Adamant: Hardest metal
Saturday, February 15, 2003

Iraq Fallout conflict broadly affects U.S. economy, society

www.wtnh.com

(Washington-AP, Feb. 15, 2003 4:00 PM) _ Suddenly, the Iraq conflict is being blamed for just about everything.

 Rising oil and gold prices. The stagnant economy. The stock market's swoon. Cracks in the NATO alliance. Increasing anti-Americanism. Elevated terrorism fears.

 They all have been laid to war preparations.

 Clearly, the potential for military action is a tremendous weight on consumers, businesses and American institutions. The growing consensus is that things will not get much better as long as the crisis persists.

 But is the opposite true? Would a brief and decisive war _ or Saddam Hussein's exile _ revitalize the economy, spark a market rally and ease world tensions?

 Federal Reserve Chairman Alan Greenspan seems to think so, at least for the economy.

 He told Congress last week that war fears pose "formidable barriers" to recovery, but predicted the economy would rebound with stronger growth once those uncertainties were resolved.

 Greenspan further suggested that new tax cuts _ for instance, those sought by President Bush _ were therefore unnecessary at this time. That statement gave Democrats ammunition and Bush allies anguish.

 Some Wall Street analysts expect a rally once bombs start falling on Baghdad, pointing to other stock surges coinciding with the outset of wars. Markets can cope with war or peace, it seems, but never uncertainty.

 Economists say Iraq is the biggest factor inhibiting a broader recovery, although serious economic problems remain that are not attracting as much attention.

 "When there is one huge dark cloud, it's hard to see if there are any little clouds behind it," said David Wyss, chief economist at Standard and Poors in New York. "My feeling is that Iraq is our biggest problem, but not our only problem."

 Wyss and other economists point to manufacturing overcapacity, the loss of private sector jobs and continuing oil production shortages in Venezuela.

 "It's possible that Iraq is just a metaphor for many of our concerns," said Mark Zandi, chief economist at Economy.com, a nonpartisan consulting firm in West Chester, Pa. "I think if we get by Iraq quickly and it's relatively painless, that should help the economy get into higher gear. But that higher gear may not be high enough."

 The march toward war figured in the administration's raising of its terror alert level to high. The administration alleges links between the Iraqi government and terrorists, seizing on a new purported Osama bin Laden tape urging Iraqis to attack Americans as further evidence of such connections.

 War preparations and Bush's focus on Iraq also may be hurting his domestic proposals, which have run in to heavy congressional resistance, even from members of his own party. His proposals for eliminating taxes on stock dividends, overhauling Medicare and setting up new retirement savings accounts have become particularly hard sells.

 Political analysts note that presidents traditionally endure much flak on domestic initiatives during times of war. There is less cash to go around after national security needs are met and opposition party members unwilling to criticize a wartime president on foreign policy focus their criticism on domestic issues.

 If a war is brief and successful, then Bush "would garner great kudos," said Tom Mann, a political analyst with the Brookings Institution. "But if we continue with sluggish growth, a jobless recovery, growing deficits and competing demands for federal resources, the president is going to find that the further we get away from 9-11 and an attack on Iraq, the more problematic are politics at home."

 For his part, Bush asserts that "this economy needs help" and largely blames the 2001 recession, the Sept. 11 attacks and "a loss of confidence in the markets because of the corporate scandals."

 Meanwhile, his aides find themselves in the awkward position of having to play down optimistic predictions by Greenspan and others that a quick victory in Iraq will spur economic recovery _ in an effort to try to salvage those Bush tax cuts and other "stimulus" measures.

 "As you know, economists don't always agree," said R. Glenn Hubbard, chairman of the White House Council of Economic Advisers. "Geopolitical risks are a key source of uncertainty to the economy, but I don't think they're the only ones."

Bargain hunting helps move stocks up despite Iraqi uncertainty; Dow up 158.93

www.therecord.com Saturday February 14, 2003 - 18:42:42 EST MALCOLM MORRISON

TORONTO (CP) - Stocks finished higher Friday as investors swooped to buy beaten-down shares in what's perceived to be an oversold market amid uncertainty as to what will happen next with the Iraqi crisis.

