grab control of its oil. They're wrong.
There were two plans. I've got them both. One is 323 pages long, the other 101 pages. How I got them, I can explain later.
[Note: There are two Chalabis in this story, two Aljiburys and two confidential plans. To guide you through this Washington-Baghdad hall of mirrors, the publisher has attached a timeline to the inside cover.]
PLAN A: IN AND OUT IN THREE DAYS
Walnut Creek, February 2001
In February 2001, just three weeks after Bush and Cheney took power, Plan A was launched at a confidential gathering in Walnut Creek, California. The official justification for invading Iraq, the September 11 attack, was still seven months in the future. But let's not quibble about chronology.
Iraq Plan A was short and sweet: in and out in three days. "It was an invasion disguised as a coup," an insider-the planning group's host-told me, one of four who, when our team's knowledge of events was evident, conceded details of the program.
The "disguised coup" was simplicity itself, kind of a Marinesupported Bay of Pigs. Once the tanks crashed through the palace gate in Baghdad, they would parachute in a Ba'athist general cashiered by Saddam, a war hero-some Iraqi Eisenhower who'd beaten the Iranians in 1988-which one didn't matter. The idea was to hand the new strongman Saddam's moustache and his militarypolitical enforcement machine-the secret group was already contacting Saddam's generals to switch allegiance. Then, according to their playbook, there would be snap elections, say within 90 days, to put a democratic halo on our chosen generalissimo.
Who launched this "disguised invasion" scheme? This will come as unhappy news to fans of Colin Powell. After the war turned ugly, the Washington Post's Bob Woodward, fed with strategic leaks, told us the Secretary of State secretly opposed the invasion. That was Powell's self-serving fairy tale. Powell didn't oppose the invasion, he opposed occupation.
At the direction of Powell's State Department, Pam Quanrud, then with the National Security Counsel and now with the U.S. embassy in Moscow, organized the Walnut Creek session at the home of State's point man, Falah Aljibury. Aljibury was Ronald Reagan's and Bush Sr.'s back-channel to Saddam when Saddam was our Butcher of Baghdad. (In 1988, Saddam gassed Iranians on the al-Fao Peninsula, a chemical attack Reagan's intelligence apparatus made possible by providing satellite maps to Saddam.) After Saddam went renegade in 1990 and attempted to shoplift Kuwait's oil, Iraqi-born Aljibury followed the Bush family in their twist from Saddam backers to Saddam bashers. American oilmen pay Aljibury well for his intelligence on Iraq's industry. Hess Energy Trading, Bank of America and the oilspeculating arm of Goldman Sachs are all his clients.
The Three-Day Plan made some real tracks at first. Aljibury and his team even interviewed Ba'athists for the part of puppet president. Think of it as a kind of beauty contest for wannabe dictators. This "primary" was conducted under Saddam's nose with advice from top men in Iraq itself. One candidate that State and the CIA fancied was General Nizar Khazraji, Saddam's exiled army chief, then under house arrest in Denmark for war crimes. (Two days before the U.S. invasion, he disappeared from Copenhagen. Like Elvis, Khazraji has been sighted in Qatar, Kuwait, dead in Najaf and alive again in Kurdistan.)
Crucially, the quickie coup-cum-invasion had friends where it counted. "The petroleum industry, the chemical industry, the banking industry," Aljibury told me. "They'd hoped that Iraq would go for a revolution like other revolutions that have occurred in the past and government was shut down for two or three days" just like the last one that brought Saddam to power in 1979. The U.S. oil, chemical and banking guys liked that one too, at the time.
The idea was that no matter which strongman the Bush team designated, they would "Bring him in right away and say that Iraq is being liberated-and everybody stay in office ... everything as is." And by "everything" he meant, first and foremost, the key thing, the oil ministry and state oil company. While the Walnut Creek committee was busy-busy with many topics, Aljibury said, "It quickly became an oil group."
Why would Aljibury agree to speak with me? Once he knew we'd gotten word of the plan, he wanted to defend it. More than anything, he wanted us to know that the oilmen's plan would not have left us with what we have today: a tribal, shattered, blown-to-hell Iraq.
War Drums Across the Potomac
Alas, the three-day wham-bam-thank- you-ma'am revolution was not to be.
Aljibury and his NSC-State Department crew had expected neither the ferocity nor tactical brilliance of their enemy in Iraq: the Pentagon.
Iraq today, busted and bloody, is the detritus-strewn battlefield of a war between two political armies arrayed across opposite banks of the Potomac. On one side, the occupation-phobic Arabist realists at Foggy Bottom; on the other, bivouacked at the Pentagon, Defense Secretary Donald Rumsfeld, his deputy Paul Wolfowitz and former Iran-Contra convict Elliott Abrams, Special Advisor to the President, all three signers of that manifesto for benevolent empire, "Project for a New American Century" (PNAC), the neo-conservative Weltanschauung.
Unlike the wussies at State, these were real warriors, unafraid of moving toy tanks around the Pentagon War Room. Bush Security Advisor Michael Ledeen, one of the desktop Napoleons, encouraged his fellow neo-cons with this rallying cry,
Wage a total war ... and our children will sing great songs about us years from now
It was inspiring but not original. "Wollt ihr den totalen Krieg?" Do you want total war? Joseph Goebbels asked his Nazi Party faithful in February 1943. Two years later, the total warriors of 1943 would be crushed. But in November 2001, after the easy conquest of Afghanistan, total war looked like a cakewalk, and the neo-conservatives exploited the patriotic, triumphal mood to draft their "Plan B" for Iraq.
Plan B: "Especially the Oil"
It was nothing like State's three-day quickie. The neo-cons' 101-page confidential document goes boldly where no invasion plan had gone before: the complete rewrite of the conquered state's "policies, laws and regulations. " Here's a sample:
• Pages 8 & 21: A big income tax cut for Iraq's wealthiest and complete elimination of taxes on business revenues.
• Pages 35 & 73: The quick sale of Iraq's banks, bridges and water companies to foreign operators.
• Page 45: The application for Iraq to join the World Trade Organization, kindly ghostwritten by U.S. government contractors.
• Page 28: A "market-friendly" customs law-a kind of superNAFTA-aiming for a complete wipeout of tariffs that had protected Iraq's industry from cheap foreign imports.
• Page 44: New copyright laws protecting foreign (i.e., American) software, music and drug companies
Odd to attach to an invasion plan. It was more like a corporate takeover, except with Abrams tanks instead of junk bonds. There wasn't a whole lot of thinking going on about strengthening the borders against insurgents, disarming private armies or securing Baghdad from looters; and not a thing about elections or "democracy" Instead, there was much about securing a "market-friendly regulatory environment" and "strengthening property rights-related legislation, corporate and contract law"
The draft that came my way, in February 2003, just as our tanks were about to cross Iraq's border, has a pleasant title: "Moving the Iraqi Economy from Recovery to Sustainable Growth."
