The Oily Development in Iraq: Tracing the Impact of Oil on Iraq During the Twentieth Century

The Oily Development in Iraq: Tracing the impact of oil on Iraq during the Twentieth Century

An oil spill ignites an ominous, yet alluring response. The duality in the visual appearance of petroleum is paralleled in the complexity of its effects. The rainbow that surfaces the oil spill is aesthetically pleasing and one can not help but be intrigued by it, yet contained in its beauty is the uneasy, liquidity of its loyalty. The dark fluid is out of place, as it blemishes the pavement. Just as the oil spill leaves the audience unsettled as it juxtaposes beauty and threat in a single form, a similar phenomenon has occurred throughout the oil producing countries. The potential for transformation has enticed many governments to extract and produce petroleum but this wealth has come at a great cost. The envy and complications attached to oil revenues have proven destructive throughout the Middle East. Iraq exemplifies the contrast between construction and regression that oil has caused in many of the oil producing countries world wide. Despite the vast transformations that have occurred through oil revenue, little in the way of true independence has been attained for the Iraqi people.

The Beginnings: Western Domination in Iraq and Oil Concessions
The Ottoman Empire fell during the First World War and the victors, mainly Britain and France, divided up the territory for their convenience. Iraq fell under the British mandate and was formed from an awkward amalgamation of three distinct provinces; diverse ethnic, cultural and religious groups were brought together under a single nation state. The British installed a loyal puppet government under the leadership of King Faysal. This ruler signed a concession which granted the Iraq Petroleum Company (IPC) low cost oil for an extended period of time- 75 years. These agreements were extremely favourable to the corporation for they created a set price per barrel, and gave control of all means of production and distribution to IPC. The government became powerless in determining or even influencing prices or levels of production. Between the 1925 and Iraq’s independence in 1958, the United States had risen as a Superpower and many of the Multinational Oil Corporations were American based. The new government renegotiated the oil concessions during its first years in power. Rather than have a fixed price (approximately $0.22 per barrel), Iraq tied their profits to the market economy; this quadrupled their profits within a year. Despite these negotiations, oil producing countries were still barred from controlling production levels or market prices over their major resource.

The Vulnerability of Iraq:
Iraq was in a difficult position because it had very little leverage for negotiating with the IPC. Oil had become central to the states funds and losing oil revenues would destabilize the economy. The IPC was a collection of five different multinational corporations which had control of oil fields across the Middle East. Therefore even if the Iraqi government could slow down oil production, corporations in IPC would just increase it in another area to counter the reduction. Thus while only Iraq was hindered by lack of production, the corporation was the main benefactor when production was stable. Multinational Corporations were an influential force aloof from the needs and grievances of the Iraqi people. Iraq and other countries dependent on oil as their main source of revenue were in a vulnerable position on the world scale. Iraq was victimized by the oil embargos in 1966 when Syria turned off a major pipeline that transported two thirds of Iraqi oil to the world market. Syria and some of the Corporations in IPC were in conflict, In response the Syrian government turned of the pipelines. Iraq had no participation in the problem nor did it have any control in the negotiations. IPC saw no reason to negotiate with Syria for Saudi Arabia was compensating for Iraq’s lost oil production. Thus IPC was not losing considerable revenues; however, the Iraqi government which had become dependent on oil exportation was greatly affected. The loss of its oil revenues caused both political and economical instability.

The Shift: The Inferior gains Leverage
When Iraq gained independence in 1958, their oil was still controlled by IPC. While the government had plans, much of the progress that could be made depended on the IPC’s cooperation. An Iraqi historian states: “The British got everything they came for and even more”. The ‘more’ refers to an instable government, dependent on the British due to their control over petroleum. He concludes: “Did we throw the British out? Of course not. They were the absolute masters of our petroleum industry until it was nationalized as late as 1972.” After the Second World War, it became clear that only through a union of oil producing companies, could the American policy be influenced. This reality was the impetus for the creation of Organization of Petroleum Exporting Countries (OPEC) which united five major oil producing countries- Saudi Arabia, Kuwait, Iraq, Iran and Venezuela. OPEC was formed as a way to thwart the Western dominance in oil production and market prices. Despite its emergence in 1960, the full strength of OPEC was not demonstrated until the October War in 1973. In 1972 Iraq nationalized it oil. The rewards were almost instant; in 1973 OPEC decided to limit its supply of oil to America. This action was taken in an attempt to have the United States pressure Israel to evacuate the occupied Palestinian territory. The strength of oil as a weapon became acknowledged world wide. Japan and Britain both recognized Palestine and advocated for their rights.

