March 27, 2008

I've got a dumb question

With fighting in Basra between the Iranian-aligned Shi'ite government (who we're backing) and Mookie Sadr's less-Iranian-aligned Shi'ite militia (who we're fighting), I've got a dumb question that I should know the answer to but I don't:

Who's pocketing Iraq's oil money these days?

About 2 million barrels a day are pumped in the Basra province, so that's roughly $200 million dollars per day or $73 billion per year. That's a lot. Who gets it?

The cover story "Oil for War" by Robert Bryce in the American Conservative says:

"As A.F. Alhajji, energy economist and professor at Ohio Northern University, has said, “whoever controls Iraq’s oil, controls Iraq.” For the last five years, it’s never been exactly clear who controls Iraq’s oil."

I presume that's what the Shiite vs. Shiite fighting in Basra is over, right? I mean, $73 billion per year -- that's a lot of money. Can you imagine what Cortez would have done for $73 billion per year? (Indeed, the U.S. is lucky that some military genius hasn't emerged out of the chaos in Iraq over the last five years, the way the wars of the French Revolution shook things up enough for Bonaparte to appear.)

The Bush Administration has done a tremendous job of boosting Iraq's oil revenues. Unfortunately, that has come about not by boosting production, which is up only modestly, but by seeing the world price of oil more than triple since the invasion.

By the way, the U.S. military is spending almost $1,000,000,000 per week on fuel for Iraq, with most of that going to pay for the 5,500 tanker trucks that deliver fuel to our 3-mpg armor-plated Hummers. We're spending $42 to deliver each gallon of gas to the boys in the field. That's almost the kind of fuel economics you saw with a Saturn V moon rocket.

My published articles are archived at iSteve.com -- Steve Sailer

24 comments:

headache said...

The thing I don't understand is why the US Army keeps using the Hummer. The thing is unsafe and chews gas to boot. Why don't they just revert to say the South African CASPIR which is sure to use less fuel, runs on diesel and has been proven to be mine and bomb-resistent. They could buy them on the cheap since they are produced in South Africa, and the USD is still relatively strong against the South African Rand, which is headed the usual African toilet paper money way. It's best to do that now before the USD becomes another tissue currency.

Eric said...

NPR had a piece on this today. Yeah, apparently Sadr's people are siphoning off so much oil the government has to act or lose creadibility. A bit of theft is part of the culture, but they're not supposed to overdo it.

Meh. It's common knowledge the government has to break the Mahdi militia at some point - now's as good a time as any. The Sunnis are pretty quiet these days, so Maliki has the resources. The new government has to assert its monopoly over the use of force or it's just a debating society.

On the plus side, Juan Cole, who was a guest, thinks this is about to flare up into a region-wide conflict. So I figure everything will be calm by the end of the week.

Anonymous said...

Most of the Iraqi oil money (what isn't smuggled) goes to the Iraqi central government, which then distributes most of this money to the various provinces according to a budget passed by its legislature. The most recent budget passed was for about $42 billion. The fighting in Basra is mainly about the central government attempting to assert its control over this port city by cracking down on Sadrist militias that have been expropriating Iraq's oil and smuggling it.

- Fred

Buzzkill said...

Heckuva post!

"$1,000,000,000 per week on fuel for Iraq"

At first glance I thought that had to be a typo. Wow. Think of all the man hours of labour that go into generating a billion bucks for the feds, just to fill the tank for the week.

W Bakerr said...

You can't burn crude oil in a vehicle, so I guess whichever Emirates or neighboring country has the biggest refining capabilities is getting the bigger cut of that 1 billion per week. (Hell, for $42/gallon maybe they're shipping it from Houston!)

As to who's pocketing other cuts of the US tax dollar/crude oil price, a few oil/petrol brokers, contractors, and Sovereign Funds are probably the biggest culprits. Who would have thunk ten years ago that good ol' Kadafi would have made out so well!

Dubya has set the Arab world (and it's arch enemy, Israel) up for the next 50 years at least. He's helped spike the price of crude oil, money has trickled down to every 'Tom, Dick, and Harry' - don't ask for Arabic equivalents! And we'll get to sit back and watch Muslim-Brotherhood-like groups spring up from here to eternity. Meanwhile, Israel will make out like a bandit from the US Congress and Pentagon when AIPAC and crew starts showing round the clock coverage of the increasing Muslim threat to their spit of land.

