Nos. 33 & 34, December 2002


Why this Special Issue: India as a Pillar of US Hegemony

From Colony to Semi-Colony

Towards Nationalisation

The Iran-Iraq War: Serving American Interests

The Torment of Iraq

Return of Imperialist Occupation
The Current Strategic Agenda of the United States

Home Front in Shambles

Military Solution to an Economic Crisis
US Declares India a Strategic Pillar

The Pages Ripped out by the US from the Weapons Report

Western Imperialism and Iraq:
Towards Nationalisation

In July 1958 an army faction led by Abdel Karim Qasim seized power in Iraq, executed the king and Nuri as-Said, and declared a republic to wide public acclaim. This was the first overthrow of a puppet regime in an oil-producing country. The new regime appealed to the popular anti-imperialist consciousness in its very first announcement: “With the aid of God Almighty and the support of the people and the armed services, we have liberated the country from the domination of a corrupt group which was installed by imperialism to lull the people.”

The US and UK immediately moved their troops to Lebanon and Jordan respectively in preparation to invade Iraq. Unfortunately for the United States, the deposed regime was so widely despised in Iraq that no force could be found to assist the American plan. Nevertheless, the US delivered an ultimatum threatening intervention if the new regime did not respect its oil interests. The coup leaders for their part issued repeated declarations that these interests would in fact not be touched. Only then were American and British troops withdrawn. Thus Iraq is no stranger to the threat of imperialist invasion.

Popular pressure and the companies’ counter-attack
Despite its assurances to the Americans, the new Iraqi regime remained under popular pressure. The Iraqi masses expected the downfall of the puppet king to result in a renegotiation or scrapping of the colonial-era oil concession to the IPC. (According to Tanzer, the total investment made by the oil companies in Iraq was less than $50 million—after this they received profits sufficient to finance all future investment; whereas Stork calculates their profits from Iraq at $322.9 million in 1963 alone.—Michael Tanzer, The Energy Crisis, World Struggle for Power and Wealth, 1974, p. 59; Stork, p. 119.) Even Iran and Saudi Arabia had obtained better terms than Iraq because their earlier concessions did not cover their entire territories, whereas IPC owned the entire territory of Iraq.

However, the owners of IPC, principally the American and British oil giants1,owned fields elsewhere in the world as well, and it was not the cost of production but complex strategic considerations that determined which fields they would exploit first. They were in no hurry to develop the Iraqi fields or build larger refining capacity there—IPC’s existing installations covered only 0.5 per cent of its concession area. When the Qasim regime demanded that the IPC give up 60 per cent of its concession area, double output from existing installations and double refining capacity, the IPC responded by reducing output. The oil giants had decided to make an example of Iraq, to prevent any other oil producing country from showing backbone.

Qasim responded to the oil giants’ intransigence by withdrawing from the Baghdad Pact, withdrawing from the sterling bloc, signing an economic and technical aid deal with the Soviet Union in 1959, ordering British forces out of Habbaniya base, and cancelling the American aid programme. In 1961 he wound up negotiations with the IPC and issued Law 80, under which the IPC could continue to exploit its existing installations, but the remaining territory (99.5 per cent) would revert to the government.2

The oil giants responded by further suppressing IPC production. In turn, Qasim in 1963 announced the formation of a new state oil company to develop the non-concession lands, and revealed an American note threatening Iraq with sanctions unless he changed his position. He was overthrown four days later in a coup that the Paris weekly L’Express stated flatly was “inspired by the CIA”. (Tanzer, p.52)

1963 coup and the IPC negotiations
The coup was carried out by an alliance between the Ba’ath party (full form: Arab Socialist Ba’ath Party; “Ba’ath” means “renaissance”) and an army faction, but the Ba’ath was soon ejected from power by its partners in the coup. The new rulers promptly granted the IPC another 0.5 per cent of the concession area, including the rich North Rumaila field which the IPC had discovered but failed to exploit. IPC agreed to enter a joint venture with the new Iraq National Oil Company (INOC) to explore and develop a large portion of the expropriated area as well.

The agreement, however, was condemned by Arab nationalist opinion, and the regime hesitated for years to ratify it. Meanwhile the Arab-Israeli war, in which Iraq participated, broke out in 1967. Israel, with American backing, seized and occupied lands belonging to Syria, Egypt and Jordan. Diplomatic ties between Iraq and the US were broken. The strength of anti-American and anti-British sentiment after the 1967 war made it impossible for the Iraqi regime to return North Rumaila to the IPC. The Iraqi government instead issued Law 97, whereby the INOC alone would develop oil in all but the 0.5 per cent still conceded to the IPC.

