Investigative reporter and Armed Madhouse author Greg Palast discusses the new Iraqi oil law, the fight inside the American government over what that law should be, “the surge” and what he describes as a proxy war in Iraq between Iran and Saudi Arabia over the control over the price of oil.
Greg Palast is the author of the New York Times bestseller, Armed Madhouse (Penguin 2006). His first reports appeared on BBC television and in the Guardian newspapers. Author of another New York Times bestseller, The Best Democracy Money Can Buy, Palast is best known in his native USA as the journalist who, for the Observer (UK), broke the story of how Jeb Bush purged thousands of Black Florida citizens from voter rolls before the 2000 election, thereby handing the White House to his brother George. His reports on the theft of election 2004, the spike of the FBI investigations of the bin Ladens before September 11, the secret State Department documents planning the seizure of Iraq’s oil fields have won him a record six “Project Censored” for reporting the news American media doesn’t want you to hear. He returned to America to report for Harper’s magazine.
Comments welcome at Stress.
Houston, the Neocons and the Future of Iraq’s Oil
An interview with Greg Palast
by Scott Horton
Interviewed January, 23, 2007. Click here to listen.
The New York Times is reporting that the Iraqi government, such as it is, is almost finished with negotiations on a new oil law, which will nationalize the oil and divide up the proceeds from it evenly among the different ethnicities. This has been a major sticking point, and one of the reasons why the Sunnis have refused to accept the majority rule of the Shia. They don’t live on oil land. It is all in the North and the South. This new oil law is going to go a long way towards solving that problem, at least that’s the way the New York Times has it, but for a little bit of background to help us understand what is really going on with Iraqi oil, I have on the phone investigative reporter Greg Palast. He is the author of The Best Democracy Money Can Buy and Armed Madhouse. He also writes for the Guardian and does BBC Newsnight. Welcome to the show Greg.
Palast: Hey, glad to be with you Scott. Don’t believe the baloney – at all.
Horton: I shouldn’t believe it, huh?
Palast: The plan for dividing up Iraq’s oil and the program for Iraq’s oil were not written in Iraq, and it is not to make sure there’s no civil war there. It was written in the capital of America – in Houston, Texas. That is, it was written by the oil industry under the watchful eye of the functional president of the U.S., a guy named James Baker.
Horton: And when was it written? This is part of the recent Baker plan?
Palast: Here’s the interesting part. Everyone knows about the great Baker report that was going to save us, though it’s kind of been forgotten while Bush has the urge to surge. Until then, everyone was saying, “thank God a grown up – James Baker – has been called in to save us in Iraq.”
Well, let me tell you something. Baker has been the grise eminance. He has actually had an office in the White House, which is very rare. Even Dick Cheney isn’t in the White House at 1600 Pennsylvania Avenue. Baker has had an office in the White House, since 2003, to deal with Iraq and basically pull the strings.
Horton: He was the guy in charge of restructuring the debt after the war.
Palast: Right, now technically the guy is restructuring Iraq’s debt for – last I looked it’s sovereign debt – George Bush is not the the sovereign of Iraq. Okay?
They were messing not only with Iraq’s debt, but secretly – they didn’t tell you, and this is one of the stories in Armed Madhouse, – James Baker’s crew out of Houston, oil company executives, wrote up a 323 page plan for the oil fields of Iraq. The point of that plan was to “enhance Iraq’s relationship with OPEC.” There was a great fear that the neocons were going to use Iraq – they were going to privatize the oil fields, ramp up production, bring down the price of oil and thereby bring Saudi Arabia and OPEC to their knees.
That was the geopolitical game plan of the neocons. But that didn’t work, because they’re neocons – who looked very powerful in Washington, DC because they write all the op-eds and go on the Sunday morning TV Shows – were not really powerful. That is not what is powerful in Washington. Op-eds are not powerful – oil is.