What would get "moved"? Selling off banks and bridges was just the beginning. The would-be conquistadors left nothing to chanceor to the Iraqis. At page 74, the plan's authors required Iraq to "privatize" (i.e., sell off) "all state-owned companies." In Iraq, that's just about everything worth having.
And it would all be open to foreign ownership. That would be convenient for Anglo-American bidders. Post-invasion, Iraqis with their just-about-worthles s Saddam dinars would have nothing to bid with anyway.
All this --from the big asset sell-off to the World Trade application- - would have to take longer than the State Department's three-days-slam- bam invasion plan. According to Annex D of the plan, the schedule, economic conquest would take 270 to 360 days. Logically, that would require 270 to 360 days of American boots on the ground, a year of full-scale occupation before Iraq could be given back to the Iraqis.
And certainly, this full year of occupation would be needed for the big prize targeted on page 73: "... privatization, asset sales, concessions, leases and management contracts, especially those in the oil and supporting industries."
"ESPECIALLY THE OIL" -- complete and total sell-off of Iraq's oil assets from the pipes to the pumps to the crude in the ground.
The Plan makes it clear to me that, even if we didn't go into Iraq for the oil, we sure as hell weren't leaving without it.
Nose-Twist's Hidden Hand
The document gave off a strange odor. The weird details gave it away. I smelled Grover Norquist.
Norquist is the capo di tutti capi of lobbyists of the rich and the Right. In Washington, every Wednesday, Norquist, former lobbyist for Bill Gates and for American Express, hosts a powwow of big business political operatives, conservative media moguls, the National Rifle Association and right-wing muscle groups. Officially, he fronts Americans for Tax Reform, a kind of trade union for billionaires (he won't name them) whose cause is a regressive "flat-tax" scheme to cap income taxes on the super-rich.
Karl Rove calls him, with admiration, "The Impresario." You could call him "Satan's lobbyist," but that would be wrong. After all, his Wednesday group includes the Lord's designated representatives, Pat Robertson's Christian Coalition. Indeed, the devout Norquist channeled nearly a million dollars from his tax group to the Alabama Christian Coalition to fight the devil's tool, legalized gambling. He didn't tell them he got the cash from an Indian tribe running a casino in Mississippi that didn't want competition in next-door Alabama. But then, the "Christians" didn't ask.
Who drafted the extraordinary "Economy Plan"? The Defense Department flat-out denied involvement, but after a week of calls, our research team (working for BBC TV London, Rolling Stone, and Harper's magazine, New York) reached a diplomat in Kazakhstan, a State Department man, who confirmed that the Pentagon had barged in on the drafting. If the Pentagon was in on it, that meant neo-cons were involved. And if neo-cons were toying with another nation's assets, Norquist was certain to be circling nearby, salivating for a taste of the asset action. I'd picked up that several likely lobbyists were hanging their balls on this Christmas tree, but the "reform" of Iraq's taxes-from soak the rich to fleece the poor-carried the unmistakable fingerprints of Norquist's soft little hands.
Acting on this scant info, I took a chance and dropped by the super-lobbyist' s Washington office tower on L Street. Norquist greeted me under a huge wall-spanning photo of his idol, Richard Nixon, with the disturbing slogan, "Nixon -- NOW MORE THAN EVER."
With his pudgy red freckled face under a Dennis-the-Menace hairdo, Norquist looked like an oversized toddler. His rivals call him Gopher Nose-Twist, but they're just jealous of Norquist's ability to auction off access to the White House.
As Nixon's eyes followed us to his desk, Grover saw the 101-page Iraq plan in my hand and beamed. His baby! Rather than attempt to cover his involvement, he nearly autographed it. He couldn't wait, now that I was in on the secret, to boast how he'd waltzed with ease through the Pentagon, the Treasury and the State Department, busy for months before the invasion, planning Iraq's economy for the Iraqis.
In Iraq, the neo-con plan would create a private enterprise utopia in Mesopotamia. The model, said Norquist, was Chile under General Augusto Pinochet.
Chile's low-tax free-trade property-rights model led to its growth ... even though at the time it was not fully democratic.
Not fully democratic is one way of putting it. Pinochet, a South American Saddam Hussein, created his free-market "miracle" in 1973 after he murdered Chile's elected president and executed 3,000 dissenters. The Chile model is indeed instructive of what was in store for Iraq. Pinochet's cronies plundered the government's assets and drove the nation into a deep depression. But Norquist found the free-market "deregulation" that the dictator ordered very much to his liking. Iraq, he decided, could do with a little of the Pinochet treatment.
In all fairness to the rottweiler of the radical right, the hidden plan had an unwitting public proponent stationed within the influential liberal chatterati. The New York Times columnist Thomas Friedman also pumped for democracy a la Pinochet in Iraq. "Economic reform" first, vote later, he wrote in his column. For Friedman, "economic reform" translates to privatization, asset sales and free market rigmarole. Now that we've seized Baghdad, U.S. occupiers ...
"... should not focus on holding national elections-the hardware of democracy. Elections should come last. Instead, it must start with the software."
Software? "Free press, free speech," Friedman begins promisingly, but, first and foremost, "economic reform"; which Friedman defines as lots of deregulation and privatization.
While star columnist Friedman was motivated by his dilettante's exuberance for economics lessons half learned, Norquist's well-heeled backers and corporate allies would have had different motives: Undoubtedly, they would have expected something tangible from their investments in Washington politicians. And they got it. Through the Economy Plan, Iraq became Pig Heaven with something for everybody in corporate America. This was undoubtedly history's first military assault plan appended to a program for toughening the target nation's copyright laws. This change in "intellectual property" rules suggested by Norquist means that nevermore would Iraqi Ba'athists threaten America with bootleg dubs of Britney Spears's "... Baby One More Time."
Wolfowitz's Gusher
Whether it's Wal-Mart or war, Americans just can't pass up a bargain. As tanks rolled toward Baghdad, Paul Wolfowitz offered America the Bargain of the Century: a free Iraq-not "free" in the sense of "freedom and democracy" but free in the sense of this won't cost us a penny.
On March 27, 2003, the Deputy Secretary of Defense testified:
"There's a lot of money to pay for this that doesn't have to be U.S. taxpayer money."
And where would these billions and billions come from?
"It starts with the assets of the Iraqi people. We're dealing with a country that can really finance its own reconstruction and relatively soon."
We could bomb them and then the wrecked nation would pay to rebuild itself-free of charge to the USA!
Now, wait a minute. The President's own Chief Economist, Larry Lindsey, had said a war in Iraq could cost $100 billion. The Bush Administration corrected Lindsey's error: He was fired.
Lindsey, apparently, didn't figure in the Black Gold. Wolfowitz, by contrast, gushed before Congress:
"The oil revenues of that country could bring between $50 and $100 billion over the next two or three years."
This was no small matter. The vulpine Deputy Secretary was the Bush team's salesman-in- chief for the war. For Europeans, the question of invading Iraq was a joust over whether Saddam did or did not have evil germs and nukes. U.S. Congressional debate fixed on the weightier issue, "What's this little war going to cost us?" There was no way the Senate would vote to authorize an adventure with a price tag of $100 billion.
