Bush Administration Role in Iraq Oil Deals Confirmed

Last week, we had put up a perplexed post, wondering out loud as to why some prominent Democratic senators (Charles Schumer, John Kerry, and Claire McCaskill) were calling to block contracts being signed between oil companies and the Iraq government. Narrowly, these deals would help get the faltering country back on its feet economically, both via the jobs created to build oil infrastructure, and through increased oil revenues. And we sure need the oil.

Readers offered helpful information, including the fact that even though Iraq was displaying independence on some fronts, notably in forging links with Iran, this wasn’t one of them. But note that the Bush Administration had asserted its lack of any role in these deals:

“We welcome Iraq’s decision to negotiate with companies on these contracts, as we believe that commercial partnerships with private companies will accelerate Iraq’s ability to develop its oil and gas resources,” said State Department Iraq Press Officer John Fleming…

“The Ministry of Oil has been developing relations with about 40 international oil companies since 2004,” he said, adding the U.S. government “is not playing any role in the Ministry of Oil’s commercial negotiations.”

Scott McClellan has told us how much trust we should place in the declarations of Bush Administration press officer. Today the New York Times reports that the US government was involved in the Iraq oil contracts.

The new story is, “Yes, we helped them, but only in providing them with contract language.” Given how insistent Team Bush was initially that they played no role, I’m waiting for other details of US government involvement to develop.

And the idea that the State Department provided legal advice on contract language is just plain peculiar. Pray, when did they develop this expertise? Who are the bread and butter clients of Tatweer, the consulting firm? Note the “lawyers” were “American government lawyers.” Is the US regularly negotiating with the majors?

The article is not exactly clear on where the contract that Tatweer and the US attorneys commented on came from, that is, whether the Iraqis generated it (yikes!) or whether the oil companies had provided it (double yikes!). One of the basic rules of negotiation is “He who controls the document controls the deal.” You always want to be the one preparing a contract. The other side will find it hard to claw back from your language.

Having been party to more than a few negotiations in my day, there is a great deal of artwork in legal agreements, and they are often negotiated line by line, even when working from broadly accepted templates, like merger agreements. I have a sneaking suspicion that that did not happen here.

Put it another way: the right way to do this would have been for the Iraq Oil Ministry to interview at least a half-dozen law firms to represent them in the negotiations and to have chosen one. Since only a short list of oil companies are up for these deals, there should be some law firms that work for other majors and hence would not be conflicted out of this exercise.

The idea that Iraquis could take a standard document, even if it had (miraculously) been written so as to favor their interests, and have them negotiate it with no understanding of norms and nuances is a prescription for them to get taken. Which was presumably the point of this exercise.

From the New York Times:

A group of American advisers led by a small State Department team played an integral part in drawing up contracts between the Iraqi government and five major Western oil companies to develop some of the largest fields in Iraq, American officials say.

The disclosure, coming on the eve of the contracts’ announcement, is the first confirmation of direct involvement by the Bush administration in deals to open Iraq’s oil to commercial development and is likely to stoke criticism.

In their role as advisers to the Iraqi Oil Ministry, American government lawyers and private-sector consultants provided template contracts and detailed suggestions on drafting the contracts, advisers and a senior State Department official said….

The advisers — who, along with the diplomatic official, spoke on condition of anonymity — say that their involvement was only to help an understaffed Iraqi ministry with technical and legal details of the contracts and that they in no way helped choose which companies got the deals…

The deals have been criticized by opponents of the Iraq war, who accuse the Bush administration of working behind the scenes to ensure Western access to Iraqi oil fields even as most other oil-exporting countries have been sharply limiting the roles of international oil companies in development.

For its part, the administration has repeatedly denied steering the Iraqis toward decisions…..

But any perception of American meddling in Iraq’s oil policies threatens to inflame opinion against the United States, particularly in Arab nations…

“We pretend it is not a centerpiece of our motivation, yet we keep confirming that it is,” Frederick D. Barton, senior adviser at the Center for Strategic and International Studies in Washington, said in a telephone interview. “And we undermine our own veracity by citing issues like sovereignty, when we have our hands right in the middle of it.”…

The State Department advisers on the Western contracts say they purposely avoid trying to shape Iraqi policy.

“They have not negotiated with the international oil companies since the 1970s,” said the senior State Department official, who was speaking about Iraqi oil officials and who is directly involved in shaping United States energy policy in Iraq.

Yves here. This is a patently ridiculous excuse. Most people with any sophistication do not negotiate on their own behalf (the exceptions come in industries where negotiations are a frequent and integral part of the business, as in the media). You hire someone to do it for you. This is one of the highest and best uses of lawyers.

The advice on the drafting of the contracts was not binding, he said, and sometimes the ministry chose to ignore it. “The ministry did not have to take our advice,” he said, adding that the Iraqis had also turned to the Norwegian government for counsel. “It has been their sole decision.”

The advisers say they were not involved in advancing the oil companies’ interests, but rather treated the Oil Ministry as a client, the State Department official said. “I do not see this as a conflict of interest,” he said. A potential area of criticism, however, is that only Western companies got the bigger oil contracts. In particular, Russian companies that have experience in Iraq and had sought development contracts are still waiting….

The new oil contracts have also become a significant political issue in the United States.

Three Democratic senators, led by Charles E. Schumer of New York, sent a letter to the State Department last week asking that the deals be delayed until after the Iraqi Parliament passes a hydrocarbons law outlining the distribution of oil revenues and regulatory matters. They contend the contracts could deepen political tensions in Iraq and endanger American soldiers…

Advisers from the State, Commerce, Energy and Interior Departments are assigned to work with the Iraqi Oil Ministry, according to the senior diplomat. In addition, the United States Agency for International Development has a contract for Management Systems International, a Washington consulting firm, to advise the oil and other ministries. The agency’s program is called Tatweer, the Arabic word for development.

“The legal department of the Ministry of Oil passed us a draft of the contract,” Samir Abid, a Canadian of Iraqi origin who is an employee of the Tatweer program, said in a telephone interview. “They passed it to us and asked for our comments because we were mentoring them.”

He added: “It was an exercise in deciding how best to do these contracts. I don’t know if they used our comments or not.”

In a statement, the agency said its advisers had reviewed the oil company contracts, known as technical support agreements: “At the request of the Ministry of Oil, the Tatweer Energy Team has done a review of the format, structure and clarity of language of blank draft contracts.”

The statement said the team did not have access to confidential information from the oil companies.

Consultants said the advice was necessary because the Oil Ministry, like other sectors of the Iraqi government, has experienced an exodus of qualified employees and lacks lawyers schooled in drawing up contracts.

A supervisor with the Tatweer program, who was not authorized to speak publicly and declined to be quoted by name, said that ministry officials, many of them near retirement, needed help.

The American government lawyers provided specific advice, the State Department official said, like: “These are the clauses you may want. You will need a clause on arbitration. You will need this clause to make this work.”