ENERGY INFRASTRUCTURE PLANNING:
BRIEFING FOR DEPUTIES
18 OCTOBER 2002
10117/02 4:56PM OSD MUTTIT 46 SI3CR+J'F;'fl'ii9F9ftl"t 1 Derived from Multiple Sources
Agenda
• Summary of Tasl(
• Status of Planning
• Discussion of Key Issues
• Discussion of Declaratory Policy l0/17/02 4:56PM OSD MUTTIT 47 8~CM'I'/R'l9F9Rff 2 Derived from Multiple Sources
Sumnzary of Task
• Develop a con1prel1ensive contingency plan for protecting, repairing and operating Iraqi energy infrastructure, to be used if US/allies must occupy.
I Address legal, policy and operational issues.
I DoD lead, with other agencies participating as required.
I OSD/CENTCOM division of labor.
- JCS/CENTCOM: plans for protection and repair.
- OSD: plans for maintaining continuity of operations.
10117/02 4:56PM OSD MUTTIT 48
~l!ICM~/~l8F8RN . 3
Derived from Multiple Sources
Statrts of Plan11ing
OSD: Reported 15 October 02.
CENTCOM:
Have identified key locations to protect, repair as necessary, including:
- Vital facilities at Rumaila oil field.
- Export tem1inal shipping berths.
- Major pump stations.
- Storage, metering and export terminals.
Developing full range of repair contingencies (heavy to no damage).
- US Army Corp of Engineers developing courses of action for sabotage and battle damage, including collateral damage done by coalition forces.
- Unlikely US forces moving through area will cause damage, but if Iraqis defend oil facilities, battle damage and collateral damage could be significant.
- Have identified energy-related strike areas posing risk of collateral damage.
CIA has assessed sabotage and its effects on production.
Fragmentary intelligence indicates Saddam has placed explosives on wells and other facilities.
- Saddam's motivation not known, but could include deterring military operations, creating unfavorable battlefield environment, denying revenues to post-Saddam regime, punishing neighbors environmentally.
Operational plans to be briefed in greater detail at later time.
10/17/02 4:56PM OSD MUTTIT 49 St!l€Rf!l'f#N8F'8~i 4 Derived from Multiple Sources
Next Steps
Energy Infrastructure Planning Group (EIPG).
- Chaired by DoD.
- Participating agencies are detailing individuals to DoD.
• CIA officer with oil industry experience.
• DOE expert from Strategic Petroleum Reserve.
• DOS Iraq expert.
EIPG has begun work-up of key policy issues, outlined in following slides, for Deputy and Principal decisions.
• Within 2 weeks after detailees on board, will present Deputies with decision options on first priority issues.
• Sotne of these issues are subsets of broader issues, n1ust be decided in that context.
EIPG will:
- Address need for an up-to-date survey of Iraqi oil infrastructure.
- Ensure integration of policy decisions into planning process.
- Keep NSC staff advised daily.
10/17/02 4:56 PM OSD MUTTIT 50 SlilCRJ!l'iV/li9F8ftP'E 5 Derived from Multiple Sources
Key Policy Issues EIPG Will Bring To Deputies/Principals With Decision Options 10/17/02 4:56 PM OSD MUTTIT 51 SI!1CM'f/IN6F6Rtt 6 Derived from Multiple Sources
A Gzticling Principle
• All policy issues are guided by the underlying principle that Iraqi petroleum resources belong to the people of Iraq, i.e., to the nation as a whole, not to any regional entity.
• Accordingly, policies should be set at a national level, for the benefit of all the Iraqi people, and proceeds must be allocated · equitably among the regions.
10/17/02 4:56 PM · OSD MUTTIT 52 i:J!i(;IY!J'I'JA)fgFgR.'\l" 7 Derived from Multiple Sources
Ho}v to organize and manage?
DoD 1nanagen1ent lead required, assun1ing CENTCOM Con1mander will be initial post-conflict authority in an occupied Iraq and absence of any UNSCR providing otherwise.
During occupation, ovcra111nanagen1ent responsibility could be vested in an interim "Iraqi Petroleum Trust" or similar entity, under authority of US military command, that would:
- Supervise and administer Iraqi petroleum industry, supported initially by US contractor team from private sector.
- Be a US or coalition entity, possibly with USG agencies represented on its board (as in OPIC).
- Be run by a qualified American as chief executive, reporting to SecDefthrough CENTCOM Commander.
- Be governed by USG policies coordinated inter-agency and approved by President.
These responsibilities could be transferred to a coalition civilian authority when such authority is formed and ready to assume control.
Assumption: l(eep existing Iraqi organizations and personnel functioning to the extent possible, after purging the Saddam "machine" -- but plan for worst case that few Iraqi managers/workers available.
Should be transparent n1echanism to enhance credibility and demonstrate fairness to Iraqi people and in~emational community.
Issue: When/whether to include allied/coalition/third-country governments or Iraqi entities in the "Iraqi Petroleum Trust"? Whether to include non-US companies (e.g., Lukoil, others) in contractor support team?
10/17/02 4:56PM OSD MUTTIT 53
~K{;UT!'I>lQI'QR."l 8
Derived from Multiple Sources
Dill ./ 1-Jc,:)' t:J liSe ]Jetrolell11l proceeds?
Use of oil proceeds consistent with current Oil-for-Food Progran1 --humanitarian needs of Iraqi people, urgent repairs to petroleum and other critical infrastructure -- may be relatively less controversial.
Other possible uses, likely to be more controversial:
- Recover US/allied costs of military campaign.
• Costs of military operations inside Iraq?
• Military operations outside Iraq?
• Costs of occupation?
- Pay Iraqi foreign debt?
• Or defer some or all?
- Some debts are controversial, such as for anns bought from fanner USSR.
- Policy on eventual "Paris Club" re-scheduling?
Current UNSC sanctions, if applicable to US-led occupation, would limit our authority to administer the oil industry (including importation of infrastructure, sale of petroleum products, use of proceeds).
- Lawyers now analyzing legal case for and against.
10/17/02 4:56PM OSD MUTTIT 54 stlCH't¥1N8F'8ftfi 9 Derived from Multiple Sources
1¥1zat to clo ctbout current sanctions a ainst Ira ?
UN Sanctions:
Include restrictions on oil sector import/exports, WMD-related restrictions, and a reparations regime for Kuwait and other goven1ments affected by Iraqi invasion.
• Now analyzing which UNSCRs should be revised or terminated in event of US-led temporary administration in Iraq.
• Current UNSCRS require, for example, all oil export contracts to be approved by GOI and UN 661 (sanctions) Committee, and all imports to Iraq on a "Goods Review List" (dual-use technologies) to be approved by UN Committee-- sales proceeds go to UN escrow account.
Could prevent us from managing petroleum resources rationally.
• As applied to US-occupied territory, strong argument sanctions inapplicable as their purpose would no longer be served.
• UNSC action may nevertheless be desirable, to ensure international recognition of actions by temporary administration on oil sales, infrastructure development, oil exports, and imports of items on UN Goods Review List.
- Be ready with draft UNSCR at proper moment.
Must address how and whether to continue funding reparations to Kuwait, other governments (including USG) and other claimants-- payments now funded by oil sales through UN Oil-for-Food program and UN Compensation Commission. Some altem(;ltives:
• Fund reparations directly without channeling through UN.
• A residual UN program just to administer reparations.
• Encourage claimants to consider foregoing additional Gulf War reparations in light oflraqi regime change.
US Domestic Law:
Various restrictions on dealings with Iraq.
Lawyers to analyze, advise which might need to be changed, and how.
• By executive action?
Sl!lC:RiB'ti'IN8F8Rf'i
Derived from Multiple Sources
Develop Iraqi oil prodttctioJt capacity, :;r };;~·rely oper?tte 1vltat ctlready exists?
CIA estimate:
Current production capacity about 3.1 million b/d, but producing only about 1.9 million b/d.
Solllc prival..:-scctor estimates s~:~y production c~:~pacity lower than this and and major infrastructure investment needed to realize it.
Could reach cuiTent production capacity within a few weeks if shortage of sales contracts coiTected.
Could return to pre-Gulf War production capacity of about 3.5 million b/d by year-end 2003, assuming little damage to facilities.
Questions:
Should we take immediate steps to increase production up to current capacity?
Should we undertake to increase production capacity?
Considerations on increasing production capacity:
Doing so during occupation presents legal issues now under study (e.g., impact, if any, of existing UNSCRs ).
Would tend to bring down world oil prices over time.
• (b )(1)
•
Would tend to increase revenues available to Iraq.
• W auld tend to raise living standards in Iraq .
Might be necessary to pay for both domestic needs and Iraqi foreign debt, depending on which debts were paid, and when.
• Would it improve conditions for political stability, establishment of democratic institutions?
Would require decisions on whether to have open competition for development rights, or to favor or disfavor investors and companies from some countries.
Might exacerbate internal power struggles among Iraqi factions.
10117/02 4:56PM OSD MUTTIT 56 11
Derived from Multiple Sources
Jj- develop production capacit]J, w/1at to do abotct existing a11d 11ew developtnent contracts?
TrJC]_ currently has development contracts with con1panies fron1L_[ (b-)(_ 1 > _________ __j Little or no work yet done under these contracts, reportedly because would violate UN sanctions.
Question whether mere existence of contracts violates UN sanctions.
Worth billions of dollars to develop reserves in billions of barrels, potential daily production in millions of barrels.
Need legal analysis of these contracts, then develop policy on whether to honor, modify, abrogate, or merely defer them for new Iraqi government to address. [Need more data on contracts.]
- Pro: Honoring could reduce prospect of negative UNSCRs on post-conflict US actions in Iraq.
Con:
• Honoring would penalize companies (e.g., US and UK) that played by the sanctions rules.
• Honoring could strengthen some countries whose interests in the region may be inconsistent with ours.
Will need policy and legal review on whether to open up competition for new development contracts to investors/companies from all, or only some, countries.
- Excluding countries that did not support military campaign would weaken international acceptance of interim administration.
• But prospect of exclusion could motivate some countries to be more cooperative now.
- Unrestricted competition could help establish free market principles in Iraqi economy.
May be legal considerations for or against.
10/17/02 4:56PM OSD MUTTIT 57 ii:"IQi'I\W'f8F6ftN 12 Derived from Multiple Sources
(b)(1)
iii€Rl51'HPl8F'8RP4" 13
Derived from Multiple Sources
Declaratory Policy
For now: [The United States routinely plans for all contingencies in connection with potential military actions that may or may not occur in the future. In the case of potential military action in Iraq, our contingency planning addresses the possibility that US and allied forces might be called upon to protect the Iraqi petroleum infrastructure from damage, and to maintain conditions that would permit the continuing operations of the Iraqi petroleum industry.] For later: [Iraqi energy resources belong to the legitimate government of Iraq, i.e., to the Iraqi people as a whole. The people of Iraq have suffered decades of war under an oppressive dictatorship leaving the country's economy and infrastructure in ruins.
To begin addressing these problems, the United States will protect, repair and temporarily operate the Iraqi energy infrastructure, for the benefit of the Iraqi people and to ensure stability in the region. Energy revenues will be used to meet the immediate humanitarian needs of the Iraqi people and to begin the reconstruction of Iraq. For those nations that have incurred expenses associated with liberating and administering Iraq, those expenses may be offset by energy revenues after the urgent needs of the Iraqi people are met. To the extent appropriate under the circumstances, the United States intends to afford due respect to existing, legitimate . . . . .
SECRB'F/R~9F9R-rf 14
Derived from Multiple Sources
(b)(5)
• It
1 ..
-
r--------------------------------i(b)(5) I PLANNING FOR THE IRAQI PETROLEUM INFRASTRUCTURE:
Briefing for the Secretary of Defense 11 January 2003
(b)(5)
(b)(5)
1111103 12:33
Prepared by Energy Infrastructure Planning Group lr=-;(b),...,..(S)o--------,1 j(b)(2) I > SHCR:t!Ti'?Pl9F9M (b)(5) Derived from Multiple Source DECL ON: 11 JAN 2013 OSD MUTIIT60 .. .
St!CRR'f/fNOFORN
Outline of Presentation
• Guiding Principles
• Public Diplomacy
• Contingency Planning for Repair, Production and Sales
• Legal Considerations
• Organization and Management (Issue for Decision: Chairman/CEO Appointment,Reporting, Removal
• Use of Petroleum Proceeds
• Funding Enhancement: Borrow Against Future Oil Revenues?
• Production Targets
• Existing and New Contracts
• Iraq-Syria Pipeline
1111103 12:3 3 Prepared by Energy Infrastructure Planning Group l<b)(2) I OSD MUTTIT 61 S:ECM'f'/ff'(tlF6RN Derived from Multiple Sources 2 DECL ON: 11 JAN 2013
S~CRETHNOFORN
Guiding Principles
Certain principles should guide any temporary US/coalition administration of Iraqi petroleum resources, including:
•
Iraq s oil resources are an asset that belongs to all the Iraqi people .
•
Any te"!porary administration of Iraqi oil production and mar~eting:
- Will seek to minimize disruptions and promote confidence and stability in world markets;
- Should involve existing Iraqi personnel and organizations whenever possible to ease future transition;
- Should work with the international community to build support for our policies;
- Will respect Iraqi contracts previously approved by the United Nations (NB: Just service contracts, no development contracts);
- Will be conducted transparently and accountably, in accordance with applicable legal norms and prudent industry practices, for the benefit of the Iraqi people;
- Will prepare for the return of production and marketing responsibility to a stable Iraqi authority as soon as practicable.
• The initial goal should be to bring Iraqi petroleum production up to pre-hostility capacity of about 3.1 million barrels/day, consistent with sound business considerations.
• Any increase in production levels and capacity should serve the interest of maximizing revenues r the o Ir Derived from Multiple Sources 3 DECL ON: I I JAN 2013 OSD MUTTIT 62
SRCM!'ftfNOFORN
Public Diplomacy--Main Themes
• Iraqi petroleum resources are a national asset of all the Iraqi people, i.e., the nation as a whole, and not of any regional entity.
• We want to work with the Iraqis themselves and the international community in administering petrolewn proceeds for the benefit of the Iraqi people.
• Interim administration decisions will be based on prudent, accountable, best practices to prepare for the return of the sector and its management to responsible Iraqi authorities.
• We will act, through our administration, so as not to prejudice Iraq's future decisions regarding:
Its oil development policies.
- Its relations with international organizations.
- The future ownership structure of the its oil industry.
• US/Coalition will fulfill its responsibility to the Iraqi people to create conditions of stability and well-being for the people of Iraq, but we will not administer oil assets on a long-term basis.
• Petroleum proceeds will be handled transparently and used for the benefit of the Iraqi people.
• We will respect the legitimate interests of all countries in the reconstruction period.
• We will respect Iraqi contracts previously approved by the United Nations.
1/11/03 12:33 Prepared by Energy Infrastructure Planning Group J <b)(2) I SI3C~JR'i8F8RN Derived from Multiple Sources 4 DECL ON: U JAN 2013 OSD MUTTIT 63
SECRFJT/fNOFORN
Contingency Plans for Repair
• OUSD(P)/Energy Infrastructure Planning Group (''EIPG") manages planning.
• EIPG guidance to the Army contractor:
Plan for full range of damage scenarios: ·Little or no damage, to major disabling damage by Iraqi forces to key choke points (e.g., gas and oil separation plants, marine terminals, pumping stations).
- Fight over 1,000 well fires, if necessary.
Repair priorities:
- First, restore current production of about 2.4 million barrels per day as soon as conditions penn it.
- Second, restore current capacity of about 3.1 million barrels per day.
•
Plan (draft) calls for n1odular components for major facilities (e.g., gas-oil separators, pumping stations) wherever needed, to restore production ASAP.
•
"Best case" ==No infrastructure damage, just safety repairs needed .
- 6 mos. to 2.4 million b/d, 9 mos. to 3.1 million b/d.
- Cost: appro. $0.8 Billion.
•
"Worst case"= Major, disabling damage throughout infrastructure .
- 20 mos. to 2.4, 30+ mos. to 3.1.
