Shell in Iraq:

Shell – Stealing Iraq’s Future
Factsheet by PLATFORM

May 2007

The war in Iraq has brought enormous suffering to
the Iraqi people. By some estimates, more than
650,000 Iraqis have died as a direct result of the war
and occupation1, while millions more have been
displaced from their homes. But some companies –
foremost among them Shell – are hoping to profit
from this suffering.

After the 2004 fiasco, in which it was revealed that
Shell had systematically lied about its reserves in
order to cover up its management failures, the
company now sees the Iraq war as its opportunity to
fill the gap.

Shell’s history of exploitation in Iraq
This is not the first time that Shell has profited at the
expense of the Iraqi people. In fact, Shell was one of
the first companies to target Iraqi oil, and even
before the First World War was seeking a drilling
concession from the authorities of the Ottoman
Empire.

When Iraq shifted from Ottoman to British control
following the War, Shell was again at the forefront. In
1925, a 75-year concession contract was granted to
a consortium2 23.75% owned by Shell, together with
other British, French and American companies.
Combined with two further contracts signed in the
1930s, the consortium gained control over all the oil
entire country.

The terms of the contracts, reflecting the fact that
Iraq was occupied by Britain (under a League of
Nations Mandate), gave most of the oil revenue to
the companies, along with complete control over
decision-making. Yet these terms long outlasted the
occupation.

Throughout the 1940s and 1950s, successive Iraqi
governments tried to change the unfair terms of the
contract. Ultimately, following the overthrow of the
British-installed monarchy in 1958, the consortium’s
rights were in 1961 restricted to only the oilfields
already in production. Between 1972 and 1975,
those fields too were brought under national control,
like those of all of the major oil producers of the
Middle East. Iraqis vowed that never again would
they allow foreign companies to control their most
important economic resource.

But now Shell is attempting to reverse this change.
Using the military occupation

In March 2003, just days before the bombs started
falling on Baghdad, senior company managers met
with officials at 10 Downing Street, to insist that
“there should be a level playing field for oil
companies so that everybody has got a fair
opportunity.”3 In other words, Iraq’s oil should benefit
not just US companies, but European companies
too. (The idea that it might benefit the Iraqi people
was somehow neglected).

Since then, Shell’s strategy has worked closely with
the UK and US governments, as military occupation
powers, to create the framework for multinational
companies to take control of Iraqi oil.

The company had little difficulty persuading the two
governments of this approach. There has long been
a revolving door between Shell and the British
Foreign Office. Indeed, of the last five (civil servant)
heads of the Foreign Office, four have gone on to
become directors of oil and gas companies – two of
them in Shell4.

Meanwhile, Phillip Carroll, the former head of Shell
USA was appointed as senior oil adviser to the
Coalition Provisional Authority from February to
September 2003 – the most senior post in the
foreign reconstruction process of the Iraqi oil
industry.

Shell has carried out its own lobbying efforts too. In
2004, the company hired a lobbyist to help get it
access in Iraq: the job description called for “A
person of Iraqi extraction with strong family
connections and an insight into the network of
families of significance within Iraq”.5

Shell was also one of six oil companies that
sponsored a lobbying effort beginning in June 2003,
coordinated by the International Tax & Investment
Centre. The purpose was to pressure the Iraqi
government to grant the companies long-term
contracts called production sharing agreements –
which would give them exclusive rights to extract
Iraq’s oil, along with potentially unlimited profits.6

Again, the British government stepped in to help: the
British Ambassador formally presented the lobbying
document to the Iraqi Finance Minister7, and a British
diplomat helped arrange the meeting at which Shell
managers (and those of other companies) met
directly with Iraqi ministers and officials8.

The oil law

In order for Shell and its fellow companies to feel
legally secure, they needed an oil law to confirm their
rights to the oil. This law was presented to the Iraqi
parliament for ratification in May 2007.

Based on ideas proposed by a US State Department
committee before the occupation of Iraq, the first
draft was written in July 2006, and was seen by Shell
and other oil companies within two weeks.9

Members of the Iraqi parliament would not see it until eight
months later; while Iraqi civil society was excluded
altogether. And the interest groups involved in the
drafting were reflected in the content: the law
proposes that multinational companies will play the
primary role in developing Iraq’s oil, for the first time
since the 1970s. It offers them contracts of up to 30
years, with exclusive rights to develop the oil, and
extensive legal powers – everything Shell had been
asking for.

If these contracts are signed while Iraq is unstable
and still occupied – as is planned – these
circumstances will be reflected in the terms of any
contracts. As such, we could see a repeat of history,
with unfair terms of a contract signed under
occupation, but lasting a generation.