Senator Fullbright vividly articulated that “United in OPEC, they (the Arab Nations) set out to redress the imbalance between cheap oil and costly imports, and also in the psychological sense, to redress centuries of colonialism and exploitation.” The battle seemed to be won for OPEC when the contributing countries decided to end the embargo in March 1974. The price of oil per barrel had risen drastically, and the use of oil as a weapon proved powerful. The loose coalition of what was perceived to be weak Arab nations had been able to exert a considerable pressure on the Western Superpower America. Despite this small victory, this action showed the U.S. its vulnerability and the American government took measures to eliminate this Achilles’ heel. The consequences of the OPEC embargo proved to be dire for Iraq.

International Dependence: Change in USA Politics
The 1973 embargo had an enormous affect on the United States of America. For the first time America understood how dependent they had become upon oil, and consequently the Middle East. The embargo demonstrated the weakness in American development; mainly that the entire system rested upon the assumptions of infinite amounts of oil coupled with low prices. OPEC showed that Middle Eastern powers were unwilling to continue in the subordinate role they had been pushed into after the fall of the Ottoman Empire. This new vulnerability did not sit well with the American Superpower and President Carter made this clear in 1980. The Shah of Iran, who had been a strong and loyal ally to the United States, was overthrown by Islamic revolutionists in 1979. The Iranian Revolution was a source of distress for it not only eliminated a powerful ally it also threatened to destabilize the Gulf States. In response to this new undesirable development in Iran, President Carter proclaimed: Let our position be absolutely clear: An attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interest of the United States of America and such an assault will be repelled by any means necessary, including military force.

This aggressive stance became the foundation of American foreign policy towards the Middle East. From this declaration, it is clear how vital the United States viewed oil and how unwilling it was to allow such an important resource rest in the hands of others. While America also took steps towards improving its relations with some Arab states in hopes of using non-violent measures to secure their oil reserves, it is clear that the U.S. did not give oil producing nations of the Middle East full autonomy. If Arab nations did not negotiate kindly with America then threat of military intervention was ever present. This became the reality of Iraq.

Domestic Changes: Providing for Citizens
Oil was sold to generate revenue, which could be utilized to improve the social conditions of the Iraqi people. After the embargo of 1973 the oil venues provided enough money to allow the government to embark on social and industrial projects. The progress throughout the 1970’s exemplifies some of the positive effects that oil can have on a country. President Hussein created a social welfare state that greatly benefited the standard of living for its citizens. Under these reforms, better education was provided and higher levels of employment occurred. The status of women improved greatly as the law enforced equal pay, paid maternity leave and child care. While some have argued that Saddam Hussein implemented such policies to quell public criticism, nevertheless the reforms were good for the population as standards of living improved.

Out from Isolation: Iran-Iraq War and Western Orientation
The oil revenues had allowed the Iraqi government to enjoy a period of freedom from American influence. In an attempt to lead the Pan-Arab cause, Hussein had adopted more radical policies than many of the other Arab countries. The Iraqi President refused to recognize the Israeli state, severed ties with America and condemned the Arab nations which continued friendly relations with the West. The radical policies held by Saddam Hussein were revised due to the Iran-Iraq War. Iran destroyed many of the Iraqi oil fields which severely injured Iraq’s economy. To compensate for these lost funds, Iraq turned to surrounding nations for aid; Kuwait and Saudi Arabia provided huge loans. Due to the Pro-Western position of Iraq’s saviours, Hussein was forced to revise his radical stance towards Israel and the West. In 1984, Iraq restored diplomatic relations with America. The Western oriented Shah had been over thrown by a regime hostile towards the United States. In the loss of this valuable ally and weary of the new Islamic government, America began to take measures to contain the revolution though diplomatic relations and support in the Gulf States.