The Canadian dollar closed at 65.66 cents US, down 0.23 after a half-cent gain Thursday, and gold fell $5.70 to $351.30 US an ounce in New York. Stock markets took heart from a relatively positive assessment of Iraqi compliance from chief United Nations chief weapons inspector Hans Blix, who said Friday that UN inspectors haven't found any weapons of mass destruction.

On the other hand, Blix said, many banned military materials remain unaccounted for and U.S. State Secretary Colin Powell asserted "the threat of force must remain" - causing markets to initially give up their early gains.

Still, the Dow industrial average was up 158.93 points to 7,908.8 late in the day. The blue-chip barometer edged up 44 points on the week.

The Nasdaq was ahead 32.73 at 1,310.17 for a gain of 27.7 points this week and the S&P 500 index rose 17.52 to 834.89.

Gains in the information technology sector helped balance weakness in the gold sector to give the S&P/TSX index a gain of 34 points to 6,487.13, adding 9.39 points this week. The junior TSX Venture Exchange was up 8.36 at 1,095.49.

On the Toronto Stock Exchange, Nortel Networks advanced 11 cents to $3.53. The financial sector was also stronger as Royal Bank rose $1.30 to $56. The gold sector fell 2.6 per cent. Barrick Gold lost 87 cents to $24.

Crude oil futures edged up 44 cents to a 29-month high of $36.80 US a barrel on the New York Mercantile Exchange. Crude prices have been pushed up by the Iraqi crisis and a general strike in Venezuela, another major petroleum producer.

Analysts were doubtful the gains of the session would stick since the Blix report didn't convince markets that war would be averted.

"The running assumption in the markets right now is that there will be a war, it will happen - happen very quickly - and the second half of the year will be very strong," said Mark Chandler, financial markets economist at Scotiabank.

The U.S. market was supported by a solid earnings report Thursday from Dell Computer. The No. 2 maker of personal computers reported record fourth-quarter sales and a profit of $603 million US, up 32 per cent. Its shares rose $2.54 to $25.77 US.

In economic data, American industrial production rose 0.7 per cent in January after a 0.4 per cent drop in December. But the University of Michigan consumer confidence index fell to 79.2 for February, its lowest level since September 1993. A reading of 82.5 had been expected.

Analysts said the confidence number had little effect on the markets, perhaps because previous swings in the index have not been reflected in consumer spending.

"What they tell the polls is very different from what they do at the shopping mall," said Patricia Croft, managing partner at Sceptre Investment. "So I pay more attention to what they do than what they say."

On the Toronto market, advances beat declines 545 to 496 with 225 unchanged.

The bottom line of Telus, Canada's second-largest phone company was hit by restructuring and workforce-reduction charges. Losses for the fourth quarter totalled $139.2 million, triple the $46.7-million loss a year ago. Telus shares rose 52 cents to $16.90.

Rogers Communications, which controls major cable TV, wireless phone, broadcasting, publishing and sports businesses, reported a sharp turnaround from a $173.7-million loss a year ago.

But the $698.2-million profit at Rogers Communications came from a $904.3-million gain on the sale of its shares in AT&T Canada. Excluding non-recurring items, Rogers lost $88.3 million. Rogers B shares rose 78 cents to $13.63.

Shares in the Brascan conglomerate were ahead 20 cents at $29.90 after it reported that it lost $174 million in the fourth quarter after a charge at its Noranda mining subsidiary. However, Brascan reported solid results from its financial, property and energy-generation operations, with cash flow from operations up 17 per cent on the year.

Another big Canadian conglomerate, Onex, lost $145 million last year as several businesses it controls - notably electronics assembler Celestica - struggled. Onex shares lost 17 cents to $14.45 while Celestica advanced 44 cents to $16.60.

