Dr. Jhirad is a Visiting Professor of Science, Technology, and International Affairs at Georgetown University's School of Foreign Service,
where he teaches courses on energy and world affairs, energy and security, and mathematics for policy. He has held senior positions within the U.S. government, including as deputy assistant secretary of energy for international energy policy, trade, and investment, and as senior energy advisor to the U.S. Agency for International Development. For five years, he served as vice-chairman of the governing board of the International Energy Agency in Paris and as the lead U.S. representative to the Asia-Pacific Economic Cooperation (APEC) Energy Working Group. He headed US bilateral energy consultations with all major oil producing and consuming countries over the period from 1995-2000, including the US-Saudi dialogue. Dr. Jhirad has authored or co-authored more than 80 publications on energy, climate and development issues. He has taught at Boston University and the University of Massachusetts. Dr.Jhirad received a bachelor and masters in physics from Cambridge University, and a doctorate in applied physics from Harvard University.
One of the most popular beliefs –especially in the Middle East- concerning the rationale behind the U.S. attack on Iraq, is that Washington invaded in order to control the country’s oil and gradually drop the price of oil at around 15$/barrel so as to prop up its economy and reduce its import dependency on an increasingly less trustworthy Saudi Arabia. What are the main reasons behind this perception and how do you judge its credibility?
The stated reason for the Iraqi invasion is now under enormous criticism in the U.S. and- more severely- in Britain. The justification of the War and “regime change” was built on the need to destroy Saddam’s Weapons of Mass Destruction (WMD). Since no WMD have been found yet, this justification of the war appears invalid. However, there are advisors both inside and outside the current government who have asserted that an important bonus arising from the invasion of Iraq could be the establishment of a competitive supplier to Saudi Arabia on the world oil market. Even though the oil industry is under the control of occupying forces, I still believe that the control of Iraqi oil supply is a major bonus but not the major reason for the U.S. invasion of Iraq.
What is your estimate of the country’s untapped reserves? The Baker Institute, the Center for Global Energy Studies and the Federation of American Scientists estimate up to 100 Billion Barrels (hereafter BB) in the Western Desert area, while the U.S. Geological Survey is more skeptic putting the number around 45 BB.1 Where do you stand given the fact that 1990s exploration technology –as 3-D drilling- has never been implemented anywhere in the country?
Based on private discussions with respected geologists, I believe that the country’s proven reserves can range anywhere from 112-the published figure- to 300 Billion Barrels.
What are the main impediments to Iraq’s “resurrection” as a major oil exporter, initially at its pre-1990 level of 3,5 Million Barrels per Day (hereafter MB/D) and at what approximate cost?
The main immediate impediment is a very unstable security situation arising from continuing guerilla warfare. Iraq needs major capital investment to achieve the outcome you mention. Without a genuine and legitimate Iraqi authority the entire reconstruction effort will be met by very severe resistance, and massive capital mobilization of $5 to $10 billion dollars will not occur.
Do you share the estimate of a relatively recent study by the Baker Institute and the Council on Foreign Relations that predicts the needed level of investment to $5 Billion for Iraq to reach its pre-1990 3,5 MB/D production capacity?
I do not want to pin myself to a specific number, but that estimate is probably in the ballpark. Yet with if a condition of substantial sabotage and escalating guerilla warfare persists, that figure may very well increase substantially.
What are your longer-term –say 5 years from now- projections on Iraq’s production capacity rise and what are the major parameters on which this rise will depend on?
The prognosis really depends entirely on whether a legitimate and domestically acceptable Iraqi authority is in place to manage the oil revenues and oil fields. The current situation is clearly not sustainable. With a politically acceptable solution, the long-term prospects are evidently very bright for expanding oil production beyond the 3,5 MB/D. There is no question about that. How bright is a matter of pure speculation.
During the 1990s Chinese, Russian and French companies singed several production-sharing agreements, which the Deutsche Bank estimates to worth around $ 38 Billion regarding the development of new –so called- “green” fields with a prospective cumulative production capacity of 4,7 MB/D. Since these governments opposed vehemently the U.S. war effort the future of these contracts is seemed to be extremely fragile if not moribund. To what extent would the exclusion of “non-Anglo Saxon” oil companies damage the speed of the country’s nearly dilapidated oil industry? Do you think that President Bush should be inclusive or exclusive of “old” European and Russian oil majors?