Unconventional Warfare: Reasons for Iraqi Invasion of Kuwait
Oil caused a high degree of interdependence among the oil producing states which is symbolized in the creation of OPEC. As described above, Corporations had control within a number of countries. Thus if one country stopped producing, the corporation would just increase oil export from another country to compensate. This greatly damaged the ability to use oil as a form of diplomacy for Middle Eastern countries. Even when many states nationalized oil, little pressure could be enforced on the Western world by one country stopping production levels if all other countries maintained or increased oil output. Within OPEC, there were diverging theories as to how to best maximize oil profits. Some countries like Kuwait and Saudi Arabia, mainly those with larger oil reserves, felt that oil should be kept at a low price to ensure the Western dependence on oil. These countries feared that if oil prices rose too much the West would begin to look for other means of energy, thus depressing their economies greatly. An opposing theory, held by Iraq, maintained that oil should be kept at a high price to maximize annual profits. The divide tended to be between those with huge oil reserves, wanting security of future profit verses those with less oil who wanted to get the highest possible price for what they did have. In February 1990, Kuwait’s oil minister stated that his country had been producing more than the quota set by OPEC. The new interconnectedness of the OPEC countries allowed Kuwait’s decision to overproduce to negatively affect Iraq. President Hussein explained that Kuwait’s overproduction drove down the price of oil on the international market; a drop of $1 per barrel equated to $1 billion annual revenue from Iraq. Another source of contention was Kuwait’s equipment. The American produced machinery that Kuwait implemented allowed for a lateral rather than a vertical form of extraction. The Rumeila oil field sat on the Iraqi/Kuwait border and Hussein claimed that Kuwait was stealing Iraqi oil. The President estimated that $2.4 billion had been illegally extracted by their already prosperous neighbour. The stolen oil and the overproduction were seen as unconventional warfare in Saddam Hussein’s eyes and justification for invading Kuwait.

When Unconventional turns Conventional and Regional becomes Global
The need for oil allowed the United States to declare its strength abroad. While the Saudi government debated about allowing American involvement, “the Americans had already made their decision.” No longer constrained by territorial restrictions, the US was able to implement its policy for ‘security’ overseas. U.S. Ambassador Madeleine Albright declared bluntly: “We recognize this area [the Persian Gulf] as vital to U.S. national interests, and we will behave with others multi laterally when we can and unilaterally when we must.” This development is interesting because it is a form of colonialism but even more detached. The U.S holds no responsibility to the people of the country they are affecting. Instead, the foreign government must withstand the burdens of the consequences from U.S foreign policy. This security threat gave America the initiative to attack Iraq through conventional warfare. In addition to direct combat with Iraq, America and the UN imposed sanctions to pressure the Iraqi government to comply with demands. Since the beginning of the Gulf War, there have been around 30 UN resolutions which have rendered Iraq in a state of economic paralysis. The first of these sanctions prohibited exportation of Iraqi goods and the importation of all products with the exception of what the Security Council deems as “humanitarian goods”. While foodstuff and medicine were allowed to be imported, Iraq was unable to purchase such goods because of the export restrictions. Oil had been the main source of Iraq revenue; through the sanctions the economy was greatly depressed. Furthermore, the sanctions against importing fertilizer, pesticides or spare parts, which have potential military uses, were detrimental to the agricultural sector. Neither able to produce domestic food, nor have the income to import food, starvation, malnutrition and epidemic have become common. These sanctions continued until 2003, the same year the United States invaded Iraq.

