Why TotalEnergies’ $27 Billion Deal With Iraq Is A Gamechanger
The long-delayed US$27 billion four-pronged megadeal between France’s TotalEnergies and the Federal Government of Iraq has received the final go-ahead from both sides and is due to start within the next four weeks. The huge deal is crucial in enabling Iraq to increase its oil production from around 4.5 million barrels per day (bpd) to perhaps 13 million bpd within five years. It is also critical to Iraq’s ability to end its dependence on Iran for gas imports and electricity for its power grid. For the West, the deal is crucial is securing access to Iraq’s huge, underdeveloped oil and gas reserves as part of its strategy to find new sources of each to compensate for lost supplies from Russia. It is also vital in reasserting a stake in the central Middle East to counteract the increasing influence of China and Russia there, as analysed in my new book on the new global oil market order. In short, this four-pronged deal with TotalEnergies is a very big thing indeed, which is why all parties involved have pulled out all the stops to either get it across the line or stop it in its tracks, depending on which side they are on. Iraq’s input into proceedings, which caused the main delays from the original signing of the megadeal in 2021 to now, was not part of a brilliantly interwoven geopolitical strategy aimed at world domination (that was China, with a little help from Russia – more of that in a moment). Instead, it was down to its standard attempts to gouge out as much as possible in the way of commissions – delivered in the form of ‘cash compensation payments’ made to various front companies – for some senior government people. Suffice it to say here that at one stage Iraq was in the process of re-establishing the omni-toxic Iraqi National Oil Company (INOC), an organisation widely regarded within the oil industry as one of the most corrupt organisations ever created. It quickly became clear that one does not get to become a senior figure in France’s leading oil and gas company by being as stupid as seems to be the minimum requirement to secure a senior position in Iraq’s Oil Ministry, with TotalEnergies refusing to partner with INOC ‘due to the lack of clarity on the legal status of the company’. In layman’s terms, the French oil and gas behemoth did not trust INOC as far as it could throw it. In October 2022, then, Iraq’s Federal Supreme Court invalidated the decision to re-establish the Iraqi National Oil Company on the basis that several of its founding clauses were in breach of the constitution, and the deal with TotalEnergies was again a realistic prospect. There have been further shenanigans from Iraq aimed at increasing the possibilities for personal enrichment of some key government people involved – the main one being an increase in the government’s stake in the projects to varying degrees – but all have been rebuffed by the French firm. As it stands, the agreement is now for the Iraq government (through the Basrah Oil Company) to hold a 30 percent stake in the megadeal. TotalEnergies will hold 45 percent of it, with QatarEnergy holding the remaining 25 percent stake. According to sources in the U.S.’s and European Union’s energy security complexes spoken to exclusively by OilPrice.com on this megadeal, Iraq was emboldened to make such demands of TotalEnergies by elements from China and Russia. Following the recent landmark resumption of relations between Iran – which retains enormous influence over Iraq through political, military and economic proxies – and Saudi Arabia, brokered by China (and Russia to a lesser degree), it was made clear to Iran it should do all it could to stop Western companies doing deals in Iraq. Specifically, the European Union’s energy security source exclusively told OilPrice.com, Iran was told by a very high-ranking official from the Kremlin that: “By keeping the West out of energy deals in Iraq – and closer to the new Iran-Saudi axis – the end of Western hegemony in the Middle East will become the decisive chapter in the West’s final demise”. This would also play into what China wants from the Middle East in its grand scheme of things, as delineated in its multi-generational power-grab project, ‘One Belt, One Road’. What it wants is to turn the region into a large oil and gas station by which it can fuel its economic growth to overtake the U.S. as the number one economic and political superpower by 2030. The three biggest oil and gas reserves in the region belong to Iran, Iraq, and Saudi Arabia, so it wants to control those to begin with, as examined in detail in my new book. For Russia, which already has lots of oil and gas – over which China already has significant control – the objectives in the Middle East are more varied. One objective is to continue to exert influence in several countries that it regards as being key to maintaining some of its hold over the Former Soviet Union states. Another, more recent one, is to use this influence to bolster its position as a partner of note to China. As for the other countries in this soap opera – Iran, and Iraq, and now also more clearly, Saudi Arabia – they are in this new global alliance partly for the economic and political support from China (and to a lesser degree, Russia) and because their political systems are naturally much closer to the authoritarian regimes of China and Russia than they are to the democratic ones of the U.S. and its allies. Nonetheless, as it stands, the US$27 billion megadeal is set to move into action within four weeks and, if it does, then it will be a game-changer for Iraq. Most important of the four projects is the completion of the Common Seawater Supply Project (CSSP). This is crucial to enabling Iraq to reach its longer-term crude oil
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