A closer look at Schaffer's Iraqi oil dealings

Republican Senate candidate Bob Schaffer has recently come under attack for an oil lease signed last year with the Kurdish regional government by his former employer, Aspect Energy. It was one of about 25 leases the Kurds have signed with foreign oil companies on their own and under heavy protest from the Iraq's central government.

Democrats said the move is a statement on Schaffer's priorities and unwillingness to sacrifice the interests of his company for the greater good of stability in Iraq. The State Department had a publicly stated policy of discouraging those leases, they point out. In fact, officials now say they repeatedly warned these companies that such leases were both legally risky and directly undermined U.S. foreign policy, fomenting tensions between the central government and the Kurds. By representing a U.S. company that ignored those pleas - in fact by traveling to Iraq to help negotiate the lease - Schaffer undercut U.S. efforts to create a stable Iraqi regime and put our country's long-term goals there even farther out of reach, Democrats argue.

Documents suggest that the situation was much less clear cut. They show that State Department officials in Iraq may even have encouraged some American oil companies in their efforts to secure those leases even as it was publicly describing them as problematic. To the extent that's true, Schaffer and Aspect may be much less culpable than Democratic critics suggest and it may be the State Department that is most to blame for playing the diplomatic game of saying one thing in public and another in private.

The whole issue popped up recently because the House Committee on Oversight and Government Reform released internal documents related to a similar lease deal between the Kurds and Texas-based Hunt Oil. After Hunt signed a lease agreement with the Kurds last September, administration officials all the way up to President Bush said the lease went against U.S. policy. In response to questioning, Assistant Secretary of State Jeffrey Bergner sent a letter to Edward Markey (D-MA) in which he assured the lawmaker that:

"(W)e continue to advise all companies that they incur significant political and legal risk by signing contracts with any party before (a national oil law known as) the Hydrocarbon Framework Law is passed by the Iraqi Parliament and that signature of such contracts would needlessly elevate tensions between the KRG and the Government of Iraq. We have expressed the same concerns to all companies that have contacted the U.S. Government about investment in Iraq's oil sector, regardless of size or nationality. We have also made the point publicly several times over the last year."

Yet the Oversight Committee documents present a very different picture. They include internal Hunt memos describing meetings with U.S. officials in which they talked about the potential leases with no mention of any warning that they were a bad idea. They also include an e-mail from a State Department official in Iraq to Hunt Oil vice president Jeanne Phillips, in which the U.S. official chats amicably about the Kurdish deal and flags a new opportunity the company might be interested in: "Anything I can do from here to give info or whatever, let me know," it reads.

Those documents match what Schaffer says about Aspect's own dealings as the company was arranging the Kurdish lease - that they received no discouragement from U.S. officials in their efforts. It is still unclear exactly what the State Department said to Aspect executives as they worked to line up the lease in 2006, if anything.

Alex Cranberg said in an e-mail that he wouldn't comment about any communications between his company and the State Department over the issue. And officials with the U.S. Embassy in Baghdad would only confirm that no one working on the oil issue there talked directly to either Aspect or Schaffer. Cranberg might do Schaffer a favor by clarifying what communication they had with the State Department or other U.S. officials - and if they were of a similar tone to those with Hunt.

What is clear is that in 2006, high-level U.S. officials were expressing concern over Kurdistan's insistence on going its own way with the region's rich oil reserves. Secretary of State Condoleezza Rice made a trip to Irbil in the fall of 2006 to personally request that Kurdistan leaders cooperate with the central government in a national oil law that would specify how oil revenues would be shared between the various regions and the national government (a key benchmark for political success in Iraq that still has yet to pass). Democrats say Aspect should have looked beyond its own interests and forgone the possibility of a lucrative oil deal in Kurdistan until after the internal Iraqi dispute had been settled.

But Cranberg has an answer to that, suggesting in an e-mail that the Kurds were going to lease the oil anyway and it is better that it be extracted with American help than handing it over companies from other countries:

"Americans need to decide whether they think it is in the best interest of our country for American and other western companies to hold these leases or the Arabs, Chinese and Russians - because those are the alternatives. The Kurds are key allies of the US, and have fought with our country's forces throughout this conflict. Kurdistan is the one part of Iraq where there have been no US casualties, to my knowledge," Cranberg wrote.

"We should be sending more than bullets to Iraq; we should be investing and creating a strong civilian economy so that fighting is not necessary."

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