Iraq's Oil - A
Enormous Treasure

By Sajid Rizvi
United Press International

LONDON (UPI) -- Iraq is poised to emerge as a major player on the international oil scene, a critical energy supplier of the West, if it secures a future without President Saddam Hussein in a swift U.S-led campaign of high-pressure diplomacy or contained conflict.

That was an overwhelming view as American and European oil experts met at a London think tank Wednesday to consider the potential impact on energy security of a regime change in Baghdad.

Echoing assessments by analysts on both sides of the Atlantic, the experts could not however agree on how best that "regime change" could be brought about -- through dialogue or war.

The conference on "Gulf Oil, Global Politics: The Future of Energy Security in the Middle East" took place at London's Royal United Services Institute against the backdrop of intense diplomatic moves at the United Nations to defuse the Iraq crisis and head off a U.S.-led military operation.

Oil traders have speculated over the possible effects of a Gulf conflict, but their fears have been largely allayed so far by oversupply in the face of weak demand for crude oil, a response to slow global economic growth.

Iraq is a member of the Organization of Petroleum Exporting Countries, better known as OPEC, but can only sell oil under a U.N.-administered program, part of the sanctions in force since its 1990 invasion of Kuwait.

A war in Iraq would disrupt Iraqi oil supplies in the short term but what conference attendees deemed its successful outcome -- a change of government in Baghdad -- could enable Iraq to bounce back with higher than current output, depriving suppliers in and outside OPEC of their market share, said the experts.

Iraq currently supplies about 9 percent of OPEC's total oil production of about 27 million barrels a day, but has about 14 percent of OPEC's total reserves of 819 billion barrels.

Industry analysts noted that Iraq is sitting on unquantified but likely vast oil and gas reserves. Iraqi-born Mohammad Al-Gailani, a London-based consultant, said only a fifth of Iraq's oil deposits had been drilled and more than 100,000 square miles awaited exploration by companies likely to be allowed in after a government change. He added oil exploration in Iraq had the highest success rate with exploration costs of 50 cents a barrel -- the cheapest in the world.

Manouchehr Takin, senior analyst from the London Center for Global Energy Studies, asserted that concern over energy insecurity was often exaggerated: Oil-producing countries had to sell oil to survive and would always find the means to deliver the commodity to the consumer, he said.

However, should Iraq's isolation end -- and that includes the sanctions -- the expected major new finds would almost certainly lead to key geopolitical realignments in the Gulf, challenging neighbors Iran and Saudi Arabia in particular.

In some strategists' view, Iraq after a regime change could prove to be more reliable a partner for the West than Saudi Arabia, which currently holds the greatest clout in OPEC. Other experts attributed that position to minority conservative American view.

Joseph Barnes from the Baker Institute for Public Policy at Rice University, Houston, said that U.S. dependence on the Middle East oil and Washington's "special relationship" with Saudi Arabia was under constant review since the Sept. 11, 2001, terrorist attacks on the World Trade Center and the Pentagon.

"Despite protestations to the contrary in both Riyadh and Washington, Saudi Arabia is seen by many, including apparently some in the administration, to be an unreliable ally in the war on terrorism," Barnes said.

In contrast, a successful U.S. occupation of Iraq could lead to higher oil production and help lower global oil prices, said Barnes, a view echoed by several others at the conference.

Although actual presentations were on record, analysts' answers to questions could only be quoted under "Chatham House rules," which cloak such comments in anonymity.

The experts, agreeing that no one can predict the future, outlined a range of scenarios, from a peaceful removal of Saddam Hussein to what Dutch-born energy guru Hermann Franssen described as a "worst-case" scenario of war in Iraq spinning out of control and engulfing the whole region.

Bruce Riedel, a former member of the U.S. National Security Council who served former presidents George Herbert Bush and Bill Clinton, said in his remarks that the Middle East in general was "on the edge of a fundamental transformation."

He said, "This change is almost a certainty. The change will manifest itself over years, not over months." However, he added, "This change will not change Saudi Arabia's central position as the principal U.S. partner."

Pointing out that the situation held too many imponderables, Barnes said, "It is a cliche that it is easier to say where a war begins than where it ends. World War I is a case in point. Did it end with armistice of 1918? With the Versailles peace treaty? With the end of the Russian Civil War? Or (Turkish leader Kemal) Ataturk's defeat of the Greeks? The final suppression of the Germany's European ambitions in 1945? Or the collapse of the Soviet Union -- very much a creature of World War I -- just over a decade ago?" He concluded, "On a lesser but still important scale, a U.S. invasion and occupation of Iraq introduces similar uncertainties, not just for the geopolitics of oil, but for the broader geostrategic environment." .upi&Sys=rayelan&Type=News&Filter=Late%20Breaking&Fid=LATEBRKN


This Site Served by TheHostPros