CANADA/IRAQ: Drill, Garner, Drill

In the history of the Iraq War, one name is perhaps synonymous with the
collapse of the Bush administration's hopes for a post-Saddam world:
Retired Lt. General Jay M. Garner. It was Garner who served as the
first post-war administrator for Iraq, running the country during the
fateful two months immediately following the invasion before being
replaced by L. Paul Bremer III.

However,
Garner's frustrating tenure in Iraq wasn't entirely wasted. This year,
he and a small group of former US military leaders, officials, and
lobbyists have quietly used their deep connections in Kurdistan to help
Canadian companies access some of the region's richest oil fields.

Though Garner's
involvement in these deals has, so far, remained under the US media's
radar, the situation presents an embarrassment for the Bush
administration. US policy holds that foreign companies should not jump
into the Iraqi oil business until after Iraqis figure out how to
apportion their petroleum between various regions and the central
government. In fact, last year, an American company named Hunt Oil
triggered a controversy when it signed a deal to produce oil in the
area of Dahuk in Kurdistan. Hunt Oil's CEO is a friend of President
Bush and a former member of his Foreign Intelligence Advisory Board;
congressional investigators discovered that even though the State
Department eventually condemned the contract, the administration had
long known about the deal and elected not to intervene. Garner has so
far evaded a similar outcry because he's acting on behalf of companies
in Canada.

But Garner's
deal-making is not without risks. In the spring of 2007, Iraq's cabinet
began working on an oil law to govern the country's oil reserves, which
are the third largest in the world. Ever since then, however, Iraq's
Sunni, Shiite, and Kurdish factions have been locked in a contentious
struggle over the proposal. According to several observers, including a
State Department official familiar with the matter, Garner's efforts to
help his Canadian employers preempt the oil law have undermined the
already fragile possibility of a cohesive Iraq-which was, of course,
what Garner was originally sent to Iraq in 2003 to achieve. Referring
to Garner and his colleagues, the official says, "It's unfortunate that
they are working for a company that is just adding fuel to the fire in
disagreements between Baghdad and Erbil, but there's not much we can do
about it."

Garner calls
this "a typical State Department response." In his view, he's simply
helping the Kurdistan Regional Government, or KRG, to get back on its
feet. "The State Department has forgotten the Kurds were our allies
during the war, and the Arabs were not," he says. The Bush
administration, he says, should be encouraging the kind of contracts
he's facilitating: "If the State Department had any sense they would
make the [KRG] the model and have the rest of Iraq follow that model,"
he told me. "But our State Department is so inept that they're
incapable of doing something like that."

Following the
1991 Gulf War, Jay Garner was charged with securing Kurdistan, and for
some time he has belonged to a selective clique of American military
figures and politicians friendly to Kurdish interests. He's also not
shy about leveraging his military credentials in the business world.
After leaving the Army in 1997, he became, as The New York Times
put it, a card-carrying member of the "iron web" of former military
officials and defense contractors that "operates with very little
public scrutiny and is saturated with conflicts of interest." He took a
leave from his job as the president of SYColeman, a defense firm that
works on missile systems, to run the Iraqi reconstruction, but soon
clashed with the Bush administration: Garner wanted quick elections so
that Iraqi leaders could determine their own future, while the
administration wanted to impose privatization of the country's assets.
Garner did share some common ground with the administration that
dismissed him, though: Like the White House, he believed that "the only
way to reconstruct the country was through [private] contractors."

Garner's
Canadian work dates back to around 2006, when he discussed Kurdistan
with Stan Bharti, CEO of a Toronto-based merchant bank called Forbes
& Manhattan, which manages 20 Canadian mining, oil and homeland
security companies. Garner told Mother Jones that he brought
Bharti to Kurdistan a couple of times, and in October 2007, F&M
announced its intention to invest $100 million in the region's oil and
gas sector by 2010. Garner became an adviser to F&M, along with
retired Lt. General Ron Hite, a business partner of Garner's who sits
with him on at least six boards of security, defense, and technology
firms. In June 2008, retired Lt. Colonel Richard Naab signed on as the
Kurdistan operations vice president for an F&M oil and gas company
called Vast Exploration. Naab had commanded US troops in northern Iraq
beginning in 1991, and was swiftly tapped by Garner after the invasion
in 2003. He effectively ran northern Iraq from 2003 to 2004.