If the occupying forces do not succeed in transferring the management of the Iraqi oil industry to a legitimate Iraqi authority, the perception that the invasion of Iraq was determined by the desire to control the country’s oil wealth would be difficult to dispute. If such a transfer were to occur, then the legitimate Iraqi authority would have to make the decision on whether “non-Anglo Saxon” companies should compete for contracts or not. It would basically be up to them.
Well with all due respect, I think it would be quite difficult to persuade almost everyone else on the planet that the U.S. advisor to the relevant Iraqi Oil industry will have basically no influence over the Iraqi Oil Minister’s decision. At the end to the day the crucial question here is: is it to the U.S. national interest to let Russian, French and other major EU oil players antagonize with U.S and U.K. companies for production-sharing agreement and thus gain in the process the political and economic support of the respective governments who stood against the U.S. before March 2003?
It would certainly be in the U.S. interest to create a free and open contractual regime that allows all companies to participate fairly in the bidding process. Such an approach would also serve to improve international relationships severely damaged by the invasion.
Τo what extent do you think that the pre-war declaration regarding the establishment of an Iraqi Oil Fund –in the example of the Norwegian and Alaskan experiences- help to legitimize the U.S. and British occupation in the mind of the Iraqi people. How would such a process really work?
The usefulness of the Norwegian Oil Fund is very well established. Its governance arrangements are very transparent and allow for targeting the funds toward social investments that benefit the Norwegian people. The Norwegian model could provide an excellent model for managing Iraqi oil revenues to serve the reconstruction of the country, to benefit the Iraqi people, and to reverse the environmental destruction that has occurred. The trust fund model cannot be viewed as a device to legitimize the current situation.
Is there any chance the Iraqi oil industry will not be privatized, as the majority of the country’s anti-Saddam forces would wish to?
A very good question that strikes at the heart of what is currently debated in Washington’s policy circles. The major argument against privatization is that there has never been any private sector in Iraq capable or running the industry. The only private industries capable of performing such tasks are the multinational oil companies. Such a development, though theoretically attractive, would be very damaging politically.
What are the main scenarios regarding the potential political evolution of the Iraqi oil industry?
The first scenario is a continuation of the present situation: a highly tense and unstable political environment with continued occupation, guerilla warfare and rising Islamic fundamentalism. Second, there is a political stabilization scenario that envisions the rise of a legitimate government –I cannot say what form it would take- and a real transfer of power to a legitimate authority that owns and operates the oil fields independently of the occupying forces. The third option is a façade of local “legitimate” authority in Iraq, with real control exercised by occupying forces.
If we were to accept the scenario that political stability is slowly but steadily reasserted by the US forces and that Iraqi production further down the road starts to pick-up aggressively with Iraq remaining outside OPEC, what measures can OPEC implement to deal with the prospect of an Iraqi “rogue-producer” that will would strive to increase production so as to capture more market share regardless of the price control considerations as Russia is currently perceived to be doing?
I think that it is very unlikely an Iraq in desperate need of oil revenues would want to force Saudi Arabia to undercut the oil price in any substantial way. I do not see this scenario as being very likely.
Given the huge foreign and debt of the country –that reaches around $ 200 billion- and the lack of forthcoming reconstruction aid especially by European donors, do you think that Iraq will be able to self-finance at the short to medium term its reconstruction by increased oil revenues properly administrated by Paul Wolfowitz and Co.? How feasible is such a development given the present situation?
I do not see that as feasible at all given the current condition of the oil industry.
Given you expertise in dealing with the Saudi’s as the leading American official in the US-Saudi Energy Dialogue, how do you think that the Saudis will likely react to the U.S. domination of Iraq’s oil industry?
The explicit or implicit U.S./ U.K. control over the industry is going to be quite damaging in terms of Iraq’s relations with other oil producers .The Saudis would make the obvious case that Iraqi resources ultimately belong to the Iraqi people and that these resources should be under the control of a legitimate Iraqi authority. I think they would feel very strongly about that, knowing them as I do.
Do you think that U.S. control over Iraqi oil production will undermine or even negate any need for the evolving US-Russian Energy Dialogue and the overall –largely politically motivated-perception of Russia as a potential balancer to OPEC and Saudi Arabia?
There are many important aspects of the US-Russian relationship, and cooperation will continue on energy, economic and strategic questions.
To what extent would recent developments in the Middle East undermine the development of the Caspian Sea’s oil production and particularly the materialization of the Baku-Tbilisi-Ceyhan pipeline?
I do not think that the region will be affected much because of long-term investments made by corporate players on the basis of commercial and marketing criteria.