Canfor was down 24 cents to $9.46 after the B.C. forestry producer said it earned $11.5 million in 2002, despite low prices for lumber and pulp and the burden of $108 million in American import tariffs. The year's profit was down from $26.4 million in 2001. Canfor stock fell 24 cents to $9.46.

Other active Toronto stocks included ATI Technologies, ahead 27 cents at $6.43, Bombardier, up 15 cents to $5, and Inco, down 47 cents to $31.43.

Toronto volume was 143.8 million shares worth $1.61 billion.

The Nasdaq Canada index was up 2.31 points to 222.25.

The New Oil Order - Washington's War on Iraq is the Lynchpin to Controling Persian Gulf Oil

www.corpwatch.org By Michael Renner Foreign Policy in Focus February 14, 2003 Only in the most direct sense is the Bush administrations Iraq policy directed against Saddam Hussein. In contrast to all the loud talk about terrorism, weapons of mass destruction, and human rights violations, very little is being said about oil. The administration has been tight-lipped about its plans for a post-Saddam Iraq and has repeatedly disavowed any interest in the countrys oil resources. But press reports indicate that U.S. officials are considering a prolonged occupation of Iraq after their war to topple Saddam Hussein. It is likely that a U.S.-controlled Iraq will be the linchpin of a new order in the world oil industry. Indeed, a war against Iraq may well herald a major realignment of the Middle East power balance.

Oil Forever

The Bush administrations ties to the oil and gas industry are beyond extensive; they are pervasive. They flow, so to speak, from the top, with a chief executive who grew up steeped in the culture of Texas oil exploration and tried his hand at it himself; and a second-in-command who came to office with a multi-million dollar retirement package in hand from his post of CEO of Halliburton Oil. Once in office, the vice president developed an energy policy under the primary guidance of a cast of oil company executives whose identities he has gone to great lengths to withhold from public view.

Since taking office, the president and vice president have assembled a government peopled heavily with representatives from the oil culture they came from. These include Secretary of the Army Thomas White, a former vice president of Enron, and Secretary of Commerce Don Evans, former president of the oil exploration company Tom Brown, Inc., whose major stake in the company was worth $13 million by the time he took office.

The Bush administrations energy policy is predicated on ever-growing consumption of oil, preferably cheap oil. U.S. oil consumption is projected to increase by one-third over the next two decades. The White House is pushing hard for greater domestic drilling and wants to open the Arctic National Wildlife Refuge to the oil industry. Even so, the administrations National Energy Policy Development Group, led by Vice President Cheney, acknowledged in a May 2001 report that U.S. oil production will fall 12% over the next 20 years. As a result, U.S. dependence on imported oilwhich has risen from one-third in 1985 to more than half todayis set to climb to two-thirds by 2020.1

Since the 1970s, the U.S. has put considerable effort into diversifying its sources of supply, going largely outside of OPEC and outside the Middle East. The current administration is advocating greater efforts to expand production in such far-flung places as the Caspian area, Nigeria, Chad, Angola, and deep offshore areas in the Atlantic basin and is looking to leading Western Hemispheric suppliers like Canada, Mexico, and Venezuela.2 West Africa is expected to account for as much as a quarter of U.S. oil imports a decade from now.3

But there is no escaping the fact that the Middle Eastand specifically the Persian Gulf regionremains the worlds prime oil province, for the U.S. and for other importers. Indeed, the Cheney report confirms that by any estimation, Middle East oil producers will remain central to world oil security. The Middle East currently accounts for about 30% of global oil production and more than 40% of oil exports. With about 65% of the planets known reserves, it is the only region able to satisfy the substantial rise in world oil demand predicted by the Bush administration.4 The Cheney report projects that Persian Gulf producers alone will supply 54-67% of world oil exports in 2020.5

Saudi Arabia is a pivotal player. With 262 billion barrels, it has a quarter of the worlds total proven reserves and is the single largest producer.6 More importantly, the Saudis have demonstrated repeatedlyafter the Iranian revolution, and following Iraqs invasion of Kuwaitthat they are prepared to compensate for losses from other suppliers, calming markets in times of turmoil. Today, Riyadh could raise its production of 8 million barrels per day (b/d) to 10.5 million b/d within three months, making up for any loss of Iraqi oil during a U.S. military assault.7

