Table 3.3: Estimates of Accounting Profitability of the IPC Group, Year Accounting Rate of Return 1952 38 1953 46 1954 62 1955 69 1956 66 1957 46 1958 50 Source: Mikdashi, 1966 The high profitability for foreign companies of oil reserves and those of Iraq’s the Middle East in general is partly because of the higher productivity of these oil fields, very low production costs, and also the fact that Middle Eastern prices have remained in line with the high price of crude oil in the Gulf of Mexico (Issawi and Yeganeh, 1962: 105) and the fact that the terms were very generous to the companies. Thus the Iraqi Government, during the period of concessions, could not capture this economic rent, even after increasing the royalties at different times. The other problem with the IPC concession is that no taxes on profits were paid by IPC. Instead a small amount of money was paid annually by the IPC group. However, there are explanations for this. The terms of concessions were very weak at the beginning of the 20th century for various reasons. First, the Iraqi government wanted the foreign companies to explore and extract the mineral from the ground. Second, Iraq was under the direct control of the British, who, as we have seen, went to a lot of trouble to control Iraq’s oilfields: so the rewarding of the British companies involved in the concessions was not unexpected that is, Iraq was not allowed sovereignty over its own oil: Britain ensured, through the power of its empire, that British companies enjoyed excess profits. Third, after Persia, Iraq was the first country in the Middle East to discover oil; thus there were no other examples or case studies for Iraq to learn from. 3.5 Qassim and the Republic of Iraq (1958-1963) The Iraq revolution of 14 July 1958 came as a surprise to the entire world. It overthrew the Iraqi Hashemite monarchy under Faisal II. The Republic of Iraq was established, under the leadership of General Abdu Al Karim Qassim.
Table 3.3: Estimates of Accounting Profitability of the IPC Group, Year Accounting Rate of Return 1952 38 1953 46 1954 62 1955 69 1956 66 1957 46 1958 50 Source: Mikdashi, 1966 The high profitability for foreign companies of Iraq’s oil reserves and those of the Middle East in general is partly because of the higher productivity of these oil fields, very low production costs, and also the fact that Middle Eastern prices have remained in line with the high price of crude oil in the Gulf of Mexico (Issawi and Yeganeh, 1962: 105) and the fact that the terms were very generous to the companies. Thus the Iraqi Government, during the period of concessions, could not capture this economic rent, even after increasing the royalties at different times. The other problem with the IPC concession is that no taxes on profits were paid by IPC. Instead a small amount of money was paid annually by the IPC group. However, there are explanations for this. The terms of concessions were very weak at the beginning of the 20th century for various reasons. First, the Iraqi government wanted the foreign companies to explore and extract the mineral from the ground. Second, Iraq was under the direct control of the British, who, as we have seen, went to a lot of trouble to control Iraq’s oilfields: so the rewarding of the British companies involved in the concessions was not unexpected that is, Iraq was not allowed sovereignty over its own oil: Britain ensured, through the power of its empire, that British companies enjoyed excess profits. Third, after Persia, Iraq was the first country in the Middle East to discover oil; thus there were no other examples or case studies for Iraq to learn from. 3.5 Qassim and the Republic of Iraq (1958-1963) The Iraq revolution of 14 July 1958 came as a surprise to the entire world. It overthrew the Iraqi Hashemite monarchy under Faisal II. The Republic of Iraq was established, under the leadership of General Abdu Al Karim Qassim.