- Cost: $7 to $8 Billion (oil only). Refmeries and gas plants add another $4-$. 5 Billion.
1111/03 12:33 Prepared by Energy Infrastructure Planning Group 81!\SRK'J/IN9F9M . l<bH2> I Derived from Multiple Sources 5 DECL ON: 11 JAN 2013 · OSD MUTTIT 64
SEC.RETh'NOFOR'N ·
Contingency Plans for Production and Sale
• n priorities:
- First, crude oil.
Second, natural gas to support electrical grid.
Third, refined products (import during interim if necessary).
• Build on "modular" approach.
- Pre-conflict: Profile all fields and facilities.
Post-conflict:
• Rapidly assess production level achievable with whatever still works.
• Assemble building-blocks of a functioning system with whatever still works.
• Use all functioning production facilities to extent safe and cost effective.
• Produce first where damage is least, to maximize early output.
• Sales:
New USG-created organization to manage Iraqi oil assets {acronym: "IOTA") uses personnel from Iraq's State Oil Marketing Organization (SOMO) to extent available and reliable -- supplement with other nationals as needed.
lOT A approves terms and conditions of sales, within policies set by h1gher authority.
"Good Title": SOMO and Iraqi Central Bank currently co-sign aU oil sales contracts.
• Standard terms include warranty of title.
• Suggests need to maintain existence and operations of Iraqi Central Bank and SOMO.
- Would continue to warrant good title to buyers.
- Would reduce
1/11/03 12:3 3
Derived from Multiple Sources 6 DECL ON: 11 JAN 2013 OSD MUTIIT65
Organization and Management .
• Deputies agreed to recommend establishing an organization dedicated solely to managing Iraqi petroleum industry.
- Corporate organizational model ("Iraqi Oil Temporary Administration"-- "IOTA") drawing on current Iraqi Oil Ministry structure.
• To "internationalize," appoint:
- Chairman
• American.
• Current or former statesman.
Chief Executive Officer.
• British or other international.
• Former chainnan or CEO of oil company.
Vice Presidents for each functional sector within current Ministry.
• Preferably Iraqis.
- Board of Advisors.
• Advisory only, non-binding on management.
• Half composed of Iraqis, the rest could be international figures.
Issues for Decision: Appointment, Reporting, Removal of Chairman, CEO.
- Candidates vetted by PCC wi11 go to Deputies/Principals for consid~ration (see Back Up Slide).
Chairman, CEO will recommend to USG the candidates for Board of Advisors.
- Recommend: SecDefappoints and removes Chairman, CEO (with White House coordination).
- Recommend: Chairman reports to top civil administrator; CEO reports to Chairman.
ivil
Derived from Multiple Sources 9 DECL ON: 11 JAN 2013 OSD MUTIIT68
SBCRETifNOFOR?\
Petroleum Proceeds: Possible Uses and Availability
• Figures below exclude high end range of humanitarian needs and unaddressed Gulf War claims. When possible, (average) annual numbers are provided.
• Humanitarian aid, military campaign and occupation costs -- about 1 year; others vary from about 2 to 10 years or more.
• Bottom Line: Demands on petroleum revenue will likely exceed available funds for foreseeable future.
~~~· .. ~- ::· ·~--~--=~~~~--~~~~ . Resto-re p-rewar oil productio· n-capacitY (initial)"~~ CIA/Industry . . I . . 1 . . . . 8 ·exparici" oil capacitY. to 3.6 miJJiorl" b/ct (additional) ~~ cLAIIndu-stry ------ --------- . j . .
- ------"3-- ----- 5
·efxp- aii-(i-on capacitY.to-s.s··n-iimon blcT.(annil-ai avg) ~~-c1Ailr1Cfustr\l _···--· ----- .] - ----·····························1 .....
--
... --~1
F:_or~ig~ l:? . ~l?.t P;:ty~~~~ _(~~-~~alt~~ _G_IA_ . . .
_
. .. . __ .... ... . . ........ .. ..... . _____ ..... ____ . J . _ . . 7 __ _ .. . 15
@.Y.~!.~~r Clai!1J! (a_~~~~~!.::- ... ~.!A.lSt~t~------ .. ... _ ....... ____ · · ······---- ------ . ____ 5 .. __ ?
Costs of O~~upatlo~_{~nnuall_:-- CBO .. _______ 48 .... - -----~:!~.
t:;o~~~--~fM~-i~~~-€:;amp~~igr:- (tot~l)
-- C_B_Qj!jquse BudgE;)t Comm., Dem S~Eiff 30 60 ITO!A~_Q~~~~P ..... ··----~ . -·· . . ..
·-
~- ......... .... . 114 167
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-
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-
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-
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.. ~
. ............. . .
-----~ .. ~--
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- -- -· ........... -
---
TOTAL ANNUAL PETROLEUM PRODUCTION REVENUE*
- -----------------· ----
-
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----
..... __ ,,, ............................ ,.__ ......................
BALANCE
.
l ... .. . . . .................. ····-·· . ... .. . .. -------~-- .. .- - ···~ ·------· ··"·-·------ -.--·-----------· -----------------~~----------------· ·· - . .
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-
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L~J2?Ss.!~ g_!)_?_._'! m~1!~-2!l.Jtd of oil product!Qt! a_f!_d !!_f!__$18-281bf?j_?_~~e___l?!!_"q_~------- 1111103 12:33 Prepared by Energy Infrastructure Planning Group l(b)(2) I st!JCR:El'¥/Hf 9F9R"l Derived from Multiple Sources 10 DECL ON: 11 JAN 2013 OSD MUTTIT 69
•
S~CR-ET/fNOFOR.'t
Funding Enhancement: Borrow Against Future Oil Revenues? · Major issues:
- Recent Iraqi oil revenu~s may not support major loans (i.e., billions of dollars) without new .
development contracts In place to ba~k them up. .
- W!lo would borrower be during temporary adminis~tion? Iraqi Central Bank? Would it still exist and function?
New lender(s) likely to demand subordination of pre-existing debt and third-party guarantors (other governments'?). .
- LikelY. to require rescheduling Iraq's existing foreign debt (about $82 billion at end 2002 · assunung 6% Interest rate).
- Irag also owes $27 billion in unpaid claims awarded by UN Compensation Commission for GuffWar damages.
1/1 1103 12:33 Prepared by Energy Infrastructure Planning Group j<b)(2) l Derived from Multiple Sources II DECL ON: 11 JAN 2013 &80:1t~rf¥H#8F8m't OSD MUTTIT 70
IraqiProductionGoa~:
Initial Objective
Bring production up to prewar capacity level of about 3.1 million barrels/day (bid).
We have contingency plans to do this (see Slides 5 and 6).
• Current actual production: 2.4 million b/d.
- Annual revenue with $18-28/barrel average price range: $16-25 B.
• Current production capacity: 3.1 million b/d (CIA).
- Some in private sector say sustainable capacity closer to 2.8 million barrels/day (b/d), with significant rehabilitation needed to reach 3.1.
- Investment needed to sustain: $1-8 B over 6-20 months, depending on damage level (based on CIA and industry estimate).
• Iraq a member of OPEC but has not been in quota system since Gulf War.
1111103 12:33 Prepared by Energy Infrastructure Planning Group l(b)(2) I OSD MUTTIT 71 SECRB'THPH3F9RN Derived from MultipJe Sources 12 DECL ON: ll JAN 2013
SECiffiT/fNOFORN
Iraqi Production:
Mid-Term Objective
Enable Iraq to regain its historical capacity.
• 3.6 million b/d.
Likely to require high repair, maintenance and upgrade of existing fields, possible development of new fields.
- Reachable about one year after obtaining 3.1 million b/d.
- Cost: additional $3-5 billion over 3.1 million b/d level (industry estimate).
1/11/03 12:33
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Sf3CR.E:'F//NOPORN
Iraqi Production:
. Long-Term Objective
Allow Iraq to achieve economically reasonable increase in capacity.
• Would exceed 5 million b/d.
Requires development of new fields.
- About 5 million b/d reachable within 3-5 years with investments of around $30 B (CIA and industry estimate).
1/11/03 12:33 Prepared by Energy Infrastructure Planning Group l(b)(2) I OSD MUTIIT73 SFl€M'fffl'#BF8Rf'# Derived from Multiple Sources 14 DECL ON: 11 JAN 2013
St:CitE'fYiNOf?ORN
Increasing Iraqi Production:
Considerations ·
Advantages Disadvantages
• Speeds Iraqi rehabilitation and stability. •
• Supported by many in Iraqi opposition .
• Puts long-term downward pressure on price .
• Helps consumers. •
• Diversifies/increases global oil supply and spare production capacity in long-term, if no price war.
- Strengthens global economic security.
- Only 3.7 million b/d of global spare capacity (CIA), or 5% of demand.
•
- Saudis have 2/3 of global spare capacity.
Politically
controversial, especially
if new fields are
developed.
Might trigger a price war, which would likely decrease Iraqi oil revenues and could drive out higher-cost producers, thus reducing diversity of supply.
Some would argue that
new Iraqi government
should decide.
1/11/03 12:33 Prepared by Energy Infrastructure Planning Group l(b)(2) I OSD MUTTIT 74 S£CIY£'FHNQFQftll'l Derived from Multiple Sources 15 DECL ON: 11 JAN 2013
SECRET/R'fOFORN
•
•
Contract Policy
Existing deals: IOTA should observe contracts previously approved by UN. Query whether should observe those made in hopes sanctions eventually would be lifted?
- Four "fee-for-service" maintenance contracts (three Russian companies, one Turkish) currently approved by UN under OFF. (See Back Up Slide).
- Iraq has si~ed about four capacity expansion contracts (Chinese CNPC, Petro Vietnam, Tunisian ETAP, maybe Syrian Oil Co.), which await lifting ofUN sanctions.
• French Total Fina Elf initialed but reportedly not yet signed.
• Iraq recently abrogated Russia's Lukoil contract.
Over 60 foreign companies pursued various stages of oil negotiations since sanctions were imposed.
Iraqi opposition opposed to honoring deals made by Saddam unless clearly in Iraqi interests.
• Better to defer these for new Iraqi government to decide.
- US and British companies were not allowed to do this.
New deals: As a rule, should be based only on economic return, open competition, and sound business practices.
IOTA w!llli.kely _ne.ed to con!fact with foreign companies-- whether to expand production capacity or to matntatn extstlng capacity.
• Repairs from war damage, safety upgrades, normal operations and maintenance.
- · Should be governed by sound business decisions unless compelling reasons otherwise.
l/ll/0312:33 Prepared by Energy Infrastructure Planning Group . l(b)(2) I OSD MUTTIT 75 SIS€A:E'I'J,..-QF9BN Derived from Multiple Sources 16 DECLON: 11 JAN 2013
SECRETHNOPOR7N
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Derived from Multiple Sources DECL ON: 11 JAN 2013
SIBCRETftNOFORN
Next Steps
• Brief DC next week, PC soon thereafter.
• Promptly appoint management of lOT A.
• Proposal early next week that you appoint Army as Executive Agent.
• Proposal to you next week for pre-positioning assessment teams, fire-fighting and other critical equipment.
• Within 2 weeks present final draft of detailed continuity-of-oil operations plans for your review.
1111/03 12:33 .
Prepared by Energy Infrastructure Planning Group l(b)(2) I OSD MUTIIT77 SB€RI!i' Fhlf'i8F'9R."\J Derived from Multiple Sour ces DECL ON: 11 JAN 2013 .
18
Back Up
1/11103 12:33 Prepared by Energy Infrastructure Planning Group l(b)(2) I OSD MUTIIT78 SECRii'FHPf9F'9ftPf Derlved from Multiple Sources 19 DECL ON: 11 JAN 2013
SECRE'f'J'J'NOF'ORN
1/11/03 12:33 Prepared by E~ergy Infrastructure Planning Group [<b)(2) I OSD MUTTIT 79 SElCH'f'/;'NBFBR.'' ZO Derived from MultipJe Sources DECL ON: ll JAN 2013
SEC:ItE'f'tfNOJ?OitN
1/11/03 12:33 Prepared by Energy Infrastructure Planning Group [<b)(2) l .
SJil€HTHN8F@Rf't
Derived from Multiple Sources DECL ON: 11 JAN 2013 21 OSD MUTTIT 80
SECfttL~ffNOf'OitN
Prep Task: Pre-position Contractor Equipment and Personnel, Sustain Planning Costs of Prep Task Item Firefighting (4 sets) & Well Testing Equipment Planning Sustainment/ Advance Party Assessment Teams (Hire, Train & Move) Firefighting Teams Movement Firefighting & Oil Spill LNO's with CENTCOM Engineering oflong lead items (GOSP's & pipeline pumps) Freight/Insurance $Millions
23.3
3.3
4.1
0.4
0.6
2.0
3.8
Total
37.5
1/11/03 12:33 • Pre-position firefighting and well testing equipment.
• Rapid damage assessment from maritime and river oil spills and remediation plan development.
• Rapid deployment of facility assessment teams.
• Rapid deployment of wellhead assessment equipn1ent.
• Sustain ongoing planning effort.
• Pre-position personnel and equipment to support rapid deployment.
Prepared by En ~y Infrastructure Planning Group
(b)(2) I
&BCRI!l'f'/Jilf8P8RN
Derived from Multiple Sources 22 DECL ON: 11 JAN 2013 OSD MUTTIT 81
. S. ECRI!!'tWNOFORN
Iraq's Share of OPEC Production IRAQ'S SHARE a= CPEC PRODUCTION 2002 IRAQ 9% IRAQ·s SHARE OF OPEC PRODUCTION 1990 IRAQ 15% REST CF CFEC 91% REST OF OPEC 85% Prepared by Energy Infrastructure Planning Group S:l!l€R1~/t'IINM'8HN 1111/03 12:33 Derived from Multiple Sources 23 DECL ON: 1 I JAN 2013 . l(b)(2) I OSD MUTTIT 82
SRCRJ!:'f'h'NOFORN
OPEC Production
OPEC PRODUCTION OCT. 2002
oiiEciiRoooCfli5N2oo2 vs1990-(illo-usands barrels/day) ..
-
(Excludes 'Equador and Gabon, which are no longer members) ...
----·-
- ----
··--- ~--~~--~-- ----- ----~-~ SAUDIMABIA
31% QATAR NIGERIA
3% 7%
OPEC PRODUCTION JULY 1990
ALGERIA
IRAQ 3%
15%
·
· ·
- --
- -
--
·-------+------- -· ·-·:-
'--·-~-------F=O=ut=pu=t=O,;;;,;ct"=:::. ·=o2~0;;:;u;,;~.;tp=ut;,::;J=::ul='9;;;;0*0;;;21;,:;'9;,;,0 ,;;,Di;;,;_jff Algeria 1, 000 760 240
--
.. ---+--· ~
-
_ _ 1,100 1,280 ( 180)
Iran 3,600 3,000 600
··--'"·-·-····~··· .. --~-- -- '- - ~ .......
__ _ _ ____ ___ _ ..... .... "' ....
·-· ---· ....
"""'-
.. ,_
Kuwait · 2,000 1,900 · 100
-·----·---
---- ----
---
..
· " '-·• ·---··---.
Libya 1 ,400 1 ,250 150
Nigeria-
--- · ·· ............. ---· 2,000· - · __ ___ ..
_ 1,750 -~- -- - 250
~---=~ --- -----·-- ·----------f---.-------- 1----- Qatar 700 370 330
- ·--·----
Saudi Arabia 8,500 5,610 2,890 UAE - --· 2,000 ----- 1,950 .... SO ··------~~----!
- - -
-·-------+-----~-+----_:_ __ Venezuela 3,100 1,950 1,150 ~-=-=-==-~--~-+--~-.....:-.--~~-- ...
OPEC·10 Total 25,400 19,820
--·--
Iraq 2,400 3,500 (1,100)
·---------
·---~--" ..
~ ..
