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>All Of Iraq's Oil Can't Pay The Cost Of A War
>Iraq's Annual Oil Revenues At Present Are Only Around $10 Billion A Year.
>
>
>By TRUDY RUBIN
>Published on 1/14/2003
>
>Is the United States going to war with Iraq to get its hands on Iraqi oil
>fields? Nearly everyone in the Middle East thinks so. So do some Americans.
>
>The theory is seductive. Iraq has the world's second-largest oil reserves,
>with rich new fields to explore.
>
>It's not just critics of an Iraq war who speculate about a war-oil linkage.
>Conservative pundits contend that post-Saddam Iraq will turn on the pumps
>and drive global oil prices down, while pulling out of the OPEC oil cartel
>and replacing the unpleasant Saudis as our key oil ally. Administration
>officials predict that oil will pay for all of Iraq's reconstruction — and,
>some hint, for the costs of war.
>
>The only problem with all these oil theories is that they are wrong.
>
>There will be no fantastic oil bonanza at hand if Saddam Hussein is ousted.
>After 20 years of war and sanctions, Iraq's oil infrastructure is in
>disarray. It will take three or more years and $7 billion to $8 billion just
>to get back to 1980 production levels of 3.5 million barrels per day,
>according to experts.
>
>Boosting production to 6 million barrels per day would take $30 billion to
>$40 billion more in investment — and many more years. (So much for hopes
>that the Iraqi oil tap will soon make Saudia Arabia's 8 billion barrels per
>day irrelevant).
>
>Moreover, Baghdad doesn't even have the cash to get started. Iraq's annual
>oil revenues at present are only around $10 billion a year.
>
>Even if we assume that Saddam doesn't torch the oil fields as a parting
>gesture, that level of income won't begin to meet the country's immediate
>needs.
>
>There will be huge emergency humanitarian bills after a military conflict.
>There will be an urgent need to rebuild basic infrastructure, like power
>grids, roads, and hospitals, which will eat up $25 billion to $100 billion
>more.
>
>Do the math, and what you get is a huge shortfall. In the next couple of
>years, international donors will have to pour money into Iraq. Anyone who
>imagines that Iraqi oil is going to pay the $100 billion bill for a war
>there is in fantasyland.
>
>Of course, foreign investment could help speed up the oil industry's
>recovery and augment Iraq's future income. But this brings us to the
>political impediments to dipping into Iraqi oil.
>
>U.S. companies might not be in a hurry to invest in an Iraq whose stability
>will be shaky in the near term. Even if they are eager, they will confront
>crucial issues of Iraqi nationalism — and of law.
>
>Iraq, like the rest of the Gulf, has a state-owned oil company. No foreign
>oil company has operated in Iraq since 1960. Multinationals buy Iraqi oil
>for refining, but they have no equity share in the oil fields, nor do they
>get any percentage of oil for services performed.
>
>In a desperate bid for political support, Saddam promised the Russians and
>the French that he would offer them a chance to develop new oilfields. But
>if his dictatorship ends, any new oil arrangement will require the passage
>of new laws by a new, democratically elected parliament. This process will
>be time-consuming, but — if the Bush administration really means to support
>democracy — it must accept the results. And the results may not be to its
>liking.
>
>“If the Baath Party survives, or some general makes a coup, it might be
>conceivable they would give the U.S. some oil contracts,” says oil expert
>Fereidun Fesharaki of the East-West Center in Honolulu. “But if they have
>proper elections ... you can't predict. You might have a nationalist
>government which doesn't want equity sharing or to give the U.S. the oil.”
>
>Prime case in point: After the Gulf War, American companies expected to be
>invited to develop new Kuwaiti oilfields. Kuwait's government was willing,
>but the elected parliament refused.
>
>For similar Arab nationalist reasons, many experts expect that a new Iraqi
>government would stay in OPEC.
>
>“Iraq was a founding member of OPEC,” says Amy Myers Jaffe, senior energy
>adviser at the James A. Baker III Institute in Houston. “You can't eradicate
>a country's history because they have a new government.”
>
>That history — which includes British colonial rule — will require the
>United States to handle the oil issue with care after an Iraq war.
>
>Iraq has many oil experts, inside and outside the country, who can manage
>the industry. Control should be turned over to them once oil proceeds are
>weaned from U.N. supervision under the “oil-for-food” program.
>
>An elected Iraqi government may give contracts to U.S. companies or not. But
>any heavy-handed U.S. pressure is likely to boomerang and confirm the
>beliefs of those who think the war was only about oil.
>
>Even though, in reality, Iraq's fields are not up for grabs.
>
>Trudy Rubin is a columnist and editorial-board member for the Philadelphia
>Inquirer. Readers may write to her at: Philadelphia Inquirer, P.O. Box 8263,
>Philadelphia, Pa. 19101, or by e-mail at trubin at phillynews.com.