James Baker represents Exxon Mobile Oil, most of the oil companies, and he also represents the government of Saudi Arabia. His team moved in and said, “just forget the neocon plan guys. What we are going to have is a state owned oil company, which will adhere to the OPEC quotas, keep production down in Iraq and keep the price of oil up.”
That is a key matter that came out in the Baker plan. Everyone talks about troop levels, but the big hunk of the Baker plan was what to do with the oil fields of Iraq. This was his secret plan, which he now made public in 2006 – the secret plan that they drafted in 2004, which I have a copy of, by the way.
We now see the public version of it in 2006 as the Baker plan. Within a week of Baker and his oil boys drafting the plan it was adopted by Iraq – not that they had much choice. The Iraq plan is about saving OPEC, saving Saudi Arabia, maintaining a high price of oil and saving Exxon Mobile and buddies – so that oil profits stay high. That is what that plan is about. They don’t care if there is endless blood in the streets of Baghdad. The vision there has nothing to do with ending the civil war whatsoever. Nothing! Zero.
Horton: Well, you write in your book that Baker actually was on board – the original plan was the Baker Institute Council on Foreign Relations plan that, correct me if I am wrong, was basically to do a coup de tête in Iraq and replace Saddam with, as you say, the “next mustache in line,” meaning the next Sunni general, the next Ba’athist general, that they could put in power.
Palast: Originally, for those who haven’t read my book – shame on you if you have not read Armed Madhouse – we discovered that there were secret meetings of the Council on Foreign Relations (CFR) and the James Baker Institute to discuss the future of world oil, not just Iraq – you have to understand – it was not just Iraq. It was the entire world’s oil future.
By the way, that also explains the meetings with Dick Cheney. This committee, (a guy on that committee was Ken Lay) this Council on Foreign Relations-James Baker crew, was the one that had the secret meeting in the bunker with Dick Cheney to go over the oil maps of Iraq, and Ken Lay was on that committee.
Horton: The stuff that they still won’t release.
Palast: They won’t release it, but now I know what happened there.
Horton: And how do you know what happened there?
Palast: I talked to the people who were in it.
Palast: That explained this weird thing where a guy like Ken Lay is talking about Iraq’s oil with Dick Cheney. Lay was on the Baker-CFR little committee – or cabal.
Horton: But Cheney didn’t go with the Baker-CFR plan. He went with the neocon plan.
Palast: At that time, within a month of the administration taking office and before 9/11, the State Department and the oil companies met in Walnut Creek, California and devised a plan – I hope your listeners are taking notes – to have a coup de tête, or what they call an invasion disguised as a coup de tête You’d have an Iraqi general bump off Saddam, take control and invite, if needed, the 82nd airborne in to protect the new democracy of Iraq. Just like the way that we supported Saddam’s takeover, we say, “OK, there is a new guy. Recognize the new government.” Nothing changes. The only thing that would change is that, you would now have the same guys in charge of Iraq that the oil companies were always comfortable with.
Remember, Saddam was our butcher in Baghdad. We liked the guy. He got along well with our oil companies. But then after September 11th, the neocons did gain power – that’s Rumsfeld, Wolfowitz, Perle and gang – and their idea was quite different. Instead of just the invasion and coup de tête combo, where we are in and out literally in three days – that was the original idea: three days in and out – there would be a full scale invasion and one year occupation.
This would allow for the remaking of Iraq into this kind of free market miracle. Everything would be privatized including the oil fields, but Saudi Arabia would be the ultimate target of the invasion of Iraq. That was conceived of at the Heritage Foundation, by a guy named Ari Cohen, who was the so-called brains behind it. As an ex-CEO of Shell Oil said, “the neocon plan, which was presented as a no-brainer, was clearly devised by someone with no brains.”
