I was on the blogger call with Tony Snow and Bret McGurk yesterday, and was actually pretty impressed by them. But the basic truth is that while they knew and acknowledged that we were getting our heads handed to us in Information War, they really didn’t strike me as having much of an idea as to what to do about it.
As one aspect, I asked about the report in the Independent (yes, Robert Fisk’s paper) that the new Iraqi oil law would both provide shares in national oil revenue to all Iraqis (great thing to do, three years too late), and that it would rely on “Production Sharing Agreements” with US oil companies to exploit the oil – PSA’s being a way that a nation might hypothecate it’s oil reserves in return for allowing them to be exploited.
There’s a bad history with national oil contracts like that in Iraq (and throughout the Middle east, to be honest); in 1925, the British-owned Iraq Petroleum Company had the exclusive franchise – which the British imposed on Amir Faysal (the king they had in turn imposed on Iraq).The terms of the agreement – as presented by the Independent – are quite generous to the oil companies:
It is also understood that once companies have recouped their costs from developing the oil field, they are allowed to keep 20 per cent of the profits, with the rest going to the government. According to analysts and oil company executives, this is because Iraq is so dangerous, but Dr Muhammad-Ali Zainy, a senior economist at the Centre for Global Energy Studies, said: “Twenty per cent of the profits in a production sharing agreement, once all the costs have been recouped, is a large amount.” In more stable countries, 10 per cent would be the norm.
While the costs are being recovered, companies will be able to recoup 60 to 70 per cent of revenue; 40 per cent is more usual. David Horgan, managing director of Petrel Resources, an Aim-listed oil company focused on Iraq, said: “They are reasonable rates of return, and take account of the bad security situation in Iraq. The government needs people, technology and capital to develop its oil reserves. It has got to come up with terms which are good enough to attract companies. The major companies tend to be conservative.”
OK, this is, plain and simple, a public relations disaster. And, if true, a moral disaster as well.
My question to Snow and McGurk (go over to Outside the Beltway for a full recounting of the call) was along the lines of “Is this true? And if so is this something the Administration supports?”
Snow, amusingly, answered “I’m not even going to fake it. Brent?”
Brent had read the article, said it was based on a very early draft, and that it had been shot down on Al Jezzera (I couldn’t find it searching…) – and he expects the Iraqi Parliament would be modifying the terms (note that he didn’t take a position).
I pointed out that this was doubtless all over the Arab and Iraqi press – and where was the Administration reply? Why wasn’t the Administration taking a strong position that we wouldn’t allow US oil companies to exploit the Iraqi people by entering into contracts reminiscent of 1920’s imperial exploitaton?
So I’m left with two concerns – does the Administration realize how bad issues like this make us look? And if they do, why can’t they take a lesson from political campaign management and create a message machine that looks at what’s out there and responds? Bueller? Anyone?