Opposed by Iraqis

Most Iraqis believe that oil production should remain
in the public sector, controlled by Iraqi companies.
A meeting in December 2006 of leaderships of all
five of Iraq’s trade union federations stated that “Iraqi
public opinion strongly opposes the handing of
authority and control over the oil to foreign
companies, that aim to make big profits at the
expense of the people… We strongly reject the
privatization of our oil wealth, as well as production
sharing agreements, and there is no room for
discussing this matter. This is the demand of the
Iraqi street, and the privatization of oil is a red line
that may not be crossed.”10

Iraqi oil experts too oppose the oil law. A meeting of
over 60 senior experts – including former ministers,
and former directors-general from the Oil Ministry –
met in February 2007, and called for a delay to the
law, stating that “Long-term contracts with
international companies are better avoided now.”11

“Ready to move”

In 2007, the US government has taken the lead in
pushing for the passage of the law. It became the
most important of President Bush’s “benchmarks” –
political developments he insisted on, alongside the
troop surge announced in January 2007. On every
occasion that senior US government officials
(including Bush himself, Condoleezza Rice, Defense
Secretary Robert Gates and others) have visited
Baghdad since summer 2006, they have spent their
time meeting with Iraqi ministers pushing for the swift
passage of the law. According to advisers to Prime
Minister Maliki, he has been warned that if the oil law
is not passed by June, the USA will seek to bring
down his government.12

Whilst all these efforts were underway to reshape
Iraq’s oil industry, Shell has worked harder than
almost any other company to make contacts in the
Oil Ministry, to gain a preferential position for signing
subsequent contracts. It has sponsored Ministry
officials’ visits to conferences, showered them with
gifts (such as technical manuals), and spent time
with them on international trips.

It also took on a series of advice contracts, including
a geological study of the Kirkuk oilfield (Iraq’s second
biggest producing field), designing a Gas Master
Plan for the country-wide development of natural
gas, and installing meters on export terminals – thus
giving Shell access not only to contacts in the Oil
Ministry, but also to vital data on almost all aspects
of Iraq’s oil industry, including its geology, its gas
plans and its exports.

In September 2006, Shell’s Chief Executive Jeroen
van der Veer announced that things were on course
for his company: “We have done all our homework
for Iraq . I'm not going to speculate on the timing, but
we are ready to move.”13

1 The Lancet, 11/10/06, ‘Mortality after the 2003 invasion of Iraq: a cross-sectional cluster sample survey’, by Gilbert Burnham, Riyadh Lafta, Shannon Doocy, Les
Roberts
2 The consortium was called the Turkish Petroleum Company, later renamed the Iraq Petroleum Company. The companies that would later become BP and Total also had
23.75% stakes, and a group of American companies (primarily the forbears of Exxon and Mobil) between them held another 23.75%. The remaining 5% was held by deal
fixer Calouste Gulbenkian.
3 Financial Times, 11/3/03, ‘Oil groups eye stake in wake of conflict’, by Cathy Newman
4 Sir Anthony Acland (Permanent Under-Secretary of State, Foreign & Commonwealth Office, 1982-86; Ambassador to USA 1986-91; non-executive director of Shell
1991-99) and Sir John Kerr (PUS, FCO, 1997-2002; non-executive director, Shell, 2002 to date; currently deputy chairman). The other two went to BP (Lord Wright of
Richmond) and British Gas (Sir John Coles).
55 Advertisement publicised by recruitment agency Glenn Irvine International, August 2004. See  http://www.carbonweb.org/showitem.asp?article=141&parent=9
6 See International Tax & Investment Centre, ‘Petroleum and Iraq’s Future’,  http://www.iticnet.org/publications/Iraq-book.pdf
7 ITIC Bulletin, November/December 2004, p.8
8 Interview by Greg Muttitt with Dan Witt, President, ITIC, 17/5/06. See ‘A Game As Old As Empire’, ed. Stephen Hiatt, pub. Berrett-Koehler, 2007, chapter 7. See also
 http://www.carbonweb.org/showitem.asp?article=257&parent=39
9 Nine multinational oil companies (including Shell) discussed the law at a meeting in Washington DC chaired by US Energy Secretary Sam Bodman in July 2006.
10 See statement at  http://www.carbonweb.org/showitem.asp?article=222&parent=4
11 al-Rasheed et al (61 signatories) , 17/2/07, Open letter to Members of Iraqi Parliament –Iraqi Oil Experts Seminar held in Amman
12 Associated Press, 14/3/07, ‘Iraqi Leader Fears Ouster Over Oil Money’, by Steven R. Hurst
13 speaking at the OPEC conference, Vienna, 13 September 2006