We're all Middle Easterners now...

J. said...

Bush and Cheney's objective was to open Irak to American (and British) oil companies. That has largely been achieved. The oil revenue is "pocketed" by the party providing security. I am not sure "pocketed" is the right word, as the typical galabiyyah has no pockets.

Anonymous said...

According to the WSJ most of Iraq’s oil revenue is currently left in the bank, since the Iraqi government does not have the infrastructure to spend it.

Anonymous said...

Iraq has got its ups and downs. Its government and the American forces there are often inefficient and suffer from inertia. That's life. That's politics. For all the criticism from the left and the right, for all the scorn for the neocons and their Wilsonianism, for all the doomsday paleocons with their doubts about the reformability of an Arab rabble, it does seem that things are improving in Iraq. Even the mainstream media has let up. Where's the oil going? Does anyone care? Iraq is passe. One thing is for sure, though: if Iraq works out half well, there'll be less Iraqis who want to move to the West. Now that is newsworthy!

Anonymous said...

Everyone is sharing the revenue, Steve, as opposed to Saddam using it for palaces and arms. The Kurds have the territory to the North, the Shia the South, the Sunni would have been screwed, but for massive new finds at al-Anbar.

This puts in huge incentives for stability. Particularly among the Sunni. They can't share in the oil graft if they kick up fights, since there will be zero investments. They also have something to lose.

The Hummer is courtesy of Colin Powell and the post-Vietnam Army which wanted to avoid all urban combat for domestic political reasons. Bush's main failing, laziness, is evident in not replacing commanders like Casey or Abaizad who did not want to rock the procurement boat with the Hummer. There are a couple of new vehicles that are MRAP (mine resistant armored personnel carriers), but operations in Iraq are declining so not as many are being ordered.

I just sort of shrug at the cost of Iraq. Yeah it costs a lot. Nations that don't have military forces and use them occasionally end up either cowering under a protector that's stronger and wants something, or surrendering to any adversary. If say Pakistan turns south in a hurry with their nukes and Islamists, it would be nice to have something, including a real capability, other than nuke em all or surrender to Sharia.

Iraq exposed weakness in command: Casey & Abazaid, vehicles: Hummvee, tactics: fortified bases, and so on. At the same time solid commanders like Petraues and H. R. McMaster, vehicles like the Grizzly (MRAP), and combined arms operations all came to the fore or got better.

We need a bigger military, obviously, and probably more things like UAVs, bombers, A-10's etc. Better to find out now than when it really matters.

vanya said...

Essentially Bush has managed to engineer a massive transfer of wealth from the pockets of working American s to staunch allies of the US like Putin, Chavez, Iran, Saudi Arabia and Iraqi warlords. And yet 30% of Americans still like the guy, go figure.

Anonymous said...

The Hummer wasn't designed to be weighed down with tons of armor plating. It was designed to be a replacement for the old jeep. It was not designed to fight it out in an urban environment with RPGs, mines or IEDs. I'm not bashing it, it is a great vehicle and is in my humble opinion maybe the best type of general purpose vehicle around. It beats the old jeep hands down in comfort, speed and durability, cargo capacity, ease of use and maintenance etc...
Remember that whole controversy of the Hummers being "under armored?" When many of the up-armored versions were delivered, may units took the plating off. Why? Because the excess plating caused it to move more slowly and really reduced visibility, while adding to maintenence issues. If you want an armored vehicle to slug it out in an urban environment, get a tank or a Gavin. They military was trying (surprise!) to use something for urban combat that wasn't designed for urban combat.
There is a really long, sad history for this kind of stuff that has resulted in unecessary deaths and it mostly seems to be the infantry that gets the worst of it. At times, the learning curve makes me cry, literally. And sometimes I'm really glad I'm in the AF.

WLW said...

The Hummer is a piece of crap for comfort. It is in no way comfortable. I'm 6'1'' and can barely sit on the drivers side. Don't do any long hauls in it either. It really is a zero when it comes to comfort.

Anonymous said...

The Hummer wasnt just designed to replace the jeep. It replaced all sorts of disparate lighter vehicles. It makes good sense, logistically, to have one basic type rather than many.

