Where oil profits come from

There is probably no need to convince anyone today of the disproportionate - and more than shady - role played by the oil industry in society, and, more specifically, by its five largest operators, the so-called oil majors - namely Exxon-Mobil, BP-Amoco, Royal Dutch-Shell, Chevron-Texaco and Total. It is not for nothing that a growing section of the British public has come to endorse the idea that the real issue behind the wars against Iraq, both in 1991 and in 2003, but also behind other minor but no less bloody conflicts, such as the on-going civil war in Sudan, was oil and the greed of the oil companies.

The importance of the oil majors today is best illustrated by a few figures. In 2001, for instance, these five majors were all among the world's 13 largest non-banking companies, in terms of revenue, but they were more than three times as profitable as the other companies in this top league, with a total $44bn profit for that year. And yet, according to most commentators, 2001 was supposed to be a "bad year" for the oil industry due to the 11/09 terrorist attack!

The level of profitability of the oil majors is not just due to the vital role of petrol and other oil derivatives in the economy. In fact, the majors only derive a small proportion of their profits from making and selling such derivatives - around 15-20% according to most estimates. The other 80-85% comes directly from crude oil itself - from exploration, maintaining and operating oil fields, and trading crude oil. And yet, crude oil represents only around 20% of the majors' total revenue. This would indicate, therefore, that profit margins in the crude oil industry are around 16 times larger than in the oil derivatives industry!

Where does this huge imbalance in profitability come from? There is certainly an element of misreporting for tax evasion purposes on the part of the majors, even though they enjoy exceptionally favourable tax treatment in most industrialised countries. But the main reason is a matter of relationship of forces: the majors operate, and have been operating for nearly a century, as a cartel of thieves making a fat living out of controlling prices on the world oil market by holding to ransom the Third World countries which provide them with a huge supply of cheap oil and natural gas.

The existence of this cartel reflects the fact that the rivals see the advantage of avoiding the unwanted effects of all-out competition - such as, for instance, a possible sharp fall in oil prices. But this does not stop the thieves from waging an on-going turf war one against another. Many of the oil wars in Africa, in particular, have been fuelled by this turf war. At best this cartel only conceals the majors' rivalries and ambitions. In that sense, the closest thing to the oil cartel is the Chicago Mafia as portrayed in B-movies - a hornets' nest of rivals all aspiring to be godfather.

In order to enforce the dominant position of their cartel, the majors have relied on every weapon that their home industrialised country could provide - economic and diplomatic blackmail and, when this failed, covert or open military action. And the rich capitalist states have been all the more willing to oblige, even at the cost of waging politically damaging wars, because oil - and, more importantly, cheap oil - remains one of the few strategic raw materials which no imperialist country can afford to be short of, at least not without risking great disadvantage from an economic and military point of view. As a result, more than in any other industry, except weapons manufacturing itself, the interests and rivalries of the oil companies are intertwined with the interests and rivalries of their respective states.

Hence the extensive, complex ties between the oil majors and the political and military personnel of the main imperialist countries, as illustrated, for instance, by the Bush administration. But this is not specific to the US. Another illustration of these ties was Blair's unexpected appointment of the chief executive of BP, David Simon, as minister for trade and competitiveness in Europe, just one week after Labour's return to power, in 1997. Conversely, at the time, a former Commander in Chief of UK land forces sat on BP's board, together with a former head of the diplomatic services. And this is not to mention the host of former senior British officers who are involved in managing so-called "risk-protection" companies which provide the majors with private armies in Third-World countries.

This does not mean, however, that the oil industry is fundamentally different from any other industry, nor that its centralisation and cartelisation are new, or even recent features. In fact the oil industry's occasional operation as a cartel was already described by economists as early as 1905! As to being a "special case", today, there are many other industries which share strong similarities with oil - investment banking, mining, weapons manufacturing, heavy engineering, pharmaceuticals, electronics, food processing, among others. They all have some form of cartel organisations, which may operate differently from the oil majors and/or may be less visible, but are just as damaging for society as a whole.

Above all, ultimately, all these industries are operated by the same capital, if not the same capitalists. The biggest shareholders in the oil majors belong to the same world of ultra-rich dynasties, fund managers, bankers and insurance companies who control BAE in weapons manufacturing, Monsanto in food processing or GlaxoSmithKline in the pharmaceutical industry. The methods they use, when they wear their oil majors' cap, are just cruder. But they are first and foremost an integral part of today's exploitative system - capitalism.

Rockefeller's unbroken line

So what is the background of today's five majors? They all have one thing in common: their origin goes back, one way or another, to the period between the 1850s and the early 1920s. No significant international oil company has been formed since then, thereby reflecting the fact that, by the 1920s, the entire planet had already been shared out between the richest imperialist powers. As to the majors' present form, it is relatively new since, between the five of them, they have swallowed 12 other large companies which were still independent in 1998.

The two US majors - Exxon-Mobil, by far the largest, and the smaller Chevron-Texaco - are only the latest phase in the development of two industrial and banking empires built respectively by JD Rockefeller and the Mellon banking family in the 19th century.

While it is the Middle East, the cradle of Western civilisation, where much of the world's oil reserves are located, the cradle of the world's oil industry was actually Oil Creek, Titusville, Pennsylvania, in the relatively "uncivilised" USA of the mid-19th century. It was there that the first substantial oil wells began producing in 1859. And it was by refining this oil and selling its by-products to consumers that John D Rockefeller got his head start in the industry, founding Standard Oil in 1870 - which was really the forefather of all but two of the ten largest US oil corporations which existed by the beginning of the 20th century.

Rockefeller first bought up and built refineries in Cleveland on the East coast, based on a process which extracted more kerosene from crude than rival refineries, thus allowing him to undercut them. In fact Rockefeller left the oil drilling and pumping to the smaller fry in Titusville and then followed this same practice in later years, wherever oil was found, during the chaotic oil rushes of the latter 19th century. The oil operators could be relied upon to overproduce in the first period after a huge gusher was discovered, and then find themselves unable to sustain their operations as the price for crude fell, thus allowing Rockefeller or his like to buy them out at rock-bottom prices.

At first Rockefeller concentrated on monopolising the refining process in Pennsylvania and Cleveland and on getting the cheapest and most efficient means of transportation to bring the crude to his refineries and then take the kerosene (and later the gasoline) to the customers. He literally railroaded the railroad barons into giving his company special rebates for transporting his oil cheaper than his rivals. To this end he formed the South Improvement Company incorporating a few other refineries which did not dare challenge him, and three railroad companies. When these railroad companies, as part of the conspiracy, put up the rate for freight transport for anyone outside the new Company, those producers and refiners who had so far resisted Rockefeller's advances were under pressure to back down. This caused the so-called "Oil War of 1872", when the independent producers in Titusville and the other remaining refiners they formed themselves into an Independent Petroleum Producers Union, went on strike, and refused to sell oil to any of Rockefeller's known collaborators or to his company.

As a result, a congressional investigation was held, which ruled that the South Improvement Company had to be disbanded. But it did no harm to Rockefeller who came out of it with gains on the refining side having acquired new companies which went bust due to the price fixing, while it lasted. He may not have achieved absolute domination in the field of rail and road distribution, but it soon became evident that oil pipelines were a better way to get oil from A to B, anyway. So Standard built its very own network of pipelines converging on the East Coast.

By the 1880s Standard Oil had come to monopolise most aspects of the US oil industry. Since laws now forbade corporations from existing across state boundaries, Rockefeller's empire was divided into state-based companies which were allegedly independent, but whose shares were all held by an innocuous "not-for-profit" trust. Its total income was larger than that of most states. It was sufficiently rich to bribe many politicians or, in any case, to bargain with them from a strong position and its profits were large enough to avoid having to borrow from the banks in order to finance its investments.

