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Context of 'Late October 2003: Iraq’s Governing Council Rejects Privatization Plan'

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Paul Bremer, the US administrator for Iraq, tells the Washington Post: “I’m not opposed to [self-rule], but I want to do it a way that takes care of our concerns…. In a postwar situation like this, if you start holding elections, the people who are rejectionists tend to win… It’s often the best-organized who win, and the best-organized right now are the former Baathists and to some extent the Islamists.” [Washington Post, 6/28/2003]

Entity Tags: L. Paul Bremer

Timeline Tags: Events Leading to Iraq Invasion, Iraq under US Occupation

At a press briefing in Baghdad, Paul Bremer says that Iraq should consider privatizing its state-owned sectors and allowing foreign investment into its oil industry soon, even if that means doing so before Iraq has an elected government. He says that the soon-to-be-appointed Iraq Governing Council will need to reassure private investors by taking a friendly stance toward foreign capital. “Privatization is obviously something we have been giving a lot of thought to,” he says. “When we sit down with the governing council… it is going to be on the table. The governing council will be able to make statements that could be seen as more binding and the trick will be to figure out how we do this. Everybody knows we cannot wait until there is an elected government here to start economic reform.” [Reuters, 7/8/2003]

Entity Tags: L. Paul Bremer, Iraqi Governing Council

Timeline Tags: Iraq under US Occupation

The Iraqi Governing Council is created and its 15 members sworn in. The members were selected by Paul Bremer on July 11 after tense negotiations between the Coalition Provisional Authority and a number of Iraqi opposition groups. Thirteen of the members are Shiites, five are Kurds, five are Sunni Muslims, one is an Assyrian Christian, and another, one of three women on the council, is a Turkoman. Most of the members are Iraqi exile leaders or Kurdish chieftains who worked with the US and Britain prior to the invasion. More than half of the members have connections to, or were members of, the Iraqi National Congress. The new governing council will have the authority to appoint some officials and diplomats, review laws, and approve budgets. But Paul Bremer may veto any of the council’s proposals. [New York Times, 7/13/2003; Cox News Service, 7/14/2003]

Entity Tags: L. Paul Bremer, Iraqi Governing Council

Timeline Tags: Iraq under US Occupation

Coalition Provisional Authority (CPA) administrator L. Paul Bremer is under pressure to explain how he intends to transfer power in Iraq from the CPA and the hand-picked Iraqi Governing Council (IGC—see July 13, 2003), especially in light of Bremer’s recent, unilateral cancellation of national elections (see June 28, 2003). Bremer chooses an unusual venue to respond: the op-ed pages of the Washington Post. In a column entitled “Iraq’s Path to Sovereignty,” Bremer writes that national elections are “simply… not possible” at this time. Instead, the IGC will develop a plan for drafting and ratifying a new constitution. [Washington Post, 9/8/2003; Roberts, 2008, pp. 129-130] This will be followed by elections and, finally, complete transfer of the CPA’s powers to the new Iraqi government. Bremer gives no hint of a timetable, and implies that the process will not end quickly. Influential Iraqis, and US allies such as France and Germany, are disturbed by the prospect of an essentially indefinite occupation. Senior Bush officials, particularly National Security Adviser Condoleezza Rice, will later claim to have been blindsided by Bremer’s plan. New York Times columnist David Brooks, a conservative with excellent sources within the White House, will later write that Bremer “hadn’t cleared the [Post] piece with his higher-ups in the Pentagon or the White House” (see December 2003 and After). However, Bremer’s column is consistent with a Bush statement on Iraqi governance the day before, and with the text of a resolution the administration will try to push through the UN Security Council in October. It is unclear what, if any, authorization Bremer has for his decision, but there are manifest disagreements in the top ranks of White House officials as to the wisdom of Bremer’s planning (see November 15, 2003). [Roberts, 2008, pp. 129-130]

Entity Tags: United Nations Security Council, Coalition Provisional Authority, Bush administration (43), Condoleezza Rice, David Brooks, Iraqi Governing Council, L. Paul Bremer, Washington Post