Thats a compromise though, one vehicle many roles, and we know compromises dont always work out.

Zimri said...

Steve, you're assuming that the revolutionaries are militarily meritocratic.

The ideals of the Revolution in France included equality and reason. That unleashed meritocratic forces in France. Only once the heads of the office-purchasing crooks and nobles had rolled off the scaffold could the military become meritocratic too.

In Iraq, by contrast, the aim of the jihad is to be Muslim and to enter Paradise. These are not rational ends, and so the jihad won't find a rational leader.

The continued idiocy of Iraq's would-be leaders is in Iran's interest, of course. If Iraqi ever did rally around a non-moron, I wouldn't put out two cents for his continued survival.

Eric said...

The hummer wasn't designed to be an armored truck. We have armored trucks for that purpose, we just don't have nearly enough of them. And yes, we could buy one of several excellent vehicles from around the world, include the stryker, but it takes time and costs tons of money.

There's endless list of things the army would like to change - a bigger bore rifle, for instance. More UAVs. More modern C3 for non-stryker brigades. More stryker brigades. The new body armor. It's all getting prioritized, and not everything makes the cut.

When you go to war you find the military is never set up just right for what you want to do - but truer words were never spoken: You go to war with what you have. I don't know why people think wars are supposed to go smoothly - the never do. This war has gone pretty well by historical standards.

Martin said...

"Eric said...

This war has gone pretty well by historical standards."

Yeah, other than there not really being any point to it anymore.

Anonymous said...

"Meh. It's common knowledge the government has to break the Mahdi militia at some point - now's as good a time as any. The Sunnis are pretty quiet these days, so Maliki has the resources."

A government that has to stay holed up behind a mile of barricades and foreign troops isn't really in a position to dictate anything.

nzconservative said...

I thought the original left liberal, Chomsky-type argument was the point of the war was to crank up oil production to lower oil prices, therefore keeping US consumers happy, weakening Russia, and keeping the Saudi's under the thumb.

Since this clearly hasn't worked, the left is now saying it was to widen the us/uk stake in middle eastern oil so as to cash in on increasing prices.

But again, this still isn't rational behaviour, wars of conquest are just too expensive for modern democracies

The example of military equipment shows you can't fight wars using purely economic citeria.

Military equipment is strategic, if the US bought lots of its gear from Germany, South Africa etc it would weaken its ability to conduct an independent foreign policy. Hence it has no choice but to buy overpriced, and often unsuitable domestically produced stuff.

Another thing, if the war was primarily an economic war about getting a stake in Iraqi oil, why wouldn't the French and Russians want to get in on the act?

The likely reason is they thought it was an unrealistic venture conducted for muddled reasons and so wasn't worth the risk and expense.

Eric said...

The likely reason is they thought it was an unrealistic venture conducted for muddled reasons and so wasn't worth the risk and expense.

Sometimes people actually mean what they say. I think, for Bush at least, the war was about removing Hussein, and pretty much for the reasons he outlined.

There may have been other interests that went along for their own reasons, but certainly the aftermath of the invasion would have been conducted differently if the point was to take the oil. For one thing, digging Hussein out of his spider hole seems to have been the last page of the plan.

Anonymous said...

Nations that don't have military forces and use them occasionally end up either cowering under a protector that's stronger and wants something, or surrendering to any adversary.

Yeah, Switzerland, Luxembourg and Bahrain do a lot of cowering and surrendering.

In addition to Steve's question, remember that truck fulqsesl of an emptied bank's money that Saddam's sons supposedly spirited out of Iraq as the country was about to fall? Does anyone know whether it was ever recovered?

David Davenport said...

Re: Mine Resistant Ambush Protected
vehicles


Getting Used To MRAPs

March 13, 2008:

The U.S. Department of Defense, after deciding to buy a fleet of over 20,000 MRAPs (Mine Resistant Ambush Protected) vehicles last year, has delivered 3,500 new ones to Iraq (mostly) and Afghanistan. About 65 percent of those are actually in use. Since then, the success of the surge campaign in Iraq, and problems using the bulky MRAP vehicles in some situations, has led to the cancellation of about a third of those orders.