That's when Wolfowitz made oil spring forth from the desert.
Wolfowitz said it and the sheep-o-witz press published it. The sale was made and Congress voted for Wolfowitz's invasion on the cheap.
The Wall Street journal editorial page went further: The invasion would be cheaper than free. With the colossal oil strike Wolfowitz promised we'd find in Iraq, it stood to reason that the price of oil would fall worldwide. The invasion would not only be free to the U.S. taxpayer, gasoline would flow like discounted milk and honey into our SUVs. But I had some questions. Between Lindsey's calculations in September 2002, and Wolfowitz's testimony in March 2003, who discovered this massive oil windfall? Who said that Iraq could pump that much oil?
"Nobody ever said that," Aljibury told me, speaking of his hidden group of oil experts working with the State Department. Well, what did the experts tell Wolfowitz?
Looking back, it's easy to say Wolfowitz was wrong: stunningly, breathtakingly, eye-poppingly wrong. The bill for Bush's big adventure in Iraq has taken over a quarter trillion dollars from the U.S. taxpayer.
Wrong is one thing. Anyone can make a mistake. But if Wolfowitz was told one thing in his ear but something else came out of his mouth, that could be perjury.
We wanted to find out what Wolfowitz had been told-the Administration' s real working numbers for Iraq's potential oil production. These would have come from Guy Caruso, head of the Energy Information Administration. Caruso, a source informed us, was stunned to hear Wolfowitz's oil-gusher claims. The informer, a Saudi intelligence operative I reached by phone in Riyadh, said, "Guy Caruso, he was like `what are they getting this from?"'
But Caruso, who'd come to the Energy Information Administration job from the CIA, knew how to keep a secret. Caruso's little secretthat Iraq could not produce what Wolfowitz promised-was significant. Just as significant, the Saudis, not the U.S. Congress, knew about it. "Leading up to the war," the Riyadh source told me, "I was just giving the Saudi view on this. I was [saying], `You gotta be joking, right?"'
Some joke.
In March 2004, I flew to Washington to ask Caruso himself about what Wolfowitz knew and when he knew it. It was Caruso's job to project those Iraq figures for the Pentagon. At his Energy Department office suite, an affable, sharp and very guarded Caruso led me through an enchanting forest of technical details"West Texas Intermediate, " "7-11 buy-back," "bandwidth"- which, when I did the arithmetic, got us less than halfway to Wolfowitz's magic $50 billion. Did Caruso give the Deputy Defense Secretary this bad news? Knowing where I was heading, he passed the buck to "my numbers man, Bob Ebel," who had performed the calculations and carried them, in confidence, to the Defense Department, Wolfowitz's warriors.
That grabbed my attention: Robert Ebel doesn't work for the government. I found Ebel at the Washington Center for Strategic and International Studies, one of those think tanks where our betters choose our wars for us. It's an ecumenical house of power worship. Its fellows include National Security Advisor Richard Allen, former Secretary of State Madeleine Albright, Nixon's chief-of-staff and Reagan-era Secretary of State Alexander Haig, and a "Henry Kissinger chair" for them to sit in funded by corporate donors.
Ebel is no hands-off think-tank egghead. For eleven years, Ebel was the CIA's brain on oil. Other posts of influence followed, including fourteen years with international energy giant ENSERCH Corp.
With Caruso's unofficial approval, Ebel agreed to speak with me. He said he'd been quietly dispatched in 2002 and 2003 to London and elsewhere by the Pentagon to meet with Saddam's former Minister of oil and his "Future of Iraq Group." How odd. In September 2002, the State Department insisted to The Washington Post that the U.S.-sponsored Future of Iraq Group "does not have oil on its list of issues."
State Department pronouncements notwithstanding, Ebel last met with Saddam's former oil minister Fadhil Chalabi before Wolfowitz testified. Fadhil Chalabi (not to be confused with Ahmad Chalabi), in frustrating exile in London, had big plans for Iraq's oil. You could read Chalabi's thoughts in a report on the target nation's petroleum industry. He sold copies for $52,000 each, with lunch and a seminar thrown in. Given Chalabi's influence over the Pentagon's team of handpicked rulers-to-be, it was an offer oil companies could not refuse.
Ebel didn't need a copy. He had clearance and access to the CIA reports showing Saddam's fields in a crippled state. Repairs and new equipment for a big new drilling push, Ebel knew, could eat up $40 billion, more than Iraq could sell in years. The get-together was less than pleasant.
Ebel told Fadhil and his chums flat out that their projections of pumping three to three and a half million barrels a day out of a post-invasion Iraq were "ridiculous. "
Fadhil Chalabi didn't want to hear that. There was more at stake in the big numbers than flim flamming a docile Congress. Joining Fadhil in the meeting with Ebel in London was Ibrahim Bahr al-Ulum, son of a top Iraqi sheik. He was quiet and subservient, and nodded, grinned and agreed when Fadhil spoke. The sheik's son had plans to sell off Iraq's oil fields as soon as the 82nd Airborne had them in hand. The sell-off was worth billions of dollars-maybe a trillion to Iraq. The wannabe rulers' trillion-dollar oil field sell-off hung precariously from Wolfowitz's phantasmagorical projections of the amount that could be pumped.
Which takes us back to our original question: Was it madly wrong or was he trying to mislead Congress? If Fadhil Chalabi's oil projections were "ridiculous, " what would Ebel call Wolfowitz's testimony promising up to $100 billion in oil profits to pay for reconstruction? After our formal television interview for BBC was over, I asked Ebel, What about the Wolfowitz numbers?
Ebel smiled. "It was just part of the sales pitch, wasn't it?"
The sales pitch. War for sale -- cheap!
You could say that one man's sales pitch is another man's perjury.
If Wolfowitz had knowingly concealed the Caruso team's findings while testifying under oath, the question of perjury arises. In fact, another Bush neo-con poobah, Elliott Abrams, was convicted in 1991 of lying under oath to Congress over selling arms to Iran.
But no need to worry yourself with these weighty questions -- Wolfowitz can't be guilty of perjury Since Abrams' conviction, Wolfowitz and other Bush boys do not testify to Congress under oath.
He did not raise his hand and swear to "tell the whole truth, so help me, God," he's off the hook. How the Lord will judge Wolfowitz's testimony, we cannot say
CHICAGO TAKES BAGHDAD
On March 17, 2003, President George Bush gave Saddam and his sons 48 hours to get out of Baghdad-or we were coming in to take him out. Like a scene from High Noon: forty-eight hours to get out of Dodge.
This was war. Then our President turned to the camera and said, "I'd like to speak to the Iraqi people."
They speak Arabic, but never mind, I was intrigued. I'd thought our Commander-in- Chief would say something like, "Dear people of Iraq, our kids are coming in to liberate you ... so don't shoot them." But instead of telling Iraqis not to kill our troops, the President warned the people of Iraq: "Do not destroy oil wells."
Do not destroy oil wells.