In 1890, Rockefeller, appearing before a committee appointed to look into Standard Oil's affairs admitted that the company, which was then capitalised at $90m, controlled about 90% of US production. But, said he, Standard could not be called a monopoly because there were another 11 companies out there! Yes, sharing between them 10% of oil US production! That same year, Senator John Shermann's Anti-trust Act was passed, declaring "unlawful trusts and combinations in restraint of trade and production".

However, the aim of this Act was more to stem the public's distrust towards corporation sharks than to take real action. Rockefeller was, therefore, able to use existing legal loopholes to carry on as normal, and even to expand his monopoly. Since the state of New Jersey had introduced laws allowing companies to hold shares outside the state, Standard Oil of New Jersey now became a "holding company" carrying all the stocks of every other Rockefeller constituent company. And in fact Standard of New Jersey's capitalisation increased to $110m!

Everything's big in Texas

It is really only by chance that any other oil companies actually managed to emerge during the period of Rockefeller's rise. After Pennsylvania, the next big oil strike took place at Spindletop, in Texas. However, Rockefeller's agent who was sent to check out early rumours of oil there, reported back that Spindletop had no significant oil deposits.

But in fact it produced the biggest oil gusher ever seen so far. So Rockefeller's rivals for once struck lucky! There followed a Texas oil rush whose consequences were described as follows by one contemporary writer: "By the end of 1901 there were 440 wells dug into Big Hill and the mound was spouting oil so fast that much of it was wasted or destroyed in the frequent fires. And gas pressure, which boosted the oil to the derricks, was being released in one great puncture. The derricks on Spindletop were so close together that workmen laid planks from one wooden structure to the next so they could make a quick escape when an oil fire flared up. It wasn't until midsummer 1901 that a safety committee was organised to provide stiff fines for anyone lighting a match in the field, to insure proper drainage from the wells and to prohibit the building of a saloon within one thousand feet of any well."

The operators were clearly far more concerned about getting their oil dispatched and sold than the safety of their workmen, who were only good enough to be fined. Due to waste and greed, overproduction led these fields to run nearly dry in just 3 years - going from 100,000 barrels a day in 1901 to just 10,000 a day in 1904. But while oil was gushing at such a huge rate, the price of oil tumbled down and as a result, oil replaced coal as a more efficient, and now relatively cheap energy source. Railway locomotives were converted to oil, and soon American ships were running on oil.

It was out of this Texas oil rush that two new big players on the oil scene were to emerge - Guffey Oil, later to become Gulf Oil, and Texaco. In this, they were aided by Texas state anti-monopoly laws, which were deliberately formulated against Standard Oil. Guffey was one of the two prospectors responsible for the discovery of the Spindletop strike. He had then obtained financial backing from the Mellon banking family of Pittsburgh in order to start producing oil. However the Mellons showed their gratitude to Guffey by throwing him out in 1907, and renaming the company Gulf Oil. By this time it had subsidiaries in Venezuela, Mexico and the Netherlands and was already one of the industry's giants.

As for Texaco, it had been set up by Joe Cullinan, an ex-Standard Oil employee who initially had some secret help from Standard in starting his Texas Fuel Company. However he was later financed by the Lapham brothers who controlled the Leather Trust in New York, in partnership with Arnold Schlaet. Texas Company or Texaco was their new joint company, which proceeded to buy oil cheap at Spindletop and sell it on dearer to sugar planters along the Mississippi as well as to Standard Oil. Subsequently, the company went from strength to strength as new oil deposits were discovered in Texas one after another. So much so that it was also soon able to join the major's club.

The emergence of five US majors

It was only in 1911, after five years of legal procedures, that President Theodore Roosevelt finally got the courts to rule Standard Oil's 30-year old monopoly of the US oil industry to be "illegal". Of course, Roosevelt was by no means an anticapitalist, nor was he against monopolies. However the price fixing by Standard was pushing up fuel costs for all consumers, including the big US manufacturers. So in the end the interests of one larger group of capitalists came to prevail over the interests of the smaller group of oil capitalists around Rockefeller.

Standard Oil was ordered to divest itself of all its subsidiaries and it was broken up into its component parts. However, Rockefeller was still able to retain a 25% share in the now nominally dispersed Standard oil businesses. He proceeded to found the Chase Manhattan Bank, and moved into other commodity trading like copper and steel. He died in 1937 at the age of 98 years, leaving a fortune equivalent to over £2bn.

As to the remaining components of Standard Oil, three of them made it to the majors' club. The largest, Standard Oil of New jersey, now known as Exxon, remains the biggest oil company in the world. But at the time of the dissolution, it was more like a trading company which obtained its oil from the other subsidiaries. Now, as a separate entity it was cut off from many of the previous advantages it had enjoyed domestically and it was forced to embark on an aggressive push for cheaper oil resources in other parts of the world.

Standard Oil of New York, or Socony as it was known, also had no oil production of its own. It bought a controlling stake in a Texas producing company. In 1931 during the depression, it merged with the old Vacuum Oil Company which produced lubricants, thereby forming Socony-Vacuum, which was renamed Mobil in 1959. By that time Mobil had already joined the majors' club in which it remained until its merger with Exxon in 1998.

Standard Oil of California, or Socal was an actual producer of oil and in 1919 was providing 26% of the total US production. Later it was to become a main player in the Middle East, thereby joining the majors' club. In 1984, Socal absorbed Mellon's Gulf Oil and the merged company took the name Chevron, which merged with Texaco in the late 1990s.

By 1914, on the eve of WW1, there were, therefore, five US companies which dominated the US market - three of them sired by Rockefeller, one by the Mellons, plus the maverick Texaco.

As to the other offshoots of Rockefeller's empire, another two were to make it later to the majors' club when they were bought by BP: Standard Oil of Ohio (known as Marathon Oil) and Standard Oil of Indiana (Amoco).

...And the lesser majors

Shell's empire within the empire

The two British companies which built their own monopolies, Shell and BP, were never troubled by the kind of anti-trust laws which had been initiated against Rockefeller. On the contrary, Shell and BP's drives to build up their own monopolies were regarded as "serving the empire"! Of course, there was some logic to this as, unlike in the USA, there was no oil in Britain. Therefore the expansion of British oil companies could only expand Britain's economic sphere of influence.

In a way Shell fell into oil transportation rather naturally, since it had been a specialist shipping company which imported luxury goods from the Far East, deriving its name from shell boxes which it marketed, for some strange reason, in Brighton!

Having begun to ship coal from Japan, the turn to oil as a more efficient fuel obviously meant that Shell's owner, Marcus Samuel, would have to begin to transport oil. He needed a cheap source, however, and he became interested in the Russian oil fields which seemed richer than those in Pennsylvania, not to mention the fact that they were "on route" as it were. But the concession for Russia's Baku fields was owned by the Nobel brothers (the sons of the inventor of dynamite) with the backing of the French Rothschild bank. And, for the time being, the Nobel brothers and Standard Oil had already carved up the Asian market between themselves.

In the end, however, Samuel was able to negotiate a deal with the Russian Nobel-Rothschild syndicate. But, more importantly, he was able to gain another significant advantage over Standard Oil by using inside information from the British government over the required specifications for ships using the Suez canal - specifications which Standard's tankers did not comply with. As a result Shell was able to build a fleet of tankers which could use this canal, thereby cutting its own transport costs significantly compared with those of Standard Oil.

Standard responded by dropping its oil price to rock bottom (driving hundreds of smaller producers out of business), but Samuel's Shell was able to withstand this and turn down the offer Rockefeller then made to buy him out. In 1897 the Shell Transport and Trading Company was formed.