---- --·--·--· ,. _________ _.. .. .. ...... ·---·· . ~ - ------~---- OPEC Total 27,800 23,320 4,980
- -----· --·-· · ----- ·-··---------- --- ,._ .. _ L-----------
lndo.~es~a
· -· ~·-
SAUDI ARABIA
24%
NIGERIA
8%
1/11/03 12:33 Prepared by Energy Infrastructure Planning Group M!ERBIJWP<:'@FQR'\1 DeriYed from Multiple Sources 24 l(b)(2) I DECL ON: 11 JAN 2013 OSD MUTTIT 83
S~CltE'f/INOFORN
Awarded Contracts
Country! Oilfield(s) (potential Type of Status Details Voidable Company production) Contract Russia , U~ n~ W• China j! ~i RR r~w t!
., .. . i! H J
:
1111/03 12:33 Prepared by Energy Infrastructure Plarming Group l(b)(2) I Derived from Multiple Sources 25 DECL ON: l1 JAN 2013 OSD MUTTIT 84
SBCRBT/fNOFORN
Awarded Contracts (cont.)
Vietnam
1111/03 12:33 Prepared by Energy Infrastructure Planning Group l(b)(2) I SHCH'fHf'ri6F6RN Derived from Multiple Sources 26 DECL ON: 11 JAN 2013 OSD MUTTIT 85
·----- - · -· -------------------=---:-=:---- (b )(5) ~sECRE'i'//NOFORN CONTINGENCY PLANNING FOR REPAIR PRODUCTION AND SALES -- IRAQI PETROLEUM INFRASTRUCTURE STATUS December 18, 2002 12/18/02 18:42 Prepared by Energ;y Infrastructure Planning Group [tb){2:) 1 Sli:!CR:Kf'HPi8F'8RN Derived from Multiple Sources DECL ON: 17 DEC 2012 1 OSD MUTTIT 100
SRCH~fJNOFORN
Repair, Production and Sale Plans -- Overview ~OGCAP contractor to Army Materiel Command tasked 8 N( )2 to prepare Contingency Support Plan (CSP).
- "LOGCAP" == Logistics Civil Augmentation Program. ,
- LOGCAP contractor = Brown & Root Services.
)USD(P)/Energy Infrastructure Planning Group (EIPG) ;upervises contractor.
~lPG received draft CSP 11 Dec 02, now refining with furthe:
~uidance to contractor. .
~inal plan ready for SecDef review/approval early-mid Jan 03 12118/02 18:42 Prepared by Ene[ft;} Infrastructure Planning Group
(b)(2> 1
~~"M~' :'taiQUI'API 2
Derived from Multiple Sources DECL ON: 17 DEC 2012 OSD MUTTIT 101
Planning Guidance
EIPG instructions to contractor -- be prepared to:
Iandle full range of repair scenarios, from minor to extensive testore current production level of about 2.4 million barrels p lay (BPD) as first priority. .
testore current production capacity of about 3.1 million BPD text priority.
>roduce at 3.1 million BPD or other levels if so directed.
)upply marketing and sales force if so directed.
vfaintain operations until directed to hand over to others.
12/18/02 18:42 Prepared by Energy Infrastructure Planning Group i<b)(2) I SKCRIYI+fN8P61tN 3 Derived from Multiple Sources DECL ON: 17 DEC 2012 OSD MUTTIT 102
Key Features of Repair Plans tll range of damage scenarios: Little or no damage to major, disab lmage tnflicted b;: Iraqi forces on key choke points (e.g., Gas and ( ~paration Plants t GOSPs ), marine terminals, pumping stations).
eal with over 1 000 well fires if necessary.
se modular components for major facilities (e.g., GOSPs, pumping :ttions) to restore production as soon as posstbre.
~est case" == No infrastructure damage, just safety repairs needed.
· 6 mos. to 2.4 million BPD, 9 mos. to 3.1 million BPD.
Cost: appro. $800,000,000
"Vorst case"== Major, disabling damage throughout infrastructure.
20 mos. to 2.4, 30+ mos. to 3 .1.
Cost: $7 to $8 billion. Refineries and gas plants add $4-$5 billion mon 12/18/02 18:42 Prepared by Energy Infrastructure Planning Group i<b)(2) I 4 SECRE!IWtf8F8RPi Derived from Multiple Sources DECL ON: 17 DEC 2012 OSD MUTTIT 103
~ M:CIHJ'f/IN6FOiey Features of Production Plans )duction restoration priorities:
First, crude oiL
Second, natural gas to support electrical grid.
Third, refined products (import during interim if necessary).
e "modular" building-block approach:
Pre-conflict: Profile all fields and facilities.
Post ... conflict:
• Rapidly assess production level achievable with whatever still works.
• Assemble building-blocks of a functioning system with whatever still works.
• Use all functioning production facilities to extent feasible.
)duce first where damage is least, to maximize early output.
e Iraqi production personnel to extent available and reliable -- suppleme th American and other nationals as needed.
roup Sli.!CRii.!'fJJ'N8F8RN 5 Derived from Multiple Sources DECL ON: 17 DEC 2012 OSD MUTIIT 104
• sEcM:'t'JINMoRN Keys Features of Sales Plans ~ sumes US/coalition Iraqi oil temporary administration ("lOT A") ' tnage, per marketing and sales policies set by governing authority.
IOTA uses personnel from Iraq's State Oil Marketing Organization, SOMC extent available and reliable.
Contractor supplements with American or other nationals as needed.
Alternatively or additionally, IOTA hires qualified personnel, uses reputab:
brokers and trading companies.
lOT A sets terms and conditions of sale, within policies set by higher autho:
arket Iraqi petroleum efficiently as soon, and at as high a price, as ssible.
ansparent and accountable -- JOT A must prohibit all corrupt pract:
d monitor closely.
12/18/02 18:42 Prepared by Energy Infrastructure Planning Group PJJ!CH:E::f/fPi 8F8RP~ 6 l(b)(2) I Derived from Multiple Sources DECL ON: 17 DEC 2012 OSD M UTTIT 1 05
SECRE'f'lfNOFOIH'i
Issue: How Do We Execute These Plans?
we need: Organizational structure for executing contingency plans immedia ~o directed.
r:le: New program, with no "owner" and no funding.
lhead: Designate Army as Executive Agent, responsible for:
. dgeting, with USD(Comptroller) assistance.
)gram requirements.
)gram Management (Army to stand up Program Office ASAP).
Conform a11 program activity to USG policies on Iraq, in coordination with USD(P:
quisition and contracting.
Coordinate acquisition strategy with USD( AT &L).
Negotiate standby contract, with developer of plan, that can be signed when needed
• Prepare sole source justification.
Plan for competition at most reasonable opportunity. Possibilities include:
• Compete mitial execution (requires resolution of security concerns and adequate time).
• Com ete follow-on contract, to be awarded for subse uent sta es of execution.
OSD M UTTIT 1 06
SI!CRET/fNOFORN
Issue: Should We Pre-position Personnel and E . t?
:ons:
~-position critical equipment (fire-fighting, other) in high readiness close to theater?
~-hire, train assessment teams poised for immediate entry to survey damage/begin reJ
•uld facilitate quick and smooth execution of plan.
•uld facilitate immediate fire-fighting efforts (oil well fires), reduce criticism we wer( tdy despite lessons from Kuwait.
lcely to shorten by 30+ days time needed to begin damage assessments and repairs.
•uld cost up to$?????, but no funding programmed or budgeted.
:~y be misconstrued as decision to commence military campaign.
~-positioning people starts expense of unknown duration, compromises government'~ ility to compete later.
~-positioning some equipment not productive to extent operations depend on other, 1< Ld time equipment not yet available.
lhead:
) not pre-position people.
r now, do not pre-position equipment but determine whether pre-positioning fire-figl other immediately useable equipment is feasible and cost-effective (on-going).
12118/02 18:42 Prepared by EneriZV Infrastructure Planning Group
(b)(2) I _
SECRE'ft'fN8F8:ft:N 8
Derived from Multiple Sources DECL ON: 17 DEC 2012 OSD MUTTIT 107
ECR:EIVINOFOR.'f
CONTINGENCY PLANNING FOR
PRODUCTION AND SALES
STATUS
December 12,2002
'02 10:13
Prepared by Energy Infrastructure Planning Group l(b)(2) I Derived from Multiple Sour1 DECL ON: 12 DEC 2012 OSD MUTTIT 108
,:f!CH't'I/NOfi'OftN
Production and Sale Plans -- Overview ·n & Root Services (BRS) under contract with Army Materiel Co >vide Contingency Support Plan (CSP).
r ork overseen by OUSD(P)/Energy Infrastructure Planning Group (EIP< lnal product subject to USD(P) and SecDef approval.
IPG received final draft CSP yesterday (11 Dec 02).
rief SecDef in detail during week of 16 Dec 02.
1ction and sales targets (per EIPG guidance to .BRS) -- be prepan estore current production level of about 2.4 million barrels per day (BPI rst priority.
estore current production capacity of about 3.1 million BPD as next pri< ~oduce at 3.1 million BPD or other levels if so directed.
1pply marketing and sa1es force if so directed.
faintain operations until directed to hand over to others.
/02 10:13 Prepared by Enerzy Infrastructure Planning Group i<b)(2) I Sl!i€Mlf¥1N8f8Jti'f Derived from Multiple Sour DECL ON: 12 DEC 2012 OSD MUTTIT 109
JECRR'fWNOt'OttN
Key Features of Production Plans uction restoration priorities:
'irst, crude oil.
,econd, natural gas to support electrical grid.
,hird, refined products (import during interim if necessary).
bodular components for major facilities (e.g., Oil and Gas lration Plants J and pre-positioned materials to restore produ ~on as possible.
Iraqi production personnel to extent available and reliable - ared to supplement with American and other nationals as fl( uce first where damage is least, to maximize early output.
)W policies set by governing authority. "Iraq Oil TransitioJ ority" (IOTA)?
l/02 10:13 Prepared by Energy Infrastructure Planning Group i<b)(2) I Slil€Riil't'hlf6fi'6ftH Derived from Multiple Sou DECL ON: 1l DEC lOU OSD MUTTIT 11 0
Production Capacity vs Time 5 ~--------------------------------------------------------------.
3 +-------------------------~ 5 +---------------------~
2-+----------------:
5 +------:
1 -+----
5
()
~
30 60 240 300 360 630 71(
Days
Best Case
• Production capacity of2.4 million BPD within 6 months, 3.1 million BPD in 9 months.
Worst Case
• Production capacity of 2.4 mimon BPD within 20 months, 3.1 million BPD in 21 months.
• Contractor costs of about $0.8 bi1Jion.
• Up to 1.5 biiJioTI ban-els of additional potential production versus worst case (over
21-month period).
l/02 10:13 • Contractor costs of about $3.4 billion (excludes refinery repair).
• Opportunity costs from lost production in excess of $30 billion (over 21-month period:
versus best case.
Prepared bY Energy lnft8Structure Planning Group i<b)(2) I SE:CRI'f'h'Pl8F8RPI Derived from Multiple Soul DECL ON: 12 DEC 2012 OSD MUTTIT 111
tl!:Cltt!'t'/fNOfi'ORN
Keys Features of Sales Plans applies marketing and sales policies approved by SecDef/ lent/any coalition members participating in military goverru TA uses personnel from Iraq's State Oil Marketing Organization, SC :ent available and reliable.
~S or other contractor supplements with American or other nationals ~ded.
ternatively or additionally, IOTA authorized to hire qualified persoru iable brokers, engage reputable trading companies.
T A authorized to set terms and conditions of sale, within policies est higher authority.
~t Iraqi petroleum efficiently as soon, and at as high a price, ,le.
~Jf
1 J?i~n sparen cy · PreparOd by EDEJ' liifi8structure Planning Group
(b)(2) I
SleHTlfN6P6ltN
Derived rrom Multiple Sou1 DECL ON: 1l DEC lOll OSD MUTTIT 112
SECRE'IWNOFORN
ENERGY INFRASTRUCTURE PLANNING:
Declaratory Policy
DECISION BRIEFING FOR DEPUTIES
Dated: December 17, 2002
2/17/02 15:40 Prepared by Energy Infrastructure Planning Group l(b)(2) I SE!€RB'f/R:i8F8RN Derived from Multiple Source~ DECL ON: 17 DEC 2012 OSD MUTTIT 124
SECRE'f'/fNOFORN
Agenda
• Review of Issues Addressed This Month
• Issues for Today
• Decisions Needed
l2117 /02 15:40 Prepared by Ener Infrastructure Planning Group
(b)(2)
SE€RE'¥r'JN8F8ft:Pi
Derived from Multiple Source DECL ON: 17 DEC 2012 OSD M UTTIT 125
SECRE'fYfNOFORN
Issues Addressed This Month
• How to organize and manage USG administration of Iraqi petroleum ~esources?
• How to use petroleum proceeds?
• What to do about current sanctions against Iraq?
• Expand Iraqi oil production capacity, or merely operate what already exists'
• What to do about existing and new development contracts?
• Whether to use control of Iraqi oil to advance important US foreign policy Jbjectives affected by energy issues?
• Declaratory policy? ........
2/17/02 15:40 Prepared by Energy Infrastructure Planning Group l(b)(2) I ili:"K~TJ.q:fQ:tllQR:N Derived from Multiple Source:
DECL ON: 17 DEC 2012
OSD MUTTIT 126
------------ - - ---- - --------- -- - --- --- ·- - Issues for Today
• Objectives
• Guiding Principles
• Main Themes of Public Diplomacy
• Rollout Strategy
2/17/02 15:40 Prepared by Energy Infrastructure Planning Group l(b)(2) I SEC~IR<l81i'8RPl Derived from Multiple Soun::e DECL ON: 17 DEC 2012 OSD MUTTIT 127
--------------------- ·--·-.-.
SECRE'f'//NOFORN
Objectives of Declaratory Policy
• Promote a stable Iraq that is committed to international cooperation.
• Promote understanding that US motives and actions are in best interests of Iraq and of international peace and security.
• Increase likelihood of international cooperation with US regarding Iraq and, in particular, Iraq energy.
• Manage relations with Congress, allies, coalition partners and UN to encourage effective domestic and international cooperation on sensitive issues including existing sanctions regimes.
.2/17/02 15:40 Prepared by Energy Infrastructure Planning Group [<b)(2) I Derived from Multiple Source DECL ON: 17 DEC 2012 S~€RH'f'/JN61i'6ftN OSD MUTTIT 128
SI!:CitR'f'ffNOFORN
Guiding Principles
Iraq's oil resources are a national asset of all the Iraqi people.
US policy should be transparent and sustainable over whatever period of time our administration may last.
In using proceeds, the US will act consistently with applicable legal norms while using proceeds for the benefit of the Iraqi people and other appropriate purposes.
Interim oil sector administration decisions will be based on prudent, accountable, best practices to prepare for the return Oj production and marketing responsibility to a stable Iraqi authority.
Use existing Iraqi personnel and organizations whenever possil to ease future transition.
l2!17/02 15:40 Prepared by Ener Infrastructure Planning Group
(b)(2)
SE€ltB'f/fN8F'8Rfi
Derived from Multiple SourCE DECLON: 17DEC2012 OSD MUTTIT 129
SE!CRE~fiNOf?ORN
[ Public Diplomacy--Main Themes
• Iraqi petroleum resources are a national asset for all the people of Iraq, i.e., the nation as a whole, and not of any regional entity .
·-
- ·- - --- - ------- - -- - - .. .
.
• Interim US administration decisions will be based on prudent, accountable, best practices to prepare for the return of the sector and its management to the responsible Iraqi authorities.
• Market forces should set prices.
:2/17/02 15:40 Prepared by Ener Infrastructure Planning Group
(b)(2)
Sl!l€RE'f//N8F6ftU
Derived from Multiple Source DECL ON: 17 DEC 2012 OSD MUTTIT 130
SI!!CRR'tYINOFORN
Public Diplomacy--Main Themes
• We will act, through our administration, so as not to prejudice future Government of Iraq decisions regarding:
- Its oil development policies.
- GOI relations with international organizations.
- The future ownership structure of the Iraqi oil industry.
• US/Coalition will help the Iraqi people for as long as it takes to create conditions of stability and well-being for the people of Iraq, but the US/Coalition will not administer oil assets on a permanent basis.