Meanwhile, Tony Blair assured Britain's Parliament, "Our actions have nothing to do with oil or any of the other conspiracy theories put forward."
And so began what White House press spokesman Ari Fleischer called ... Operation Iraqi Liberation -- O.I.L.
<'For those who dismiss the White House announcement of "O.I.L." as urban myth, check the BBC's White House archive via www.gregpalast. com/detail. cfm?artid= 419&row=2 >
Everybody loves a joke, but this was a bit too droll even for Karl Rove's spinmeisters, who barked out the new brand name for the war: Operation Iraqi FREEDOM.
The General Toppled
But before Iraq and its oil could be liberated, there was the strongman in Baghdad to remove. On April 7, 2003, U.S. tanks broke through the walls of Saddam's palace and two days later pulled down his statue. That was good TV, but not Rumsfeld's real target. It wasn't until two weeks later, on April 21, that the Defense Secretary succeeded in pulling down General Jay Garner.
Only four months earlier, in January 2003, Bush appointed Garner as viceroy of soon-to-be-occupied Iraq. Garner was certainly the man for the job, known and liked among Iraqis and beloved among the Kurds for whom he acted as protector from Saddam's revenge in the year following the first Gulf War. In 1991, in just a few months, he'd turned Northern Iraq into an economically strong, relatively peaceful sovereign state. But there were questions about his record: He'd gotten along well with the old guard around Colin Powell and he was a registered Democrat.
The general didn't waste time in provoking the neo-con planmeisters. Just days after Bush's "do not destroy oil wells" speech, in Kuwait City, Garner, fresh off the plane from the USA, promised Iraqis they would have free and fair elections as soon as Saddam was toppled, preferably within 90 days. That was a problem. Garner's 90-days-todemocracy pledge ran into that hard object, the neo-con's Economy Plan's "Annex D." Disposing of a nation's oil industry, let alone redrafting trade and tax laws, couldn't be done in 90 days. There was no way to shorten the Norquist/neo- con schedule to transform Iraq into a Chile on the Tigris. Democracy was a problem. Even if Iraqis allowed the Pentagon to rewrite the nation's tax laws, it was utterly inconceivable that any popularly elected government would let America flog off the nation's crown jewels: its oil.
An insider working on the game plan for Iraq's oil put it coldly:
"They have Wolfowitz coming out saying it's going to be a democratic country ... but we're going to do something that 99% of the people of Iraq wouldn't vote for."
Elections would have to wait.
As Norquist explained when I asked him about "Annex D":
"The right to trade, property rights -- these are not to be determined by some democratic election."
The lesson of General Pinochet's Chile was that asset sales and free markets must, Norquist said, "predate" elections.
I assumed Garner was unaware of the Pentagon plan's timetable when he made his 90-days-to-election s commitment. Not so. When we met in his Washington office a year after the invasion, Garner told me he chose to ignore it. He said he had other things on his mind as he crossed the Kuwaiti border. "You prevent epidemics, you start the food distribution program to prevent famine, you try to get the electricity going again."
Seizing ownership of the oil was not on Garner's must-do list, nor was Washington's rewrite of the tax laws and trade rules, and the rest of the elaborate free-market makeover scheme. In his mind, such radical legislation required a legitimate government. "My preference," the general said in his understated manner, "was to put the Iraqis in charge as soon as we can and do it in some form of elections."
Garner didn't just fall off a watermelon truck: He knew elections would mean the compost heap for the neo-con program. But he couldn't care less. "I don't think they need to go by the U.S. plan. I think that what we need to do is set an Iraqi government that represents the freely elected will of the people."
He added, "It's their country ... their oil."
Apparently, the Secretary of Defense disagreed.
On April 21, the very night Garner arrived in Baghdad from Kuwait, the general received a call from Washington. It was Donald Rumsfeld. In so many words, Rummy told Garner, don't unpack, you're fired.
I should note that Garner tried to explain to me that he wasn't "fired," just "replaced." Maybe "fired" is the wrong word. Garner was not merely sacked, he was savaged with terms like "incompetent" and "hapless" by whispering sources from within the President's inner circle. The White House needed to do more than remove Garner, they needed to discredit him and his talk of Iraq for Iraqis.
"BUSH CALLS ON MIDDLE EAST TO OPEN ARMS TO DEMOCRACY," ran the headline in The San Francisco Chronicle ... but not until the oil fields change ownership.
Garner, until he agreed to appear for my British TV audience, hadn't spoken out about the problems he caused himself by confusing Bush's call for democracy with holding elections. Throughout our talk, he remained gracious toward the President and Rumsfeld; first, because the guy has class, and second, because, as Douglas MacArthur said, old soldiers never die; nowadays, they become executives of defense contractors. Garner is CEO of SYColeman, subsidiary of L-3 Communications, the hot rising defense and spyware firm. George Bush's wars (in Iraq and on terror) have juiced L-3's bottom line big time, with sales up 167% in the first four years of war.
Let's not confuse Garner with Thomas Jefferson. Like the gang at the State and Defense Departments, he had his own ideas and uses for Iraq. The military man dreamed of turning Iraq into another Philippines, the U.S. colony so useful a century ago when coal was king. He explained:
"The Philippines was in essence a coaling station for the Navy. And it allowed the U.S. navy to maintain a presence in the Pacific. It's a bad analogy, but I think we should look right now at Iraq as our coaling station in the Middle East .. and it gives us a strategic advantage there and we ought to just accept that."
"But the privatizations, " he added, "that's just one fight you don't want to take on right now."
Kissinger's Man in the Dream Palace
But that's just the fight the neo-cons wanted, and in Rumsfeld's replacement for Garner, they had just the man for the fight. Unlike Gar-ner, Paul Bremer III had no experience on the ground in Iraq, no training to fight a guerrilla insurgency, and no background in nationbuilding. But he had one unbeatable credential that Garner lacked: Bremer had served as Managing Director of Kissinger and Associates.
Thirty years ago, in greenlighting the assassination of Chile's elected president, Henry Kissinger said, "The issues are too important to be left for the voters." It was a lesson in Realpolitik Garner missed, but it was not lost on Kissinger's protege Bremer.
In his rush to democracy, Garner had planned what he called a "big tent" meeting of Iraq's tribal leaders to plan national elections. Garner knew these characters well and figured he had only those 90 days to keep the Sunni, Shia and Kurdish factions under the tent from slitting each other's throats. The general planned to seal a deal before a slighted group would launch an "insurgency. "
Bremer knew better. In April 2003, pausing only to install himself in Saddam's old palace-and adding an extra ring of barbed wire"Jerry" Bremer cancelled Garner's "big tent" meeting. Instead, Bremer appointed the entire government himself.
National elections, Bremer pronounced, would have to wait until 2005. The delay, incidentally, would be long enough to lock in the laws, regulations and irreversible sales of assets in accordance with the Economy Plan's timeline.
After just a month in the palace, in June 2003, Bremer ordered a halt to all municipal elections including the crucial vote about to take place for mayor of the city of Najaf. The front-runner in Najaf, moderate Asad Sultan Abu Gilal, warned, "If they don't give us freedom, what will we do? We have patience, but not for long."
