IRAQ OIL - plan A plan B

For two years, the State Department (and Defense and the White House) denied there were secret plans for Iraq's oil. They told us so in writing. That was the first indication the plan existed. Proving that, and getting a copy, became the near-to-pathologic obsession of our team.

Our big break came when James Baker's factotum, Amy Jaffe, first reached on her cell in Amsterdam, then at Baker's operation in Houston, convinced herself that I had the right to know about the plan. I saw no reason to correct her impression. To get the plan's title I used a truly dumb trick, asking if her copy's headings matched mine. She read it to me and listed its true authors from the industry.

The plan carries the State Department logo on the cover, Washington DC. But it was crafted in Houston, under the tutelage of the oil industry -- including, we discovered, Donald Hertzmark, an advisor to the Indonesia state oil company, and Garfield Miller of Aegis Energy, advisors to Solomon Smith Barney, all hosted by the James A. Baker III Institute.

After a year of schmoozing, Jaffe invited me to the Baker lair in Houston.

The James A. Baker III Institute is constructed a bit like a church or mosque, with a large echoing rotunda under a dome at its center, encircled by memorabilia and photos of the Great Man himself with the world's leaders, about evenly split between dictators and democrats.

And there is the obligatory shot of a smiling Nelson Mandela shaking Baker III's hand. (Mandela is not so impolite as to remind Jim that he was Reagan's Chief of Staff when Reagan coddled the regime that kept Mandela imprisoned.)

For tax purposes, it's an educational institute, and looking through the alarm-protected display cases along the wall was unquestionably an education. You could virtually write the recommendations of the 'Options for Iraqi Oil' report by a careful inspection of the trinkets of Baker's travels among the powerful.

There is the golden royal robe given Baker by Kazakh strongman Nazerbaev, the one who shared in the $51 million payment from ExxonMobil -- a James A. Baker client -- and alongside it a jeweled sword with a note from Nazerbaev, "Jim, there will always be a slice for you." (I made that up.)

Who is this James A. Baker III that he rates a whole institute, and one that will tell Iraq its oil future? Once Secretary of State to Bush Sr., Baker was now promoted to consigliere to ExxonMobil, the Republican National Committee and the Kingdom of Saudi Arabia.

In Houston, I found in Jaffe a preppy, talky Jewish girl with a Bronx accent like a dentist's drill who, stranded in a cowboy world, poignantly wanted to be one of The Boys. She thinks she can accomplish this through fashion accoutrements -- she showed me her alligator cowboy boots and rolled her eyes -- "for Rodeo Day!"

Lucky for me and my (hidden) recorder, she did not learn from Baker and the boys' Rule #1 for rulers: shut up.

So while Amy was in the mood to say too much, and before I got into the details of Big Oil's plan for Iraq, I needed Amy's help in finding the answer to the question that was just driving me crazy: why did Saddam have to go? Why did the oil industry promote an invasion of Iraq to get rid of Saddam?

The question is basic but the answer is not at all obvious.

We know the neo-cons' answer: Their ultimate target of the invasion was Saudi Arabia, which would be cut low by a Free Iraq's busting the OPEC oil cartel. But Big Oil wouldn't let that happen. The neo-cons' scheme ended up an unnoted smear under
Amy's alligator boot heels.

And we can rule out Big Oil's desire for Iraq's oil as the decisive motive to invade. The last thing the oil industry wanted from Iraq in 2001 was a lot more oil.

Neither Saddam's affection for euro currency nor panic over oil supply 'peaking' ruffled the international oil industry. What, then, made Saddam, so easy to hug in the 1980s, unbearable in the 1990s?

Saddam had to go, but why?

Amy told me they held meetings about it.

Beginning just after Bush's Florida 'victory' in December 2000, the shepherds of the planet's assets got together to plan our energy future under the weighty aegis of the "Joint Task Force on Petroleum of the James A. Baker III Institute and the Council on Foreign Relations." The master plan makers included Paul Bremer's and Kissinger's partner, Mack McLarty, CEO of Kissinger McLarty Associates; John Manzoni of British Petroleum; Luis Giusti, former CEO of the Venezuelan state oil company (until Hugo Chavez kicked him out); Ken Lay of Enron (pre-indictment); Philip Verleger of the National Petroleum Council, and other movers and shakers crucial to such bi-partisan multi-continental group gropes -- all chaired by Dr. Edward Morse, the insider's insider, from Hess Oil Trading.

Their final report detailed Saddam's crimes. Gassing Kurds and Iranians? No. James A. Baker was the Reagan Chief of Staff when the U.S. provided Saddam the intelligence to better target his chemical weapons. Weapons of Mass Destruction? Not since this crowd stopped selling him the components.

In the sanitary words of the Council on Foreign Relations' report (written up by Jaffe herself), Saddam's problem was that he was a "swinger":

Tight markets have increased U.S. and global vulnerability
to disruption and provided adversaries undue potential in-
fluence over the price of oil. Iraq has become a key
"swing" producer, posing a difficult situation for the U.S.
government.

Now hold on a minute: Why is our government in a "difficult" position if Iraq is a "swing producer" of oil?

The answer was that Saddam was jerking the oil market up and down. One week, without notice, the man in the moustache suddenly announces he's going to "support the Palestinian intifada" and cuts off all oil shipments. The result: Worldwide oil prices jump up. The next week, Saddam forgets about the Palestinians and pumps to the maximum allowed under the Oil-for-Food Program. The result: Oil prices suddenly dive-bomb. Up, down, up, down. Saddam was out of control.

"Control is what it's all about," one oilman told me. "It's not about getting the oil, it's about controlling oil's price."

So, within days of Bush's election in November 2000, the James Baker Institute issued this warning:

In a market with so little cushion to cover unexpected
events, oil prices become extremely sensitive to perceived

(i just bought the new 2008 edition of ARMED MADHOUSE that includes a new chapter THE SCHEME TO SWIPE ... the best book for a long time!)