Palast: And the CEO of Shell Oil, a guy named Phil Carroll, stepped in personally and said, “This is not going to happen.” That was after the invasion. What is coming up now is that the Baker boys, the oil companies and Saudi interests are standing up and becoming… are now taking charge of policy. When you look at the Sunni-Shia conflict…
Horton: Well, Greg, let me stop you though.
Palast: OK, so we’ll stop there, you’ve got to digest just that.
Horton: Yes, let’s go back to the original split over the invasion plan. I think it is worth emphasizing: you are saying there are two very different motivations. On one side the neocons and on the other side the Baker guys. The neocons wanted to completely bankrupt Saudi Arabia by dropping the price of oil through the floor and destroying OPEC.
Palast: That’s right.
Horton: And what Baker wanted was basically to empower the Saudis over Iraq to keep the price high. Now you are saying that the Baker guys are coming to the forefront, and yet it seems to me that George Bush has told the Baker group to beat it.
Palast: Naaaaah. [laughter] First of all, it doesn’t matter. Who is George Bush anyway? I mean come on. He is just a failed oilman warming the office next to James Baker’s office. In fact, when I call the White House, because I – you have to understand that I did have a U.S. journalist say that they doubted James Baker had an office in the White House. This was last year. We actually called his office at the White House, asked for James Baker and they put you right through.
Horton: Yeah, that was reported, even in the Times I think.
Palast: What I also found out is that sometimes James Baker uses the oval office desk while George Bush plays on the rug.
Horton: Yeah, well that makes sense too.
Palast: I made that up – but see… let’s start over and do the role of George Bush here in this operation.
Horton: Let’s get to the neocons. We’ve got Houston and New York on one side, and we have the neocons and some Military-Industrial Complex type businesses on the other side. These aren’t just personality differences. There is a very serious policy difference here.
Palast: Huge policy difference. Billions of dollars are on the table. You have to understand one thing: the real fight is not between Sunni and Shia. The real fight is between big oil, Saudi Arabia and OPEC [on one side]… There are two rules in the oil business. The first rule is the lower the supply, the higher the price. The second rule is the lower the supply the higher the price. If you understand those two rules, you understand the entire oil industry. They want a low supply. They like berserkers, killings, insurgency, fires, bombings in Iraq – they love it.
Horton: Well, they will settle for that if they can’t get their tin pot Ba’athist dictator, right?
Palast: Yeah, if they [big oil] can’t get a guy who will simply turn off the spigots for them and reduce the output of his own nation to favor the oil companies and Saudi Arabia, then they will have to do it by other means and they don’t mind the mayhem.
Horton: That has been the policy since the twenties, right?
Palast: Yeah. One of the things that I wrote about, was that Iraq was the original red line. You know how we use the term red-lining when we talk about people excluded from insurance and banking? The first use of red-lining was to red-line – literally.
There was a red line drawn around a map of Iraq by oil company executives on the floor of a hotel room in Brussels in 1925. They said, no one drills within the red lines. That includes Syria, Iraq and even at that time part of Saudi Arabia – no one drills there. We are going to keep oil off the market. All of the oil executives literally signed their names on the red line on the map on the floor.
Since then the story of Iraq has been the story of how to keep Iraq from producing its oil, because Iraq has known reserves of 100 billion barrels of oil. They only have developed 35 out of 125 fields. Everyone knows that they could easily increase their provable reserves up to 200 billion barrels, which begins to threaten Saudi hegemony.
The idea is to keep Iraq out of the oil market – minimize its role in the oil market. It doesn’t matter whether you do it through: an oil for food program saying, they can’t produce more than 2 million barrels a day; an embargo in which you say they can’t produce any oil at all; or insurgencies, bombings and invasions. You can also do it through the power of OPEC setting quotas on the country.
For 80 years we have had nothing but a story of how to suppress oil production in Iraq to keep up the price of oil.
Horton: On the other side you have the neocons, who say, let’s produce every drop of Iraqi oil in order to destroy Saudi Arabia. Now, Greg – why would the neocons want to destroy Saudi Arabia?