Shell also laid its hands on Texas oil. Samuel had been trying to convince the Royal Navy to convert its coal-burning warships to oil, but had to be able to guarantee a cheap and ample supply. He managed to strike a deal with Gulf Oil and soon Shell tankers were bringing oil from Texas to Europe - half of Gulf's production in fact.

When the oil from Spindletop suddenly dried up, however, Samuel could not fulfill his contracts and had to find another supply quickly. This was what forced him into a disadvantageous merger in 1906 with the one other European company which had managed to withstand Standard's price war - Royal Dutch. This company, headed by Henri Deterding, a bookkeeper by training just like Rockefeller, had very successfully been exploiting oil in the so-called Dutch East Indies (i.e. Indonesia). Royal Dutch, Shell Trading and Standard had locked horns on many occasions over the previous years, each hoping to get the better of the other two. Now Royal Dutch obtained a 60% share of the new merged Royal Dutch-Shell, leaving Samuel with 40% - and Deterding became managing director.

Under Deterding, the company made inroads into the US market itself. In fact he made use of Standard's relative weakness just after its monopoly had been dissolved in 1911. This was a period in which demand for petrol - the petroleum component which had previously been burnt off in the production of kerosene - as fuel for cars, was growing exponentially. Taking the British Isles alone, by 1909 the annual petrol consumption by cars was 40m gallons. By 1912, there were already one million cars on American roads. Deterding invaded the American market, apparently backed secretly by one of Rockefeller's rivals, the Pierpont-Morgan banking empire. He set up Shell retailers and in order to sustain Shell against the price war which Standard immediately launched, he managed to buy a highly productive oil field in California. In the next few years he purchased another in Oklahoma and one in Illinois. This is why Americans came to be as familiar with the Shell petrol station signs as we are familiar with Gulf, Esso etc.

Royal Dutch-Shell became and remains one of Exxon's main rivals in the world oil market. It is so self-conscious of its worldwide "empire" that, in 1967, its chairman, Sir David Barren, boasted: "we are so international that nothing can happen in any other part of the world without it affecting our interests".

BP, the leech of Persia

British Petroleum, or BP, was a different case from the start. By contrast with Shell and the US oil multinationals, BP's history was constantly shaped by British government intervention, starting with the decision by Royal Navy admirals to switch fleet fuel from coal to oil.

Much of the ground work in this regard had been done by Shell, for its own interests of course. But the British government's "intelligence" of the day considered Shell as unreliable because of the potential risk at the time that it could be taken over by Standard Oil. Subsequently its merger with Royal Dutch settled the matter, since Shell ceased to be a British-dominated company. In any case, when the navy allocated its first oil supply contract in 1904, it chose Burmah Oil, a company set up by a syndicate of Scotsmen, who had been producing oil in Burma for over a decade.

It was Burmah Oil which, encouraged by the British government, provided William Knox D'Arcy, an adventurer who had made his money in the Australian gold rush, with the capital needed to explore and then develop the oil fields discovered in Persia by a French geologist, in 1901. That same year D'Arcy got the Persian King to sign over to him a 186,000 square mile exclusive concession - about twice the size of Texas. D'Arcy paid £20,000 cash for it and gave the Persian ruler 20,000 one-pound shares and the promise of 16% of future profits. After 7 years of exploration, D'Arcy struck oil and, in 1909, Anglo Persian was formed to operate the new fields, with the financial backing of Burmah Oil.

Right from the word go, the new oil company, with its large contingents of Scottish engineers and Iranian workers relied on the special protection of the British government. It sent a contingent of Indian soldiers to guard the drillers. A 130-mile pipeline was laid to the port of Abadan in the Persian Gulf where a refinery was also built. In fact the company seemed to think it was its right to be awarded public funds as well, and in 1912 applied for a subsidy on the grounds that its market was threatened by Shell which it described as a "foreign" company.

However the government was to go one step further than that in 1914 - when Winston Churchill, later the most rabid opponent of nationalisation, as first Lord of the Admiralty, declared "we must become the owners or at any rate the controllers at the source of at least a proportion of the supply of natural oil which we require". The Admiralty injected £2m of new money into the company - thereby ensuring that the state held a 51% share of its capital - and an agreement was signed whereby the company would remain an independent British company, with every director a British subject. In addition, two of these directors would be appointed by the government and would have the right of veto on questions affecting Admiralty contracts, military or foreign policy. This secured the good price for oil for the navy which Churchill had always argued was his only reason for the purchase.

However, there was obviously more to Churchill's policy than just making savings for the navy. The Anglo-Persian Oil Company, which was to become BP in 1954, was intended to be one of the institutions of the British empire, one more vehicle for the expansion of its economic sphere of influence and looting of the planet by British capital.

Total's absolute parasitism

Total, the only oil major which is not part of the US-British sphere of influence, really joined the big boys' game very recently, in the late 1990s, when it was formed by the merger of two French companies - the French Petroleum Company (or CFP) and Elf - and the Belgium company Petrofinagaz.

Much like BP, these three constituent parts were direct products of the imperialist policies of French capital. CFP and Petrofinagaz originated in the 1920 San Remo Treaty - or rather one of its secret annexes whereby London and Paris shared out the spoils of Germany's economic sphere of influence in Central Europe and the Middle East. Belgium, a satellite country of France, won oil production rights in Romania, providing the basis for Petrofinagaz' ancestor. France got the 23.75% share of the Turkish Petroleum Company (later renamed the Iraqi Petroleum Company or IPC) which had been owned by Germany's Deutsche Bank. It was to hold this participation of IPC that the French Petroleum Company CFP was launched, in 1924.

However the then centre-left French government did not dare to confront the bosses' opposition to oil remaining under state control. As a result CFP emerged as a very strange animal. Indeed, since private investors were unwilling to take too much risk by investing in the new company, the French state provided 35% of the capital. On paper, the French government even enjoyed 40% of voting rights in any major decision. But in reality no French government ever used these rights nor did they ever appoint more than one or two representatives on CFP's board. In fact, until the late 1990s, the real driving force in CFP was its second largest shareholder - the French investment bank Paribas - although it never held more than 7% of the company's capital.

CFP did not confine itself to Iraqi oil for long, however. In the late 1930s, by playing on the rivalries between the Gulf emirates, it managed to break through the US-British monopoly over the region and set foot in Abu Dabhi, where it has remained one of two main oil companies ever since. Subsequently, despite its arms-length relationship with French governments, CFP benefited from every twist and turn of France's diplomacy: in the 1950s, it got a share of Iranian oil in return for Paris supporting the coup engineered by Washington and London to bring the Shah's dictatorship to power; in 1956, it won half of Algeria's oil production rights after the first commercial well started operation in the Sahara desert; in the late 1960s, it won a share of Nigeria's oil, albeit only a small one, thanks to France's undercover backing for the Biafran secession. But the list is, in fact, much longer.

However, there were limits to what French governments could do in order to boost CFP's profits. They could offer one of the world's most favourable tax regimes - so favourable that, for instance, CFP did not pay any tax at all for part of the 1960s and 70s. But no government could substitute itself for the CFP's failure to make long-term investments in technology and oil prospection, for instance. At least it could not be done openly without risking a political backlash among the French public. And without such long-term investment, there was no way CFP would ever be able to compete with the US and British majors. This is why, from 1945 onwards, French governments began to build a galaxy of specialised state-owned companies covering just about every field connected with oil and gas, which served as covert vehicles for the state's on-going subsidies to the oil industry. Eventually, in 1965, this galaxy was merged into one single state company which came to be known as Elf.