Back in Washington, Garner fretted that holding off elections to promote neo-con schemes would come to no good. This was not ideological: The general's a tough old dog trained as a historian, well read in the grim story of Britain's decades-past occupation of Iraq. You don't have to give Iraq to the Iraqis but, then, as the British learned, you'd better expect them to shoot at you. Garner told me, "I'm a believer that you don't want to end the day with more enemies than you started with."
But then, what's a War President without a war? And what's a war without enemies, lots of them?
And he got them. Immediately after Najaf was denied the ballot, Garner's grim warning became reality when Najaf's patience did, as predicted, run out. Local Shias formed the "Mahdi Army" and voted with bullets. Religious leaders calmed this first insurgency, but George Bush preferred to taunt the locals. "Bring 'em on," he said.
And Iraqis responded to his call. It blew in Najaf again, when, in March 2004, a local paper, printed by the big-time sheik Moqtada alSadr, criticized Bremer, the sensitive CPA chief shut down its printing presses. The sheik's militia responded to this journalism faux pas by killing 21 U.S. soldiers and seizing control of the holy city for five months.
The War President had the war he wanted just in time for the reelection battle back home.
Round-up at the Not-OK Corral
What happened to that group of Ba'athist generals and collaborators Pam Quanrud's State Department group had successfully nurtured under Saddam's nose? The Ba'athist officers had done their duty, keeping almost all of Iraq's army from resisting the U.S. invasion. When the cooperative Iraqis arrived for their reward, the Pentagon's crew had them arrested. "U.S. forces imprisoned all those we named as political leaders," said a bitter Aljibury. That raises the question: Was their crime supporting Saddam's regime or supporting the U.S. State Department team over the Pentagon?
Aljibury's main concern was that busting State Department collaborators and Ba'athist big shots was a gift to the insurgency, which thereby gained experienced military commanders, mostly Sunnis, who then had no choice but to fight the U.S.-installed regime or face arrest, ruin and maybe death.
And Bremer would make sure the insurgency would not lack for weapons or personnel. Bremer's Order Number One, "De-Ba'athification ," disbanded the army, throwing nearly half a million armed men out of work, leaving the Shia and Kurdish militias as the only local military forces.
The Pentagon neo-cons wanted total war and they were going to make sure they got it.
New World Orders 12, 37, 39 and 40
But before the blowback blew in Iraq, on September 19, 2003, Bremer, having transformed his post from occupation administrator to Pasha Omnipotent, signed orders 12, 37, 39, 40 and a blizzard of others that imposed the terms and conditions laid out in the neo-con Economy Plan.
While we often hear of the tragedy of war, or the horror of war, Bremer began each proclamation by citing, "my authority under the usages of war." "Usages"? It is worth a closer look at these new world orders to find out what makes war so useful.
Consider Order Number 37, "Tax Strategy for 2003." Here is Grover Norquist's dream come true, a flat tax on corporate and individual income capped at 15%. The U.S. Congress rejected a similar Norquist plan for America, but in Iraq, with an electorate of oneJerry Bremer-the public's will was not an issue.
Most important was that Bremer's Order 37 would apply "for 2004 and all subsequent years." A future government elected by Iraqis could not undo what the occupiers had commanded, not even their own nation's tax rates. The tax order, like every order, was designed so that future puppet governments would remain tangled in Bremer's strings long after his official departure.
Order Number 40, "the Bank Law," sold off Iraqi banks to three foreign financiers. This implements pages 30 to 42 of the Economy Plan. Notably, Bremer chose to announce his fiat, not in Iraq, but in Dubai, at a meeting of multinational bankers.
Bremer lauded the "extra element of competition" that would result from his piecing off Iraqi banks; but competition was ruled out of the lucrative bidding itself. The fire sale was limited to Bremer's handpicked lucky few: Hong Kong Shanghai Banking Corporation, National Bank of Kuwait and Standard Chartered Bank of London, the junior partners of JP Morgan Chase of New York. Everybody got a piece of the Iraqi bank pie-except the Iraqis.
Simultaneous to parceling out Iraq's banks, Bremer eliminated the prohibition on their charging high-"usurious" -interest rates, a sensitive issue in a Muslim nation. "This means," said Bremer, without a hint of humor, "Iraqis can enjoy modern banking and earn market rates of interest on their money."
Unfortunately, there are not many Iraqis with money to put into their new modern banks, especially after Bremer signed Order 12, "Trade Liberalization Policy" Here the free-market fanatics' dream came true, turning Iraq into the world's first large economy with no tariff protection whatsoever. No nation on the planet, except occupied Iraq, operates without tariffs (taxes on imports) or quotas (limits on imports). Free-market America wouldn't do this nor free-market Britain nor free-market Chile-for a good reason. A nation without protection is subject to "dumping" of surplus subsidized products, which would completely demolish local producers.
And that's exactly what happened in Iraq. Iraqi industry, having gone without new equipment for a decade due to sanctions, crawling back to life after the invasion, was shattered by Order 12. From candy kitchens to washing machine makers, Iraqi businesses went bankrupt.
The U.S. "shock and awe" bombing campaign left manufacturing intact, but the bombardment of foreign goods without control flattened industry. This is free trade with a bullet, and it was devastating. Kevin Danaher runs Global Exchange, a not-for-profit group trying to help Iraqis rebuild. He told me, "They were just wiped out. Iraqis can't compete against cheap Chinese junk dumped into Baghdad." The result, a year after "liberation, " was a shocking, awful unemployment rate of 60%.
And they were hungry.
General Garner had a solution to starvation: Buy up Iraq's own harvest. This would feed the people and, just as important, keep Iraq's farmers in business and planting. But Bremer had a better idea. In Order 12, he stripped tariff protection for the nation's growers and eliminated taxes on foreign-grown food.
This was not a method for feeding the hungry; it was, rather, shockand-awe economic therapy prescribed by the Pentagon's fanatical freemarketeers in their Economy Plan. Iraq did not need a flood of cheap imported grain. Before the wars, Iraq fed itself and was a big exporter of vegetables and fruit. Saddam-era sanctions prevented repair of irrigation pumps; cattle herds died from lack of vaccines. Instead of giving local farmers and ranchers help to repair the nation's feeding machinery per Gamer's plan, Bremer crushed them with Order 12.
Not everyone felt the pain of this reckless rush to a free market. Cargill of Minneapolis, the world's largest grain merchant, flooded Iraq with hundreds of thousands of tons of wheat from both its U.S. and Australian units.
The invitation to tax-free dumping of Cargill grains into Iraq was organized by the occupation's agriculture chief, Dan Amstutz, himself an import from the USA. He was well qualified, a kind of Grover Norquist of wheat, as CEO of the North American Grain Association. Just prior to George Bush taking office, Amstutz chaired a company founded by ... Cargill.
