Banking on Carbon and Oil - Neocons Lose

Let's start with Paul Wolfowitz, nominated as head of the World Bank this week. Well, he says it is "safe in his hands" and insisted he doesn't want to shift the Bank's focus away from poverty reduction. Then he went on to say ""soundly-based economic development supports the advance of liberty and freedom as well".

Critics of course are saying that Bush is trying to spread neocon philosophy into the World Bank, just as he may have tried to do by nominating another neocon, John Bolton, as his ambassador to the UN. Certainly, Wolfowitz is one of the original founders of the influential group, The Project For The New American Century.

However, there is another possible explanation. Perhaps this is a strategy on the part of the White House planners to distance the neocons from the heart of the administration. Just as the religious right were played by Rove and Bush for their votes, being stroked but not given any really juicy stuff, perhaps now the neocons have played their part in the Rove grand scheme and can be marginalised. Certainly, Wolfowitz' departure from Defense will leave his beleagured boss, Donald Rumsfield, more isolated and vulnerable. It will also strengthen the hand of Condi Rice as she pits State against Defense and tries to build diplomacy before dropping bombs. Wolfowitz may well be furious at this kick "upstairs", an offer he probably couldn't refuse.

Could the neocon days in Bush's sun be numbered?

Here's a funny thing. One of Wolfowitz' jobs at the World Bank will be to use the Kyoto Treaty to make profits - and the people most likely to benefit are Bush's old pals in the oil and energy corporations as they continue to pollute third world nations (and not pay for cleanups) but look as if they are reducing carbon emissions by trading with nations like Russia who are so far under their target due to a collapse in manufacturing that they have plenty of credits to trade for hard cash. The Bank will act as a broker for international trade in carbon credits, making 5% on each transaction - up to $100 million a year. Hang on, I thought it's job was to help developing countries. On second thoughts, not funny at all.

The BBc's Newsnight program has obtained papers via a FOI request and backed them with interviews of some of the key players. The papers reveal that:

The Bush administration made plans for war and for Iraq's oil before the 9/11 attacks, sparking a policy battle between neo-cons and Big Oil.

It appears Big Oil won. The neocons had been intent on "using Iraq's oil to destroy the Opec cartel through massive increases in production above Opec quotas." and had Ahmed Chalabi onboard to gibe their plan the green light of Iraqi favour. Then, according to Newsnight:

Philip Carroll, the former CEO of Shell Oil USA who took control of Iraq's oil production for the US Government a month after the invasion, stalled the sell-off scheme.

Mr Carroll told us he made it clear to Paul Bremer, the US occupation chief who arrived in Iraq in May 2003, that: "There was to be no privatisation of Iraqi oil resources or facilities while I was involved."

Instead, a plan favoured by the oil industry which called for creation of a state-owned oil company was "completed in January 2004 under the guidance of Amy Jaffe of the James Baker Institute in Texas. Formerly US Secretary of State, Baker is now an attorney representing Exxon-Mobil and the Saudi Arabian government."

Heres the money quote.

Questioned by Newsnight, Ms Jaffe said the oil industry prefers state control of Iraq's oil over a sell-off because it fears a repeat of Russia's energy privatisation. In the wake of the collapse of the Soviet Union, US oil companies were barred from bidding for the reserves.

Ms Jaffe says US oil companies are not warm to any plan that would undermine Opec and the current high oil price: "I'm not sure that if I'm the chair of an American company, and you put me on a lie detector test, I would say high oil prices are bad for me or my company."

The former Shell oil boss agrees. In Houston, he told Newsnight: "Many neo conservatives are people who have certain ideological beliefs about markets, about democracy, about this, that and the other. International oil companies, without exception, are very pragmatic commercial organizations. They don't have a theology."

If John Pike is reading this, John you were right - Iraq was all about oil.

Now it looks like Bush and Big Oil are taking on the neocons, and winning.