History of the Iraq War, Part VII: America's Quest for Iraqi Oil - Background (through 2003)

In contrast to Saudi Arabia, Iraq has not always been a malleable nation. From the discovery of oil in Iraq in 1927, Western oil companies were granted extraction rights, out of which they paid royalties to the Iraqi government. In 1927, the Iraq Petroleum Company was formed and divided among a cabal of French, American, British and Iranian corporations, providing an American foothold for the first time (Zalloum, 2007, pp. 26-32). This system ended when Iraq fully nationalized its oil in 1972 (Coll, 2012, p. 558). Over the following seven years, production increased from 1.5 to 3.5 million barrels a day (Muttitt, 2011, p. 18). During the Reagan administration, steps were taken toward rapprochement, with US companies permitted to market Iraqi oil, as a possible quid pro quo for military aid and sizable loans to help Iraq fight Iran. Marketing contracts with the big oil companies continued – both legally and illegally – under the sanctions regime and Oil-for-Food program, and remain today (Juhasz, 2008, pp. 326-329).

 Sponeck discusses the impact of the sanctions at length in his dry and technical memoir describing the effects of the Oil-for-Food program, which he administered from 1998-2000.  Iraqi oil proceeds were used by foreigners to administer initiatives that they deemed desirable. In this case, Iraqi oil funded 100% of the budget of the Oil-for-Food program and revenue was deposited in a trust account held at the Banque Nationale de Paris, which received the interest payments. Officials from permanent United Nations Security Council nations were then responsible for determining what goods (e.g., foods, medicines) would be purchased abroad for the Iraqi people using their money (Sponeck, 2006, pp. 11-13). The United States and Britain threatened use of their Security Council vetoes to prevent the lifting of sanctions (Halperin, 2011, p. 211). The pattern of resource extraction and paternalism will become familiar to the reader (see “Who Pays the Costs?” and “Who Reaps the Benefits?”).

The funding of the Gulf and Iraq wars presents illustrative contrasts. “Only the 1991 Gulf War stands as a direct example” of “extracting revenue to pay the costs of empire” (Rosen, 2003). Johnson (2000, p. 25) maintains that the Gulf War cost the American government nothing, and perhaps allowed it to extract a small profit. For example, Japan alone paid $13 billion and Saudi Arabia, Kuwait, the United Arab Emirates and Germany each chipped in more than $1 billion (Arrighi, 2005). Ironically, since Iraq was forced to pay and continues to pay reparations to Kuwait for its bellicosity, Iraq partially financed its own invasion (Sponeck, 2006, p. 175). In the current Iraq war, Japan has paid $1.5 billion, an order of magnitude lower than its commitments for the Gulf War when adjusted for inflation (Arrighi, 2005). In Arrighi’s conception, the American protection racket was no longer as effective at extortion due to the demise of the Soviet-Russian threat and the destructiveness of neoliberalism.


Arrighi, Giovanni. May/June, 2005. “Hegemony Unraveling – II.” New Left Review 33.

Coll, Steve. 2012. Private Empire: ExxonMobil and American Power. Penguin Press.

Halperin, Sandra. 2011. “The Political Economy of Anglo-American War: The Case of Iraq.” International Politics 48(2/3), pp. 207-228.

Johnson, Chalmers. 2000. Blowback: The Costs and Consequences of American Empire. Metropolitan Books.

Juhasz, Antonia. 2008. The Tyranny of Oil: The World’s Most Powerful Industry – and What We Must Do to Stop It. Harper.

Rosen, Stephen. Spring, 2003. “An Empire, If You Can Keep It.” National Interest.

Sponeck, H. von. 2006. A Different Kind of War: The UN Sanctions Regime in Iraq. Berghahn Books.

Zalloum, Abdulhay Yahya. 2007. Oil Crusades: American through Arab Eyes. Pluto Press.

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