In May 2004, in the final days before Bremer escaped out Baghdad's back door, he took time from the burgeoning insurrection to sign a score of new orders, including numbers 81, "Patents," and 83, "Copyrights. " Here, Grover Norquist's hard work once again paid off. Fifty years of royalties would now be conferred on music recordings and twenty years on Windows code.
Not all of Iraq's laws were "de-Saddamized. " The dictator's prohibition on public-sector labor union activity remains with a vengeance. In December 2003, Bremer's troops arrested the entire board of the Iraqi Workers Federation of Trade Unions, then released them, though not until U.S. soldiers painted the union's building marquee black.
I called Falah Aljibury for his take on what was happening in his home country under the Bremer regime. Even if it was not his or Powell's "disguised coup," this new political-economic order was Aljibury's long-dreamed- of "liberation" come to life. He was the last person I expected to say, a year after the invasion, "The people are worse off today than they were before we went in." Oilman, Reagan man, maybe, but first and foremost, he is scion of the Aljibury tribe, the largest in a nation of tribes; and his million-strong "family" was reporting to him daily. They weren't sending congratulations.
You could say that Saddam was killing them, murdering them. He was awful, he was terrible, but at least the people were living. People don't have livelihood today You've got 15 million people without food. Does anybody care? Does anybody think if you are hungry and your children "hungry you don't care if you die? And all they tell you is "Saddam is gone." Well, thank you very much-the second day you need to eat.
Missing: A Billion and a Half in Oil
But Bremer's Governing Council feasted.
Instead of installing one of the State Department's four-star strongmen in Baghdad, Bremer chose the Pentagon's pet Iraqis for his Governing Council ("GC") that stitched together Kurdish warlords, scary sheiks and sticky-fingered ex-pats under the control of Ahmad Chalabi, a convicted bank swindler sought by Jordanian authorities. Despised but not feared, Bremer's GC could not hold power without a huge American guard.
In no time, the Oil for Food program, which had been, under the former regime, a tightly controlled conduit for kickbacks to Saddam's buddies, became, under U.S. rule, a loosely controlled conduit for huge kickbacks. With a nod and wink from the UN and, let's not forget, U.S. brokers who bought the stuff, Saddam skimmed $1.7 billion off the $65 billion program. This was amateur stuff, a rake-off, reported The Wall Street Journal, of only about fifty cents a barrel.
Under the new regime, "Corruption is rampant-more than ever," worse than under Saddam, one oilman complained to me, on condition, as you can imagine, of anonymity. The kickbacks kicked up into higher percentages.
It's, "you wanna get a contract you gotta get the people who participate in it," so it's you know, it's direct pay-offs to Government officials, by commercial operators, who demand it in order to give people access to anything, whether it's oil or information.
Oil simply disappeared. During its one year in power, Bremer's Civilian Provisional Authority says Iraq's Governing Council sold $10 billion of petroleum-or maybe they sold $11.5 billion, depending on which set of reports you check. Wonder how to lose track of a billion and half dollars in oil? Answer: Iraq's oil was unmetered.
Investigators with George Soros's Iraq Revenue Watch and Christian Aid of Britain did their best to find the Iraqis' oil money, but the CPA, once it closed shop, sealed their books, which, along with the oil, disappeared.
Who pocketed the loot? Don't ask Mr. Bremer. Before he slipped out of Baghdad, he had a little trouble with CPA bookkeeping himself. We all lose an expense receipt or two on occasion, but the CPA's petty cash drawer was fatter than most. They kept $200 million in bricks of U.S. currency in a room in Saddam's palace and another $400 million tucked away here and there. Agents could check out these cash bricks, like library books. Unlike a library, they didn't have to return them as long as they brought receipts. One agent took $23 million in a tub of cash and returned with $6 million in receipts. Another took $25 million and returned, it appears, with nothing at all. In all, 363 tons of U.S. currency were shipped to Iraq. Where did the cash go?
Let's get realistic. A little grease around the edges is the norm for war. But we're not talking edges here. According to U.S. government inspectors, of the $8.8 billion spent by the Bremer "interim government," $8 billion is not properly accounted for. Ninety-six million dollars from Bremer's cash piggy bank is gone with the wind. Bremer didn't take it, but he just can't say for sure where it went. Inspectors examined 198 contracts at random and found that 148 showed no evidence that that the money paid for anything, neither work nor goods. Another test of $327 million in contracts showed payment figures off by $228 million.
Where did the money go? The Bremer-Bush regime's policy is, "Don't ask, don't tell." The interim government stonewalled international auditors. However, contract employees, nauseated by the hogs at the trough, brought claims under U.S. law, which bars war profiteering. But the CPA had a perfect defense: This isn't U.S. taxpayer money The missing cash and the billions handed out without receipts by Bremer's crew were taken from Iraq's own accounts at the U.S. Federal Reserve. This was cash left over from the Oil for Food program and its successor, the "Development Fund for Iraq," made up of donations and profits from Iraq's own oil sales.
What about Iraqi law? Forget it. The money was given to the "Civilian Provisional Authority"-which isn't a U.S. agency and it's not an Iraqi agency. And now it doesn't exist. Not only are the billions gone, but so is the Authority itself. The perfect getaway car-one that simply disappears.
Not just bricks of dollars took flight. The Pentagon plan called for replacing the Iraqi money which had Saddam's smirking face on it with new "dinars." Nineteen billion in the new dinar notes (about U.S. $1.3 million) were found, mysteriously, on board a plane in Lebanon sent from Iraq by the Interior Minister of the Bremer "government. "
Chicago Boys to Baghdad
Where did they find these guys?
I asked insiders how Ahmad Chalabi, a fugitive from Jordanian jailers, who hadn't set foot in Baghdad since he was a child, could have floated to the top of the neo-con list to replace Saddam.
His career as leader of Iraq was not born in Baghdad but in Chicago, where he and his two schoolmates, Paul Wolfowitz and Richard Perle, spent their sober, unyouthful days. This was the sixties. While the rest of us at the University of Chicago grew long hair and wore peace symbols, these guys had briefcases and discussed the "manly art of war" and "graduated deterrence" bombing with strange Professors Leo Strauss and Albert Wohlstetter. In other rooms, the "Chicago Boys" took lessons from Milton Friedman and his acolytes. (I joined them, surreptitiously working for the electrical and steelworkers unions, trying to figure out what the Chicago Boys were up to.) There the Chicago Boys planned for General Pinochet, the freemarket-and- interim-dictator ship model that would eventually mutate into the neo-con "Economy Plan" for Iraq.
Chalabi's unwild college days with future gods of the neo-con pantheon gave him access and protection, but his power, I'm told, came from a lesser-known neo-con light: Harold Rhode.
When Bush came to power, the Arabic-speaking Rhode was strategically placed at the Pentagon's "Office of Net Assessment," one of those oddly named fulcrum points of hidden power. We now know (see "The Other Downing Street Memo," below) that, in 2002, the British Defense ministry told the Prime Minister Tony Blair that the Pentagon had "fixed ... facts and intelligence" on Iraq to match George Bush's sales pitch for war. The Office of Net Assessment was one of the repair shops accused of smoothing and repainting views not conforming to the neo-con stratagem or Bush's bias. When I interviewed Bob Ebel, the former CIA oil expert, he suggested, when the cameras were off, that Net Assessment was the dream factory that produced the fantasy oil gushers for Wolfowitz.