• Proceeds from energy will be handled transparently and used for the benefit of the Iraqi people and other appropriate purposes.
• The United States will respect the legitimate interests of all countries in t reconstruction period.
.2/17/02 15:40 Prepared by Ener Infrastructure Planning Group
(b)(2)
Derived from Multiple Source DECL ON: 17 DEC 2012 OSD MUTTIT 131
g1£CRBT//NOFORN
Rollout Strategy
• A phased rollout that first briefs key coalition members (e.g., UK, AUS and perhaps Turkey), then other diplomatic demarches, and then the press.
- Phase 1 (pre-military campaign).
• Immediately before commencement of military action, brief key coalition members on contingency plans and policy objectives.
- Phase 2 (after commencement of military action).
• Announce that X will assume role as head of transitional oil authority.
• Brief main themes of public diplomacy to larger diplomatic audience, and press.
• Primary diplomatic briefs include Saudi Arabia, Russia, Franj and UN.
2117/02 15:40 Prepared by Ener Infrastructure Planning Group
(b)(2)
SFi9Rili'Wif'J9F91Ul
Derived from Multiple Source DECL ON: 17 DEC 2012 OSD MUTTIT 132
·
-----------------
- · . .
S~CR-ET//NOFORN
Decisions Needed
• Declaratory Policy?
• Main Themes of Public Diplomacy?
• Rollout strategy?
l2/17/02 15:40 Prepared by Energy Infrastructure Planning Group l(b)(2) I Derived from Multiple SourCE DECL ON: 17 DEC 2012 OSD MUTIIT 133
SECRE'f'//NOFORN
Formulating Oil Policy
Production Contracts
Russia Oil Policy Foreign Policy 'hina Organization Sanctions France UN 2/17/02 15:40 Prepared by Energy Infrastructure Planning Group l(b)(2) I OSD MUTTIT 134 OPEC Saudi Arabi Gulf States Jordan Tur~ Syria SECIH!l'flfR:f81i'8RPl Derived from Multiple Source:
DECL ON: 17 DEC 2012
St3CRtYF#NOFORN
4'~ •
0' (
ENERGY INFRASTRUCTURE PLANNING:
How to Spend Proceeds from Iraqi Petroleum Production DECISION BRIEFING FOR DEPUTIES Dated: November 6, 2002
11-12-0 2 1 1 : 21 t N
11/6/02 5:40PM
~l!:eftl!:'t¥fN8F9RP~ 1
Derived from Multiple Sources DECL ON: 6 Nov 2012 OSD M UTTIT 135
SECM'fYfNOFOR-N
Issues to be Addressed This Month )W to organize and manage USG administration of Iraqi petroleum resources· )W to use petroleum proceeds? .,.. .,..
hat to do about current sanctions against Iraq?
~velop Iraqi oil production capacity, or merely operate what already exists?
develop production capacity, what to do about existing and new developmen tracts?
hether to use control of Iraqi oil to advance important US foreign policy ~cti ves affected by energy issues?
claratory policy?
11/6/02 5:40PM Prepared by Energy Infrastructure Planning Group i<b)(2) I Sl!:eft~TI l'f:ft,P6ltN 2 Derived from Multiple Sources DECL ON: 6 Nov 2012
---------
··
---- -- - ----- - -- -- -- -
-- --·
- - - --
- - -
--------- - -
OSD M UTTIT 136
SECRE'fYINOJ?OitN
Assumptions
isting UN Security Council economic sanctions against Iraq no longer apply 1e been modified to permit U.S.-led administration of petroleum proceeds.
~ Iraq escrow account.
Will not be available for use by US-led administration of Iraq.
Will continue to have virtually no reserve funds.
Jceeds from petroleum proceeds will be insufficient to pay for all needs oflr ·several years to come.
~:Interagency legal review underway on sanctions regime, Hague regulation ated matters that may affect assumptions and decisions on use of proceeds.
1116/02 5:40PM Prepared by Enr Infrastructure r•nning Group
(b)(2)
SECKE~tm6F6ftN 3
Derived from Multiple Sources DECL ON: 6 Nov 2012 OSD MUTTIT 137
St::CRE'f/fNOFO:R."l
Unknowns
vel of aid other countries will be willing to provide to post-Saddam Iraq.
>ndition of Iraqi energy infrastructure.
Lictuations of world oil supply and price .
.ris Club decisions on rescheduling Iraqi debt.
illingness of Gulf War claimants to forgo claims.
11/6/02 5:40PM Prepared by Energy Infrastructure ranning Group l(b)(2) SfJERE'f:'fti9t'9RH Derived from Multiple Sources DECL ON: 6 Nov 2012 4 OSD MUTTIT 138
S~Cit:E'f'//NOf'OitN
Revenue Amount
troleum revenue will vary according to levels of production and price.
tal revenue, including export revenue, could exceed $20 billion per year.
If Iraq produced its approximate current capacity of 3 million barrels/day, and oil p fluctuated within a $18-28 per barrel range, it would reap $20-31 billion in annual revenue, excluding cost of production.
If domestic Iraqi consumption remained constant at current level, 300 thousand barrels/day, annual export revenue would range from $18 to $28 billion.
In principle, as Iraqi economy recovers, its production should rise.
ution: it took Kuwait two years after the Gulf War to regain prewar producti 11/6/02 5:40PM Prepared by EnerllY Infrastructure Planning Group i<b)(2) I Total: $20-31 billion per aJ 6ECRE'f¥)tlf8FQR:Pi 5 Derived from Multiple Sources DECL ON: 6 Nov 2012 OSD M UTTIT 139
S:t!:Cftt!'f'h'NOt'OitN
Option: Pay For Humanitarian Aid vel of aid required is unknown and difficult to estimate in advance.
~quirements will depend on numerous variables.
Extent of war damage.
Disruption of electricity, fuel, water and food supplies/distribution systems.
Displacement of population.
0
Could be an immediately available source of funding for urgent needs, if petroleun production not seriously disrupted.
Would reduce dependence on international assistance, which is time-consuming an difficult to assemble.
Would reduce aid costs borne by US.
>n
Could reduce incentives for other countries to provide aid.
Would divert resources from other important uses.
Tota~
1116/02 5:40 PM Prepared by Energy Infrastructure Planning Group l(b)(2) I 6 SI!!CRI!l'fWPf8F6RPt Derived from Multiple Sources DECL ON: 6 Nov 2012 OSD MUTTIT 140
sECRE'ftJPi1'3'n: Post-Conflict Reconstruction o National In tructure vel of damage resulting from military campaign cannot be precisely estimatt vance.
Degree of resistance.
Incidence of sabotage.
A estimates of need range widely.
$28-40 billion over ten years ($3-4 billion annually) if war damage comparable to ( War.
Damage could be much higher than in Gulf War.
11/6/02 5:40PM Total: $3-4 billion per a Prepared by Energy Infrastructure Planning Group . l(b)(2) I SEJCRE':Fl'fN8F8RN 7 Derived from Multiple Sources DECL ON: 6 Nov 2012 OSD MUTTIT 141
sEotF:rlJPiJ':n: Post-Conflict Reconstruction o National In tructure cont.
0
Could be immediately available source of funding.
Would reduce dependence on international assistance.
Would reduce needs for US funds and avoid implication that USG is legally respor Could accelerate process of Iraqi independence and political stability.
)fl
Diverts resources from other uses.
Arguably should be decided by new Iraqi government.
11/6/02 5:40 PM Prepared by Energy Infrastructure Planning Group l(b)(2) I SI!:CRI!l'¥/;'Pi8F€J:RPi 8 Derived from Multiple Snurces DI~:CL ON: 6 Nov 2012 OSD MUTTIT 142
SF:iCRETJ~OtlORN
Option: Repair Existing Energy Infrastructure ;ludes petroleum production, refining, pipeline, electricity and natural gas :ilities.
us and sanctions have eroded condition of energy infrastructure .
.qis have used band-aids and questionable industry practices to keep oil flow ther damaging the oil fields.
Possible decline in production capacity of roughly 5-15% annually, and even more north, if current conditions persist.
Iraqi cost of production per barrel is less than one-half of other producing countries region, suggesting improper production techniques.
I reach pre-Gulf War production of3.5 million barrels/day, with no new dam ll cost $2-3 billion over 12-18 months.
Includes well workovers, and maintaining and fully utilizing existing facilities.
Might require expansion beyond existing facilities.
reach 3.5 million barrels/day with war damage, costs could exceed $5 billio l: Kuwait spent $5 billion in first 12-18 months to repair damage caused by j 'otage in Gulf War, and perhaps $20 billion overall.
11/6/02 5:40PM Prepared by Ener y Infrastructure Planning Group 9
(b)(2)
S'ECRJYIWN 8F8ftN
Derived from Multiple Sources DECL ON: 6 Nov 2012 OSD MUTTIT 143
SECRE~h'NOFORN
Option: Repair Energy Infrastructure (cont.) ) Essential for maintaining revenue stream and even partly meeting demand for fund:
outlined in this briefing.
Would minimize reliance on international assistance.
Would facilitate any decision, by US-led administration or new Iraqi government, t increase production capacity.
)fl
Could be controversial, sparking allegation of US exploitation.
Would divert resources from other uses.
Could discourage private sector involvement.
Could prejudge policy decision on increasing production.
1116/02 5 :40 PM Total: $2-5 billion per a Prepared by Energy Infrastructure Planning Group l(b)(2) I SECft:l!;'f;';'f':fBF6ltN I 0 Derived from Multiple Sources DECL ON: 6 Nov 2012
---
.
--:===================;;;;;;;;;;;;;;;~~~~== OSD M UTTIT 144
St;CRE'fYfNOFOitN
Option: Pay Foreign Debt
,q has made no foreign debt payments since 1990.
UN sanctions regime has shielded oil reserves from claims by those holding Iraqi d ficial Iraqi government foreign debt estimated to be over $82 billion, includi erest from 1990.
Principal owed is $41 billion.
Excludes $37 billion principal owed to Gulf states from Iran-Iraq war.
rgest governmental creditors--Russia and France.
Russia is owed $16.1 billion (principal: $8 billion), or 20% of total--mostly for we France is owed $9.1 billion (principal: $4.5 billion), or 11% of debt.
Japan is owed $9.1 billion (principal: $4.8 billion), or 11%.
US is 6th largest creditor: owed $4.4 billion (principal: $2.2 billion), or 5%, less t] Germany and former Yugoslavia.
mual debt service estimated at $7-15 billion.
far no bilateral or multilateral debt rescheduling.
11/6/02 5:40PM Prepared by Ener Infrastructure Planning Group
(b)(2)
Total: $7-15 billion per ai St!CRI!!1WN8F91<M'\ 11 Derived from Multiple Sources DECL ON: 6 Nov 2012 OSD M UTTIT 145
----- - ----------- - - -- --- SECRt;T//NOFORN Option: Pay Foreign Debt (cont.) !W investment often not precluded by non-payment of previous regime's deb Not unusual to give new regime grace period of several years.
Cuba never repaid its pre-Castro debt or compensated investors for expropriated property, and yet investors came in. Soviet Union was lent money even though it I tiny fraction of tsarist debt.
0
Debt servicing may be necessary to promote investment, trade and economic recov Could strengthen international support for US policies.
We have generally not distinguished debt for military sales from other types of det )fl Not an urgent priority, unless necessary for near-term foreign investment.
Paris Club negotiations necessary, and appropriate for new Iraqi government to participate on matter that will have such long-standing consequences.
US should not be perceived as adding to new government's burdens.
Paying for Russian arms sales to Saddam should not be a priority.
Diverts resources from other needs.
ll/6/02 5:40PM Prepared by Energy Infrastructure Planning Group i<b)(2) I SECitl!!'t1 //ff8f'8Rff 12 Derived from Multiple Sources DECL ON: 6 Nov 2012
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OSD MUTTIT 146
[5f::Cft:E'f'//NOFORN
Option: Pay Gulf War Compensation 1ce 1991, UN Compensation Commission has received 2.6 million claims fr< aost 100 countries totaling over $300 billion, for compensation for losses dir ~ulting from Iraq's invasion and occupation of Kuwait.
of October 2002, UN Compensation Commission has approved $43 billion i million claims, of which $16 billion has been paid.
UN deducts 25% annually of Iraq's oil revenues for compensation.
7 billion left to be paid on claims already validated and awarded.
Over $15 billion alone to Kuwaiti Oil Company.
$457 million to US corporations.
70 billion in claims remain to be considered.
$149 billion worth of claims from governments, over half of which are from Kuwa:
Other large claimants: Jordan and Saudi Arabia.
$5.2 billion in corporate claims, including 119 U.S.-filed claims seeking $213 milli $8.5 billion in individual claims.
11/6/02 5:40PM Prepared by Energy Infrastructure Planning Group l(b)(2) 1 SE€1tE'f¥fU6F6ltH · 13 Derived from Multiple Sources DECL ON: 6 Nov 2012 OSD MUTTIT 147
SECRE'F/INOFO:ttN
Option: Pay Gulf War Compensation (cont.) OFF does not apply, a new structure would need to be established to pay cia:
~SCR 687 imposes liability on Iraq for these claims independently of OFF ogram.
25% payout for compensation could exceed $5 billion in annual payments.
0
Could promote international support for US policies.
Could avoid renegotiation of UNSCR 687.
Preserves an important precedent in using Security Council action to deter future aggression by ensuring aggressor sacrifices fmancially to compensate its victims.
}n
Would burden new Iraqi government with precedent of paying for substantial war i caused by Saddam regime.
Many American groups and businesses already feel the process is opaque and unfa Could be preferable to establish a conference of claimants, where we would encou1 forgiveness of claims, particularly by Kuwait, which would have an interest in generosity. Total: $5-7 billion per ann 11/6/02 5:40PM Prepared by Energy Infrastructure Planning Group l(b)(2) I ~t!:E:Itl!!'fh'P4BF8R~f 14 Derived from Multiple Sources DECL ON: 6 Nov 2012 OSD M UTTIT 148
St:CitE!'ifNOFORN
Recover US/Allied Costs of Occupation ree aspects US/allied military--salaries, operations and maintenance, etc.
• Most controversial.
US/allied civilian--American civilians involved in administration.
• Very few people involved.
Iraqi administrative--salaries for Iraqis in government bureaucracy, utilities, etc.
• Uncontroversial.
• Costs partly met by collection of taxes from Iraqis.
~0 estimates cost at $4 billion per month, excluding costs for humanitarian a d reconstruction of Iraq.
ansparency in accounting particularly necessary here.
11/6/02 5:40PM Prepared by Energy Infrastructure Planning Group l<b><2> I Total: $48 billion per a Sl!l€Rt!'ii';'PU'Jf'6KN 15 Derived from Multiple Sources DECL ON: 6 Nov 2012 OSD MUTTIT 149
Recover US/Allied Costs of Occupation (cont.) ) Occupation benefits Iraqi people and should be paid by Iraqi resources.
Probably permissible under any applicable legal theory (legal review still ongoing).
•n
Would be highly controversial internationally.
Could generate domestic Iraqi opposition.
Would reduce resources available for other urgent needs.
Even if all revenues devoted to this category, it would only cover about half of proj monthly costs.
Would deviate from UNSC decisions to exclude costs of military operations from I Gulf War compensation obligations.
1116/02 5:40PM Prepared by Ene Infrastructure Planning Group
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S~CRRT>'INOFORN
Recover US/Allied Costs of Military Campaign timated costs of campaign vary.
CBO estimates $20 billion for deploying troops to Gulf and returning troops home, $6-9 billion in combat expense per month.
House Budget Committee, Democratic staff, estimates up to $60 billion total.
Llf War of 1991 cost $58 billion.
tentiallegal distinction between operations inside and outside Iraq (subject c going legal review).
Operations inside Iraq: legally permissible.
Operation outside Iraq: legally controversial.
1nsparency in accounting also essential here.
1116/02 5:40 PM Prepared by Ener Infrastructure Planning Group
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Total: $30-60 billion per aj 17 SECftE't'/fl{8F8RP~ Derived from Multiple Sources DECL ON: 6 Nov 2012 OSD MUTTIT 151
~ sRe::::Us!Allied Costs of Military Campaign , (cont.) ) Iraqi resources should pay for campaign that liberated Iraqi people and removed international threat emanating from the country.
n
'
Would be very controversial.