Palast: OK. The neocons… They have a whole different geopolitical viewpoint. Obviously neocons are close to and see themselves as great defenders of Israel. They see Saudi Arabia as the ultimate enemy and threat to Israel.
Horton: Even more so than Iran?
Palast: Well, yes. I think that may be beginning to change.
You have to understand that a lot of this Shia-Sunni split would be nothing… After all, there are religious factional – nasty differences, sectarian differences – all over the world. What is fueling this is oil. Saudi Arabia backs the Sunnis. Iran backs the Shia. You are developing a kind of split in OPEC, which also has a religious tint to it.
They are creating blocks. You have to understand that Iran and Saudi Arabia have completely different interests in OPEC. Saudi Arabia – well, everyone in OPEC wants a high price. Certainly so do the oil companies. But Saudi Arabia wants – and this is subtle – volatility in the oil market. Saudi Arabia likes the price of oil to shoot through the roof to $75 per barrel and then fall through the floor to $18 a barrel. It has done that over the past three decades.
Horton: Now why do they do that? Why do they like it to be volatile?
Palast: You got a windmill? [laughs] It becomes worthless the second oil drops below 30 or 25 dollars a barrel. Every solar project, every alternative energy project, and now significantly, the tar sands of Canada – and really important – the heavy oil of Venezuela are all pulled off the market because that crap, the crud from Canada and Venezuela, costs 30 bucks a barrel to produce, to market, to refine and get out there. Solar power requires high value. So the idea is that the Saudis eliminate all competitors to Saudi light crude. If you eliminate the competitors to Saudi light crude, you can keep cranking the price of oil up.
Think about it this way. If you keep the price of oil up, by classic economic theory – and this was a point made by my old, late and gratefully dead mentor, Milton Friedman – if you keep the price up, all of these alternative energies will come in. Then the price will slowly drift down and drift down permanently, once all of these new sources come on line.
Palast: Saudi Arabia… Sheik Imani, the former head of OPEC, once said, “The stone age did not end because people ran out of stones.” His point was that OPEC better watch how they deal with high prices. You can’t keep up high prices forever. Every eight to nine years you have to drop the price through the floor to destroy the alternatives. Iran cannot afford that. Venezuela cannot afford that. They are in a war with Saudi Arabia. You cannot look at Iraq without looking at this war over control of OPEC.
Horton: So the neocons are willing to destroy Saudi Arabia and OPEC, and take the risk of empowering Iran in that fight?
Palast: Well, remember that not everything they have is based on Israel. That’s one of their pet projects, but their view is that Saudi Arabia is the ultimate threat: that they [Saudi Arabia] control the policies of the U.S. government through guys like James Baker. They [the Saudis] are the big – obviously… We have seen that through the influence of the bin Laden…
Horton: Well, who’s zooming who? Is it not the case that America is the empire, and Saudi Arabia is our client state?
Palast: No. After all, it’s not like George Bush was elected [laughter]. Who’s calling the shots in Iraq. Is it George Bush, or is it the Saudi monarchy? Who is really calling the shots here? And is there a real big difference at this moment? House of Bush or House of Saud? Is there a difference?
Horton: What shots are the Saudis calling in Iraq, Greg?
Palast: Well, that’s the point. For example, who wrote the James Baker report? Here is a good example of power works…
Horton: But Greg, pardon me for a second. Just last night on the Internet I was reading Edward Djerejian, from the James Baker Institute, fighting against and arguing vociferously against the neocons, Frederick Kagan and the guys at the American Enterprise Institute, that wrote up the Iraq surge plan. These guys are at war against each other: the Baker group and the neocons. Don’t tell me that the surge and the neocon plan is really a front for the James Baker plan.
Palast: Yeah it is. Okay, now let me explain.