Timeline Tags: Iraq under US Occupation

In a speech to the nation commemorating the second anniversary of the 9/11 attacks, President Bush promises that no more troops are needed in Iraq. The 130,000 currently deployed are enough to handle the mission, he says. Besides, “now some 60,000 Iraqi citizens under arms, defending the security of their own country, are now active, with more coming.” The Iraqi Governing Council, which he calls “25 leaders representing Iraq’s diverse people,” is almost ready to take over governance of their country (see September 8, 2003), Bush says. Viewership for the speech is half the number of people who watched Bush’s January State of the Union address (see 9:01 pm January 28, 2003), and polls indicate that support for the Iraqi occupation is sagging among Americans. [Rich, 2006, pp. 102-103]

Entity Tags: Iraqi Governing Council, George W. Bush

Timeline Tags: Iraq under US Occupation

The Coalition Provisional Authority provides US Congress with a justification for a request of $20.3 billion for reconstruction projects in Iraq. The report—which leaves many questions unanswered—describes 115 projects. Less than 25 of them mention employing Iraqis or using Iraqi resources. [US Congress, 9/30/2003, pp. 2, 4-5 pdf file]

Entity Tags: US Congress, Coalition Provisional Authority

Timeline Tags: Iraq under US Occupation

Members of Congressman Henry A. Waxman’s staff interview two members of the Iraqi Governing Council. They state that Iraqi firms could be hired for reconstruction projects at one-tenth the amount being charged by US firms. Their claim is corroborated by the Coalition Provisional Authority’s (CPA) own justification (see September 17, 2003) for the $20 billion reconstruction supplemental. The CPA states that when work is done by Iraqi companies the “cost of construction is 1/10th of US standard per sq. ft. in general construction.” [US Congress, 9/30/2003, pp. 3-4 pdf file]

Entity Tags: Iraqi Governing Council, Henry A. Waxman

Timeline Tags: Iraq under US Occupation

National Security Adviser Condoleezza Rice, frustrated with Coalition Provisional Authority (CPA) administrator L. Paul Bremer’s lack of cooperation and coordination with her office (see September 8, 2003 and December 2003 and After), forms the Iraq Stabilization Group (ISG) to oversee Bremer and settle disputes between the Defense and State Departments in governing Iraq. [Roberts, 2008, pp. 130] According to unnamed White House officials, the ISG originated with President Bush’s frustration at the lack of progress in both Iraq and Afghanistan. “The president knows his legacy, and maybe his re-election, depends on getting this right,” says an administration official. “This is as close as anyone will come to acknowledging that it’s not working.” Defense Department officials deny that the ISG is designed to take power away from Defense Secretary Donald Rumsfeld: “Don recognizes this is not what the Pentagon does best, and he is, in some ways, relieved to give up some of the authority here,” says one senior Pentagon official. In reality, both Rumsfeld and Secretary of State Colin Powell are giving up some control over the reconstruction efforts to the White House, specifically to the National Security Council. Rice will oversee four coordinating committees, on counterterrorism efforts, economic development, political affairs in Iraq and media messaging. One of her deputies will run each committee, assisted by undersecretaries from State, Defense, and the Treasury Department, as well as representatives from the CIA. The counterterrorism committee will be run by Frances Fragos Townsend; the economic committee by Gary Edson; the political affairs committee by Robert Blackwill; and the communications committee by Anna Perez. [New York Times, 10/6/2003] In May 2004, the Washington Post will report that the ISG is dysfunctional and ineffective almost from the outset; within months, all but Blackwill have been reassigned (Perez will leave Washington for a job with NBC), and a search of the White House Web site will find no mention of the ISG later than October 2003. [Washington Post, 5/18/2004]

Entity Tags: Iraq Stabilization Group, Donald Rumsfeld, Condoleezza Rice, Colin Powell, Coalition Provisional Authority, Anna Perez, Frances Townsend, George W. Bush, US Department of Defense, US Department of State, Robert Blackwill, National Security Council, L. Paul Bremer, US Department of the Treasury, Gary Edson

Timeline Tags: Iraq under US Occupation

The twenty-five members of the Iraqi Governing Council and the twenty-five interim ministers unanimously decide to reject cooperation with the CPA in the privatization of state-owned companies and publicly owned infrastructure. [Harper's, 9/24/2004]

