Econ-Atrocity: "No Matter What the Cost" Iraqi Oil Workers Fight Privatisation

"No Matter What the Cost" Iraqi Oil Workers Fight Privatisation
By Andy Barenberg, CPE Staff Economist

In Iraq a new battle is about is about to begin. On one side is the Iraqi Government, backed not only by occupation forces but also by Prime Minister Nouri al-Maliki’s secretive and deadly Badr Corps militia. On the other side stand 23,000 workers in Iraq’s General Union of Oil Employees (GEOU). The stakes: one of the greatest prizes of natural resources on the planet.

The June appointment of the respected Dr. Hussein Shahristani to the position of Oil Minister gave the union hope; but all signs now indicate he was brought in to give political cover to the signing of a new energy law that would effectively end Iraq’s public control and ownership over the oil fields. On July first GEOU held an emergency strategy meeting with the Iraqi Freedom Congress. The union swore to stop the new law “no matter what the cost.”

The Government of Iraq can’t take such things lightly. The union has proven before it can stop the flow of oil, but has never done so for more than a day or two—the indefinite strike now threatened promises to be the occupation’s gravest political crisis since Grand Ayatollah Ali al-Sistani’s massive rallies demanding elections. The Iraqi Government has moved to neutralize the union’s power by seizing its bank accounts. (The union is illegal after all; Saddam Hussein’s Public Law 150, which banned public sector unions, was the one law Paul Bremmer, the former U.S. Administrator of Iraq, didn’t believe he had authority to override.) And so now the battle begins.

Although the actual content of the law has been withheld from the public, it is almost sure to authorize the use of production sharing agreements (PSAs) as proposed by the US State Department’s pre-war “Future of Iraq Project.” Under a PSA, an oil field is technically not privatized. Instead a corporation receives exclusive rights to the oil field and it gets complete control over the revenue up to the cost of its investment. After costs are covered, the revenue is split between the company and the government in some predetermined rate, most likely to be 50/50 in Iraq.

Such agreements are popular in areas where oil is difficult to get to—such as offshore or deep in a jungle—and where the amount of oil is uncertain. Under a PSA in such conditions, the government avoids paying the risky cost of trying to develop the oil field. Compared to service contracts traditionally used in Iraq and the Middle East where the corporation receives a set fee for work done, a PSA promises windfall profits for the corporation should they happen to strike oil.

Of course in Iraq, where oil can practically be found by stubbing your toe on the ground, a PSA represents one of the greatest give-aways in history. More importantly, should a future Iraqi Governments try to change the agreement the company can sue for expropriation. According to the US State Department’s pre-war planning, “the most important feature from the perspective of private oil companies is that the government take is defined in the terms of the [PSA] and the oil companies are therefore protected under a PSA from future adverse legislation.” Not surprisingly, the US and British are pushing hard for these agreements to be signed while they have near total control over the Iraqi government.

Greg Muttitt of the oil watchdog group PLATFORM, using conservative assumptions, estimates that a PSA program in Iraq means oil companies can expect “annual rates of return ranging from 42% to 62% for a small field, or 98% to 162% for a large field” and that this will “cost Iraq between $74 billion and $194 billion in lost revenue, compared to keeping oil development in public hands.” Just how conservative is this estimate? Well, he was using the assumption that the cost of oil would stay at $40 a barrel over the next 40 years; just changing the assumption to the current price of roughly $75 a barrel almost doubles the estimates.

The wealth of Iraqi oil can play a role in creating a future Iraq where the needs of the people are met, but only if the General Union of Oil Employees succeeds in keeping control of oil in Iraqi hands.

Sources and resources:

• Antonia Juhasz, The Bush Agenda: Invading the World One Economy at a Time. New York: Harper Collins, 2006.
• Greg Muttitt, Crude Designs: The rip-off of Iraq's oil wealth. London: PLATFORM, 2005. www.crudedesigns.org.
• To find out more about the GEOU and actions of solidarity see www.basraoilunion.org.

(c) 2006 Center for Popular Economics

Econ-Atrocities are a periodic publication of the Center for Popular Economics.They are the work of their authors and reflect their author's opinions and analyses. CPE does not necessarily endorse any particular idea expressed in these articles.

Econ-Atrocity: Health Care on a Wing and a Prayer

Health Care on a Wing and a Prayer
By Jonathan Teller-Elsberg, CPE Staff Economist

Millions of employed Americans who are offered health insurance through their jobs are turning down the benefit because of high costs. This has been a tragic fact for many years, but the situation is only getting worse.

According to a recent report from the Robert Wood Johnson Foundation, the number of workers who declined to accept health insurance when it was offered by their employer increased by three million between 1998 and 2003. All told, some 12 million workers eligible for work-based health insurance turned it down in 2003.

Over the years of the study, the average annual cost to the worker to accept employer-supplied insurance went up by over $1,000, a 42% jump. It hardly needs mentioning that average wages have not kept pace.

Rising costs are not necessarily the reason that all of those 12 million workers declined the offered coverage—some workers turn down the health insurance from their own job because they are better off being covered as part of a family member’s work-based insurance.

Still, cost is the reason that most uninsured people lack coverage. Insurance costs have been rising for workers and employers alike. In both 1998 and 2003, employers who offered health insurance to their workers covered an average of 82% of the premiums. This means that employers also faced a 42% increase in their costs of providing health benefits. A predictable result is that more and more employers decide not to offer health insurance even as an option.

Altogether, 34% of full-time workers in private industry were not covered by employer-provided health insurance in 2004. Even those lucky enough to have insurance as an option, and lucky enough to be able to afford their share of the premium, have faced rising healthcare costs that take a toll. Rising deductibles, capped coverage, and other aspects of miserly insurance plans leave working people facing terrible financial risks. In 2001, half of Americans filing for personal bankruptcy cited medical expenses as helping to push them over the line. Of those, three quarters had health insurance when their illness or injury struck.

Clearly, the health care system in America is out of whack. When millions of workers can’t afford coverage, and many who have coverage are still driven to bankruptcy because their insurance is so stingy, we need real alternatives.

The simplest solution is a national health plan that provides universal coverage. From Canada to New Zealand, all the other economically advanced countries of the world offer examples of health care systems that care for peoples’ health instead of insurance and pharmaceutical corporation profits.

Until citizen pressure drags such a solution out of a resistant government, people can band together to create insurance alternatives. A leader in this type of grassroots movement is the Ithaca Health Alliance health care co-op, which provides a wide range of services for only $100 per year.

Sources and resources:

• Washington Post, “FINDINGS: More Are Opting Out of Employers' Insurance,” 5/5/06, p. A9, http://www.washingtonpost.com/wp-dyn/content/article/2006/05/04/AR2006050401708.html.
• Robert Wood Johnson Foundation, “Report Shows Decline in Employees Accepting Health Insurance, Rising Insurance Premiums Across Nation,” 5/4/06, http://www.rwjf.org/newsroom/newsreleasesdetail.jsp?id=10408.
• Jonathan Teller-Elsberg, Nancy Folbre, and James Heintz, Field Guide to the U.S. Economy (Revised and Expanded), pp. 27 and 122, New York: The New Press, 2006. http://www.fguide.org/.
• Ithaca Health Alliance, http://www.ithacahealth.org.
• Physicians for a National Health Plan, http://www.pnhp.org.

© 2006 Center for Popular Economics

Econ-Atrocities are a periodic publication of the Center for Popular Economics. They are the work of their authors and reflect their author's opinions and analyses. CPE does not necessarily endorse any particular idea expressed in these articles.