What happened over Thanksgiving? Dick Cheney was told to drop his turkey, fly to Riyadh and kiss the throne of King Abdullah. Abdullah – we know through the impolitic leak by Prince Al-Turki and his spokesman Nawaf Obaid – told Cheney, “you are not pulling your troops out of Iraq, Jack!”
Everyone is reading the James Baker report upside down. Baker was not primarily recommending a reduction in half the troops. He was recommending keeping half the troops, and keeping all of them there for one year. The surge is a pimple. It is a distraction. It is a nothing. Okay? It means zero – nothing.
So you throw a sop to some neocon fruitcakes? Remember that Bush and Cheney have to try to keep both sides on the perk. But when it comes down to it: Why are we in Iraq?
Because Saudi Arabia told us that we can’t leave. That’s what it is all about. Whether we have twenty thousand more or twenty thousand less is virtually insignificant in the scheme of things. It’s a wonderful distraction so the democratic party can pretend that it is being in opposition. You have a bunch of Republicans, who can jump off the bandwagon and not talk about the war, but just talk about the surge. You notice you don’t have any republicans at all talking about the war. They just talk about the surge.
Horton: Well, that’s not really true, actually. You’ve got Hagel, and there are quite a few guys in the House: Walter Jones, Ron Paul and others.
Palast: And you know what?
Horton: In fact the antiwar Republicans are better than the Democrats as far as I can tell.
Palast: Yeah, but they have zero influence on policy. No one cares what these guys think – not that anyone cares what the Democrats think either. You have to understand: the Saudi Arabians have said, “you are not pulling out of Iraq.”
Horton: And now let’s narrow that down for the audience.
Why is that? Is it because America has turned Iraq over to the Iran factions, the Supreme Council for Islamic Revolution and the Dawa Party.
That’s why, right? We’ve turned the country over to the Iranians.
Palast: Well, what we did under the neocons was… The neocons are not the brightest guys: they’re as sharp as marbles.
Horton: We sure agree about that.
Palast: They are not like the oil companies. They think, “OK, we are going to go in there and smash the power Saudi Arabia through Iraq by de-Ba’athifying the country and removing the Sunnis from power.
Well, that left a place for Iran to move in. Now the Sunnis… The so called – first of all the insurgency is a joke. You have to understand that. Where are they getting their money? It’s coming from Saudi Arabia. That’s like…
Horton: This is one of the real contradictions of this policy for anybody who has family over there serving in the military. That our soldiers are fighting the Sunni insurgency that they [our soldiers] are there to protect from the Shi’ite majority that we have installed in power.
Palast: Right. So what is happening now, is that we have a… I feel terribly sorry for American troops, because they are literally… The way it is being finally put is that our troops have been put in the middle of a civil war. It is put in religious terms, and people think in terms of Ireland: you know – Catholics versus Protestants or something.
This is the wrong way of looking at it. The only way that these two factions, the Shia and the Sunni, have power is because they are funded by two fighting factions of the OPEC oil cartel.
You’ve got Iran fighting at one end, by supporting the Shia militias. Then you have the Saudis supporting the so-called Sunni insurgency. It is really a proxy war over control of OPEC. In fact, it is very interesting about this so-called October surprise that occurred just before the mid-term, this marked sudden drop in the price of oil. I am told by insiders in the oil industry, that while this was to help Bush out in the mid-term as everyone expected, the big issue for the Saudis was to kind of take a little wind out of the sails of Ahmadinejad and Hugo Chavez.
Horton: Because we have been making them very powerful with this war and driving up the price the way we have.
Palast: Yes! We are turning Chavez into the Abdul of the Americas, because what’s happening is… By the way, you know, well, Chavez considers himself a good friend of mine. It’s not mutual. I don’t make friends with politicians. Period – of any type. I think it is dangerous for a journalist to do that.
I actually think he has done a terrific job as president of his nation. Sharing the… The only oil president I know – that includes George Bush – who is working hard to share the oil wealth of his nation with his people.