Could erode international support for US policies, and could affect support for futu interventions.
Would divert resources from other needs.
1116/02 5:40 PM Prepared by Energy Infrastructure Planning Group l(b)(2) I Sl!!elt:F.:'f/I'Pf8F8R'I 18 Derived from Multiple Sources DECL ON: 6 Nov 2012 OSD MUTTIT 152
SECREr/fNOFOa"t
Summary I Balance Sheet
:mands on petroleum revenue will substantially exceed available funds for ·eseeable future.
nnbers below exclude potentially large humanitarian needs, unaddressed Gu ar claims, and potential repairs to petroleum infrastructure beyond 12-18 mo er conflict. When possible, (average) annual numbers are provided.
RANGE OF FINANCIAL DEMANDS (in $ billions)!
. . . .. "~~ -~- . . . . . . . . . ., , .. ·'''"•'' ,, ''""' -----------------~---~·!-~---- Humanitarian Aid " ' uuu"'""'"''"""' "''"" ' " ' " ' ' '-''"-"""'--n• "•"''" '-""""""" ""'-" _, " <> " ' "" ' ' ~ Reconstruction of \!Var-[)amaged Eco. (anniJal c:JY9)) _8(2pair Energy lnfr~structure (irlitial) ...... , J:greigl'l.Q~l.?tf~Yrnent (annual) Gulf War t;::~airn!?J<?t:Jnual) Costs of Occup?~iQ!'l ( annllc:11) ...
:Ct?sts of Military c:::;c:~IJlpaigq (t()t~IL .TOTAL DEMAND Low 3 2 7 5 48' 30 95:
High_
4
s:
15
7
48
60
139
·-··-· ..
TOTAL PETROLEUM PRODUCTION REVENUE
. "'" -·--
... """ .
BALANCE
20
....
-75
31
-108
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l/02 10:13
IRAQ AGREEMENTS WITH
JORDAN, TURKEY, SYRIA
December 12, 2002
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Iraq Sells Oil Outside UN Oil-for-Food Progrj rdan :1ys roughly $9 per barrel in its barter arrangement for 80,000 BPD :1ves $350 million off market price on annual basis.
ompensation for its potential loss of discounted oil already under discussior
• USG seeking regional producers to sell discounted oil.
~
1rkey
eceives $6/barrel discount on 65,000 BPD of crude oil and a $17/barrel disc 1 5,000 BPD of petroleum products.
:1ves $175 million annually on discounted crude, for which it pays cash for 1 1rchases and the rest in barter.
arns $200 million in pipeline tariffs for OFF sales; paid in kind with oil purr ssistance to ease potential wartime loss already under discussion.
• Financial compensation and attempt to provide free crude oil.
. /02 10: 13 Prepared by Energy Infrastructure Planning Group l(b)(2) I Deri-ved from Multiple Sou1 DECL ON: 12 DEC 2012 OSD MUTTIT 155
1CRE'f't'fNOFOR:J."'l
Oil Sales (Continued)
.
. yrta
ays roughly $6-1 0/barrel discount from market price on 250,000 BPi nuggled in Iraqi oil.
• 180,000 BPD via main Iraq-Syria pipeline and 20,000 BPD via pipeline i northeastern Syria.
• 50,000 BPD via tanker trucks and rail.
• Pays in cash and barter.
aves over $600 million to $1 billion from discounts.
orne illegal trade began in 1999 and then terminated.l<b><1 > (b )(1) 02 10:13 Prepared by EneriZY Infrastructure Planning Group l(b){2) l Derived from Multiple Sourc DECL ON: ll DEC 2011 OSD MUTTIT 156
ENERGY INFRASTRUCTURE PLANNING:
Iraq Sanctions Regime
DECISION BRIEFING FOR DEPUTIES
November 8, 2002
3:00PM 11-12-02 11:22 IN
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Agenda
• Review of Issues Addressed This Month
• Issues for Today
• Decisiot1s Needed
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:CRI3'FlfNOF'OltN
Issues to be Addressed This Month Jrganize and manage USG administration of Iraqi petroleum resoun Ltse petroleum proceeds?
do about current sanctions against Iraq? ~ ~ Iraqi oil production capacity, or merely operate what already exists )p production capacity, what to do about existing and new developrr.
· to use control of Iraqi oil to advance in1portant US foreign policy affected by energy issues?
)ry policy?
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/CRB'tYJNOt'OR:N
Issues for Today
t to do about current sanctions against Iraq?
Guiding principles for addressing current sanctions.
What to do about UN sanctions.
What to do about USG sanctions ..
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~CltE't'NNOFORN
Guiding Principles
~possible any desired .financial and legal transactions th 'e for immediate humanitarian and reconstruction needs ~future business activity.
zter dis information that US ob;·ective is to control Iraq's ~age relations with Congress and the UN to encourage ve cooperation.
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OSD MUTTIT 161
ECH'fftNOt'OitM
United Nations Sanctions
)pe
UN sanctions imposed pursuant to various United Nations Security Counc Resolutions beginning with Resolution 66"1, dated 6 August 1990. A listin the twenty-three resolutions is in the appendix on page 17.
UN member states required to effect broad trading and funds transfer bans against Iraq with certain humanitarian exceptions, including the OFF prog1 Iraq may use oil proceeds to purchase non dual-use items. Contracts prest approved unless they contain dual-use items on "Goods Review List" (GR UNMOVIC and IAEA review all contracts and may approve those with fl( GRL items. Contracts with GRL items are referred to UN Sanctions Committee for a decision.
Reparations to Kuwait, other governments (including USG) and other claimants are now funded through UN OFF program and UN Compensati< Comn1ission.
Existing resolutions mandate that UN-member states deposit into Iraq's ill escrow account any funds used to pay for petroleum products exported "fr~ the territory of Iraq.
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-
-- ·- .=: -·· ·_:_ · _____ ........;..; _____ _ OSD MUTTIT 162
~CitE~/INOFORN
United Nations Sanctions (con't) .
:tons
Ootion l - Seek broad lifting of all UN sanctions, except those dealing with arms tr:
particularly WMD.
• Likely require termination or suspension by Security Council. Most recent precedent was of remaining sanctions on Yugoslavia, 10 September 2001.
• Will require negotiations to obtain necessary support (9 of 15 members, no veto by pennru members).
• Assuming a US occupation and regime change, argwnent that sanctions should be remove' their purpose would no longer be served.
• Plan for phase out of UN escrow account. Reparations to Kuwait, other govenunents (incl USG) and other claimants eventually would be funded directly without channeling througl Encourage claimants to consider foregoing additional Gulf War reparations in light of Iraq regime change.
Pros Cons
e moving Iraq to a new era~ ease nanitarian suffering caused by Saddam 's :management of OFF resources.
>r rational use of proceeds from oil sales.
• Could take time and political capital to obu Security Council approval.
:3:00PM Prepared by Energy Infrastructure Planning Group l(b)(2) I SEEM1'/7N8F8AN Derived from MultipleS DECL ON: 8 NOV 2012 OSD MUTTIT 163
ECR£'¥/fNOPORN
United Nations Sanctions (con't) 1tions (con't) Option 2 - Construct new UNSC approved regime through an omnibus resolution, allowing for new situation, including a US/Coalition period of occupation. Possible scope of new UN program:
• Continue Oil for Food program in some form.
• UN continues to manage reparations, if they continue.
• UN continues sanctions on anns and WMD.
Pros
n some international community consensus.
s some continuity in regime transition.
.s US claim that we are not going in for the Cons
• Could limit our options in managing petrol resources .
• Could take time and political capital to obt Security Council approval.
• Could provide UNSC more control over oi revenue.
~3:00PM
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OSD MUTTIT 164
United Nations Sanctions (con't) tions ( con't) Option 3 - Do not change UN sanctions.
• A. Argue UN resolutions inapplicable because of changed circumstan apply Hague Regulations.
lraqi oil out of the ground may be seized and sold.
Iraqi oil in the ground may be extracted and seized at pre-war levels of production.
Extracting and seizing oil at greater than pre-war levels of production, w1 not expressly forbidden, could be controversial. E.g., development of ne· fields.
Pros Cons
flexibility for managing oil production. o negotiate sanctions issues with UN during cupation. Can be delayed until transition to new t.
• Will hurt US claim that we are not going in for the
• Only delays addressing UN sanctions. Transition to new govenunent from military occupation might be delayed until UN sanctions issues are addressed.
• Undermines UNSCR process.
• Opposition/complaints from countries and bl.isines have unpaid or unfunded contracts pending under 0 ~3:00PM Prepared by Energy Infrastructure Planning Group l(b)(2) I Derived from Multiple S DECL ON: 8 NOV 2012 OSD MUTTIT 165
fBCREFitNOPORN
United Nations Sanctions (con't) tions (can't) Option 3
• B. Operate under existing UN sanctions, apply OFF program.
Under the Oil-for-Food program, we can, through the UN:
» Produce and sell oil.
)> Pay contracts to rehab, fight fires, etc.
» Distribute revenues for humanitarian purposes, reparations and reha payments.
We cannot seek private investment because overall UN embargo would remain.
Pros Cons
1 some international community consensus.
; some continuity in regime transition.
; US claim that we are not going in for the • Could limit our options in managing petrol1 resources.
• Could provide UNSC more control over oil revenue.
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OSD MUTTIT 166
· ---- ------------
.
US Sanctions Based on EO 12722 & EO 12724 :ope Declared by President via executive orders.
Treasury implemented in consultation with State.
Comprehensive embargo includes:
• Freezing all property in which Iraq has an interest.
• Prohibit US persons from trading with Iraq or items oflraqi-ori
• Exceptions granted (in the form of licenses) consistent with for1 policy and the United Nations oil-for-food program.
Termination in whole or in part of Executive Orders 12) & 12724 would require 15 day advance notice to Congr~ . 3:00PM Prepared by Energy Infrastructure Planning Group l(b)(2) I SB€RM¥1f'i18F9Wf Derived from Multiple S DECL ON: 8 NOV 2012 OSD MUTTIT 167
~CKE't'tiNOfi'ORN
US Sanctions Based on EO 12722 & EO 12724 ptions Orders.
Option 1- Broadly remove the provisions of the Execu1
• Rescission or modification of Executive Orders.
• Suspension of implementing regulations.
Pros Cons
~ptions for tailoring a response. ~s all executive branch restrictions on activity with Iraq.
1ot require cumbersome licensing process.
~0 provides for a clean start.
• Will require Congressional notification.
• Can achieve same results at lower executi\i levels via licenses.
~3:00PM
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BCRE'F/INOFOR~
US Sanctions Based on EO 12722 & EO 12724 ptions (can't) Option 2 - General licenses from Treastrry authorizing transactions.
• Accomplished by regulatory change.
• State Department defense export controls would be unaffected.
Pros Cons
• A new EO would provide for a clean start.
,t require new EO. t require Congressional notification.
:tllow for control of types of transactions d receive waivers.
! 3:00PM Prepared by Ener Infrastructure Plarming Group
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OSD MUTTIT 169
ECitE'ffiN6FORN
US Legislative Sanctions
pe
The Iraq Sanctions Act, Iran-Iraq Arms Non-Proliferation Act, and section~ the Foreign Assistance Act, Foreign Operations Appropriations Act and Ar Export Control Act impose US restrictions on transactions with lraq. A de1 listing of these sanctions is in the appendix on page 23.
Changing the restrictions can be accomplished by legislation and executive branch determinations or waivers .
.
tons
Option 1 -Omnibus legislation that addresses all sanctions.
• Pros
- Clean start with new regime.
• Cons
- Congressional process might be cumbersome.
- Most goals can be achieved by executive branch without involving Congress.
:3:00PM Prepared by Energy Infrastructure Planning Group l(b)(2) I SEeftElfWN8P8RN Derived from Multiple ~ DECL ON: 8 NOV 2012 ·---·-·-·--·-- - -- - · ·-- - --------- ------------- OSD MUTTIT 170
leCltE'fi/NOfi'OitN
US Legislative Sanctions (con't) ions (con't) Option 2 - Go to Congress only when legislative relief is really necessary.
• Pros
• Cons
- Involves Congress only when necessary.
- Only one piece of legislation (see option 3 below) may require Congressional action.
- Legislature is still involved, so process might be cumbersome.
Option 3 - Act under executive authority alone.
• It appears that only one piece of legislation will require Congressional action; Executive act sufficient for everything else. It is Section 507 of the Foreign Operations Appropriations A< This law prohibits the obligation or expenditure of funds made available under that Act to fi:
directly any assistance or reparations to Iraq. It specifically prohibits direct loans, credits, insurance and guarantees of the Export Import Bank.
• Pros
- Avoids possible cumbersome legislative process.
• Cons
- Does not address Section 507 constraints.
- May inhibit accomplishment ofUS objectives and limit flexibility.
3:00PM Prepared by Energy Infrastructure Planning Group l(b)(2) I SBCRe'f//f'l 8F8RN Derived from Multiple S DECL ON: 8 NOV 2012 OSD MUTTIT 171
-----------------------· ---- -· teC:ttE'f'/INOfOltN Decisions Needed tiding principles.
hat to do with UN sanctions?
hat to do with Executive Orders 12722 & 12724?
rhat to do with US Legislative sanctions?
.3:00PM Prepared by Energy Infrastructure Planning Group ·I (b)(2) I SS€1t'f:"F/fN8F81tPt Derived from Multiple S DECL ON: 8 NOV 2012 ··------------------- OSD MUTTIT 172
Listing of UN Resolutions on Iraq Sanctions )61 ( 1990) of 6 August 1990 imposed economic sanctions on Iraq, including a full trade embargo barring all imp to Iraq, excepting only medica] supplies, foodstuffs, and other items of humanitarian need, as determined by the ~ ~tions committee, which was also established by Resolution 661. The sanctions committee is chaired by the Amb:
h the delegations of Mauritius and Bulgaria providing vice chairmen. (Note: All 15 Council Members sit on the s ~ (1991) of3 April1991, the cease-fire resolution, declared that the full trade embargo against Iraq would rem:
odic reviews every 60 days (para. 21) and every 120 days (para. 28) of Iraqi compliance with the obligations im1= ~87.
h1, (1991) of 19 September 1991 allowed for a partial lifting of the embargo, which would have enabled Iraq to :
oceeds for hwnanitarian purposes. In return, Iraq would have been subject to strict UN monitoring of the contrac1 of humanitarian goods bought \Vith the oil revenues.
!§§. (1995)of 14 April 1995 enables Iraq to sell up to $1 billion of oil every 90 days and use the proceeds for hum 1e country. On 20 May 1996, the UN and the Government oflraq concluded the Memorandum ofUnderstanding practical arrangements for the implementation of the oil-for-food agreement. The sanctions committee subsequer 1996 the Procedures for the implementation of Resolution 986. On 9 December 1996, the Secretary-General rep' mcil (S/1996/1015) that all the steps necessary to ensure the effective implementation of Resolution 986 had bee1 ~s a result, Resolution 986 went into effect at 00.01 hours Eastern Standard Time on I 0 December 1996. The firs ived in Iraq on 20 March 1997.
lOSt (1996) of27 March 1996 established the export/import monitoring system for Iraq. Iraq and countries expot JNSCOM (United Nations Special Commission) and the IAEA (International Atomic Energy Agency) regarding 'items to Iraq. Such items are subject to inspection upon their arrival in Iraq as well as at the site where the item~ 2 3:00PM Prepared by Energy Infrastructure Planning Group SEE!IUl1'//fi8F8JtN Derived from Multiple l(b)(2) I DECL ON: 8 NOV 201:
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- - --. ·-·--··-·-------
OSD MUTTIT 173
Listing of UN Resolutions on Iraq Sanctions (con't) 1111 (1997) of 4 June 1997 decided that the provisions of Resolution 986, except those contained in paragraphs • 1 in force for another period of 180 days beginning at 00.01 hours, Eastern Daylight Time, on 8 June 1997; furthe torough review of all aspects of the imp]ernentation of this resolution 90 days after the entry into force of paragra to the end of the 180 day period, on receipt of the reports referred to in paragraphs 3 and 4, and expressed its inte1 f the 180 day period, to consider favorably renewal of the provisions of this resolution, provided that the reports 1 1S 3 and 4 indicate that those provisions are being satisfactorily implemented.
