Volume 1 - Iraq Watch

Iraq’s Surcharge on Oil and Regime Decision MakingThe description of the surcharge episode by theformer Minister of Oil, ‘Amir Muhammad Rashid Al‘Ubaydi, while a detainee, provides an interestingexample of the Regime’s decision-making process.In the autumn of 2000 the talk of a surcharge began.Saddam never asked me about the surcharge. Hetalked to a group of sycophants who simply toldhim he had a great idea. Huwaysh would make arecommendation and Saddam would follow himblindly. Huwaysh suggested 10 percent [suggesting10 percent of the oil company’s profi t margin].I never attended a meeting and without me it wasnot a proper meeting. Ramadan formed a committeeto determine how to divert some fi xed part of thebuyer’s profi t margin to the Iraqi Government. Theidea was supported by both Ramadan and ‘Aziz.They finally agreed on 10 percent a barrel.What happened? The professionals (France, Italy,Spain, Russia) refused to buy from us. [The effectof the surcharge was to remove Iraqi oil from themarket.] However, the individuals with whom wewere trading had contracts with the trading companies.I went to the trading companies to get themto share their profit margin with us. They refused.Saddam was very critical of my efforts but I didn’tcare if I lost my job.A new committee was formed. This committeeincluded the sycophants and the “genius.” When Iwent to the meeting I brought the three top expertsfrom SOMO. They told the committee that it wasimpossible to do more than 10 cents a barrel. Nevertheless,the committee recommended 50 cents. Whathappened? They stopped buying from us. Our exportswere about 2.2 to 3.1 mbd over the time period inquestion.After two weeks I went to Saddam and got him tolower the price to 40 cents. Our exports rose about30%. The companies put pressure on SOMO to lowerthe price.A third meeting was held. I participated together withSOMO. ‘Aziz and Ramadan supported me, but theywere afraid to speak up. Finally we decided on 30cents a barrel selling to the US and 25 cents a barrelselling to Europe.Now the problem became how to explain the situationto OPEC. We couldn’t tell them about the surchargebecause it was illegal. Of course we thought the oilwas Iraq’s and we could do what we wished with it.But that was not the international situation.This situation remained through part of 2002. Idecided to fi ght. No one was lifting Iraqi oil. I talkedto Foreign Minister ‘Aziz and he pointed out that wehad lost all our friends. So we fi nally went back to 10cents a barrel for the last part of 2002.Overall, we lost $10,000,000 in exports.38