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Consumers for Peace
http://www.ConsumersForPeace.org
February 8, 2008
Jeroen van der Veer
Chief Executive
Royal Dutch Shell plc
Carel van Bylandtlaan 16
2596 HR DEN HAAG
Postbus 162
2501 AN DEN HAAG
Dear Mr. van der Veer:
In the five years since the United States, the United Kingdom and other members of the “coalition” invaded and occupied Iraq, an estimated one million Iraqis have died because of the war, along with nearly 4,000 American and more than 300 other coalition military personnel.
In this same 5-year period, your firm has reported profits totalling $113.75 billion. I would like to suggest that about $28 billion of this amount is war profit, that portion of profits Shell has realized solely because of the Iraq War. Let me explain.
In response to our request, Dr. Dean Baker, Co-Director of the Center for Economic and Policy Research, estimated that 20 to 30 percent of ExxonMobil’s 2007 profit can be traced directly to the Iraq war because of: (1) decreased Iraqi oil production caused by the war; (2) inflation in the price of a barrel of oil because of the uncertainty in the oil market created by the Iraq War, which constantly threatens to explode its infection of violence into other parts of the Middle East.
“I’m just speculating,” Dr. Baker said, “but the price of oil is probably about $10 to $22 a barrel higher because of the war” given the above factors. “If (oil) prices were 10-20 percent lower, Exxon’s profits might be 20-30 percent lower. Dr. Baker made a similar analysis of ExxonMobil’s 2005 war profits, and applying this standard to ExxonMobil’s profits from 2003 through 2007 we arrive at the estimate of $39 billion in war profits over the five war years. We believe this same analysis can be applied to Shell, hence the estimate of $28 billion in war profits for Shell since 2003
Dr. Baker’s observation about the impact of the Iraq War on the price of oil is reinforced in a 2006 report “The Economic Cost of the Iraq War: An Appraisal Three Years After the Beginning of the Conflict” by expert in public finance, Professor Linda Bilmes of Harvard’s Kennedy School and the 2001 Noble Laureate in Economics, Professsor Joseph Stiglitz, of Columbia University:
“We believe…the impact of Iraq on oil prices is a large proportion of the $45-a-barrel increase since the war began…Given U.S. imports of roughly five billion barrels a year, a $10-per-barrel increase translates into an extra expenditure of approximately $50 billion. Americans are poorer by that amount…if we base our estimates on a $10 price increase, and assume…it extends for at least six years, the cost is $300 billion.
There is circumstantial evidence that Shell, along with other major oil firms, was involved in consulations with the U.S. government on Iraq prior to the invasion and occupation with an eye toward access to Iraq’s vast pools of oil. In addition, there is evidence that Shell has been eager to promote a new oil law for Iraq that would give exceptional profits to foreign oil firms. (See ConsumersforPeace.org and Hands Off Iraqi Oil. org)
But, the war has proven profitable to Shell even prior to the firm’s gaining access to some of Iraq’s oil pools, not only because the war has run up the price of oil but because Shell has benefited from oil sales to the Pentagon totalling $5.6 billion between FY 2003 and 2007.
We call on Shell to:
Pay $28 billion, Shell’s war profit for the last five years, into a fund that will make direct payments to families of Iraqi, U.S. and other coalition war dead and wounded, in proportion to their numbers, through Iraqi Red Crescent, the U.S. Veterans Administration and the International Committee of the Red Cross. (Note that we are making similar war profit requests of ExxonMobil [$38 billion] and BP [$13.3 billion], which would lead to the creation of a war profit-war relief fund totalling approximately $80 billion. Over the next few months we will make war profit requests of other major oil companies to increase this fund.)
Make public statements urging the Congress to immediately cut off all funding for the occupation of Iraq except for what it takes for an immediate, total withdrawal of all U.S. military forces and U.S.-employed private military forces and the closure of all U.S. Iraqi bases.
Make public statements notifying the Iraqi and United States governments that Shell is stopping all lobbying for the passage of any Iraqi oil legislation and urging Congress to eliminate passage of an Iraqi oil law from the list of benchmarks established in the U.S. Troop Readiness, Veterans Care, Katrina Recovery and Iraq Accountability appropriations Act of 2007.
Sincerely,
Nick Mottern, Director, ConsumersforPeace.org
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Here is Nick's article based on their response to that letter:
SHELL DENIES WAR PROFITS - REFUSES TO AID WAR VICTIMS
By Nick Mottern, Director, ConsumersforPeace.org
In spite of findings by Nobel Prize winning economist Joseph Stiglitz and other noted experts, Royal Dutch Shell plc rejects the idea that any part of the current spike in oil prices and its record profits are directly traceable to the Iraq War.