Entity Tags: Iraqi Governing Council

Timeline Tags: Iraq under US Occupation

The White House announces a new plan for Iraqi governance. It is drastically different from the one unilaterally announced by Coalition Provisional Authority (CPA) administrator L. Paul Bremer two months before (see September 8, 2003). It flip-flops Bremer’s plan, putting a transfer of power to a provisional Iraqi government first, then having elections for an interim government, and finally providing for the drafting and adoption of a new constitution. [Roberts, 2008, pp. 130]

Entity Tags: L. Paul Bremer, Bush administration (43), Coalition Provisional Authority

Timeline Tags: Iraq under US Occupation

Coalition Provisional Authority administrator L. Paul Bremer (see May 1, 2003) asserts his independence from US government oversight, a stance assisted by Defense Secretary Donald Rumsfeld. Bremer is formally slated to report to Rumsfeld, but says Rumsfeld has no direct authority over him. Instead, Bremer insists, he reports directly to the White House. Rumsfeld, usually jealously protective of his bureaucratic prerogatives, tells National Security Adviser Condoleezza Rice: “He doesn’t work for me. He works for you” (see Late September, 2003). But Bremer is not willing to report to either Rice or the National Security Council (NSC) either. The White House had already announced that it had no intention of playing a large role in guiding the reconstruction of Iraq, and the NSC’s Executive Steering Group, set up in 2002 to coordinate war efforts, has been dissolved. Finally, Bremer flatly refuses to submit to Rice’s oversight. As a result, Bremer has already made fundamental policy shifts on his own authority that are at odds with what Pentagon planners had intended (see May 16, 2003 and May 23, 2003), with what many feel will be—or already have caused—disastrous consequences. [Roberts, 2008, pp. 128-129]

Entity Tags: Coalition Provisional Authority, Bush administration (43), National Security Council, L. Paul Bremer, Donald Rumsfeld, Condoleezza Rice

Timeline Tags: Iraq under US Occupation

June 2004: New Iraqi Oil Minister Appointed

Thamir al-Ghadban is appointed as Iraq’s minister of oil. Al-Ghadban is a British-trained petroleum engineer and former senior adviser to Ibrahim Bahr al-Uloum, Iraq’s previous oil minister under the US-appointed Iraqi Governing Council. [Muttitt, 2005]

Entity Tags: Thamir al-Ghadban

Timeline Tags: Events Leading to Iraq Invasion, Iraq under US Occupation

July 2006: Draft of Iraq Oil Law Completed

A draft for a new Iraq oil law is completed. The proposed law was drawn up by three Iraqis—Tariq Shafiq, Farouk al-Qassem, and Thamir al-Ghadban—who have been working on it for three months. Shafiq is the director of the oil consultant firm Petrolog & Associates and was the founding director of Iraq’s National Oil Company in 1964. Ghadban recently served as the country’s oil minister (see June 2004). [United Press International, 5/2/2007] One provision in the draft law lists production sharing agreements (PSAs) as one type of contract that could be used to govern private sector involvement in the development of Iraq’s oil sector. Under PSAs, oil companies would claim up to 75 percent of all profits until they have recovered initial drilling costs, after which point they would collect about 20 percent. These terms are more favorable to investors than typical PSAs, which usually give about 40 percent to the company before costs are recovered and only 10 percent afterwards. Even when the price of oil was as low as $25 per barrel, the lower paying PSAs were profitable for companies. Critics say that the oil companies want to negotiate and sign the PSAs with Iraq before the country is stabilized so they can argue that the political risk of doing business in Iraq warrants higher profit shares. But then they would wait until after the situation has improved before moving in. Iraq would be the first Middle Eastern country with large oil reserves to use PSAs. Other countries have avoided PSAs because they are widely thought to give more control to companies than governments. James Paul of the Global Policy Forum will tell the Independent: “The US and [Britain] have been pressing hard on this. It’s pretty clear that this is one of their main goals in Iraq.” The Iraqi authorities, he says, are “a government under occupation, and it is highly influenced by that. The US has a lot of leverage… Iraq is in no condition right now to go ahead and do this.” Critics also suggest the companies’ shares of profits should be lower than typical PSAs, if anything, since Iraq’s oil is so accessible and cheap to extract. Paul explains: “It is relatively easy to get the oil in Iraq. It is nowhere near as complicated as the North Sea. There are super giant fields that are completely mapped, [and] there is absolutely no exploration cost and no risk. So the argument that these agreements are needed to hedge risk is specious.” [Independent, 1/7/2007] Immediately after this draft is completed, it is shared with the US government and oil companies (see July 2006). In September it will be reviewed by the International Monetary Fund (see September 2006). Iraqi lawmakers will not see the document until early 2007. The provision mentioning PSAs will be axed from the final draft due to Iraqi opposition (see February 15, 2007).