1115 (1997) of21 JWle 1997 decided not to conduct the reviews provided for in paragraphs 21 and 28 ofresoluti after the Special Commission submits its next consolidated progress report due on 11 October 1997, after which ~resume in accordance with Resolution 687.
1129 ( 1997) of 12 September 1997 decided that the provisions of Resolution 1111 should remain in force, excep :ed to permit the import of petroleum and petroleum products originating in Iraq, including financial and other es:
: directly relating thereto, sufficient to produce a sum not exceeding a total of one billion United States dollars wi ~0 days from 00.01 hours, Eastern Daylight Time, on 8 June 1997 and, thereafter, a sum not exceeding a total of< :s dollars within a period of60 days from 00.01 hours, Eastern Daylight Time, on 4 October 1997; and decided fi ns of paragraph 1 shalJ apply only to the period of implementation of Resolution 1111.
1134 (1997) dated 23 October 1997 expressed the firm intention, iflraq does not comply with paragraphs 2 and:
1115, to adopt measures which would oblige al1 States to prevent without delay the entry into or transit through tl fall Iraqi officials and members of the Iraqi armed forces who are responsible for or participate in the instances c of paragraphs 2 and 3 of Resolution 1115. It decided not to conduct the reviews provided for in paragraphs 21 ar 587 until after the next consoJidated progress report of the Special Commission, due on 11 April 1998, after whic I resume in accordance with Resolution 687, beginning on 26 April 1998.
~3:00PM
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BCR:E'IWNOPORN
Listing of UN Resolutions on Iraq Sanctions (con't) 1137 (1997) dated 12 November 1997 imposed travel restrictions on all Iraqi officials and members of the Iraqi were responsible for or participated in the instances of non-compliance including the denial of entry to Iraq to SJ n officials on the gro~nds of their nationality and the denial of entry to sites designated by the Special Commissit :o Special Commission inspectors on the grounds of their nationality. The resolution decided that the review PfO\i 21 and 28 of Resolution 687 shall reswne in April 1998 in accordance with paragraph 8 of Resolution 1134, pro~ ment of Iraq shall have rescinded its decision of 29 October 1997 to impose conditions on cooperation with the S n .
. 1143 {1997) of 4 December 1997 the Security CounciJ decided that the provisions of Resolution 986, except tho h paragraphs 4, 11 and 12, shall remain in force for another period of 180 days beginning at 00.01 hours, Eastern December 1997 .
. 1153 (1998) of 20 February 1998 the Security Council decided that the provisions of Resolution 986, except tho n paragraphs 4, 11 and 12, shall remain in force for a new period of 180 days beginning at 00.0 l hours, Eastern S te day after the President of the Council has informed the members of the Council that he has received the report 1eneral requested in paragraph 5 of Resolution 1153, on which date the provisions of Resolution 1143, if still in f 1ate, except as regards sums already produced pursuant to that resolution prior to that date .
. 1158 (1998) of 25 March 1998 the Security Council decided that the provisions of Resolution 1 143 shaH remain b.e provisions of Resolution 1153, except that States are authorized to permit the import of petroleum and petrole1 iginating in Iraq, including financial and other essential transactions directly relating thereto, sufficient to produc ng a total of 1.4 billion United States dollars within the period of90 days from 00.01 hours, Eastern Standard Til ~.
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OSD MUTTIT 175
ECRE'ffH'iOii'OR"i
Listing of UN Resolutions on Iraq Sanctions (con 't) >o 1175 (1998) of 19 JW1e 1998 authorized States, subject to the provisions of paragraph 2 of the resolution, top« anding the provisions of paragraph 3 (c) of Resolution 661, the export to Iraq of the necessary parts and equipme :t.q to increase the export of petroleum and petroleum products, in quantities sufficient to produce the sum establi1 1 2 of Resolution 1153. By the same resolution, the Committee established by Resolution 661, or a panel of expc J by that Committee may approve contracts for the parts and equipment and up to a total of 300 million United S1 tay be used for that purpose.
m 1175 also noted that the distribution plan approved by the Secretary-General on 29 May 1998, or any new distJ :ed by the Government of Iraq and the Secretary-General, will remain in effect, as required, for each subsequent 1 >f the temporary humanitarian arrangements for Iraq and that, for this purpose, the plan will be kept under consta ~d amended as necessary through the agreement of the Secretary-General and the Government oflraq and in a m 1t with Resolution 1153.
DO 1194 (1998) of9 September 1998 decided not to conduct the review scheduled for October 1998 provided for hs 21 and 28 of Resolution 687, and not to conduct any further such reviews until Iraq rescinds its above-mentior of 5 August 1998 and the Special Commission and the IAEA report to the Council that they are satisfied that the;
: to exercise the full range of activities provided for in their mandates, including inspections.
DD 1194, the Security Council also reaffinned its intention to act in accordance with the relevant provisions of Rc 1e duration of the prohibitions referred to in that resolution and notes that by its failure so far to comply with its n ns Iraq has delayed the moment when the Council can do so.
!!.!!!!! ( 1998) of 24 November 1998, the Security Council decided that the provisions of Resolution 986, except those in paragraphs 4, 11 and 12, shall remain in force for a new period of 180 days beginning at 00.0 l hours, Eastern Standard 1 1ber 1998. The resolution also decided that paragraph 2 of Resolution 1153 shall remain in force and shall apply to the ntioned 180-day period.
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ECRE'f'ffNOt'ORN
Listing of UN Resolutions on Iraq Sanctions (con't) :ion 1242 (1999) of21 May 1999, extended the oil-for-food program for a further 180 days starting on 25 May IS :ion 1266 (1999) of 4 October 1999 decided that paragraph 2 of Resolution 1153, as extended by Resolution 124~ ified to the extent necessary to authorize States to permit the import of petroleum and petroleum products origina ;luding financial and other essential transactions directly related thereto, sufficient to produce an additional sum, that provided for by Resolution 1242, equivalent to the total shortfall of revenues authorized but not generated w ions 1210 and 1153, 3.04 billion United States dollars, within the period of 180 days from 00.01 hours, eastern st 125 May 1999.
~ (1999) of 10 December 1999, extended the oil-for-food program for a further 180 days starting on 12 .er 1999 (phase VII).
tion 1284 (1999) of 17 December 1999, stressed the need for a comprehensive approach to the full implementati' rant Security Council resolutions and Iraq compliance with these resolutions. The resolution established the Unite :Monitoring, Verification and Inspection Commission (UNMOVIC) to undertake the responsibilities of the fonnc )M, which was charged with monitoring the elimination of weapons of mass destruction in Iraq. The resolution al d the ceiling on Iraqi oil exports and provided for additional specific arrangements for facilitating humanitarian s including the conditional suspension of the sanctions regime.
tion 1302 (2000) of8 June 2000, extended the "oil for food" program for a further 180-day period beginning 9 Ju 'he Council repeatedly extended the program for 180-day periods over the following years.
tion 1409 (2002) of 14 May 2002, adopted a revised Goods Review List of military-related goods or commoditie!
vas to enter into effect on 30 May 2002. From that date onward, States are authorized to sell or supply any comm uded on the Goods Review List, while the Council would regularly conduct thorough reviews of the Goods Revi~ 2 3:00PM Prepared by Energy Infrastructure Planning Group l(b)(2) I SEoCREif'//N8F81U( Derived from Multiple l DECL ON: 8 NOV lOt~ OSD MUTTIT 177
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US Legislative Sanctions
at is the sanction and how do we change it?
Iraq Sanctions Act
1 Restricts the ability of the Executive branch to enter into, support or license vari transactions involving Iraq.
• Provide advance notice to Congress ofth~ President's intent to terminate sancti< 1 Or, President can grant a national security interests waiver.
Iran-Iraq Arms Non-Proliferation Act 1 Imposes mandatory sanctions on any person or government that transfers goods technology so as to contribute knowingly and materially to efforts by Iran or Ira acquire CBW or nuclear weapons or destabilizing numbers and types of certain advanced conventional weapons.
1 No action necessary. Does not impact oil.
2 3:00PM
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US Legislative Sanctions (con't)
Section 620A of the Foreign Assistance Act of 1961, (FAA) 1 Prohibits assistance under the FAA, the Agricultural Trade Development and Assistance Act of 1954, the Peace Corps Act, or the Export-Import Bank Act to country if the Secretary of State has determined that the government of that coUJ has repeatedly provided support for acts of international terrorism.
• Rescission of Determination by the Secretary after the President submits to the Speaker of the House and the Chairmen of the SFRC and HIRC that a fundamer 1 change has taken place in the leadership and policies of Iraq.
Section 507 of the Foreign Operations Appropriations Act, 2002
• Prohibits the obligation or expenditure of funds made available under that Act t~ finance directly any assistance or reparations to Iraq. It specifically prohibits di loans, credits, insurance and guarantees of the Export Import Bank.
• Legislative change required. No waiver authority included.
Section 523 of the Foreign Operations Appropriations Act, 2002 1 Prohibits funds appropriated under this act from being obligated to finance indit any assistance to terrorist states.
• President can grant a national interest waiver.
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US Legislative Sanctions (con't)
Section 527 of the Foreign Operations Appropriations Act, 2002
• Prohibits funds appropriated for bilateral assistance under this act or prior appropriations acts from being made available to Iraq.
• President can grant a nationai security or humanitarian waiver.
Section 620G of the FAA
• Requires withholding assistance under FAA from any foreign government that provides assistance to a state sponsor of terrorism.
• President can grant a national interests waiver.
Section 40 of the Arms Export Control Act (AECA)
• Prohibits a variety of transactions with terrorist countries, including denial oflh for export of munitions items.
• No action necessary. Does not impact oil.
Section 40A of the Arms Export Control Act
• Prohibits the sale or licensing for export of defense articles or services to a forei country that is not cooperating fully with US antiterrorism efforts.
• No action necessary. Does not impact oil.
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US ~egislative Sanctions (con't)
Section 531 ofthe Foreign Operations Appropriations Act, 2002
• . Prohibits assistance under the Act or the AECA to any country not in complian< with UN Security Council sanctions against Iraq.
• President can grant a national interests waiver.
Section 620t of the FAA
• Prohibits assistance under this or any other act to any country which has severe1 diplomatic relations with the US.
1 Section 620H of the FAA
• Requires withholding assistance under the FAA from any government that prov lethal military equipment to a terrorist state.
• President can grant a national interests waiver.
Section 570 of the Foreign Operations Appropriations Act, 2002
• Provides that Economic Support Funds may be made available for programs benefiting the Iraqi people and to support efforts to bring about a political trans in Iraq.
• No action necessary.
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ENERGY INFRASTRUCTURE PLANNING:
Organizing and Managing Iraq's Petroleum Resources DECISION BRIEFING FOR DEPUTIES Updated: 10 January 2003 SECRE'f'H~\8F8RP[ 1/10/03 18:38 Prepared by Energy Infrastructure Planning Group i<b)(2) I OSD MUTTIT 182 Derived from Multiple Sources OECL ON: 10 Jan 2013
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Issues for Today
Organizing and managing USG administration of Iraqi petroleum resources.
•Guiding principles for managing Iraq's petroleum resources.
•Organizational and management structure.
•Choosing the organization's leader.
•Composition of a board of advisors.
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Guiding Principles
•If US temporarily administers Iraqi petroleum resources, we should provide for their security and repair, and for production- and sale of petroleum products.
• Transparently manage resources:
• "In trust".
• For Iraqi people as beneficiaries.
• [To meet needs of occupation, defray costs of administering Iraq, other appropriate purposes.]
• Use existing Iraqi personnel and organizations when possible.
• Avoid unnecessary disruption to supply in the world oil market.
• Counter dis information that US objective is to control Iraq's oil.
• Be sure there is sufficient stability, transparency and responsible leadership in Iraq before US places these resources into anyone else's hands.
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Legal Authority of Iraq Oil Transitional Authority
• Assume the US in Iraq would have broad authority to administer public property in occupied territory, including natural resources.
• SECDEF orders Commander CENTCOM to establish Iraq Oil Transitional Authority (IOTA) pursuant to authority of military government.
- CENTCOM Commander's military order can detail provisions of IOTA's charter and organizational structure.
1/10/03 18:38 Prepared by Energy Infrastructure Planning Group l(b)(2) I OSD MUTIIT 185 SEERE'i'HPI8F8R~{ Derived from Multiple Sources 5 I>ECL O N: 10 Jan 2013
I
SECKE'fWNOFORN
Current Organization of Iraqi Oil & Gas Industries j Oil Ministry I l I I Undersecretary for Exploration, Undersecretary for Northern Undersecretary for Domestic Distribution of and Southern Production, Downstream Sector & Gas Products and Gas Drilling, Oil Projects I I I Public Companies + General Managers I I I I Oil Exploration Co (OEC) North Oil Compar1y (NOC) North Refineries Company I I I Iraq Oil Tankers Co (lOTC) South Oil Company (SOC) South Refineries Company I I j Oil Products Distribution Co Oil Projects Company Central Refineries Company I I I Petroleum Pipelines Company Iraqi DriJiing Company North Gas Company I I Gas Filling Company (GFC) South Gas Company I Undersecretary for the State.Oil Marketing Organization I State Oil Marketing Organization (SOMO Subsidiaries + Department Heads I First Crude Oil Department I Second Crude Oil Department I Petroleum Products Department I Shipping Department I 1/10/03 18:38 Energy Department SISCR:SlWN8F8H:N Derived rrom Multiple Sources 6 DE.CL O N! lO Jan 2013 Prepared by Energy Infrastructure Planning Group l(b)(2) I OSD MUTTIT 186
SECRST,~OFORP
·Oil Organization
Option: Iraqi Oil Ministry Model I "Chief Executive Officer" or "Chairman" ~....--~,D-ep_u_ty_"_(_or-~-,c-E_O_"_i....~..; t_o_p_i_s_"_C_h_a-irm_a_n_"_) ----.;-------------jL.._B_o_ar_d_o_f_A_dv_i_s_or_s__.
I
I
Vice President for Exploration, Domestic Distribution of Products and Gas I I Vice President for Northern and Southern Production, Drilling, Oil Projects I I Vice President for Downstream Sector and Gas Industry I Public Companies + General Manager of State Companies I Vice President for the State Oil Marketing Organization I SOMO Subsidiaries + Department Heads Structure
• Patterned after existing structure oflraqi Oil Ministry using a CEO (minister) and vice presidents (directors).
• This organization assumes that much of the oil infrastructure is in place and many of the existing personnel can remain.
• Establish a Board of Advisors to provide guidance to the CEO and to facilitate transparency to Iraqi public and international community. It could consist of representation from people oflraq, coalition countries, industry advisors and USG.
Pros
• Facilitate transition to future ministry.
• Less intrusive. Allows Iraqis more input.
Cons
• May not be feasible if much ofthe infrastructure is destroyed and many of the personnel cannot be used.
• SOMO may be too tainted to be retained.
1110/03 18:38 Prepared by Energy Infrastructure Planning Group [<b)(2) I SE€RE¥HPi8F8RPJ Derived from Multiple Sources 7 DECL ON: 10 Jan 2013 OSD MUTTIT 187
JOT A ''CEO'' Responsibilities
• Efficiently manage Iraq oil resources.
• Execute US policy as approved by the President and issued by SECDEF to the military government.
• Act as primary US liaison on Iraqi oil to:
- International community (oil producers and consumers).
- International organizations (UN, IFIS).
- Board of Advisors.
• Likely an American.
• "Mr. Outside".
IOTA "Deputy" Responsibilities
• Day-to-day oversight of operations.
• Directly manage the operating divisions.
• Applies industry expertise.
• Likely a non-American.
