Sunday, August 16, 2009

Iraqi Oil Would Pay For Reconstruction

One of the arguments made by the Bush administration before the invasion was that most of the reconstruction costs after the war would be paid for by Iraq itself. Almost all of the top White House officials said that Iraq was an oil rich country that could easily cover its own rebuilding. In September 2002 for example, President Bush’s economic adviser Larry Lindsey predicted that Iraq would be producing 3-5 million barrels a day after the invasion. In March 2003 Deputy Secretary of Defense Paul Wolfowitz told Congress that Iraq would earn $50-$100 billion in oil in the first two to three years after the invasion. Neither Lindsey nor Wolfowitz had any idea what poor condition Iraq’s oil industry was in at the time.

As it turned out, Iraq never came close to meeting either of those predictions. In May 2003 Iraq exported no oil, followed by 200,000 barrels in June, 322,000 barrels in July, and 646,000 in August. Iraq finally broke the one million barrels a month mark in October 2003. In July 2009 it reached its highest export level since the invasion, 2.037 million barrels per day.

One major problem with Iraq’s exports was that its oil pipelines became an immediate target for the insurgency. In August 2003 there was the first of many major disruptions when the northern pipeline was shut down due to an attack. This would happen over and over again for years until the U.S. was able to build and fund a security network to protect the lines.

Iraq’s oil revenues also never met those early statements by administration officials. By the end of 2003 Iraq only earned $200,000 from its petroleum. In 2004 it earned $8.1 billion. By 2005 when Wolfowitz had predicted Iraq would’ve earned $50-$100 billion, Iraq had only made $18.6 billion. In total, from May 2003 to June 2009 Iraq’s crude has brought in $99.3 billion. Iraq’s Oil Minister believes that the petroleum industry needs $75 billion to be rebuilt, and meet its potential.

Iraq Post-Invasion Oil Exports - 2003
May 0.0
June 0.2 mil/bar/day
July 0.322 mil/bar/day
Aug. 0.646 mil/bar/day
Sep. 0.983 mil/bar/day
Oct. 1.149 mil/bar/day
Nov. 1.524 mil/bar/day
Dec. 1.541 mil/bar/day

Iraq’s Oil Revenues 2003-June 2009
2003 $0.2 bil
2004 $8.1 bil
2005 $10.3 bil
2006 $15.2 bil
2007 $15.4 bil
2008 $35.5 bil
Jan.-June 2009 $14.6 bil
TOTAL: $99.3 bil

SOURCES

Kher, Unmesh, “3 Flawed Assumptions About Postwar Iraq,” Time, 9/22/03

O’Hanlon, Michael Campbell, Jason, “Iraq Index,” Brookings Institution, 7/16/09

Observer, “Carve-up of oil riches begins,” 11/3/02

Reuters, “UPDATE 1-Iraq’s oil exports rise to 2.037 mln bpd in July,” 8/2/09

Sanders, Edmund and Kraul, Chris, “Iraqi oil flow halted for a week by attack,” San Francisco Chronicle, 8/17/03

Special Inspector General for Iraq Reconstruction, “Quarterly Report and Semiannual Report to the United States Congress,” 7/30/09

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