Production Sharing Agreements (PSAs)

Up to $113 billion in Iraqi oil revenues are going to multinational oil companies under long-term contracts, and not to the Iraqi people, says a social and environmental group. In a report, the group known as Platform said that oil multinationals would be paid between 74 billion pounds ($144 billion) and 194 billion pounds, with rates of return of between 42% and 162% under proposed production-sharing agreements, or PSAs.

"The form of contracts being promoted is the most expensive and undemocratic option available," said Platform researcher Greg Muttitt on Tuesday. "Iraq's oil should be for the benefit of the Iraqi people, not foreign oil companies." Muttitt added: "Iraq's institutions are new and weak. Experience in other countries shows that oil companies generally get the upper hand in PSA negotiations with governments. The companies will inevitably use Iraq's current instability to push for highly advantageous terms and lock Iraq to those terms for decades."

The report, titled “Crude Designs: The Rip-Off of Iraq's Oil Wealth,” said the majority of Iraqis were against the large-scale involvement of foreign companies in the post-Saddam era. "Iraqi public opinion is strongly opposed to handing control over oil development to foreign companies," it said. "But with the active involvement of the US and British governments, a group of powerful Iraqi politicians and technocrats is pushing for a system of long-term contracts with foreign oil companies which will be beyond the reach of Iraqi courts, public scrutiny, or democratic control."

Under PSAs, foreign companies provide capital investment, including drilling and the construction of infrastructure, and a proportion of oil extracted is allocated to the companies. "Iraqi public opinion is strongly opposed to handing control over oil development to foreign companies." But Platform's report alleged that financing oil development could be done instead through government budgetary expenditure, using future oil flows as collateral to borrow money, or using international oil companies through shorter-term and less lucrative contracts.

Louise Richards, chief executive of aid charity War on Want, said, "People have increasingly come to realize that the Iraq war was about oil, profits, and plunder. Iraq's oil profits, far from being used to alleviate some of the suffering the Iraqi people now face, are well within the sights of the oil multinationals."