Once again, Elf was a rather strange animal. It was 100% state-owned, but various industrial and financial groups, including CFP, were invited to send representatives to its board. It operated entirely as a private capitalist company seeking to maximise profits rather than a state company striving to meet the country's energy needs. For instance, in the early 1970s, Elf launched large-scale ventures in the chemical and pharmaceutical industries. A decade later, its main pharmaceutical subsidiary, Sanofi, was to become one of the world's largest producers of up-market perfumes - a far cry from the stench of oil!

Meanwhile, however, Elf was expanding in oil and gas production. In particular, it was present in virtually every one of France's former African colonies, usually operating as a local oil and chemical monopoly which was duly imposed on the local government from Paris, through bribes, threats and sometimes force, by both left-wing and right-wing French governments.

When, eventually, in the early 1990s, the then French right-wing government, still under socialist president Mitterrand, decided to sell most of its shares in CFP and privatise Elf, the two companies were already interwoven through more than a hundred joint ventures which had allowed CFP to benefit from the public funds injected into Elf over the previous decades. Their merger, in 1999, merely amounted to formalising a long-standing state of affairs.

Carving up the Middle East

How did the world oil cartel formed by the rival majors come about? For the sake of simplicity, we will now refer to the majors using their most recent (and therefore better-known) names.

Up to 1910 or so, competition between the big oil companies was limited, if only because on world scale, the supply of oil was always significantly below potential demand. Of course, when new sources of oil were discovered, like in Mexico, Russia, Venezuela or Indonesia, the various players made feverish attempts to get their hands on the new oil fields in order to increase their ability to influence prices. But the international oil market was still too constrained by the difficulty of transporting oil over long distances for new oil finds to be of real commercial use outside a limited geographical zone. Therefore, there was plenty of space for new companies to develop, provided they did not try to encroach on the territories of others, unlike Shell and Standard Oil which insisted on doing so, in their on-going fight.

However, World War I changed this state of affairs. The war had shown the military importance of oil, with the far greater role played by the navy at sea and motorised units on land, so that the imperialist states now considered it of vital importance to secure reliable oil supplies. The war industry had resulted in the vast expansion of heavy industries in the rich countries, which required vast amounts of cheap energy. Postwar reconstruction could be expected to require even more of this cheap energy if profits were to be rebuilt. The huge development of commercial shipping during the war was bound to result in considerably increased facility in sea transport. Last, but not least, since the postwar settlement was really about redefining the way the world was shared out between the victorious imperialist powers, it was bound to redefine the sharing out of the oil resources and markets between the main players. These were the conditions which paved the way for the emergence of the oil majors' international cartel.

This process began with the 1920 San Remo Treaty, which was officially meant to seal the fate of the defunct Ottoman Empire. The large section of the Middle East which had been formerly occupied by the Empire was divided up into two spheres of influence - a French zone including today's Syria and Lebanon and a British zone including today's Iraq, Egypt, Jordan, Israel and Palestine. A secret annexe to this Treaty provided for the future of the Iraqi Petroleum Company, an oil company set up jointly by Britain and Germany before the war in order to tap Iraq's future oil resources, which were expected to be huge. This annexe offered France part of the former German share in the company in return for the right to build pipelines leading to the Mediterranean, across the French-controlled Syria and Lebanon.

However, the subsequent negotiations were complicated by the fact that the US leaders were not very pleased at the Anglo-French self-proclaimed monopoly over the Middle East. Exxon was quick to tap Washington's mood by organising a collective bid by seven US companies for exploration rights in Iraq. London, which was leading the game, felt it would be wiser not to object, especially after the US State Department had given a few lectures to the Foreign Office about the need for everyone to adopt an "open door" policy - i.e. a welcoming policy for foreign investors. But rather than having free riders operating in Iraq outside any control, London preferred to offer the US bidders a share in IPC itself, thereby ensuring that IPC's monopoly over Iraqi oil remained intact. In the end, the final agreement made in 1924 provided that BP, Shell, Total and the US bidding consortium - soon reduced to only Exxon and Mobil - would receive 23.75% each of IPC's shares and, therefore, of its oil.

This settlement was to be complemented four years later, in 1928, by another important agreement - known as the "Red Line agreement". Once again this was a sharing out agreement involving the same participants (the five largest shareholders in IPC - BP, Shell, Exxon, Mobil, CFP). However, this time the cake to share was not just IPC but the entire former territory of the Ottoman Empire, since the agreement provided that any new oil find in this region in which one of the five participants was involved, would have to be shared with the others in proportion to the shares they held in IPC. This not only tied the fate of these five companies together, but was also an incentive for all of them to keep competitors out of the region - something which, in passing, flew in the face of the "open door" policy advocated by Exxon and Mobil to gain their admission in IPC. There was also a large amount of hypocrisy on the part of British companies, and particularly BP, since a number of Gulf States, such as Kuwait for instance, were tied to Britain by treaties which prevented them from allowing any non-British company to handle their oil.

By the mid-1930s the real impact of this agreement was somewhat reduced when Chevron won the Foreign Office's approval to run a concession in Bahrein, but even more so when Chevron and Texaco formed Aramco, with exclusive exploration and production rights over the whole of Saudi Arabia. And this time no-one had bothered to get London's agreement. However, it took another two decades for US diplomacy and the US majors to finally get rid of what remained of Britain's domination over the region's oil. This was done in two stages. First, in 1946, by effectively imposing on Britain and France the termination of the "Red Line agreement". After which, Exxon, Mobil, Chevron and Texaco launched an all-out offensive in the Gulf to win new concessions in areas which were previously BP's backyard. Finally, in 1954, when the Iranian Oil Corporation was reorganised, following Mossadeq's nationalisation of BP's assets in Iran and the CIA-backed military coup which overthrew Mossadeq, the five US majors (the four previously mentioned plus Gulf Oil) were invited to take a share of Iran's oil, together with BP, Shell and Total.

So now the pendulum had swung the other way and the US had replaced Britain as the biggest oil power in the Middle East. But the same oil companies which had plundered the region since the beginning of the 20th century remained in control.

The making of an international cartel

Having established itself as a de facto monopoly in the Middle East, in the 1920s, thanks to the British troops which were repressing the population there, the oil cartel proceeded to strengthen its grip on the world market. In 1928, the year of the "Red Line agreement", the then majors signed a series of agreements, which formalised a set of rules governing the international oil market according to their wishes.

First, Exxon and Shell agreed to divide international oil transport between themselves. Then came the so-called "Achnacarry agreement", from the name of the Scottish mansion in which it was discussed by Exxon, Shell and BP. This agreement provided for uniform selling prices for oil, which were to be independent of where it had been produced. The price formula used went as follows: the selling price of a barrel of oil in London would be calculated, regardless of its origin, as the sum of the selling price of the same US-produced barrel when bought in the Gulf of Mexico, and the cost of transporting this oil from there to London. The primary purpose of this extraordinary formula was to ensure that US oil - whose production costs were about three times higher than in Iran or Iraq - would be competitive, while the oil produced in the poor countries would generate huge super-profits thanks to much lower production costs. Consumers would foot the bill of preventing a return to the past price wars between the majors. As to the poor oil-producing countries, they would get nothing out of the majors' super-profits.

Not only did the "Achnacarry agreement" fix prices for all crude oil and oil derivatives sold outside the US, but it also allocated production quotas and specific markets to each participant while defining precise rules concerning the registration and use of technical patents dealing with the processing of oil. After its first introduction, in 1928, this agreement became a framework for all subsequent agreements between the majors themselves or with new participants they chose to invite into their club.

It is worth mentioning that the restrictive practices included in the "Achnacarry agreement" were not the only ones used by the oil cartel. Another of these practices was the very controversial use of so-called "dry wells". These wells were deliberately drilled by companies in such a way as to avoid striking any oil, so as to be able to claim that they were "actively" searching for oil in a designated area while making sure that none was found. This practice, which was particularly used in Iraq and Venezuela, often resulted in devastation for poor farmers whose land was ripped apart, for the sole purpose of retaining exclusive rights on a concession, keeping a rival company away and/or avoiding an increase in oil production which might have resulted in lower oil prices.

