Ghosts of Empire (12 page)

The people at the top of the government may have changed, but the sense of national grievance against the IPC remained vehement. In early 1965, as the Iraqi government was putting more pressure on the foreign shareholders, the British Prime Minister Harold Wilson was wondering what ‘concerted action' could be taken to ‘stop the sale in Western countries of Iraqi oil if the Iraqis took violent action' against the IPC. As the control of the Western powers over Iraq's oil diminished, old imperial rivalries were revived. The view in London was that ‘French support could not be counted on', because the French were suspected of being more accommodating to the Iraqis than the other IPC shareholders. The British Foreign Office, in February 1965, complained that Paris favoured ‘acceptance of the Iraqi terms' while continually urging the British and the Americans to accept the Iraqi government's new demands.
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In 1966, the Iraqi Foreign Minister, Adnan al-Pachachi, managed to accost the British Foreign Secretary, George Brown, at the UN building in New York. He wanted the British government to put pressure on the company to come to an agreement. Brown was evasive. He regarded the whole thing as a ‘management function', not something with which the British government should interfere. Pachachi, pointing out that oil was inherently political, subtly implied that the absence of a settlement would
be a ‘barrier to the development of good relations' between the two countries. By 1968, the dispute between the IPC and the Iraqis, which had been caused by the draconian Law 80 of 1961, was still unresolved. The Foreign Office issued a note to ‘certain missions' in January 1968 which described, in diplomatic language, ‘oil affairs in Iraq' as being ‘confused and in a state of flux'. The situation was, in fact, much worse than the memorandum suggested; Iraq's oil had now become a nightmare for the original colonial powers, whose interests were represented by the IPC. Dissension between the powers themselves was growing, as each power, in particular the French, sought to carve its own niche in any arrangement. The Foreign Office grumbled that the French were ‘attempting to exploit' the political situation, with ‘two French Companies negotiating to gain access' to different parcels of land which had been expropriated from the IPC in 1961. In the meantime, the Soviet government had been in the process of reaching its own agreement, promising to provide assistance to the Iraqis in oil exploration and development. As the old colonial order tottered, other governments were hovering around Iraq to divide the spoils. Early in 1967, Eni, the Italian state-owned oil company, approached the Iraq government with an offer to exploit the most valuable part of the land that had been confiscated from the IPC. This area was called the North Rumaila field, where large quantities of oil had been proven to exist. The British, American and Dutch governments lodged strong protests with the Italians without any success. Italy was eager to develop commercial ties to a region from which it had been excluded in the various treaties and settlements after the end of the First World War.

The Arab–Israeli War in June 1967 made the situation more complicated. The Iraqis passed another measure, Law 97, which gave their newly founded state oil company, the Iraq National Oil Company (INOC), all the land which had been confiscated from the IPC by Law 80. The resentment which many in the Arab world felt towards the United States and its Western allies, as a consequence of perceived Western bias towards Israel, gave the Soviet Union further opportunity to exploit Middle Eastern oil. Yet Soviet interest in Iraqi oil was not regarded at all seriously by the British Foreign Office. The intransigence of the IPC had led to a situation in which the Iraqis could turn ‘to other countries', principally the Soviet Union.
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The main source of the dispute remained the North Rumaila fields, which had been on the verge of starting production when the IPC was compelled to relinquish control over them. The Soviet government was eager to take these fields over, with Iraqi consent, having promised to produce 100 million tons a year from them. This would give the Iraqis an added £200 million at a time when Iraq's oil production was only about 60 million tons.