Cycle Complete: British Mandate vs. United Nations Resolutions
Under the Treaty of Serves, Iraq and other mandate states were ‘recognized as independent states subject to the rendering of administrative advice and assistance by a Mandatory until such time as they are able to stand alone.’ Through the guise of humanitarian aid, the Allies were able to encroach upon the Middle Eastern territory. This façade of assistance allowed international recognition of the Allied powers in the Middle East; this was manifested in the Mandates that were sanctioned by the League of Nations. The UN endorsed but American led humanitarian action against Iraq shows parallels the British Mandate. From the beginning of the British Mandate, the Iraqi public resented its presence. One major source of contention was the arbitrary boarders that the British drew. The British extended Kuwait’s boarders with the aim of limiting Iraq’s access to the Persian Gulf and consequently restricting Iraq’s revenue and power. Similarly, at the end of the Gulf War, Iraq was punished by losing 570 meters of the Rumeila oil field. Paralleling the Treaty of Serves, this UN commission was suggested and instituted by foreign observers. Neither this land, nor the territory lost in the 1920’s, were historically Kuwaiti, thus the borders were arbitrarily drawn in both cases. Akin to the earlier mandate, the UN sanctions took away the sovereignty of Iraq. Through the management of imports and exports and the creation of an enforced distribution of the countries revenues, the UN was able to wrest economic control from the government. Despite promises of ending the sanctions if Hussein complied with two of the UN’s resolutions, these hopes were dashed due to American veto power in the Security Council. In this fateful year it became clear that if Iraq did not comply to all the demands then the sanctions and suffering would continue. This rhetoric was vague in that the demands on Iraq were ever changing, for example the United States would no longer be satisfied with just an overthrow of Saddam Hussein. “Rather, we will want to be satisfied that any successor government complies fully with all UN resolutions.” This suggests that the goal shifted to the creation of a puppet government that would comply with all demands, similar to King Faysal’s regime.

In 1993, the United States was able to set up ‘safe haven’ for the Kurdish people in Northern Iraq. While President Bush justified these actions for humanitarian reasons, the military operations to establish these safe havens were in violation to the UN charter which sought to protect the ‘sovereignty, territorial integrity and independence’ of all states. Under the British Mandate, Iraqi government and public resented the installed puppet regime, subordination, exploitation and the powerlessness over their own economy and politics. The dependency created by the Mandate left the Iraqi’s feeling humiliated. These sources of contention are mirrored in the UN sanctions. Iraq lost its freedom, its sovereignty and its independence. It appears that the progress that had been possible with the revenues from oil seemed to be reversed by the ambitions of the Western world. Despite the superficial changes that have occurred, the underlying ambition of states to exploit others is still a leading incentive for conflict. In the aftermath of the Gulf War, the United States took over the mandate that had been established by Britain. Through the use of the UN, the United States was able to legitimacy implement its policies.

Open Wounds: Failures of the Invasion of the Gulf
The Gulf War demonstrated the complexity of the new globalized world. The discrepancy between ideology and reality became clear. The United States couched their argument for the invasion of Iraq in terms of humanitarian necessity. Saddam Hussein was demonized for his occupation of Kuwait. President Bush was determined to prevent Hussein from gaining any benefits from his aggressive actions on innocent Kuwaitis. Simultaneously however, the Israelis were occupying Palestinian land that had been won during the June War in 1967. Despite the clear parallels that can and were drawn between these two events, the United States continued to do little to pressure Israel’s evacuation of Palestinian territory. This double standard provided concrete evidence that imperial interests were the real incentive for the U.S. Unfortunately, the United Nations were also a part of this affair and it became clear that this organization was little more than a global instrument for superpowers. Despite Resolutions being drawn for both Iraqi and Israeli aggression, only the Iraqi Resolution was enforced. This hypocrisy also furthered resentment of Arabs toward the West. The constant neo-colonialism measures coupled with the substandard foreign model of governance created a fertile atmosphere for Islamist Movements to rise.

Oil has transformed the Gulf States. The once impoverished, dominated and weak states have become the centre of Global Politics. The dependency of Western countries on oil coupled with the plethora of oilfields situated in the Middle East has created interesting and controversial developments on the World Stage. Despite these vast changes over the 20th century, it is clear that military warfare remains the accepted form of domination. Oil itself has taken on many different roles: This resource has enriched previously poor nations and provided revenue to improve the lot of some people. Oil has also stimulated Western aggression and domination in the Middle East. However what it symbolized from the beginning and continues to symbolize today is western domination. While globalization has provided extra territorial expansion for western countries, it has failed to set up sovereignty for existing nations. In the oil spill there are many colors that merge and diverge depending on what the angle from which it is viewed. Similarly, the affects of oil depend on the place and time one is analyzing, it can be perceived as good or bad, a saviour or a destroyer, a liberator or a repressor. However, from the overview of Iraq, it is apparent that history has a much more defined pattern: The West is unable to relinquish its power and allow other countries to gain equality on the World Stage. While much has changed in the Middle East, the Western approach has not. Despite new incentives, norms and goals, the belief of the Western world that the property of other nations is their right has not yet altered. The subordination continues in a neo-colonialist manner. Supremacy, ownership and military have dictated Iraq’s past and present; unfortunately the future does not look bright.