In fact the cartel's restrictive agreements went even beyond the oil industry itself. Also in 1928, for instance, Exxon, BP and Shell signed an agreement with the German chemical monopoly IG Farben. This provided that the majors would not get involved directly or indirectly in coal-based chemical operations (in particular, in the liquefaction of coal, which produces some derivatives similar to those produced by processing crude oil) while IG Farben would not get involved in oil-based chemical operations. Remarkably, 75 years later, the three big companies which came out of the splitting up of IG Farben in retribution for its close association with Hitler's regime - i.e. Bayer, BASF and Hoechst-Clariant - still stick to the agreement passed with the oil cartel in 1928 and so does the oil cartel.

To all intents and purposes, for the following four decades, the oil cartel's framework remained in place, with more or less the same structures and rules which had been adopted in 1928. By 1952, US Secretary of State Dean Acheson had to admit that any independent company trying to compete with the cartel was"either crushed or integrated into the cartel in return for a small market share confined to a restricted zone." The following year, a US government statement, part of an anti-trust law suit against the oil industry, said: "It appears that the uninterrupted extension and continuance of the basic cartel agreements has resulted in a world-wide pattern in which seven of the major oil companies - (1) control all major oil producing areas outside the US; (2) control all foreign refining operations; (3) control patents, know-how and technology covering the refining processes; (4) effectively divide world markets; (5) maintain non-competitive world prices for oil and its products; and (6) control foreign pipeline and world tanker transportation facilities."

This was the heyday of the "seven sisters", as the majors were called. And it was only with the re-emergence of the world economic crisis, and particularly the currency crisis of the early 1970s, that the majors were forced to invent some new methods to maintain their profits.

The oil cartel and the 1970s "upheaval"

The 1970s provided the most spectacular example of the oil cartel's ability to reshape the oil market according to its needs, as well as the most cynical exercise of hypocrisy on the part of Western politicians.

Let us recall the facts. In 1971, Algeria nationalised 51% of all French oil and natural gas concessions on its territory, followed, the next year, by Libya. This was the starting point of a wave of nationalisations which spread across most Third World oil-producing countries and lasted until 1980, when Saudi Arabia itself, the pillar of the power of the US majors, completed its 100% nationalisation of Aramco. Meanwhile, in 1973-74, oil prices increased by 368% over just 12 months. The Western media launched an all-out attack against OPEC, the organisation of oil producing countries, accusing them of taking the West hostage in order to impose their rule.

This was a red herring of course. OPEC, which had been set up in 1960 by Saudi Arabia, Iran, Iraq, Kuwait and Venezuela, was certainly never an anti-imperialist organisation. Not was it a war machine against the looting of the oil majors. At best, it was an attempt by some of the most pro-western regimes in the Third World to establish a gentlemanly partnership with the oil cartel.

However, the world currency crisis, and particularly the depreciation of the dollar fuelled by the US ballooning debt, was hitting oil-producing countries hard, since the royalties they earned were pegged to the dollar. And by 1971, after the dollar was devalued for the first time since WWII, the purchasing power of a barrel of oil was down to 60% of what it had been in 1948. The oil producing countries had every reason, therefore, to seek an increase in oil prices to regain the ground lost.

However, the real masters of the game were not these countries. US administration memos dating from 1971, but whose content was only revealed five years later, showed that US leaders were actively encouraging their partners in OPEC to increase oil prices. As early as January 1971, a conference between OPEC members and 22 western oil companies had been convened under US auspices in the Iranian capital, Tehran, to discuss the possibility of an agreed oil price increase. Not only had an increase been agreed but the tax rate on crude oil profits had been raised to 55%. The following year, another conference was held resulting in another price increase.

By 1973, a report published by the White House's policy committee on international economics, argued that higher oil prices would be counterbalanced in the industrialised countries, particularly the USA, by demand for more imports by oil producing countries. James Atkins, the US ambassador in Saudi Arabia, provided an additional argument - namely, that since Europe and Japan would suffer more than the US from increased oil prices, they would bring the US economy a competitive advantage. And in September that year, at a major seminar on currency issues organised by the Federal Research Institute, representatives of the oil majors argued in favour of increased oil prices so as to increase the profitability of oil produced in the rich countries and offshore.

So there was clearly a consensus among the oil majors and US governmental circles in favour of an oil price increase. Quite apart from the currency crisis, there was a rationale for the majors to be pushing oil prices up. Indeed as long as they relied mostly on oil coming from OPEC countries, where production costs were very cheap, low oil prices did not affect the majors' profits. But there were massive oil resources to be tapped, in the North Sea, Alaska, the Gulf of Mexico, etc.., all involving huge investment and high production costs, which could only become profitable provided oil prices went up significantly, far higher than the framework of the 1928 Achnacarry agreement allowed.

The fact that the majors did anticipate the rise of oil prices and prepared themselves to make the most of it, was shown by the large investment they made in the early 1970s in sources of energy which, so far, had been more expensive (and therefore less profitable) than Third World oil - such as coal, bituminous schists and nuclear fuel. This way the majors were able to hedge their positions, in case the higher oil prices resulted in a larger than expected reduction in oil consumption. But only companies which knew for certain that oil prices were about to rise sharply would have made such investments.

As to the US authorities, who were confronted with the dollar's severe disorder, an increased oil price meant that the rest of the world had to buy a proportionally larger amount of dollars, thereby relieving the US Treasury of a significant pile of depreciated currency - which was a convenient way to force the rest of the world to share a larger part of US inflation.

Much the same can be said about the nationalisations of Western oil concessions. The mere fact that regimes as subservient to imperialism in general, and to the oil companies in particular, as the Shah's regime in Iran, or the ruling monarchies of Saudi Arabia and Kuwait, had followed the example of Algeria, showed that the oil majors saw advantages in these nationalisations. Indeed, in most of these countries, the oil companies traded their share of the national oil companies against comfortable compensation in cash and long-term contracts which guaranteed them a large, regular flow of cheap oil, shielded from the ups and downs of world prices.

More importantly, these nationalisations allowed the majors to get the states of the oil producing countries to share the cost of the investment required for oil production as well as the cost of the fluctuations of the oil market. In addition, because they had a monopoly on the technology and industrial resources required, the majors were able to get these states to pay them for providing services such as carrying out exploration, developing new fields and even managing them. Not only did the brunt of the investment costs fall on the producing countries' states, but the majors managed to get paid for producing the oil they were going to buy on the cheap as a result of the long-term contracts they had with these countries. This cut even further the real price paid by the majors for OPEC oil and did nothing to reduce the dependance of the oil producing countries on the West.

Under the majors' thumbs

On paper the oil price increase of the early 1970s and the one that followed in the late 1970s, could have raised the standard of living of the populations of the oil producing countries. And to some extent it did. But, at best, it only benefited a tiny elite, for a limited period of time and at a very high cost for the population as a whole.

For a limited period because the high oil prices of the 1970s were short-lived. In fact today, the level of official oil prices is, in real terms, less than half what it was in 1974 - and these prices are higher than the actual prices that the majors pay as part of their long-term supply contracts!