• uMr. Inside :11.
l/10/03 18:38 Prepared by Energy Infrastructure Planning Group l(b)(2) I OSD MUTIIT 188 Derived from Multiple Sources 8 DECL ON: IOJan 2013
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Timing of Choosing ''CEO''
• First step: As soon as possible, appoint X as a Special Advisor to the President or other appropriate position.
- Get X into place and involved in on-going planning for administration of Iraqi petro 1 eum industry.
• Second: At appropriate time, announce that all Iraqi oil assets will be administered by lOT A and that President is appointing X to head IOTA.
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Choosing a ''CEO''
Will send a message.
• Selecting an individual with significant public recognition will draw attention to the announcement.
• The candidate's background, credentials, politics and experience will spark speculation regarding USG intentions toward the Iraqi oil sector.
• The candidate will have to work with a variety of other significant individuals.
• Some factors to consider:
- Relevant expertise, previous experience in region.
Any continuing involvement with business organizations (conflicts of interest).
• Will need DOJ, possibly other, legal vetting.
- Working styles: Purely corporate? Ability to adapt to government service role?
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IOTA CEO Candidates from Industry (con't)
• Selecting a "CEO" from oil industry.
- Advantages:
• Has experience running large oil operations.
• May give perception of some independence from politics.
Technical versus political leadership.
Disadvantages:
• May give perception of US corporate control of Iraq oil.
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IOTA CEO Candidates not from Industry (con't)
• Selecting a "CEO" not from oil industry (statesman/ other).
- Advantages:
• Provides statesman with international political experience.
• May avoid perception of "big oil" control.
- Disadvantages:
• May not have sufficient industry expertise to manage large oil organization effectively.
• May require appointment of a "Deputy" from oil industry to manage oil business effectively.
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Board of Advisors Responsibilities
-
• Provide advice and feedback from interested parties to lOT A CEO. CEO not bound by Board advice.
• Provide transparency.
- Communicate to interested parties the Guiding Principles of US policy.
• Oversee work of independent auditors.
CEO and Deputy should nominate to USG candidates for Board based on policy principles.
~~c~~:J:NPIQf-=QA:~
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Policy Principles: Composition of Board of Advisors
• Should be substantially international.
• Half of members should be Iraqi.
• Could include members from:
- Representatives of allied governments or coalition partners.
- US and international oil industry experts.
- Former Iraqi opposition figures.
-Remaining Iraqi industry technocrats (non-Ba'athist).
- US or non-US financial and development specialists.
• Could allow observers from international organizations to attend Board meetings, at selected times.
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PLANNING FOR THE IRAQI PETROLEUM
INFRASTRUCTURE:
·Work Status and Decisions Needed Revised as of 10 January 2003 1110/03 21:12 Prepared by Energy Infrastructure Planning Group i<b)(2) I OSD MUTTIT 238 SECKE'f//N8f8R:N Derived from Multiple Sources DECL ON: 10 JAN 2013
SECRETHNOfORN
Outline of Presentation
'
• Guiding Principles
• Public Diplomacy
• Contingency Planning for Repair, Production and Sales
• Legal Considerations
• Organization and Management (.Issue {or Decision: Chairman/CEO Candidates
• Use of Petroleum Proceeds
• Funding Enhancement: Borrow Against Future Oil Revenues?
• Issue (or Decision: Production Targets
• Existing and New Contracts
• Issue (or Decision: Iraq-Syria Pipeline 1110/03 21:12 Prepared by Energy Infrastructure Planning Group i< b)(2) I SI5€RKF//Pi8F8HN Derived from Multiple Sources 2 OECL ON: 10 JAN 1013 OSD MUTTIT 239 ·
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Guiding Principles
Certain principles should guide any temporary US/coalition administration of Iraqi petroleum resources, including:
• Iraq's oil resources are an asset that belongs to all the Iraqi people.
• Any temporary administration of Iraqi oil production and marketing:
- Should involve existing Iraqi personnel and organizations whenever possible to ease future transition;
- Should work with the international community to build support for our policies;
- Will seek to minimize disruptions and promote confidence and stability in world markets;
- [Will not be used to influence world prices];
- [Will respect Iraqi contracts previously approved by the United Nations];
- Will be conducted transparently and accountably, in accordance with applicable legal norms and prudent industry practices, for the benefit of the Iraqi people;
- Will prepare for the return of production and marketing responsibility to a stable Iraqi authority as soon as practicable.
• The initial goal should be to bring Iraqi petroleum production up to pre-hostility capacity of about 3.1 million barrels/day, consistent with sound business considerations.
• Any increase in production levels and capacity should serve the interest of maximizing revenues for the of Iraq.
1/10/03 21 : 12 Derived rrom Multiple Sources 3 DECL ON: 10 JAN 2013
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Public Diplomacy--Main Themes
• Iraqi petroleum resources are a national asset of all the Iraqi people, i.e., the nation as a whole, and not of any regional entity.
• We want to work with the Iraqis themselves and the international community in administering petroleum proceeds for the benefit of the Iraqi people.
• Interim administration decisions will be based on prudent, accountable, best practices to prepare for the return of the sector and its management to responsible Iraqi authorities.
• We will act, through our administration, so as not to prejudice Iraq's future decisions regarding:
- Its oil development policies.
- Its relations with international organizations.
- The future ownership structure of the its oil industry.
• US/Coalition will fulfill its responsibility to the Iraqi people to create conditions of stability and well-being for the people of Iraq, but we will not administer oil assets on a long-term basis.
• Petroleum proceeds will be handled transparently and used for the benefit of the Iraqi people.
• We will respect the legitimate interests of all countries in the reconstruction period.
• e will re i contracts ved the United Nations.
Sf:€REFF//N8F8RP4
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Contingency Plans for Repair
• SD(P)/Energy Infrastructure Planning Group manages planning project.
• EIPG guidance to the Army contractor:
- Plan for full range of damage scenarios: Little or no damage, to major disabling damage by Iraqi forces to key choke points (e.g., Gas and Oil Separation Plants (GOSPs), marine terminals, pumping stations).
- Fight over 1,000 well fires, if necessary.
- Repair priorities:
- First, restore current production of about 2.4 million barrels per day as soon as conditions permit.
- Second, restore current capacity of about 3 .I million barrels per day.
• Plan (draft) calls for modular components for major facilities (e.g., GOSPs, pumping stations) wherever needed, to restore production ASAP.
• "Best case'' = No infrastructure damage, just safety repairs needed.
- 6 mos. to 2.4 million b/d, 9 mos. to 3.1 million b/d.
- Cost: appro. $0.8 Billion.
• "Worst case"= Major, disabling damage throughout infrastructure.
- 20 mos. to 2.4, 30+ mos. to 3.1.
- Cost: $7 to $8 Billion (oil only). Refineries and gas plants add another $4-$5 Billion.
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SECRET,~OFORN
Contingency Plans for Production and Sale
• Production priorities:
First, crude oil.
Second, natural gas to support electrical grid.
- Third, refined products (import during interim if necessary).
• Build on "modular" approach.
- Pre-conflict: Profile all fields and facilities.
Post-conflict:
1 Rapidly assess production level achievable with whatever still works.
1 Assemble building-blocks of a functioning system with whatever still works.
1 Use all functioning production facilities to extent safe and cost effective.
• Produce first where damage is least, to maximize early output.
• Sales:
IOTA uses personnel from Iraq's State Oil Marketing Organization (SOMO) to extent available and reliable -- supplement with other nationals as needed.
IOTA approves terms and conditions of sales, within policies set by higher authority.
- "Good Title": SOMO and Iraqi Central Bank currently co-sign all oil sales contracts.
1 Standard terms include warranty of title.
1 Suggests need to maintain existence and operations of Iraqi Central Bank and SOMO.
- Would continue to warrant good title to buyers.
- Would help reassure markets, reduce likelihood of later disputes about val· of sales.
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Organization and Management
• Deputies agreed to recommend establishing an organization dedicated solely to managing Iraqi petroleum industry, with a corporate organizational model ("Iraqi Oil Temporary Administration" -- "lOT A") drawing on current Iraqi Oil Ministry structure.
• To "internationalize," appoint:
Chairman
• American.
• Current or former statesman or former CEO of oil company.
Chief Executive Officer.
• British or other international.
• Former chairman or CEO of oil company or other significant business.
Vice Presidents for each functional sector within current Ministry.
• Preferably Iraq is.
Board of Advisors.
• Advisory, non-binding on management.
• Half composed by Iraqis, rest by various international figures.
Issue for Decision: Selection of Chairman, CEO.
~ Candidates vetted by PCC (see Back-Up Slides for possible candidates).
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Petroleum Proceeds: Possible Uses and Availability
• Figures below exclude high end range of humanitarian needs and unaddressed Gulf War claims. When possible, (average) annual numbers are provided.
• Humanitarian aid, military campaign and occupation costs -- about 1 year; others vary from about 2 to 10 years or more. .
• Bottom Line: Demands on petroleum revenue will likely exceed available funds for foreseeable future.
RANGE OF POTENTIAL FINANCIAL DEMANDS (in $ billions)
--
Humanitarian Aid (minimum)-- Humanitarian Planning Group - Reconstruction ofWar~amaged Eco. (annual avg) --CIA ~estore prewar oil production capacity (initial)_- CIA/Industry Expand oil capacity to 3.6 million bid (additional} -- CIA/Industry Expand oil capacity to 5-8 million bid {annual avg) -: CINindustry F orelgn Debt Payment (annual) -- CIA Gulf War Claims (annual) - CIA/State Costs of Occupation (annual) -- CBO Costs of Military Campaign (total) -- CBO/House Budget Cor:!l~ .. Dem. staff TOTAL DEMAND TOTAL ANNUAL PETROLEUM PRODUCTION REVENUE* BALANC.E ,. Based on 2. 4 million bid of oil production and an $18-28/bbl average price · ·· · ··· ·----~- Low Hlah 16 16 3 4 1 8 3 5 ·--·- 1 4
----------------- -
7 15
5 7
48 48
30 60
114 167
16 25
-98 -142
~-··
1/10/03 21:12 Prepared by Energy Infrastructure Planning Group l< b><2 > I OSD MUTTIT 247 ~l!i€1UFFHP48F81Ui Derived from Multiple Sources 1 0 DECL ON: IOJAN 2013
•
•
•
•
•
SECft:E'f'h'NOFORN
Funding Enhancement: Borrow Against Future Oil Revenues?
Could explore using future oil revenues as collateral for loans .
Precedents: Russia, Iran, Ecuador have borrowed using oil revenues as security .
Iranian practice could be a model; Iranian Central Bank has borrowed billions of dollars:
- As direct bank loans secured by future oil sales.
- By treating developer capital "invested" under exploration and development contracts as :'loans," repaid witb future oil produced (developer gets oil as loan payment, no "ownership" tn reserves).
Iraq's existing major claimants--Russia~ France, Ja_Ran, Kuwait, Saudi Arabia--would be urged to postpone claims in favor oftnese loans. Their incentives to do so?
- Current UN sanctions regime already takes precedence over these claimants.
Major issues:
- Lawyers would need to assess any actual plan for international law compliance.
- Recent Iraqi oil revenuys may not support major loans (i.e., billions of dollars) without new development contracts tn place to back them up.
- Who would borrower be during temporary administration? Iraqi Central Bank? Would it still exist and function?
- New lender(s) likely to demand subordination of pre-existing debt and third-party guarantors (other govemments1).
- Likely to require rescheduling Iraq's existing foreign debt (about $82 billion at end 2002 assuming 6% interest rate). Practicable? Complications?
- Iraq also owes $27 billion in unpaid claims awarded by UN Compensation Commission for Gulf War 1110/03 21:12 Prepared by Energy Infrastructure Planning Group I ~K2) I Derived from Multiple Sources 11 OECL ON: 10 JAN 2013 OSD MUTTIT 248
SECRE'i'lfNOFORN
IraqiProducuonGoa~:
Initial Objective of up to 3.1 million bid Bring production up to prewar capacity of about 3.1 million barrels/day (bid).
We have contingency plans to do this (see Slides 5 and 6).
• Current actual production: 2.4 million b/d.
- Annual revenue with $18-28/barrel average price range: $16-25 B.
• Current production capacity: 2.8 - 3.1 million b/d .
- Investment needed to sustain: $1-8 B over 6-20 months, depending on damage level (based on CIA and industry estimate).
• Iraq a member of OPEC but has not been in quota system since Gulf War.
- Traditional OPEC quota at parity with Iran, or currently 3.18 million b/d.
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Iraqi Production:
Possible Mid-Term Objective of 3.6 million bid?
Enable Iraq to regain its historical capacity?.
• 3.6 million b/d.
- Likely to require heavy maintenance of existing fields and possible development of new fields.
- Reachable about one year after obtaining 3.1 million b/d.
- Cost: additional $3-5 billion over 3.1 million b/d level (industry estimate).
- Would put Iraq output at current Iranian output levels of 3.6 million b/d.
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Iraqi Production:
Possible Long-Term Objective> 5 million bid?
Put Iraq on path to achieve economically reasonable increase in capacity?
• Would exceed 5 million b/d.
- Requires development of new fields.
- About 5 million b/d reachable within 3-5 years with investments of around $30 B (CIA and industry estimate).
- Consistent with long-term plans of Iraqi Oil Ministry for 6-8 million b/d with investment of$30-40 B (CIA and industry estimate).
- Could force questions about Iraq's future relations with OPEC.
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Increasing Iraqi Production Beyond 3.1 million bld: Considerations Advantages
• Hastens Iraqi rehabilitation and stability.
• Supported by many in Iraqi opposition.
• May put long-term downward pressure on price.
• May help consumers.
• Diversifies/increases global oil supply and spare production capacity in long-term, if no price war.
- Strengthens global economic security.
- Only 3. 7 million b/d of global spare capacity (CIA), or 5o/o of demand.
- Saudis have 2/3 of global spare capacity.
Disadvantages
• Politically controversial, especially if new fields are developed.
• Might trigger a price war, which would likely decrease Iraqi oil revenues and could drive out higher-cost producers, thus reducing diversity of supply.
• Some would argue that
new Iraqi government
should decide.
• Could force unwelcome
questions about our
intentions towards
OPEC.
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SECRE'IWNOFORN
Contract Policy
•
Existing deals: [IOTA should observe contracts previously approved by UN./ Query whether should observe those made in hopes sanctions eventually would be lifted? (May depend on terms of particular contracts, provisions of which not fully known to us now.)
- One production maintenance "fee-for-service" contract (Zarubezhneft and Tatneft of Russia) currently approved by UN under OFF.
- Iraq has signed four capacity expansion contracts (Chinese CNPC, Syrian Oil Co., Petro Vietnam, Tunisian ET AP), which await lifting of UN sanctions.
1 French Total Fina Elf initialed but reportedly not yet signed.
• Iraq recently abrogated Russia's Lukoil contract.
- Over 60 foreign companies pursued various stages of oil negotiations since sanctions were imposed.
- Iraqi opposition opposed to honoring deals made by Saddam unless clearly in Iraqi interests.
1 Better to defer these for new Iraqi government to decide.
- US and British companies were not allowed to enter into such contingency contracts.
• New deals: As a rule, should be based only on economic return, open competition, and sound business practices.
- IOTA will likely need to contract with foreign companies-- whether to expand production capacity or to maintain existing capacity.
• Repairs from war damage, safety upgrades, normal operations and maintenance.
- Should be governed by sound business decisions unless compelling reasons otherwise.
- Gen let JOT A n~a.nac.,om,onJ 1/ 1 0/03 21 :12 De rind from Multiple Sources 16 DE:CL ON: l6 JAN 20\3 OSD MUTTIT 253
Sf:CitE't'/fNOFORN
Iraq-Syria Pipeline: Use As Leverage?