Alnasrawi, Abbas. Iraq’s Burdens. London: Greenwood Press, 2002.
This book was extremely helpful. Well organized and good facts. Although dry in some areas it really outlines some of the problems of oil in Iraq. I found it especially helpful for it was written in 2002. Thus more information about the Gulf war had come to light but it was before the invasion of 2003. Many articles after 2003 focus a lot on the most recent events which made it difficult to address this issue. Also texts written in the 1990’s have a difficult task because the aftermath is present and the ability to judge things objectively becomes a hard.

Clairmont Frederic. “Iraq: The End of Empire”. Economic and Political Weekly, Volume 38, No. 38 September 20 2003.
This article gave an interesting background of British involvement in Iraq. It describes that while independence was declared, little had changed. Because of the power that oil companies had in the Middle East it was not until nationalizing oil were these countries free from British involvement in politics and economics.

Cleveland, William. A History of the Modern Middle East, 3rd Edition. Colorado: Westview Press Books, 2004.
This text gives a good overview of events that occurred in the Middle East. The author raises interesting questions and links events well between countries as well he suggests that later problems may be consequences of earlier hardships. Cleveland’s book helps in the general understanding of the Middle East creation of states and problems that ensued.

Khater, Akram. Sources in the History of the Modern Middle East, 1st Edition. New York: Houghton Mifflin Company, 2004
The Treaty of Serves
The Treaty of Serves solidified the division of the Ottoman Empire that was originally outlined in the secret Skyes-Picot agreement. This source shows the limitations that the Treaty imposed upon the Ottoman Empire, for its power was confined to only the state of Turkey. The rest, under the Treaty signed August 10, 1920, was allotted to either Britain or France. This source outlined some of the injustices placed upon the Middle East by foreign powers and gives a background understanding of the bitterness and resentment that resided during the mandates.

Koshy, Ninan. “The United Nations, the US and Northern Iraq.” Economic and Political Weekly. Volume 31, No. 40 (October 5th 1996) p. 2762.
This article gave a good overview of the UN sanctions in Iraq. It explains how the United States has been able to manipulate the global organization to its own ends. It also explains how the UN’s resolutions became harsher and drifted away from its original goals.

Merrill, Karen. The Oil Crisis of 1973-1974: A Brief History with Documents. New York: Bedford/ St. Martin’s, 2007
This text was great for its brief history of United States policy in reaction to Middle Eastern events. It presents a variety of articles which are briefly discussed at the beginning of each chapter and was a good source of reference to the interdependence that has occurred in the globalized climate.

Jimmy Charter. The Carter Doctrine: State of the Union Address, January 23, 1980 (found in Merrill)
The Carter Doctrine showed the willingness of the United States to use military force when necessary. This is significant for it demonstrates the complexity of competing aspects within American ideology. While the sovereignty of Kuwait is a justifiable reason for invasion, oil security takes precedence over Iraqi sovereignty.

Zuhayr Mikdashi, The OPEC Process, 1976 (found in Merrill)
The piece shows the bewilderment that many Americans felt during the OPEC embargos. For the first time the Middle East had challenged the Western Dominated rhetoric and the West was unsettled by this event. The text shows a variety of opinions of how best to address the oil crisis.

Rouleau, Eric. ‘America’s Unyielding Policy toward Iraq’, Foreign Affairs. Volume 74. No. 1 (Jan/Feb 1995).
This article describes the affects of the sanctions on the Iraqi people. It explains why the sanctions are in place and why some of them are unreasonable. It shows how the US has been able to affect the UN greatly to pass through its own agenda rather than the reconstruction of Iraq.

Lawrence Wright. The Looming Tower. New York: Vintage Books Edition. 2006.
This book is interesting in the way that it stylistically explains the rise of Islamist movements. Although it does not directly pertain to this topic much, many of the reasons for hostility and frustration towards America in the Islamist fundamentalist groups are mirrored in Iraqi depression.