By control of information flow, net assessment could allay any qualms about the people of Iraq's love of the neo-cons' anointed man, Chalabi. (However, once Chalabi took power in Baghdad, a large U.S. occupation force would be needed to ensure Iraqis' affection for him.)
Rhode is "one of those Arab-haters, Muslim-haters, everything haters," hissed a well-placed Saudi Arabian out to discredit him.
Rhode is no such thing. In practice, Rhode is an OPEC-hater. But, of course, to a Saudi, OPEC, the Organization of the Petroleum Exporting Countries, the oil monopoly, is everything..
Rhode, said the Saudi, saw Iraq as the weak fissure in the OPEC edifice. The right tool-Ahmad Chalabi-properly placed in the crack, could break OPEC apart. Chalabi was right for the task, a rare "Iraqi" ready to call for his nation's quitting the OPEC cartel.
And the tool was cheap as these things go, the rental already paid. The CIA and Defense Intelligence Agency, beginning in 1992, had been giving Chalabi's group, the "Iraqi National Congress," monthly stipends of typically $335,000 per month. The "Iraqi National Congress" was neither in Iraq nor a Congress, but with CIA pay stub in hand, Chicago ties, and the neo-con plan in his pocket, Chalabi made himself a government in exile. The convict, still on the run from Jordanian police, opened Iraq for business even before he arrived there. In late 2002, Ahmad Chalabi met privately with executives from three big U.S. oil companies. With his fellow tribesman, Fadhil Chalabi (in London), Ahmad Chalabi was hot to sell off Iraq's oil fieldsin accordance with page 73 of the neo-con Economy Plan. We only know of the secret meeting because British Petroleum screamed bloody murder over being left out of Chalabi's sale-a-thon.
The aim of the neo-con Chicago Boys was for Chalabi to get Iraq out of OPEC, or at least bust its quotas. But before he could be used to destroy OPEC, Chalabi, who hadn't lived in Iraq for four decades, had to get back in-and quickly, before the State Department put others in power. On April 6, 2003, two weeks after U.S. motorized cavalry sped through southern Iraq, when enemy fire would not ruin the photo-op, Chalabi landed at Nasariyah at the head of a "liberation" force of 700 Iraqi exiles. They had secretly trained for the mission in Hungary. Saddam, whose intelligence agents had likely infiltrated the group, would have known they were coming. Nevertheless, I'm told, the invasion force realized its goal: The State Department, kept in the dark about the Pentagon's airlift of Chalabi's army, was taken completely by surprise.
PART 3
THE WAR FOR OPEC: THE NO-BRAINERS
VERSUS THE WITCHES BREW
"Was the invasion about the oil?" Bob Ebel asked himself, anticipating my question. "No," he answered himself, "it was about getting rid of Saddam Hussein."
Then why did the Pentagon fly him to London? "The morning after, it's about oil." But what about the oil?
Here's what I found. It's not the oil itself-the United States could have doubled our take from Iraq simply by lifting sanctions. It's all about George Bush's seat on OPEC. That is the real, if never discussed, booty of this war.
But what George Bush should do with his OPEC perch is what requires the occupation to drag on, not the provincial tussle between Shias and Sunnis, but the gladiatorial fight to the death between neocons and the Big Oil establishment.
This was The Prize: Through the new captive state of Iraq, the power to control or destroy OPEC, the Organization of Petroleum Exporting Countries, the elite club that sets oil's price.
And it all began with Ari Cohen.
The Godfather of Plan B
"It's a no-brainer," Cohen told me of his grand design to divide and sell Iraq's entire oil industry. Cohen operates from the Heritage Foundation, the madrassa of neo-con fundamentalism in Washington, DC. For the neo-cons, this was The Big One. Long before the State Department dreamed of the three-day coup, long before George Bush "won" Florida in 2000, Cohen and his neo-comrades at the Heritage Foundation and American Enterprise Institute had big plans for the Middle East. Their true target was not Saddam. He was just a troublesome nudnik whose replacement would provide the hunting blind to shoot at bigger game: the Saudi Arabians. Getting at the Saudis required tearing apart OPEC. And tearing apart OPEC was completely dependent on the privatization of Iraq's oil reserves, the second-largest in OPEC after the Saudis.
A year before the invasion, Cohen laid out his scheme for an OPEC-free world in a report for Kim Holmes, the Heritage chief, who took it inside the Bush Administration when Holmes became an Assistant Secretary of State. It included the neo-cons' call for a "massive ... privatization of State-owned enterprises, especially the restructuring and privatization of the oil sector." There it is: "especially the oil"-Cohen's words which would be sucked in, virtually unedited, in the Economy Plan which Defense would attempt to shove down General Garner's throat.
Details of Cohen's talks with Bush insiders remain confidential, but Ari considers his theories too brilliant to keep under wraps. He explained the no-brainer to me in baby steps.
1. OPEC's power comes from imposing production limits ("quotas") on its member states, limiting supply and raising prices.
2. Iraq's quota is well below what it can produce. Iraq kept a limit on output through its 100% government-owned oil monopoly ("SOMO," the State Oil Marketing Organization) .
3. If you sell off Iraq's oil fields in itty-bitty pieces, dozens of operators will maximize their production from each field, jumping up Iraq's output to 6 million barrels a day, way above the OPEC quota.
4. The additional two million barrels of oil a day from Iraq will flood the market, OPEC will dissolve into mass cheating and break apart. With every nation pumping to the max, the price of oil will fall over a cliff, and ...
5. ... Saudi Arabia, financially and politically, will fall to its knees.
And there were additional bonuses to privatizing oil fields in Iraq, Cohen told me. Taking away oil revenues from the Shia clerics who will certainly take over Iraq will deny them "the cash cow for the project of forced Islamization. " There was more. With OPEC smashed, the former Soviet states, including Russia, completely dependent on oil income, will be at America's mercy.
But, on the way to Iraq's new government implementing Cohen's no-brainer, something went wrong. Bremer had marched through Iraq's economy like Sherman marching through Georgia, issuing his 100 orders while Iraqis bowed and cowed. Yet, one part of the neocon Economy Plan seemed forgotten: Page 73, the no-brainer, the privatization, the total sell-off of Iraq's oil fields.
So what happened, Ari? Who undermined your plan? I spoke to Cohen in his small, dim office at Heritage. For a man with a plan to shake the economic planet, his station seemed a bit diminished. In a dark Russian accent, Cohen hissed the names of the saboteurs.
"Arab economists hired by the State Department who are supporting the witches' brew of the Saudi royal family and the Soviet ostblock."
("Ostblock" is the Cold War name for the Soviet sphere of influence. Neither the Ostblock nor the Soviet Union still exist-except, in Cohen's mind, in the machinations of Russia's President Vladimir Putin.)