Of course, there is the case of the artificial statelets which have been built around oil fields, such as the Gulf emirates or the Sultanate of Brunei, on the Northern coast of Borneo island. In these statelets, a tiny minority of nationals enjoys a comfortable life thanks to the oil revenue, while virtually all the productive tasks are carried out by a much larger low-paid immigrant workforce which has no rights whatsoever. But immigrant or not, these despised workers are an integral part of the population of these artificial states. In fact without their labour, everything, including oil production, would grind to a halt. But these workers have gained nothing out of the years of relative affluence, simply because the reactionary regimes of these countries, which come straight out of the Middle Ages, are a necessity for the oil profits to keep flowing towards the headquarters of the oil majors. The more blatant the social inequalities, the more repressive the regimes have to be, in order to contain the majority of enslaved workers.

In the larger oil producing countries such as Saudi Arabia, Iran, Iraq, Nigeria or Angola, corrupt dictatorships have been nurtured by the imperialist powers in order to protect western assets against their own populations - in fact, not only nurtured, but armed to the hilt, both to provide them with the means to crush any mass protest among the poor and to fill the coffers of western arms manufacturers. While the ruling elite was investing their stolen loot in London or New York, the states of these countries got increasingly into debt in order to finance their huge payments to the oil majors, the military expenditure that they were required to make and the countless prestige and luxury projects which, according to the IMF, were supposed to be the key to attracting foreign capital.

As a result, today, even a country like Saudi Arabia is, despite its colossal underground wealth, one of the world's most indebted countries. As a result also, despair is growing in the ranks of these countries' populations, including among the youth from what used to be relatively privileged social layers. In these oil-rich societies, the poor were always deprived of any rights. But today, the corruption of the ruling circles by imperialism and the growing social inequalities leaves less and less space for the petty-bourgeoisie - whether in economic terms or in political terms. In the absence of a powerful working class movement which could take the lead of all the discontented, a section of this disgruntled petty-bourgeoisie has turned to Islamic fundamentalism. It is not a coincidence if most of the fundamentalist figure heads come from the educated intelligentsia, whether in Saudi Arabia, Algeria or Indonesia.

Far from being a factor of progress for the populations of the poor oil-producing countries, oil has turned into a calamity due to the stranglehold of the oil cartel.

Africa's blood for oil

But the oil majors' grip on the world takes on an even more ugly face in the poorest of the oil producing countries. Africa has been the worst hit of all, primarily because most of its territory has been under direct or indirect Western colonial domination in the past.

There, blood for oil is the name of the majors' game - and African people, in particular, have paid a high price for the discovery of such wealth on their continent. They have died or been maimed and starved for it, yet they have remained poor or become even poorer. More often than not the fabric of society has been destroyed around them and their world has been turned into a bloody nightmare, dominated by ethnic conflict!

Over the last decade the US has increased its imports of African oil in line with its policy to decrease its dependency on Middle Eastern oil. Today it gets 15% of its oil from Nigeria, and the majors, which all deal in oil for the US, are following the same kind of policy. It is not that Africa is more stable for oil investment than the Middle East. Africa is even less stable. But the wars and insurgency which have characterised the years after the end of the Cold War in particular, are not the kind of wars that bother the majors or their home states one iota. They can work round the dead bodies. And that is precisely what they do. In Africa, life is still "cheap".

The first African war for oil was in Nigeria. One million people died in the Biafran war between 1967-69. In just 18 months. That is how long it took to starve so many among the besieged population of the Niger Delta to death. And this is on top of the tens of thousands who were killed in the bombing and fighting. This war, for the secession of the oil-rich Niger Delta (or Biafra) from the Nigerian federation was precipitated by the denial of the Biafran demand for a share of oil royalties paid by Shell/BP (in a joint venture) to the Federal government. However the oil companies (British and French at this stage, as the Americans were only just beginning to show an interest in African oil) were only concerned that their oil exploitation would be undisturbed. The British felt that stability was better ensured by the federal Nigerian state and backed it against the Biafran nationalists. While the French, whose state company Elf was in direct competition with Shell/BP, backed the Biafrans behind the scenes. The outcome was a humanitarian catastrophe and a defeat for the Delta peoples who up until today are still fighting to gain some kind of tangible benefit from all the billions made by the majors at their expense.

Of course these days it pays to look as if you care and even the mighty oil majors are not exempt from keeping up appearances, at least in those countries where there are enough NGOs and UN officials having to earn their keep... So for instance, Shell in Nigeria has undertaken to show how its attitude towards local communities and "human rights issues" has changed. The company has had to refurbish its image since 1995, at least in Nigeria, after the execution by the Nigerian regime of Ken Saro-Wiwa. He and eight of his fellow Ogoni activists were hanged for their role in organising widespread and effective protests against Shell's destructive exploitation of oil from the Niger Delta in general and the Ogoni homeland in particular, 25 years after Biafra, while giving absolutely nothing back to the local peoples.

General Abacha, the then dictator, put on a show trial and dispatched these brave men to the gallows, ignoring all international appeals for clemency. This was doubly obscene since Abacha portrayed himself as standing up to the imperialists by going ahead with the executions, while in fact he was sending a message to the imperialist oil companies that the Nigerian government intended to make the country a safe place for them to exploit, by acting decisively against anyone who dared to protest against foreign oil exploitation.

Needless to say the refurbishment of Shell's image has largely consisted of reviews, reports, seminars and many resolutions. In 1997, it formally committed itself to "give proper regard to health, safety, and the environment consistent with a commitment to contribute to sustainable development." In 1998, Shell published a report entitled "Profits and principles - does there have to be a choice?" which was renamed "People, planet and profits", describing how it is trying to live up to its responsibilities. No doubt the report was renamed because there obviously does have to be a choice, judging by Shell's own performance. In any case, an outside consultancy found that less than one third of 408 projects funded by Shell's $52m spending on "community development" in the Niger Delta in 2001, were "successful". Human Rights Watch in Nigeria says that although Shell has apparently made efforts to improve its impact on the local communities, "for the villager living near Shell's facilities in the Niger Delta little if anything has changed; too often, oil spills still destroy farming land and fishing grounds and remediation is poor; state security forces deployed to Shell's facilities continue to harass people indiscriminately ; and the benefits of the oil industry are still channelled to a small elite."

The test of these companies is surely how they are received by the local people whose land, river and sea they occupy with their drills, rigs and terminals. And one month into 2004, a report from "This Day" newspaper based in Lagos is unfortunately typical of today's general situation throughout the Delta. It speaks of 7 people having been killed in the oil town of Warri, Delta State, in what is said by the army to be an inter-ethnic skirmish. However they also mention that it appeared to have been started by the same youths who kidnapped 18 Chevron-Texaco workers earlier that month. In fact, Warri has been a focus for warfare between the Nigerian army and the local communities for the past year and longer. Last September Total, Shell and Chevron Texaco went so far as to shut their production facilities in the Western Delta. Chevron-Texaco has regular occupations, invasions and kidnapping to contend with. All the companies face sabotage - from the blowing up of pipelines to setting fire to storage tanks.

While all the different minority groups in the Delta demand the same thing - a share of the wealth being pumped out of their land, river and sea - no-one seems to be seeing any of the benefits of the money which the companies have allocated to so-called "local community development". It has set one community against another, and all communities against the repressive forces sent from the central government. Every week local people are being killed and injured as a result, not to mention the constant attacks on oil operations and personnel. This only shows the increasing frustration of local people who have to contend with 18 (!) international oil companies literally destroying their front yards, while making billions in total profits and throwing only a few crumbs in "aid" back to the communities - paltry sums which are usually diverted through local corruption to the pockets of politicians, police chiefs or other officials.

Sudan - a 20-year war fuelled by oil

The bloody scorched earth warfare in the Southern Sudan aimed at clearing mainly the Nuer and Dinka peoples off their land - which has been sold as people-free oil concession to various big and smaller players in the oil industry - has killed an estimated two million people since 1983, the year Chevron began prospecting for oil fields in the south-west. Four million people have, over this same 20-year period of war for oil, been displaced from their homelands and suffered consequent recurring famine and epidemics.

