MERIP: The geostrategic fruits of control of Iraqi Oil

Michael Pollak mpollak at panix.com
Sat Oct 12 23:25:19 PDT 2002


Excerpted from:

http://www.merip.org/mer/mer224/224_mohamedi_alkadiri.html

Middle East Report 224

Washington Makes Its Case for War,

by Fareed Mohamedi and Raad Alkadiri

<snip>

Treasure Trove

But a key -- if much overlooked -- aspect of the pro-war worldview is

oil and its centrality to the economies of many Middle Eastern states.

Iraqs oil potential is regarded by the neo-conservatives as a powerful

weapon to be wielded in their crusade to reshape the political

environment in the Middle East, affecting not just relations between

oil-producing countries of the region and the United States, but the

very nature of those countries themselves.

With proven reserves of over 110 billion barrels, Iraq's treasure trove

of oil is second only to Saudi Arabias, and this figure may

underestimate Iraqs production potential. For much of its modern

history, political and commercial obstacles have conspired to hamper

exploration and development in the country. Only during part of the

1950s and part of the 1970s was there any systematic focus on these

activities. Consequently, there is optimism in the oil industry that

considerable reserves await discovery.

Even if no more reserves were to be discovered, Iraq still has huge

production potential once UN sanctions are lifted. Of the over 70

fields that have been discovered so far, only around 20 percent have

actually been developed, and many of the remaining fields -- eight of

which contain over one billion barrels of reserves -- harbor oil that

would be cheap and easy to operate. Much will depend on the speed and

volume of inward investment into the industry, but in the mid-1990s,

the Ministry of Oil published a blueprint for developing the industry

after sanctions. The plan, which Iraq estimated would cost $30

billion, anticipated increasing production capacity from the present

three million barrels per day to six million within seven years of the

UN embargo being lifted. Other experts have offered even more

optimistic visions of Iraqs future production potential, citing

eventual figures of eight or even ten million barrels per day.(4)

While these latter figures seem exaggerated, an Iraq unrestrained by

sanctions could have a large impact on the oil markets and on existing

supply networks. Neo-conservatives in the administration are looking

to take advantage of precisely this potential to push their agenda.

Iraq would serve their purpose on a number of levels. Firstly, the

growth in Iraqi oil production could further diminish the need for a

strategic partnership with Saudi Arabia. Oil supply security has long

underpinned the US-Saudi relationship, but the value of this

relationship has been called into question of late, particularly since

September 11. A US-allied government in Baghdad with something

approaching the Kingdoms production capacity would offer a legitimate

long-term strategic supply alternative, leaving the administration

room to pursue its broader political agenda without compromise.

Moreover, a US-allied Iraq could work with Russia and other emerging

oil producers in the Caspian and West Africa to undercut the power of

OPEC and its influence over oil prices, on the assumption that a

US-backed Iraq would first leave the organization. At the very least,

Iraq could pursue an unrestrained production strategy that undermined

the organizations price manipulation from within.

The impact of rising Iraqi oil production on OPEC and oil prices is a

second and equally important benefit of regime change for

neo-conservatives. Rapid growth in Iraqi capacity, at a time when

global demand is growing slowly, while non-OPEC supply continues to

rise and OPEC capacity continues to grow will leave the organizations

members, particularly in the Persian Gulf, facing a range of equally

unpalatable choices. OPEC can either cut back its production in order

to keep prices at their present levels, or -- as is more likely --

member states can fight with Iraq, non-OPEC states and each other to

secure increased market share as supplies increase. Either way, the

financial impact on OPEC budgets will be severe, putting the Gulf

states -- which rely primarily on oil revenues to fund their budgets

-- under considerable economic strain. Neo-conservatives hope that

this pressure, combined with the political fallout of regime change in

Iraq, will be sufficient to force either fundamental reform of the

Gulf regimes, or their removal by disgruntled populations as the

regimes find themselves incapable of delivering on the social contract

that underpins their fragile legitimacy.

<snip>

4 See, for example, Fadhil Chalabi, "Iraq and the Future of World

Oil," Middle East Policy 8/4 (October 2000).

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