Entity Tags: Thamir al-Ghadban, Farouk al-Qassem, Tariq Shafiq

Timeline Tags: Iraq under US Occupation

The US government and major oil companies are given the opportunity to review the latest draft of a new oil law for Iraq (see July 2006). The draft has yet to be seen by Iraqi lawmakers. [Independent, 1/7/2007]

Entity Tags: United States

Timeline Tags: Iraq under US Occupation

The International Monetary Fund is reportedly given the opportunity to review the latest draft of Iraq’s proposed oil law. The draft was sent to the US government and oil companies in July (see July 2006). [Independent, 1/7/2007]

Entity Tags: International Monetary Fund

Timeline Tags: Iraq under US Occupation

A committee made up of ministers and politicians from the main Shiite, Sunni Arab, and Kurdish blocs begins final negotiations on a proposed oil law that will govern the development of Iraq’s oil sector. The latest draft of the oil law was completed several months ago (see July 2006). While Iraqi legislators have yet to see law, it has already been reviewed by the US government and major oil companies (see July 2006), as well as the International Monetary Fund (see September 2006). According to the New York Times, “Gen. George W. Casey Jr., the senior American commander here, and Zalmay Khalilzad, the American ambassador, have urged Iraqi politicians to put the oil law at the top of their agendas, saying it must be passed before the year’s end.” The major issue of contention concerns how oil revenue will be distributed. Most Sunni communities are located in provinces where there is little or no oil. Consequently, they are arguing that revenue should be controlled by the central government and then distributed equitably among Iraq’s provinces. Their position is supported by the Shiites. But the Kurds, who live in the oil-rich north, strongly disagree arguing that the constitution guarantees the regions absolute authority in those matters. [New York Times, 12/9/2006]

Entity Tags: George Casey, Zalmay M. Khalilzad, Iraq

Timeline Tags: Iraq under US Occupation

Iraq’s Oil Committee (see October 2006) agrees on what is said at this time to be the final draft of the oil law. Instead of specifying the use of production sharing agreements, as a previous draft did (see July 2006), this draft calls for the creation of a federal committee that would determine what kinds of contracts can be used for hiring oil companies to help develop Iraq’s oil sector. The next step is for the law to be approved by the Iraqi cabinet. [Iraq Oil Committee, 1/15/2007; Reuters, 1/17/2007] This happens on February 15 (see February 15, 2007).