But now, as more units get MRAPs, and put them to use, ways are being found to overcome the shortcomings of these vehicles (poor off-road performance, and difficulty maneuvering along narrow village and city streets). Another minor glitch is high fuel consumption, requiring more fuel convoys to be sent north from Kuwait. But now there are fewer casualties, and higher morale as well.



Even before 2007, there were already over two thousand of these vehicles in use, mainly by bomb disposal troops, and units operating in areas almost certain to have lots of roadside bombs. People in these vehicles are much less likely to be killed or injured if they encounter a roadside bomb. Thus if all the troops who encountered these bombs were in a MRAP, casualties would be about 65 percent less. Currently, about two-thirds of all casualties in Iraq are from roadside bombs. Thus the army and marines want to use these vehicles in areas most likely to have bombs, and reduce overall casualties by about a third.



MRAPs cost about five times more than armored hummers or trucks. The original MRAP order would have cost about $16 billion. But these vehicles would prevent about a hundred troops a month from getting killed or wounded, under pre-2007 conditions. But now most of the bomb makers and planters are out of action, and there are far fewer bombs going off.



The most common of these MRAPs are called Cougars. This vehicle, and a larger one called the Buffalo, are more expensive to operate, and less flexible than the hummer. MRAPs use a capsule design to protect the passengers and key vehicle components mines and roadside bombs. The bulletproof MRAPs are built using the same construction techniques pioneered by South African firms that have, over the years, delivered thousands of landmine resistant vehicles to the South African armed forces. These were a great success. The South African technology was imported into the U.S. in 1998, and has already been used in the design of vehicles used by peacekeepers in the Balkans.



Basically, the Cougar is a 12 ton truck that is hardened to survive bombs and mines, and comes in two basic versions. The four wheel one can carry ten passengers, the six wheel one can carry 16. The trucks cost about $730,000 each, fully equipped. MRAPs are also being supplied by other manufacturers, but their designs are very similar to the Cougar.



A smaller number of MRAPs are similar to the larger Buffalos. This is a 23 ton vehicle, which is actually a heavily modified Peterbuilt Mac-10 truck. Costing $740,000 each, they have added armor protection to keep out machine-gun bullets.



The Cougar is more expensive to maintain and operate than the hummer. The large number of roadside bombs are a situation unique to Iraq. Once American forces are out of Iraq, the military would not need all these MRAPs. But vehicles like the Cougar and Buffalo are popular with many NGOs, and nations that have problems with rebel movements. So the U.S. could sell most of them, at used vehicle prices, to those buyers. Otherwise, they could have to be put in storage, because the higher operating costs, compared to hummers, would make for a highly embarrassing issue in the mass media.



It was to have taken about two years to manufacture the original order for about 20,000 MRAP vehicles, and it will still take that long, even with the orders reduced.


http://strategypage.com/htmw/htarm/articles/20080313.aspx

none of the above said...

It's hard to get inside anyone's head, but I think eric probably is right w.r.t. Bush's support for the war. Of course, even the president can't make a war happen without support, and that support came from building a coalition, with build-an-American-empire types who'd read too much Kipling and too little history, with bleeding hearts who wanted to end Saddam's genuinely nasty regime, with large masses of people who wanted to kick some Arab ass after 9/11, with large masses of people to whom the goofy idea of turning the Middle East into a region full of liberal democracies was appealing, etc.

You go to war with the coalition you have, not the one you want. And that has consequences almost as dire as what equipment and training your army has when the war begins.

David said...

for Bush at least, the war was about removing Hussein [...] digging Hussein out of his spider hole seems to have been the last page of the plan.

The "last page" was several years ago. We're still there, spending a billion per day.

So, is Bush not really in control, or what?

Sideways said...

The "last page" was several years ago. We're still there, spending a billion per day.

So, is Bush not really in control, or what?


Once the "last page" was done, every sensible person (and yes, a few people in the administration apparently qualify) realized that leaving Iraq at that time would create a chaotic country likely to host terrorists in the future, where it hadn't really in the past. In other words, leaving then would have meant our sunk costs were worse than wasted. Plus, it would have meant imposing sanctions on a government we created... not a good idea if you want to get reelected.

So, they wrote a half-assed sequel.

People really need to learn to keep arguments about whether or not we should have gone to war/the original arguments separate from arguments about whether or not we should still be there. The one has little to do with the other, unless you've got a time machine.