Despite the Soviet threat, a civil servant at the Ministry of Power, Sydney Fremantle, was writing on 19 October 1967 that ‘Russia has shown very little desire to invest risk capital overseas.' The Soviets, in the Whitehall view, were not as adventurous and buccaneering as Western capitalists. By the end of 1967, however, it was clear that any Soviet hesitation had given way to greater enthusiasm to exploit Iraq's oil wealth. In November, an Iraqi minister in the oil department announced the arrival of sixteen Soviet oil experts who had been invited by INOC in order to draw up ‘an agreement for oil exploration and development' in the northern part of the country.
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A deal was reached.
Al-Thawra
(‘The Revolution'), a popular Baghdad newspaper, reported on 25 December that letters had been exchanged between INOC and the Soviets. For their part, the Soviets agreed to send ‘technicians, equipment and machinery' to transport the exported crude oil to the Soviet Union. The Iraqis and the Soviets enjoyed the first of many warm exchanges of words and vaunted affection; Iraqis, unequivocally decrying the connection between Israel and ‘the imperialist' West, spoke of the ‘magnanimous political support extended by the Soviet Union to the Arab countries during the imperialist-Zionist aggression last June'. Sayid Adib al-Jadr, the chairman of the INOC Board of Administration, read out a statement to reporters. He enumerated the old accusations made against the IPC and the ‘imperialistic-Zionist' powers, emphasizing that ‘the oil problem in Iraq began with the imposition of the first oil concession in 1925' and denouncing the ‘monopoly of oil exploitation by a single company which resolved to embark on a unilateral limitation of production'. The 1920s settlement had prevented Iraq from benefiting fully from its own natural resources.

In London,
The Times
, in an article entitled ‘Russia moves into Middle East oil', asserted that the Russians and the French had deliberately exploited the ‘confusion and demoralization among Arab countries that
has followed [their defeat by Israel in] the June war'. It was widely known that ERAP (Entreprise de Recherches et d'Activitiés Pétrolières), the French state oil company, had already signed a deal with the Iraqis, earlier in 1967, before that war had even started. Now, the Russians were prepared to finance Iraqi oil expansion, while the French were willing to be its ‘contractors'. Encouraged by the support from these two countries, the Iraqi government was now behaving in a more confident and aggressive fashion,
The Times
believed. The Iraqi President seemed determined, according to the report in that newspaper, to provoke a serious quarrel with the IPC. Using the colourful imagery for which the Arabic language is known, he denounced the IPC, with its predominantly British and American directors, as ‘bloodsuckers'.
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The IPC was being squeezed out, yet the British government was still trying to help the company. By 1968, this attempt was looking increasingly hopeless. The British Embassy in Baghdad was keeping the Foreign Office in London informed of the discussions which were taking place between the IPC and the Iraqi government. It was apparent to British diplomats on the scene that the board of the IPC was sharply divided, as the Americans adopted a tough line, refusing further talks with the Iraqi authorities, while the French were prepared to be more conciliatory.
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The British Embassy also provided coaching for senior IPC officials in their negotiations with the Iraqis. ‘We discussed tactics. Sutcliffe and Macdonald [senior IPC executives] seemed to think that there would be an advantage in their explaining the company's position to top political figures.'
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On 17 July 1968 the Ba'ath Party carried out another coup. The party's coup against Brigadier Qasim in February 1963 had brought it to power for only nine months, as Abdul Salam Arif, Qasim's partner in the 1958 revolution, emerged as the dominant figure in Iraqi politics after November 1963 when Arif ousted various Ba'athist members of the Cabinet and was elected president. In April 1966, Arif embarked on a tour of the country in a bid to promote the regime. On the 13th he boarded a helicopter to fly to Basra. Shortly after take-off, the helicopter crashed in a sandstorm, killing all on board, including the President. Four days later, Arif's brother Abdul Rahman Arif was elected president. Abdul Rahman's weak personality and lack of political skill ensured that the regime would be ineffectual.
The coup of July 1968 brought about by the Ba'ath Party inaugurated permanent change in the orientation of government in Iraq. This time the Ba'ath leaders ‘instituted the kind of regime they had failed to achieve in 1963', under the presidency of Hassan al-Bakr.
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The Ba'athist Revolution openly promoted the policy of ‘direct national exploitation of oil'. One manager of CFP (Companie Française des Pétroles), the French oil company which was a partner in the IPC, described Iraq's new rulers as a ‘gang of fascist-type thugs' who seemed bent on defending their positions ‘with utter ruthlessness'. This, as far as the IPC was concerned, was not necessarily a bad development. It was ‘morally distasteful' to deal with these thugs, yet in their ruthlessness they might be just ‘the sort of people to show the will and capacity to reach an overall settlement and impose it politically'. The oil company executives had a grudging respect for political leaders as hard-nosed as themselves.
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This proved to be wishful thinking.