Timeline Tags: Iraq under US Occupation

Changes are again made to the draft of the proposed Iraqi oil law. [Asia Times, 2/28/2007] According to this draft:
bullet Foreign corporations would have access to nearly every sector of Iraq’s oil and natural gas industry, including service contracts on existing fields that are already being managed and operated by the Iraqi National Oil Company (INOC). For fields that have been discovered, but which are not currently being developed, the law would require INOC to be a partner in developing these fields. But the new oil law does not require participation of the INOC or any private Iraqi companies in contracts for fields that have not yet been discovered. In such cases, the new law would permit foreign companies to have full access. [Iraqi Council of Ministers, 2/2007; Inter Press Service, 2/28/2007; Asia Times, 2/28/2007]
bullet Companies contracted to develop oil fields would be given exclusive control of fields for up to 35 years, and would be guaranteed profits for 25 years. Foreign companies would not be required to partner with an Iraqi company or reinvest any of its profits in the Iraqi economy. Nor would they have to employ or train Iraqi workers, or engage in any other effort to transfer technology and skills to the Iraqis. [Iraqi Council of Ministers, 2/2007; Asia Times, 2/28/2007]
bullet An Iraqi Federal Oil and Gas Council would be established and given the ultimate decision-making authority in determining what kinds of contracts could be used to develop Iraq’s oil and what would be done with the existing exploration and production contracts already signed with French, Chinese, Russian, and other foreign companies. The law states that council members would include, among others, “executive managers from important related petroleum companies.” As an article in the Asian Times notes, “[I]t is possible that foreign oil-company executives could sit on the council. It would be unprecedented for a sovereign country to have, for instance, an executive of ExxonMobil on the board of its key oil-and-gas decision-making body.” There is no language in the law that would prevent foreign corporate executives sitting on the council from making decisions about their own contracts. And there is no requirement that a quorum be present when making decisions. The Asian Times article notes, “Thus, if only five members of the Federal Oil and Gas Council met—one from ExxonMobil, Shell, ChevronTexaco and two Iraqis—the foreign company representatives would apparently be permitted to approve contacts for themselves.” The new law does not specify what kind of oil agreements could be signed between Iraq and private firms to develop Iraq’s oil. Rather it leaves this question to the council, which would be permitted to approve and rewrite contracts using whatever type is agreed upon by a “two-thirds majority of the members in attendance.” Previous drafts of the law had specifically mentioned production sharing agreements (PSAs), a controversial type of contract that is favored by the oil companies. [Asia Times, 2/28/2007] That model, favored by the US and by oil companies, was opposed by many Iraqis, including Iraqi oil professionals, engineers, and technicians in the unions. The Iraqis prefer technical service contracts, like the ones used in Kuwait, Saudi Arabia, and Iran. Under such contracts foreign companies would be allowed to participate in the development of oil fields, but only for a limited time. [Democracy Now!, 2/20/2007] The companies would be paid to build a refinery, lay a pipeline, or offer consultancy services, but then would leave afterwards. This type of arrangement would help transfer technical expertise and skills to Iraqis. “It is a much more equitable relationship because the control of production, development of oil will stay with the Iraqi state,” notes Ewa Jasiewicz, a researcher at PLATFORM, a British human rights and environmental group that monitors the oil industry. She notes that no other country in the Middle East that is a large oil producer would ever sign a PSA because it’s “a form of privatization and… it’s not in their interests.” Critics also note that the signing of PSA agreements with US oil companies would add fuel to the unrest in Iraq and that the US would attempt to legitimize its continuing presence in Iraq with assertions about the need to safeguard US business interests. [Inter Press Service, 2/28/2007]
bullet Iraq’s national government would not have control over production levels. Rather, the contractee developing a field—e.g., the INOC, or a foreign or domestic company—would be able to decide how much oil to produce. However, the document does say: “In the event that, for national policy considerations, there is a need to introduce limitations on the national level of petroleum production, such limitations shall be applied in a fair and equitable manner and on a pro rata basis for each contract area on the basis of approved field-development plans.” But it does not specify who has the authority to introduce such nation-wide limitations or how production levels might be lowered in a “fair and equitable manner.” The language appears to signify that Iraq would no longer work with OPEC or other similar organizations. [Iraqi Council of Ministers, 2/2007; Asia Times, 2/28/2007]
bullet Oil revenues would be distributed to all of Iraq’s 18 provinces according to their population sizes. Regional administrations, not Iraq’s central government, would have the authority to negotiate contracts with foreign oil companies, monitor contracts, and deal with small disputes. But the ultimate authority would lie with the Federal Oil and Gas Council which would be able to veto decisions made by regional authorities. Critics say this arrangement almost encourages the split of Iraq into three different regions or even three different states. According to Raed Jarrar, Iraq Project Director for Global Exchange, a situation like this would mean that “Iraqis in different provinces will start signing contracts directly with foreign companies and competing between themselves, among themselves, among different Iraqi provinces, to get the oil companies to go… there without any centralized way in controlling this and thinking of the Iraqi interest and protecting Iraq as a country.” [Iraqi Council of Ministers, 2/2007; Inter Press Service, 2/28/2007]

Entity Tags: United States, Ewa Jasiewicz, Iraq, Raed Jarrar

Timeline Tags: Iraq under US Occupation

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