Ari, exactly which Arab economists were in on the conspiracy?
You know who they are, he answered.
And I did. One Saudi in the shadows had to be Nawaf Obaid. However, to label Obaid simply "an economist" would be, as our President says, to "misunderestimate" him.
If your prejudices lead you to expect Saudi princelings to sound like they just fell off a camel, Obaid would take you by surprise. The urbane, savvy graduate of Harvard and MIT jets between homes in Riyadh and London, has a seat at Bob Ebel's elite think tank in Washington and his post with the Saudi National Security Assessment Project. He's less a power in his own right than the semaphore holder who signals what the landlords of our oil supply are thinking. "He works for Saudi intelligence, " said a very close associate of his who gave me Obaid's cell phone number in Saudi Arabia.
Obaid agreed that Ari Cohen and the neo-cons' bust-OPEC scheme was a no-brainer. It came, he said, from the other end of their thinking system.
From the Saudi perspective we're, like, they're just crazy talking out of their asses again.
The Saudi was unimpressed with Ari's five steps to an end to Saudi Arabia's authority.
The neo-cons [say] "you smash OPEC you smash Saudi Arabia's power," and yeah, they're going to use Iraq to do it. Yeah, we were baffled, you know, "Ramp up production! Break all the quota!" ... This is crazy.
Interestingly, Obaid knew in detail about the initial 2001 State Department plan for a three-day "disguised coup" and the meetings convened in Walnut Creek. He could recite details of the ins and outs of State's fight against the neo-cons' OPEC-smashing scheme and, as well, the inside story of Chalabi's surprise "invasion" at Nasiriyah.
I asked the Saudi, What's so crazy about smashing OPEC? Why was he so confident the neo-cons were talking through their blowholes?
Obaid explained the oil facts of life. In the short term, Iraq's fields were trashed even before saboteurs torched them. The CIA and the Pentagon knew it no matter what Wolfowitz said to bobble-headed Congressmen. In the long run, however, many years from now, Iraq, with 114 billion barrels of proven reserves, might be able to crank up above its OPEC quota.
But that won't happen. The globe is littered with the economic skeletons of nations that flagrantly busted their OPEC quotas. There's the skeleton of Venezuela. In 1973, Venezuela broke the first Arab oil boycott. But in 1997, when Venezuela again ramped up production, punishment was swift. Saudi Arabia, which can live without big oil revenues for up to a year, opened its spigots and drowned the market. The price of oil dropped to $8 a barrel and Venezuela went bankrupt. Its government fell. The current President of that nation, Hugo Chavez, is now a very good member of OPEC, indeed its most fanatic adherent to the quota system.
The Soviet Union was also given a price-cut whupping. In the 1980s, the Saudis dropped the price of oil to punish Russia for its wild expansion of oil-pumping capacity and for the Soviets' invading Muslim Afghanistan. This choking loss of oil income had a lot more to do with the Soviet Union's collapse than Ronald Reagan's crooked smile.
Saudi Arabia has kept its economic knife sharp for Iraq if, under neo-con influence, Iraq were to exceed its OPEC quota. The warstoked jump in oil prices put $120 billion in Saudi Arabia's treasury in just one year (2004), triple its normal take. This gives the kingdom the cash to hold its breath economically should it need to drop the price of oil for a year to bring Iraq, or any quota-busting nation, to its knees.
Besides, said Obaid, why should President Bush allow troublemakers at the Pentagon to use Iraq to attack the House of Saud when the Saudi royals were so supportive of Mr. Bush's goals?
The Saudis just want to be helpful. In December 2002, for example, Obaid wrote publicly to assure the Bush administration that, while Saudi Arabia could not officially support a U.S. invasion of another Muslim country (Iraq), the Saudis would pump enough oil to hold down prices once U.S. tanks rolled.
But that was just cheese for the trap. Admittedly, in early 2003, just before the invasion, the Saudis, for the first time in memory, pumped flat out, providing nearly 12 million barrels a day. But once American forces were irreversibly committed and Iraq's pipelines in flames, the price of oil rose and the Saudis kicked it higher by withholding more than a million barrels a day from the market. The one-year 121% post-invasion jump in the price of crude, from under $30 a barrel to over $60, sucked that $120 billion windfall to the Saudis from SUV drivers and factory owners in the West. The OECD, which measures these things, estimates the U.S. economy lost 1.2% of GDP, costing the USA just over one million jobs. The harm to Africa and Asia was many times higher.
You'd think our President, as consumer-in- chief of the infidel world, would say something to Crown Prince (now King) Abdullah about the worldwide economic devastation caused by high oil prices when the Saudi monarch visited Mr. Bush at the Crawford ranch in April 2005. The newspapers show they held hands, they scooted around in our President's golf cart (Mr. Bush seems to have an aversion to horses) and the Prince left with a smile-then kicked up the price of crude another two dollars.
Maybe Mr. Bush has his own reasons to be grateful to the prince. I wasn't in the golf cart but I know this: The only other time in the past decade the Saudis have produced flat out to bring down the price of oil was just before the 2004 U.S. presidential election.
OPEC, Big Oil and the Trillion-Dollar War Bonus
But neither our President's affection for Abdullah, Saudi threats, nor the "witches' brew" of Saudi economists and Russia-lovers at the State Department could have stopped Cohen's "privatization" plan, i.e., the sale of Iraq's oil fields, if the U.S. petroleum industry wanted those spoils of war. However, the last thing the oil companies wanted was ownership of Iraq's reserves, especially if it would lead, as the neo-cons hoped, to the destruction of OPEC.
It has been a very good war for Big Oil-courtesy of OPEC price hikes. The five oil giants saw profits rise from $34 billion in 2002 to $81 billion in 2004, year two of Iraq's "transition to democracy" But this tsunami of black ink was nothing compared to the wave of $113 billion in profits to come in 2005: $13.6 billion for Conoco, $14.1 billion for Chevron and the Mother of All Earnings, Exxon's $36.1 billion.
For these record-busting earnings, the industry could thank General Tommy Franks and the troops in Baghdad, the insurgents and their oil-supply-cutting explosives. But, most of all, they had to thank OPEC and the Saudis for keeping the lid on supply even as the planet screamed in pain for crude.
And the industry was not going to let neo-con think tank fantasists kill the OPEC goose that laid the golden earnings. When OPEC raises the price of crude, Big Oil makes out big time. The oil majors are not simply passive resellers of OPEC production. In OPEC nations, they have "profit sharing agreements" (PSAs) that give the companies a direct slice of the higher price charged. More important, the industry has its own reserves whose value is attached, like a suckerfish, to OPEC's price targets. Here's a statistic you won't see on Army recruitment posters: The rise in the price of oil after the first three years of the war boosted the value of the reserves of ExxonMobil Oil alone by just over $666 billion. The devil is in the details.
Smaller Chevron Oil, where Condoleezza Rice had served as a director, gained a quarter trillion dollars in value. Chevron named a tanker after Rice, but given the firm's change in
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