Shell, the world’s second largest privately held oil company, made its position on war profits known in a letter to ConsumersforPeace.org, responding to a request that it contribute its war profits for the last five years, estimated at $28 billion, to a total $80 billion fund to benefit Iraqi, U.S. and other coalition war victims.
“The proposals in your letter are based on the contention that there is a direct casual relationship between profits achieved by some oil companies in the last few years and increases in the oil price linked to some degree to the war in Iraq,” Shell says in the letter dated March 7, 2008 and authored by Roxanne Decyk, Corporate Affairs Director.
“We reject this contention:” the letter continues, “the oil price fluctuates in response to many and various factors, and it is not possible to identify any one cause, or attribute any specific portion of profits to such a cause, in this way. We do not, therefore, accept your suggestion of payment of a specific sum into the kind of fund you have described.”
Shell said it is taking “a close interest in the reconstruction and development of post-war Iraq.” The company is “already contributing to that by providing the Ministry of Oil with assistance on training and technical studies in the oil and gas sector,” the company said.
ExxonMobil, the largest privately held oil firm and BP, the third largest, were also asked by Consumers for Peace to contribute estimated five-year war profits of $38 billion and $19 billion respectively to the aid fund. Neither firm has responded at this writing.
Shell also rejected a request from Consumers for Peace that it lobby for an end to occupation of Iraq as well as the contention by Consumers for Peace that it had been involved in pre-invasion discussions with U.S. officials. “Shell does not,” the letter said, “get involved in political activity of the kind you suggest. Your insinuation that Shell was involved in consultations with the U.S. government prior to the invasion is also entirely without foundation.”
With respect to a proposed Iraq oil law that could lead to extraordinary profits for oil firms, the letter said: “Shell is not, nor has it engaged in any lobbying about the specific form that the legislation should take, but it is no secret that we, alongside other oil companies, hope to see a legislative framework in place as soon as possible.”
Shell’s position on war profits is contradicted in “The Three Trillion Dollar War”, just published, authored by Professor Stiglitz, of Columbia University, and Professor Linda Bilmes, of Harvard’s Kennedy School of Government.
“…if America went to war in the hope of securing cheap oil, we failed miserably,” they write. “We did however, succeed in making the oil companies richer. ExxonMobil and other oil companies have been among the few real beneficiaries of the war, as their profits and share prices have soared. Meanwhile, the economy as a whole pays a big price.”
Their study finds: “If even half of the difference between the current price ($95-$100 a barrel) and the price before the war ($25 a barrel) is attributed to the war, then the oil costs of the war today are $35 a barrel…”
This analysis is consistent with that of Dr. Dean Baker, Co-founder of the Washington, D.C. based Center for Economic and Policy Research, who has estimated for Consumers for Peace that “the price of oil is probably about $10 to $20 a barrel higher because of the war.” This, he says, is because of the war-caused drop in Iraq oil production and fear in the market that the war will spread and further disrupt oil supplies.
“If (oil) prices were 10-20 percent lower,” Dr. Baker says, Exxon’s profits might be 20 – 30 percent lower.” This analysis was applied to the profits of Shell and BP to arrive at the estimates of their war profits.
Dr. Baker also estimated that about 40 cents out of $3/gallon in gasoline represents war profit.
With respect to Shell’s involvement in pre-invasion discussions, the Washington Post reported that White House records show that on April 17, 2001, staff members of Vice President Dick Cheney’s energy task force met with “Royal Dutch/Shell Group’s chairman, Sir Mark Moody-Stuart, Shell Oil chairman Steven Miller and two others.” The content of the discussions are not known because Mr. Cheney went to court to block disclosure of task force records. However, it appears the task force had access to information on Iraq oil fields and competitors for access to Iraq’s oil that was prepared by the Defense Intelligence Agency.
The Post also reported that Darci Sinclair, a Shell spokesperson, asked about the task force meeting “said she did not know whether Shell officials met with the task force, but they often meet with members of the administration.”
Phillip Carroll, a former Shell official, is reported to have been one of a group of oil people who entered Iraq in 2003 with invasion forces as an advisor to the Coalition Provisional Authority, that was set up to manage the occupation.
With respect to the Iraq oil law, Shell is among oil companies sponsoring the International Taxation and Investment Centre, which appears to have been involved in drafting a model for the oil law that is now before the Iraqi Parliament. In addition, HandsOffIraqiOil.org reports that Shell was among nine oil firms to be shown a copy of the draft law, based on work at the State Department, eight months before the draft was shown to Iraqi officials and legislators.
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