Iraq Inquiry Shows Oil Was a Consideration for UK Before War

(Bloomberg) - The U.K. government held talks with Royal Dutch Shell Plc and BP Plc to ensure British energy companies were "well-placed to pick up contracts in the aftermath" of the invasion of Iraq, according to declassified documents released as part of an official inquiry.

Although the report, overseen by former civil servant John Chilcot, doesn’t explicitly say oil played a role in the war, documents published on Wednesday show British officials discussed how to obtain "substantial business for U.K. companies" in the energy sector.

The papers, including a letter from Jack Straw, then U.K. foreign secretary, to Prime Minister Tony Blair, are likely to reinforce the belief, held by some opponents of the 2003 war, that the conflict was partly driven by Iraq’s substantial oil reserves.

After the war, BP and Shell won big contracts to develop oil fields in the south of Iraq. That said, the awards were made in an auction and Chinese and Russian companies also made successful bids despite the opposition of their countries to the war.

In one of the declassified documents, a U.K. diplomat says the British government should "start preliminary work to ensure U.K. companies are well-placed to pick up contracts in the aftermath" of the war. The memo, dated February 2003, calls for a meeting with BP, Shell and other British companies.

"We would need to handle this carefully and ensure it was confidential to avoid charges of oil motivations," the declassified memo states.

In 2005, Straw sent a now declassified letter to Blair with the title "Iraq: Oil and Gas Strategy." In the memo, the foreign secretary said a key objective of the U.K. government was to increase the "involvement of the private sector, leading to sustained investment over the next 5 to 10 years" in the Iraqi energy sector and "substantial business for U.K. companies".

"Foreign investment is badly needed and we need to continue to support Iraq to create the right framework for investment, while also supporting UK companies," he wrote. "Iraq will need to engage with international oil companies to achieve rapid rehabilitation or significant new development."

The documents also show a gap between the efforts of British officials to win contracts and the companies’ conservative attitude. Shell and BP, according to the documents, told British officials they would only invest in the country once Iraq had a new constitution.

In one document, British officials said they heard criticism from Iraq oil officials that both U.K. companies were "less committed than many of their international competitors" about investing in Iraq.

BP and Shell declined to comment.

At the time of the invasion in March 2003, Iraq -- one of the founders of OPEC -- was pumping about 2.5 million barrels a day. Output briefly fell, but recovered to the same level a year later. Although many predicted a rapid increase, oil output only started to rise significantly from 2010 onward with the help of foreign companies.

According to the inquiry, BP told the U.K. government that Iraqi oil production could rise to 4 million barrels a day within five years of the invasion. In reality, it took 12 years to reach that level. Last month, Iraq pumped 4.3 million barrels a day, making it the second largest OPEC producer, after Saudi Arabia, according to Bloomberg data.

In another document, Matthew Rycroft, then private secretary on foreign affairs to Blair, wrote to the prime minister that "BP and others are fretting that they will lose out in the carve-up of contracts after any military action, as the U.K. did after the Gulf War" in 1990-91.


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Copyright 2016 Bloomberg News.

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