The Southern peoples have had many years to build their own armies and militias for protection and over time these have developed their own factional differences, or even at times been bribed or conned into turning against their own side by the government in Khartoum. There have been many attempts at peace agreements. The latest, last August will not work any more than any of the others. How can it, when so much blood has been shed and so much injustice has been done, yet no restitution or real change is offered? And how can it when the only objective of the peace is to get the oil and its profits flowing outward, to the benefit of the Sudanese elite and oil companies, but not the poor population, north or south.

Today, now that oil has been successfully produced since 1999 and there is a pipeline all the way to the Red Sea, the big international players have become interested. Up until recently Sudanese oil was being exploited by lesser oil companies such as a Canadian company, Talisman, the Malaysian Petronas and Lundin Oil of Sweden. Partly under the pressure of human rights groups, but certainly mostly due to the worries they had due to the political situation in Sudan, Talisman has withdrawn, selling its stake to the Indian state company Videsh and Lundin has sold out to Malaysia's Petronas. The China National Petroleum Company (CNPC) - in which BP holds $578 worth of shares - is now the biggest player in the joint operating company known as the Greater Nile Petroleum Operating Company - with 40% of its capital. In fact, China is and has been a major military supplier to the Khartoum regime, takes on most of its construction projects in the oil regions, sending, according to Amnesty International, "armed workers, ready to use their weapons against civilians".

The August 2003 peace talks between the government and the southern rebel forces, the SPLM/A, stipulated that self-determination for the southern peoples would only be considered six years after peace was established. And since peace is hardly possible given the oil companies' and government plans for the region, this just gives an opportunity to foment more divisions in those opposed to the government and thus weaken their resistance.

The one question now is whether Total, which owns the largest concession (20,000 square kilometres) will be able to produce oil, given the presence of insurgents and the inherent instability of this particular area. But oil revenues from Sudan are expected to continue to grow anyway, allowing the government to buy lots of new helicopter gun ships and rocket launchers and even jet bombers. In 2001 it spent $1m per day on its war - in a country where 3.1m people rely on food aid against starvation!

Chad - Making billions out of destitution

The horror story of the oil majors' African ventures has lots more chapters - the wars in Gabon and Congo for instance. Or the war in Angola, in which the French company Elf armed both sides of the conflict in order to have every chance of being on the winning side. We will briefly tell only one more and it is probably the most absurd of all.

Chad is part of France's backyard in Africa. Since independence, in 1960, it has experienced a virtually continuous civil war including three military interventions by the French army and three military coups backed by France, in which Paris' determination to retain control of the country's southern untapped oil reserves was the prime motive. After these four decades of dictatorship and war, Chad's population is, not surprisingly, among the poorest in the world.

Having gained the "great benefit" of Exxon-Mobil's investment, Chad started exporting oil to the United States last July. At the same time Chad is not able to produce electricity for its population. Only 2% of the 8m people who live in Chad have irregular access to electricity from an ancient run-down power station in the capital city N'Djamena, carefully nurtured by a group of engineers which keep it going against all odds. But even if they get it to work a few hours a day, very few people can afford it anyway. Chad has to import fuel to run this single power station from Nigeria or Cameroon, even though it has its own oil. An oil field north of Lake Chad, which is too small to interest Exxon, would be ideal to provide for domestic use. However a pipeline which was build by a Sudanese contractor was so badly made that it is unuseable. So the government lost the money, has to rebuild it, but cannot afford to do so.

Exxon-Mobil, on the other hand, has built a brand new power station which can generate more than five times the total capacity of the N'Djamena station, just 50km from Doba, the capital of the southern oil-producing region, whose own power station went down completely some years ago. But Exxon says that its power station is for pumping oil, not providing electricity for the population! But neither, it seems, is Exxon prepared to provide cheap oil for the people it is robbing of this wealth!

The World Bank has generously identified the electricity crisis as one of the major development issues facing Chad and authorised a $55m loan for renovating equipment for the existing power station! The new oil revenues have already been allocated to health, roads, education and rural development. That is, if Chad proves an exception to other African countries where the ruling elites tend to cream off the oil revenues for their exclusive use.

The oil cartel and the Gulf wars

The three wars which took place in the Gulf, since 1980 - from the Iran-Iraq war encouraged by the West to the two wars launched against Iraq under the auspices of Bush father and son - provide another example of the criminal role played by the oil cartel.

Not that oil was necessarily the main stake in these wars, however. It was undoubtedly an important factor for the imperialist leaders - since, according to most estimates, the Middle East is thought to hold the world's largest reserves. But it was not the only important factor behind these wars, and in some respects some at least, probably not the main one. Indeed, politically, the Middle East occupies a strategic position, at the crossroads between Russia, Western Europe, Africa and Western Asia. As such it is potentially a factor of political instability - and, therefore disruptive to the process of imperialist looting. Economically, quite apart from its natural resources, the region is a huge potential market for Western companies. Overall, it is far less poor than most Third World regions, even against the backdrop of today's depleted oil prices and high indebtedness. After all, the total income of the 160m inhabitants of the combined populations of the Gulf countries, Syria and Iran is higher than that of the over 1bn population of India!

Nevertheless, the interests of the oil majors did play a role in these wars. The Iran-Iraq war provided a bounty for them. By reducing production artificially, it kept world oil prices at a high level for the best of eight years, while forcing Iraq to sell its oil at bargain-basement prices via Kuwait. Then came Saddam's attempt at saving Iraq from financial bankruptcy by invading Kuwait, its biggest creditor. The oil majors were certainly not pleased at Kuwait's large oil exports being suddenly disrupted, but this was not a major blow for them: the oil facilities themselves were not theirs - most belonged to the Kuwaiti national companies - and a recession was looming in the US and Europe, thereby reducing industrial demand for oil. However, Saddam's gesture threatened to set a precedent among the many dictators armed by imperialism throughout the world. So the imperialist leaders decided to make an example, to demonstrate to the Third World's strong men as well the poor populations of the Third World, that no-one would ever be allowed to interfere with the interests of western companies.

At the end of this war, the Western leaders showed that the last thing they wanted was Saddam Hussein to be overthrown by a popular uprising. This was a political choice, reflecting the fact that the imperialist leaders want to choose themselves who runs the countries they oppress. But it was also a choice which coincided with the interests of the oil majors - only a dictatorship could protect the smooth flow of oil profits against the aspirations of the Iraqi population.

Until the mid-1990s, Iraq's reduced oil exports, as a result of the sanctions, were not too much a problem for the oil cartel. In fact, Saudi Arabia, which was up to its neck in debt, was more than willing to make up for the shortage and even to sell its oil cheaply. But from the mid-1990s, the cartel's situation became more difficult: Russian oil exports had collapsed with the authority of the central government, African oil supplies were proving unreliable and the demand for oil was growing rapidly again. At this point, France and Russia began to distance themselves from the US-British-sponsored bombings and sanctions against Iraq, while their oil companies were rewarded with potentially lucrative prospective contracts from Saddam. The same was happening in Iran and Libya, which were also the targets of US sanctions - although these were not so drastic as those against Iraq. The US majors started to become restless. In Washington, the oil lobby went into top gear in order to pressurise the Clinton administration into easing its sanction regime with regards to US companies. It even made some headway, as was shown by the discreet negotiations launched with Libya, in 1999, under the auspices of the State Department, in order to explore how the US oil majors could resume their past activity in the country. It was clear that, as far as the oil cartel was concerned, it was high time for business to resume with Iraq, Iran and Libya.