In May 2008,
Vast announced that it had signed a contract to develop oil in the
Black Mountain block with the KRG, along with two other Canadian
companies that belong to a consortium with Vast. Vast estimates that
Black Mountain could yield up to 600 million barrels of oil, which
could sell for $73 billion, depending on oil prices. In a conference
call, Bharti described Black Mountain as "one of the largest blocks in
Kurdistan" and added that Garner "was influential in introducing me to
Kurdistan and the opportunity here." In late 2007, Garner, Hite, and
Naab were present during the signing of a Memorandum of Understanding
in Kurdistan, to show their interest in competitively bidding for oil.

Following the
Vast deal, Garner was named to the company's board of directors; the
company lists several more prominent figures, including Washington
lobbyist Joe Reeder, an undersecretary of the Army under President Bill
Clinton from 1993 to 1997, on its advisory board. Reeder says he has
worked with Kurdistan "for the last two to three years." In September
2007 his law firm, Greenberg Traurig, (the former home of disgraced
lobbyist Jack Abramoff), signed a one-year contract with the KRG worth
$480,000 "to promote awareness and understanding of Kurdish interests."
Reeder insists that in doing business with Vast, "the KRG has been
assiduously proper with regard to the hydrocarbon laws of Iraq," and is
in "complete compliance" with the 2005 Iraqi Constitution.

Unfortunately,
the legal situation isn't that simple. When the Iraqi constitution was
written, the sections relating to oil were, predictably, some of the
most hotly contested, and they remain riddled with ambiguities. The
Kurds successfully pushed for language limiting the central
government's authority to current oil fields, as opposed to
as-yet-unexplored ones. It's also unclear who has the power to actually
award contracts; that was one of the matters left for the long-awaited
oil law. Now, as a State Department legal adviser who worked on the
draft told me, the ambiguities have "come home to roost."

What is clear is
that each move by foreign companies into Kurdistan adds fresh discord
to Iraq's volatile debate over federalism and oil. A poll released in
August 2007 by a Washington, DC-based consulting firm found that more
than 60 percent of Iraqis want their oil to be developed by the Iraqi
state rather than foreign companies. More than 70 percent complained
about a lack of transparency where proposed oil laws are concerned.

Baghdad has
denounced most of the oil contracts signed by the KRG as "illegal," and
has blacklisted the companies involved from future bids. In September,
Iraq's oil minister, Hussein al-Shahristani, threatened that the oil
law might never pass if Kurdistan doesn't cancel the contracts.

A stalemate on
the oil law could be disastrous-not least for the Bush administration.
That's why, the State Department official told me, Washington's policy
is plain: "We do not support any company signing a deal before an oil
law is in place."

Canada's
government, however, holds no such policy-and F&M has been one of
the main beneficiaries of the position. In 2003, Pierre Pettigrew, the
then-minister of international trade for the Liberal administration,
informed business leaders that "As the infrastructure and governance
issues are resolved, there should be no impediments to full
participation by Canadian enterprises in Iraq." (Mother Jones
obtained Pettigrew's letter through Canada's Access to Information
law.) By 2005, Pettigrew was minister of foreign affairs, and the US
State Department upbraided him for pushing for Canadian investment in
Kurdistan (especially a deal between the KRG and a Canadian company
called Heritage Oil), saying, "You need to inform your companies
[about] the problems this is causing," according to the State
Department official. Pettigrew left government in 2006 and joined
F&M as an adviser. He is now an adviser for Vast and is also
involved with other F&M member companies. The KRG has signed more
than 20 oil deals with foreign firms; eight Canadian companies have
stakes in at least six of those deals.

As for Garner,
the success of the Vast deal has evidently encouraged him and his
associates to pursue more opportunities in Iraq. He and Hite are on the
board of Eurocontrol, a company that designs oil theft technology.
Eurocontrol's CEO, Bruce Rowlands, says the company is exploring
opportunities in Iraq, and that Garner and Hite are helping to
facilitate contracts there. Garner and Hite's ability to interpret
Iraq's "political sub-plots" and their understanding of the "U.S.
industrial military complex" is, Rowlands says, "invaluable."

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