(b)(1)
111 0/03 21 : 12 Prepared by Energy Infrastructure Planning Group i<b)(2) I OSD MUTTIT 254 SE:CRE'fWI'.'8f'8K:N Deri\:ed from Multiple Sources 17 DECL ON: 10 JAN 2013
SECRETHNOFORN
Back Up
~IS€M:IS':fM'P(8f8RP(
1110/03 21:12
Prepared by Energy Infrastructure Planning Group i<b)(2) I OSD MUTTIT 255 Derived from Multiple Sources 18 DECL ON: 10 JAN 2013
SECRET/fNOFORN
Iraq's Share of OPEC Production IRAaS SHARE a= OPEC PROOUCTION 2002 IRAQ SOlo IRAQ•s SHARE OF OPEC PRODUCTION 1990 IRAQ 1SO/o REST OF OPEC 85% 1110/03 21:12 Prepared by Energy Infrastructure Planning Group l(b)(2) I OSD MUTTIT 256 SECR:ElWN8F8R:tti Derived from Multiple Sources 19 DECL ON: 10 JAN 2013
S~CK~'ftiN"OFORN
OPEC Production
OPEC PRODUCTION OCT. 2002 OPEC PRODUCTION JULY 1990
IRAQ
INDONESIA
6%
OPEC PRODUCTION 2002 vs 1990 (thousands barrelslday) (Excludes Equador and Gabon, which are no longer members) Algeria Indonesia Iran KuwaH Libya Nigeria Qatar Saudi Arabia UAE Venezuela OPEC-10 Total Iraq OPEC Total Output Oct. '02 Output Jul '90 02r90 Oiff 1,000 760 240 1,100 1,280 (180) 3,600 3,000 600 2,000 1,900 100 1,400 1,250 150 2,000 1,750 250 700 370 330 8,500 5,610 2,890 2,000 1,950 50 3,100 1,950 1,150 25,400 19,820 2,400 3,500 (1, 100) 27,800 23,320 4,980 24% Ill 0/03 21 : 12 8% Prepared by Energy Infrastructure Planning Group i<b)(2) I OSD MUTTIT 257 SECRElWPJ8F8RttJ Derived from Multiple Sources 20 DECL ON: lO JAN 2013
SE::CREr~OPORS
S~CA:~lWPi8F8ftN
1/1 0/03 21 : 12 Prepared by Energy Infrastructure Planning Group [<b}(2) 1 OSD MUTTIT 258 Derived from Multiple Sources 21 DECL ON: 10 JAN 2013
SECRETfi-NOFORN
1110/03 21:12 Prepared by Energy Infrastructure Planning Group i<b)(2) I OSD MUTTIT 259 g KCRK'FA'NQFQRPf llerived from Multip'e Sources 22 llECL ON: 10 JAN 2013
(b)(5)
SRCRR'f#NOFORN
PLANNING FOR THE IRAQI PETROLEUM
INFRASTRUCTURE:
Decisions Needed
Dated: 30 January 2003
(b)(5)
(b)(5)
(b)(5)
~4/03 15:40
Prepared by Energy Infrastructure Planning Group l(b)(2} l SIU1RST/IN8F9RN Derived from Multiple Sources DECL ON: 30 JAN :%013 OSD MUTTIT 276
SJ£Cft:E'f1'1NOFORN
Guiding Principles/Public Diplomacy Goals Provide broad operational guidance to the field~ Counter misimpressions that the U.S. seeks to control Iraqi oil for its own benefit.
Provide transparent information to markets to enhance understanding of our actions.
Assure the Iraqi people of our commitment to their best interests.
~ee hand-out).
~4/03 15:40 Prepared by Energy Infrastructure Planning Group l(b)(2) I Derived from Multiple Sources DECL ON: 30 JAN 2013 OSD MUTTIT 277
(b )(5)
~ sF£RE~OFo;;,.ganization and Management 1eral Principle: Increase Iraqi role as situation stabilizt returning to full Iraqi control as soon as feasible.
~e phases~ In sync with overall administration of Ira (b )(5) Phase One: Military (aims: secure, protect).
• General Franks, CENTCOM.
Phase Two: US/Coalition civil administration (aims: post- conflict triage, repair, rebuild, resume and oversee operations).
• Chairman, Chief Executive Officer.
• Iraqis in senior posts to extent feasible, but not in control of funds. · (b )(5) D Phase Three: New Ira ~4/03 15:40 SSC~'/N8¥8RJri Derived from Muldple Sources DECL ON: 30 JAN 2013 OSD MUTTIT 278
SECRETlfN0¥0R-N
Petroleum Proceeds: Possible Uses and Availab · itimate-High t Re...enues 58 p.a. .
• Humanitarian Aid (minimum} -- Humanit Planning Group 1:1 Reconstruction of War-Damaged Eco. (• av.;J) --CIA · · · · • Restore prewar oil production capacity { .. " CIA/Industry · CJ Expand oil capacity to 3.6 million b/d (a
--CIA/Industry
· []Expand oil capacity to 6-8 million bid (a · a-.g) -- CIA/Industry : • Foreign Debt Payment {annual) -- CIA []Gulf War Claims (annual}-- CIA/State stimate-Low II Costs of Occupation (annual)-- CBO
• Costs of Military Campaign (total) - CB1 Budget Comm., Dem staff =,.,...--- 4/03 15:40 20 40 60 80 100 120 Prepared by Energy Infrastructure Planning Group l(b)(2) I 140 160 180 ISECR:13WR'i8P81tN Derived from Multiple Sources DECL ON: 30 JAN 2013 OSD MUTTIT 279
St';CftR'fi/NOfi'OitN
Central Question
rhether to pursue a conservative approach ( an expansive aJ2proach to U.S. manageme1 of Iraqi oil resources?
(b)(5)
~4/03 15:40 Prepared by Energy Infrastructure Planning Group l(b)(2) I Sl!l€It:M'/J'N8F61U4 Derived from Multiple Sources DECL ON: 3G JAN 2013 OSD MUTTIT 280
S£CRR'tYINOtr<lltN
Conservative Approach
~estore capacity to pre-hostility levels (roughly 3.1 nillion barrels/day), to the extent economically pruden Defer to a future Iraqi Government questions regardin~
- New oil field development/capacity expansion.
- Iraq's relationship with OPEC.
- Ownership/privatization of Iraqi oil.
- Borrowing against future oil revenues.
!4/03 15:40 Prepared by Energy Infrastructure Planning Group l(b)(2) I SE!€RE'fm19F9RN Derived from Multiple Source!
DECL ON: 30JAN 2013
OSD MUTTIT 281
St:Ciffi'fHNOFORN
Expansive Approach
Put Iraq on a path to increase its long-term capacity.
Develop/explore new oil fields.
Estimates project that capacity of 5 million b/d could t reached in 3-5 years with $30 billion in investment.
24/03 15:40 Prepared by Ener Infrastructure Planning Group
(b)(2)
SEeRF!rt¥fN8F8RP•
Derived from Multiple Source~ DECL ON: 30 JAN 2013 OSD MUTTIT 282
SHCRRIYfNOFORN
Conservative Approach: Issues larket Impact: Less likely to be interpreted as destabilizing to market or as attempt to manage prices.
ublic Diplomacy: Diminishes arguments that incursion is driven by oil considerations.
rnpact on Future GOI Decisions: Maximizes future policy flexibility; may reduce, or delay growth of, future revenues.
'
~ost: $1-8 billion needed to reach 3.1 million b/d, additional $3- 5 billion needed to reach 3.6 million b/d.
~evenue: Est. annual revenue of $20-$32 billion (3.1), $24-37 billion (3.6) one year later.
lming: 3.1 =X mos., 3.6 add a year.
~ontracts: Keeps contracting decisions limited to production maintenance.
!4/03 15:40 Prepared by Ener Infrastructure Planning Group
(b)(2)
SECitE'f/Rof9F8RN
Derived from Multiple Sources DECL ON: 30 JAN 2013
- - - -- - - - - -------- -- --· OSD MUTTIT 283
SRCRE'f'/INOFORN
Expansive Approach: Issues ~ket Impact: More likely to be interpreted as destabilizing to 1arket or as attempt to manage prices.
1lic Diplomacy: Increases arguments that incursion is driven by il.
~act on Future GOI Decisions: Reduces future policy flexibili1 1ay increase, or speed growth of, future revenues.
t: $6-10 billion/year investment required over and above costs I ~storing current capacity.
,enue: Est. annual revenue of $33-$51 billion (5Mb/d) unless >PEC starts price war, making revenue streams unpredictable.
ting : 3-5 yrs.; development contracts would extend beyond d U S d . . . f "1 l(b)(5) xpecte .. a ministration o 01 sector. · L__ _____ _ ttracts: Russian considerations would come into play.
M/03 15:40 Prepared by Ener Infrastructure Planning Group i~Gili'¥/Rl9fQRN Derived from Multiple Sources
(b)(2)
DECL ON: 30 JAN 2013
OSD MUTTIT 284
t. sEF~";;J[;;' Enhancement: Borrow Against Future Oi , Revenues?
olore using future oil revenues as collateral for loans? .
rjor issues: rr!
Perception of mortgaging the legacy of the Iraqi peopl~ Credibility of the debt.
- Who would borrower be during temporary administration? Iraqi Central Bank? Would lenders accept? ·
- Recent revenues may not support major loans (i.e., billions of dollars) without new development contracts in place to back them up.
Posture of existing creditors.
- Likely to require rescheduling Iraq's existing foreign debt (about $82 billion at end 2002 assuming 6% interest rate). Practicable?
Complications?
- New lender(s) likely to demand subordination of pre-existing debt and third-party guarantors (other governments?).
:4/03 15:40 Prepared by Energy Infrastructure Planning Group l(b)(2) I - SE€U£'1';; ri8118RN Derived from Multiple Sources DECL ON: 30 JAN 2013 ' -·--·- -
- ==~~iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii OSD MUTTIT 285
---------------
.......
Contract Policy?
•ting deals:
1ive due consideration to contracts previously approved by UN
- Four production maintenance ''fee-for-service" contracts (three Russian, o Turkish) currently approved by UN under OFF.I<b><5> >eals pending removal of UN sanctions?
- Iraq has signed about four capacity expansion contracts (Chinese CNPC, Syrian Oil Co., Petro Vietnam, Tunisian ETAP) that await lifting of UN sanctions. l<b><5>
- Iraqi opposition opposed to honoring deals made by Saddam unless clearl in Iraqi interests.
v deals: As a rule, base only on economic return, open ·ompetition, and sound business practices?
Jevelopment contract issue?
~ikely need to contract with foreign companies -- if only to naintain existing capacity.
4/03 15:40 Prepared by Ene Infrastructure Planning Group
(b)(2)
Slil€REfnN816RN
Derived from Multiple Sources DECL ON: 30 JAN 2013 OSD MUTTIT 286
(b)(5)
SRCR:EI'
OSD MUTTIT 287
-== ·---·--···--
SEICRE'f'
OSD MUTTIT 288
SECH'f
(b)(5)
St!:CR£'F
OSD MUTTIT 289
SECH'f
OSD MUTTIT 290
SI3CRET/7'NOFORN
ENERGY INFRASTRUCTURE PLANNING:
UPDATE FOR
THE SECRETARY OF DEFENSE
16 NOVEMBER 2002
11/16/02 11:26
Prepared by Ener y Infrastructure Planning Group
(b)(2)
6~CIUilWPlQFQRPI 1
Derived from Multiple Sources OE:CL ON: 16 NOV 2012 OSD MUTTIT 291
SECRET/fNOFOR't
Agenda
• Summary of Task
• Summary of Key Issues
• Backup Slides
Guiding Principles
Status of Work
Next Steps
11/16/02 11:26 Prepared by Energy Infrastructure Planning Group l(b)(2) I OSD MUTTIT 292 2 SISCRISTI/Pf8F8RP' Derived from Multiple Sources DECL ON: 16 NOV 2012
SECRET/fNOfdiOILl\t
Summary of Task
• SecDefPlanning Guidance Memo 30 Sep 02:
Develop a comprehensive contingency plan for protecting, repairing and operating Iraqi energy infrastructure, to be used if US/allies must occupy.
Address legal, policy and operational issues.
- OSD/CENTCOM division of labor.
• CENTCOM: plans for protection and repair.
• OSD: plans for maintaining continuity of operations.
• DoD lead, other agencies participating as required.
11/16/0211:26
3
~K~IUiT1
~1 QfQRJ>I
Derived from Multiple Sources DECL ON: 16 NOV 2012 OSD MUTIIT 293
SECRE'fh'NOFOitN
Summary of Key Issues
• Organizational: How USG should organize and manage its administration of Iraqi petroleum industry?
- Specially created, dedicated organization (short-hand: "Iraqi Oil Trust")?
- Who heads, what kind of board, accounting and transparency?
• Legal: What a military government can and cannot do?
- Rules for development, use, oversight of energy resources?
- How current sanctions work, how to change them?
• Operational: Spending and development policies?
- How to use proceeds (what gets paid for, what does not)?
- Develop more production capacity, or just operate what's there now?
- How to handle existing and future contracts for development and services?
• Foreign Policy?
- What key US foreign policy goals could/should be advanced by administration of petroleum industry?
- Declaratory policy (how we explain what we are doing and why)?
11116/02 11 :26
4
!SECR~Th'PI8F8R:P4
Derived from Multiple Sources DECL ON: 16 NOV 2012 OSD MUTTIT 294
SECR:E'fWNOFORN
BACKUP SLIDES
11116/02 11:26 Prepared by Energy Infrastructure Planning Group i<b)(2) I .
OSD MUTIIT 295
SIWR~T:4'PfQFQR:P'J 5
Derived from Multiple Sources DECL ON: 16 NOV 2012
•
•
•
•
•
•
•
8BCRETf;<NOFOR"t
Guiding Principles
flUS acquires possession of Iraqi petroleum resources, we should provide for their security, repair, production and sale.
Transparently manage resources:
Not for ourselves but "in trust'' For Iraqi people as beneficiaries To meet needs of occupation, defray costs of administering Iraq, other appropriate purposes.
Iraqi petroleum resources belong to all the people of Iraq, i.e., the nation as a whole, not to any regional entity, so policies should be set at a national level and proceeds allocated equitably among the regions.
U'ie existing Iraqi personnel and organizations whenpossible .
Avoid unnecessary disruption to supply in the world oil market .
Counter disinformation that US objective is to control Iraq 's oil.
Be sure there is sufficient stability, transparency and responsible leadership in Iraq before US places these reso el 's hands iSECRE1W:PI8FEHUI Derived from Multiple Sources DECL ON: 16 NOV 2012 OSD MUTIIT 296
SECRETffNOFORN
Status of Work
• SD(P)'s Energy Infrastructure Planning Group (EIPG) leads.
- Established mid-October.
- Briefed Deputies on work plan 18 October 02.
- Received full complement ofdetailees (State, Energy, CIA, OUSD/AT&L) 1 Nov 02.
- Consults with panel of senior executives (retired) from US energy sector.
- Now in briefing cycle for Deputies-- preparing key issues for decisions.
• DoD Office of General Counsel.
- Participates in interagency lawyers' group analyzing legal issues -- what a military government can lawfully do in administering petroleum industry.
• Army Materiel Command contractor (Brown & Root Services) preparing contingency plans.
- Under direction of EIPG, in coordination with CENTCOM.
- Full range of scenarios.
- Must deliver completed plans not later than 11 Dec 02 covering contingencies for repair, 8ECRE'tWN'€fF61tN 7 Derived from Multiple Sources DECL ON: 16 NOV 2012 OSD MUTTIT 297
SECREl'ffNOFOR"J
Next Steps
• Contractor.
Must deliver completed plans not later than 11 Dec 02 covering contingencies for repair, safeguarding, maintaining continuity of production, sales and delivery.
• EIPG.
- Continue preparing key policy issues for Deputies.
By end November deliver 7 policy decision briefings to Deputies.
Brief SecDef on contingency plans immediately after 11 Dec 02 receipt from contractor.
11/16/0211:26 Prepared by Ener Infrastructure Planning Group
(b)(2)
SECRE'FHPI8F8RPI
Derived from Multiple Sources DECL ON: 16 NOV 2012 8 OSD MUTTIT 298
Home / US Department of Defense records / DOD-3d01eee8
US Department of Defense records
10-L-0234 Iraqi Energy Policy Records
- Date
- 18 October 2002
- Category
- US Department of Defense records
- Text available
- English
- Source
- US Department of Defense — FOIA reading room (Internet Archive)
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