However, Bush's narrow victory and his use of 11/09 as a lever to revamp his political standing, brought these tentative moves to an end. According to most oil industry commentators, the US majors were less than lukewarm about Bush's warmongering against Iraq. True, there was the bait of the postwar contracts and a possible free-for-all allowing them to take over control of Iraq's oil. However, the fear that this war might destabilise the country and, possibly, the Gulf as a whole, thereby disrupting a large part of their oil supply, seemed to dominate among the US majors. Of course, once the war had started, their reluctance was soon forgotten and they proceeded to make the best of the situation. They got their French and Russian (and in fact British into the bargain) rivals excluded from the sharing of the future oil bonanza and the occupation authority began to talk about privatising oil one way or another.

However, events did not turn out as planned. The country began to grow restless, with recurring demonstrations. Paul Bremmer, Bush's envoy, felt he had no option to shelve the oil privatisation hot potato. But then the situation went from bad to nasty, with a growing wave of terrorism against the occupation forces. This time, Bremmer had to cancel his privatisation plans for every part of the Iraqi economy. Worse, today, nearly a year after the beginning of the war, Iraqi oil exports remain almost at a standstill, due to regular attacks on production facilities and pipelines and there is no sign that the situation will get any better in the foreseeable future.

So now, the oil cartel can only wait and hope that the Iraqi explosion will eventually be contained and, above all, that it will not spread to the rest of the Gulf. From this point of view, they have reason to be worried. There is, for instance, the vocal agitation in favour of a Greater Bahrein emirate among the Shiite minority of Saudi Arabia, which happens to dominate the new huge gas fields which are being developed in the north-eastern part of the country. If a secession took place, the development of these new gas fields could be called into question.

This being said, regardless of the worries of the US oil majors, the odds are that the Bush administration had two objectives in mind concerning oil, among its other war aims: first, that the pro-western regime it was planning to put in power in Baghdad would turn Iraq into a strategic counter-weight to Saudi Arabia in defining oil policies in the Gulf and in OPEC; and second, that the privatisation of Iraqi oil would be used to set in motion a process aimed at reversing the nationalisations of the 1970s in the OPEC countries, so as to give back to the oil cartel the direct control over production levels that it used to have.

The first of these objectives is clearly stalled for the time being. As to the second, which is also on standby as long as Iraqi oil is paralysed, it may well come up against the resistance of the oil majors themselves anyway. The problem for the majors is that they want to have their cake and eat it - in other words, they would like, instead of acting merely as subcontractors, to return to the concession ownership they enjoyed before the 1970s, or at least to lucrative production-sharing agreements in partnership with the national oil companies. But they would also like the states of the producing countries to fork out for the bulk of the required investment, especially in politically unstable areas such as Iraq or even Saudi Arabia. This is why, for instance, the first production deal offered by Saudi Arabia to western companies since the nationalisation of Aramco - a joint venture in a huge natural gas development worth $35bn - collapsed last June when the majors demanded an extortionate price in return for their technology. As a result this deal has now been replaced with a much smaller one, worth just $2bn, with only Total and Shell, while the US majors have all withdrawn.

By way of conclusion, even seen as a war for oil, Bush's war against Iraq can only be described as a failure - for the time being in any case - regardless of the fact that tens of thousands of people have paid with their lives and a whole country with its infrastructure for this attempt at tightening the grip of the oil cartel over the Middle East.

A paradigm for capitalism

In the poor countries, the oil cartel is a factor of social and economic regression. But even in the rich countries, the oil cartel is, if not a factor of regression, at least a constant hazard and a factor of technological stagnation.

It is a constant hazard, because of the environmental damage which it causes across the planet. The majors may be more cautious about how much they spill on the coast of Europe than in the Niger Delta. But, as was shown by last year's spillage from the Prestige tanker off the Spanish and French coasts, no-one is protected. And there is no such thing as a "clean" company when maximising profits is the name of the game. After all, last November, BP had no qualms about getting into bed with the Alpha group, the shady Russian operator which was behind the Prestige, in a joint venture to buy the Russian oil giant TNK.

The oil cartel is a factor of technological stagnation because, like every cartel, it has the means to resist any innovation which might reduce the value of its investment by reducing its sales. There are well-known examples of this. The electric car was invented by 1900. But no serious investment was put into developing it. Why? Because it was bound, eventually, to threaten the profits of the oil industry and petrol-powered car manufacturers. And even if this was only a distant prospect, the Fords, Rockefellers and Samuels of this world would not allow it. It is only today that money - mostly public money in fact - is being put into new research into electric engines using fuel cells which run on hydrogen and oxygen. Why now, when the fuel cell was actually invented in the 1930s? Partly under pressure from the green lobby, but mostly because the hydrogen which will be required in large quantities by fuel cells is already produced by oil refiners in such quantities that they do not know what to with it. And because, at present, instead of making a profit by selling this hydrogen, they have to comply with regulations and get rid of it at great cost. In fact some car manufacturers, no doubt in cahoots with the oil cartels, are already saying what a nice idea it would be to "invent" fuel cell-powered cars carrying a petrol engine as well!

Does it mean that oil, in and of itself, is the problem? We are not ecologists and we do not believe in the kind of Malthusian nonsense which is circulated time and again about the limited natural resources of the planet. Not that these resources are not finite. Of course they are. But it so happens that it is precisely when the oil cartel tries to get consumers to swallow a large price increase that the doom merchants are given most prominence. And this is no coincidence.

In reality, the facts fly in the face of these scare stories. Back in 1973, at the time of the first oil shock, a pseudo-scientific report published by some US academics advocated an immediate stop to economic growth for fear of a worldwide catastrophe by the year 2000. Among their stern warnings was the threat of an imminent exhaustion of oil reserves. According to recent statistics, oil reserves are currently estimated at just over 1,000 billion barrels, about the same level as in 1990 and 50% more than in 1982. This means that consumed oil has more or less been replaced with the discovery of equivalent reserves over the past decade and more than equivalent reserves over the past twenty years. It is one thing to say, as we do, that the oil majors cannot be trusted, particularly when it comes to handling natural resources responsibly, since their prime motive is profit. But it is quite another to cry wolf and go along with the doom merchants. Oil resources may be finite but, for the time being, there is no reason to think that they are close to exhaustion.

In this respect, more worrying is the fact that, since the 1997 financial crisis in Asia, exploration investment have been cut drastically worldwide. Most oil producing countries cannot afford it and the big oil companies prefer to buy existing known reserves - which is why western companies have been falling over themselves to buy Russian or Latin American oil companies, just to take over their oil reserves on the cheap.

As to whether oil should be dropped altogether as a source of energy, for environmental reasons and the planet turned into a gigantic field of deafening windmills, as some ecologists argue - we doubt it. To date, there is no consensus among scientists on whether the greenhouse effect, which is partly due to the use of fossil fuel, is a decisive factor in climate change. Nor is there even a consensus on whether the planet is currently undergoing a period of climate change. We do not have the expertise to gauge who is right or wrong in these polemics. But what we do know, is that the technology to prevent burnt fossil fuel from polluting the atmosphere exists. If it is not systematically used, it is simply because, although it would benefit society as a whole, it is considered unprofitable by the handful of big capitalists who control everything in this society.

The main problem with oil, as with any form of energy, is the objectives pursued in using it. As long as the profit motive remains the sole, or even the main objective, no form of energy will ever be safe, not even the green fuel made from sunflowers, which is advocated today by some green activists. Put it in the hands of Monsanto or some other capitalist sharks and you may end up with the worst poison!

The only guarantee of safety that we can have is to get rid of this exploitative system based on private profit and to replace it with one based on the collective interests of all, in which the population can exercise democratic control over every aspect of its life. By the same token, that would free the world of all the parasitic monsters produced by capitalism, including the oil cartel, their criminal looting of the planet and the bloody endless wars they fuel.