The new Iraqi Minister of Defence, General Hardan al-Takriti, whose cousin Saddam Hussein would soon emerge as the strongman of Iraq, telephoned the British Ambassador one morning towards the end of October 1968, asking to see him at six o'clock that evening. As it was a Friday, a holy day in the Islamic world, the call was very unusual. Takriti was obsessed with the idea that the company owed the Iraq government money as a result of the understating of its profits during the 1950s and 1960s. Meanwhile, Sutcliffe and Macdonald, the IPC executives, had a three-hour interview with Dr Rashid al-Rifa'i, the Iraqi Oil Minister, at which the minister harangued the two men, repeatedly raising the question of the 20 per cent Iraqi share in the company which had been promised at San Remo in 1920. When the IPC men protested about Law 80, which had expropriated 99.5 per cent of the IPC's land concession in 1961, the minister played his trump card, complaining of the ‘failure of the company to do anything for the people'. If the IPC had managed to build ‘only one school a year' their reputation in Iraq would have been very different, he argued. Sutcliffe, weakly but truthfully, observed that the company could do nothing right. ‘If we built schools, hospitals and so forth, we would have been accused of interfering in internal affairs. Now we are being accused of indifference,' to which Rifa'i replied that at least the IPC could have tried.

Three days later, the two oilmen, together with a representative from the American shareholders, went to see General Takriti himself. The General was ‘frank and genial' and talked about Iraq's ‘current problems'; he told the British businessmen that Iraq needed more money, and that more oil would have to be produced. It was difficult for the Iraqi government to reach a deal with the company, because the company itself, as a symbol of imperialist power, was so widely hated by the Iraqi people. ‘The IPC had an appalling image,' Takriti said, but the company needed to produce more oil to boost revenues, since Iraq was a ‘developing country and needed help', and, more ominously, the ‘armed forces needed equipment'.
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Now that Iraq's oil was effectively being underwritten by the Russians and, to a lesser degree, the French, the government could be as rude as it liked to the IPC. By early 1969, the company was clinging on by its fingernails. British civil servants were marvelling that ‘in spite of ten years of fairly constant dispute between the two sides, and of much harassment of the IPC by the Iraqis, the IPC still remained in business'. Oil was still the key to the relationship between Britain and Iraq, and the British were fully committed to preserving some kind of role for the company. In a draft of a letter dated January 1969, a British diplomat asserted that ‘the position of the IPC is not only of extreme importance in any consideration of Anglo-Iraqi relations', it was ‘crucial'.
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The Iraqis were by now enjoying their newfound independence. With the Soviets at their side, they continued to treat the IPC with insouciance verging on contempt. In January 1969, Dr Rifa'i spoke to the
Middle East Economic Survey
in language that was partially derived from current Marxist rhetoric about defending the rights of the people against the imperialist powers. He referred proudly to his own government's success in standing up to the Western companies: ‘The revolutionary government is forging ahead, and the protection of the people's rights shall not be obstructed by the dreams or wishful thinking of the companies.' Iraq was now ‘more powerful than the companies'.
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It was into this background of growing Iraqi nationalism, coupled with increased confidence and greater self-assertion, that Saddam Hussein thrust himself in the early 1970s. As vice chairman of the Revolutionary
Command Council and so formally Bakr's second-in-command, Saddam Hussein had been a popular and progressive figure. His career was defined by the steps which he took in finally nationalizing the IPC in 1972. The nationalization was perhaps inevitable. During the 1959–70 period, revenue from the profit-sharing arrangement with the IPC accounted for an average of 80 per cent of the Iraqi government's total revenue each year. The company had a potential noose around the government's neck. Yet it still needed an extra push to bring about nationalization. There were still many associated risks, since the Iraqi government could not be absolutely sure in May 1972 that there would be an international market for nationalized crude oil. A Western boycott of the nationalized oil from Iran in the early 1950s had contributed to the ousting of Mossadeq's government. The possibility of a Western boycott still existed, which meant that the market for Iraqi oil needed a guaranteed outlet, and this the Soviets provided.
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