Between 1961 and 1968, IPC increased production in Iraq by a fraction of the increase in production in the docile regimes of Iran, Kuwait, and Saudi Arabia by the same oil giants who owned IPC. Since the size of IPC’s payments to the Iraqi government depended on the size of its oil output, and since the Government’s revenues depended heavily on these payments, the oil giants’ tactic caused Iraq great financial stringency, and prevented it from undertaking developmental projects. According to a secret US government report, the IPC actually drilled wells to the wrong depth and covered others with bulldozers in order to reduce productive capacity. The prolonged deadlock had extracted a great price: “more than a dozen years of economic stagnation, political instability, and confrontation”. (Stork, p. 194, from which we have drawn much of the above account)

Saddam Hussein comes to power
The Ba’ath party returned to power in a 1968 coup (in which Saddam Hussein became vice-president, deputy head of the Revolutionary Command Council, and increasingly the real power), and that party continued the course toward extricating the oil industry from the grip of the IPC. Finally in 1972 the IPC was nationalised, its shareholders paid a compensation of $300 million (effectively offset by company payment of $345 million in back claims). The country turned to France and the Soviet Union for technical assistance and credit. The Soviets developed the North Rumaila field more or less on schedule by 1972.

For the Soviets, Iraq was an important breakthrough in the region: unlike Egypt and Syria, with whom the Soviets had ties (in the former they were ejected in 1972), Iraq had vast oil reserves. It thus yielded lucrative oil contracts, investments in Eastern Europe from its oil surpluses, massive arms sales, and the promise of greater Soviet influence in the region. France too maintained ties with Iraq’s oil industry. (Significantly, despite the overwhelming importance of oil to Iraq’s economy, and the heavy price of its dependence on foreign firms, the country did not bring about the level of technological self-reliance in this field that, during the same years, socialist China did. Rather, it merely attempted to loosen the bonds to the US/UK oil giants by tying up with other advanced countries.)

The Iraqi nationalisation took place against the background of increasing assertion by even pro-US regimes in the region. Radical Arab oil experts (most prominently Abdullah Tariki) gripped the popular imagination with their well-documented exposures of how the oil wealth of the Arab lands was being looted; the Organisation of Petroleum Exporting Countries (OPEC) actively demanded better terms for their oil; a group of young army officers led by Muammar Qaddafi overthrew the Libyan monarchy in 1969 and called for confrontation with the oil giants; and the armed Palestinian struggle was born. The defeat of the Arab armies in the 1973 war with Israel further stoked anti-American sentiment. The process culminated with an Arab oil embargo against the western states and a massive increase in prices paid to oil producing countries. Iraq, as a major oil producer (with the world’s second-largest reserves, after Saudi Arabia), played a crucial role in mounting this challenge.

Till the overthrow of the monarchy in 1958 Iraq remained largely agricultural. It was only after the removal of the puppet king that year that some developmental projects were undertaken. After 1973, reaping the benefits of higher oil prices, welfare expenditures of the State increased considerably. The supply of housing greatly increased, and living standard improved considerably. However, the regime went further, initiating a wide range of projects for industrial diversification, reduction of imports of manufactured goods, increase in agricultural production and reduction of agricultural imports, and a large increase in non-oil exports. Large investments were made in infrastructure, particularly in water projects, roads, railways, and rural electrification. Technical education was greatly expanded, training a generation of qualified personnel for industry.

These measures stood in striking contrast to the Gulf sheikhdoms of Saudi Arabia, Kuwait and the UAE. In those countries, a part of the huge increase in earnings after 1973 was spent on improving the standard of living of the kings’ subjects; the rest was invested in foreign banks and foreign treasury bills, principally American. Thus the US was not fundamentally threatened by the oil price hike: while it paid higher oil prices, most of the extra funds flowed back to its own financial sector. Iraq, by contrast, invested far more of its oil revenues internally than other Arab states, and therefore had the most diversified economy among them.

It is worth noting that Iraq’s cultural climate and progress in certain areas of social life are abhorred by Islamic fundamentalists. Till 1991, literacy grew rapidly in Iraq, including among women. Iraq is perhaps the freest society in the entire region for women, and women are to be found in several professions.3

1. The French and the Dutch continued to be part owners, but remained in the background; France in particular was seen by Iraq as sympathetic to Iraqi concerns. (back)

2. The Organisation of Petroleum Exporting Countries (OPEC) was founded in Baghdad in September 1960 to unify and coordinate member states’ petroleum policies. The original members included Iraq, Iran, Kuwait, Saudi Arabia, and Venezuela. (back)

3. The fact that the US considered Iraq’s secularism a buffer against Khomeini’s ‘Islamic revolution’ makes a hash of the occasional US attempts today to paint Saddam as an ally of a global Islamic fundamentalist conspiracy. (back)

Next: The Iran-Iraq War


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