Horton: Well, tell me that you don’t approve, Greg, now that he is ruling by decree and nationalizing every industry he can get his hands on.
Palast: Well, I think it is an exaggeration. Chavez, unlike our president, was elected by a gigantic majority of the population. He is actually doing something that doesn’t happen much in America: he is carrying out his campaign promises – you know, that he was elected on.
Horton: And he is doing so on inflated oil prices.
Palast: But he is… His authority and his popularity are based completely on the high price of oil.
Palast: Hugo Chavez is tremendously… I’ve been down to Venezuela many times. I have spoken with him and spent a lot of time, by the way, with his opposition.
His popularity is based on the high price of oil. He is wildly popular throughout Latin America and particularly in his own country. But you know if the price of oil were 22 dollars a barrel, Hugo Chavez would not be a popular guy and couldn’t be elected dogcatcher.
Okay. Chavez knows this. I know it, and everyone knows it. Now, why is it that Dick Cheney just turned this guy into a powerful man?
This goes back to this issue again of volatility. I know from inside the department of energy… We were able to get the documents showing that the Department of Energy itself feels that the largest oil fields and reserves in the world are not in Saudi Arabia, but in Venezuela.
Horton: If the price is high enough.
Palast: If the price is at least 35 – 40 dollars a barrel. People have to understand. When we talk about how much oil there is in the world, you have to say, “at what price?”
Palast: There’s not much oil in the world that you can pull up at a price of 18 dollars a barrel, outside of Arabia. If you talk about 60 dollars a barrel for oil, you’ve got a ton of oil. You can develop tar sands, and even more important, you can melt the heavy tar oils of Venezuela. Venezuela has a big giant pool of tar – ninety percent of the World’s extra heavy oil. Ninety percent is in Venezuela. That reserve of oil is about 5 times the size of Saudi Arabia’s reserve of oil. The difference is that it costs 30-40 dollars a barrel to get Venezuelan tar into your SUV. It costs about four bucks a barrel to get Saudi light crude into your SUV.
Palast: Forty versus four. You can see the Saudi game: crank the price up and make a lot of money; drop the price down below forty and no one will invest in Hugo Chavez’s oil.
By the way, when you say that Chavez is nationalizing everything in site? Not the oil. He is very, very smart. He is saying that Venezuela technically owns 51 percent of any oil venture. Any oil companies, other than the Italian or the French, have no problem with that. Chavez needs Exxon. Even more important, he needs Shell Oil and Conoco Phillips to invest billions of dollars in pulling up that gunk he has in the Orinoco. That is Chavez’s game. That is why he is allied with Ahmadinejad. It has nothing to do with fighting U.S. imperialism. It has everything to do with their joint need to maintain a minimum price of oil.
Horton: Right, very well spoken there. Now we are almost out of time here, Greg, but we’ve got to get to Ahmadinejad real quick. The neocons’ plan basically shortcuts the problem between Saudi Arabia and Iran by saying, “let’s bomb Iran and regime change Iran.” Do you think that’s really on the horizon or just a lot of tough talk?
Palast: Well, they don’t call me. I usually have to investigate. We did, by the way, just so you know…
Horton: Well, I know you are paying attention.
Palast: To get the secret oil plans out that James Baker and his crew came up with took two years of work on our staff and chief investigator…
Horton: Quick, quick… Iran! Come on, hurry!
Palast: But with Iran, I don’t know if they are going to get away with doing such a bombing game. I don’t know if it will work.
Horton: Baker wants to talk to them [Iran]. The neocons want to bomb them.
Palast: Well, it’s simple then. Then we’ll be talking.
Horton: Oh… good.
Horton: I’m glad you feel that way. Everybody, Greg Palast. He is the author of Armed Madhouse and also before that The Best Democracy Money Can Buy. Check out his website, GregPalast.com. Thanks very much, Greg.
Palast: Take it easy, Scott. Bye.