Iraq: From Pariah to Fabulous Prize

The pariah state of Iraq, however, is a key prize, with abundant, high-quality oil that can be produced at very low cost (and thus at great profit). At 112 billion barrels, its proven reserves are currently second only to Saudi Arabias. The Energy Information Administration (EIA) of the U.S. Department of Energy estimates that additional probable and possible resources could amount to 220 billion barrels. And because political instability, war, and sanctions have prevented thorough exploration of substantial portions of Iraqi territory, there is a chance that another 100 billion barrels lie undiscovered in Iraqs western desert. All in all, Iraqs oil wealth may well rival that of Saudi Arabia.8

At present, of course, this is mere potentialthe Iraqi oil industry has seriously deteriorated as a result of the 1980-88 Iran-Iraq War, the 1991 Gulf War, and inadequate postwar investment and maintenance. Since 1990, the sanctions regime has effectively frozen plans for putting additional fields into production. It has also caused a severe shortage of oil field equipment and spare parts (under the sanctions regime, the U.S. has prevented equipment imports worth some $4 billion). Meanwhile, questionable methods used to raise output from existing fields may have damaged some of the reservoirs and could actually trigger a decline in output in the short run.9

But once the facilities are rehabilitated (a lucrative job for the oil service industry, including Vice President Cheneys former employer, Halliburton) and new fields are brought into operation, the spigots could be opened wide. To pay for the massive task of rebuilding, a post-sanctions Iraq would naturally seek to maximize its oil production. Some analysts, such as Fadhil Chalabi, a former Iraqi oil official, assert that Iraq could produce 8-10 million b/d within a decade and eventually perhaps as much as 12 million.10

The impact on world markets is hard to overstate. Saudi Arabia would no longer be the sole dominant producer, able to influence oil markets single-handedly. Given that U.S.-Saudi relations cooled substantially in the wake of the September 11, 2001, terrorist attacksrifts that may widen furthera Saudi competitor would not be unwelcome in Washington. An unnamed U.S. diplomat confided to Scotlands Sunday Herald that a rehabilitated Iraq is the only sound long-term strategic alternative to Saudi Arabia. Its not just a case of swapping horses in mid-stream, the impending U.S. regime change in Baghdad is a strategic necessity.11

Washington would gain enormous leverage over the world oil market. Opening the Iraqi spigot would flood world markets and drive prices down substantially. OPEC, already struggling with overcapacity and a tendency among its members to produce above allotted quotas (an estimated 3 million barrels per day above the agreed total of 24.7 million b/d), might unravel as individual exporters engage in destructive price wars against each other.12

A massive flow of Iraqi oil would also limit any influence that other suppliers, such as Russia, Mexico, and Venezuela, have over the oil market. Lower prices could render Russian oilmore expensive to produceuncompetitive, which would cloud the prospects for attracting foreign investment to tap Siberian oil deposits.13 Russias weak economy is highly dependent on oil export revenues. Its federal budget is predicated on prices of $24-25 per barrel.14 Aleksei Arbatov, deputy chairman of the Russian parliaments defense committee, predicts that if a new Iraqi regime sells oil without limits, our budget will collapse.15

Oil Company Interests

To repair and expand its oil industry, Iraq will need substantial foreign investment. Thus, for eager oil companies, Iraq represents a huge bonanzaa boom waiting to happen, according to an unnamed industry source.16

Prior to the OPEC revolution in the early 1970s, a small number of companies (referred to as the majors or Seven Sisters) called the shots in the industry, controlling activities from exploration and production to refining and product sales. But they lost much of their reserve base, as nationalization spread through the Middle East and OPEC nations.

Today, state oil companies own the vast majority of the worlds oil resources. Even though private companies still do much of the exploring, drilling, and pumping, in many countries they have access to the oil only under prices and conditions set by the host government. Although oil companies have managed to adjust to this situation, a directly owned concession would offer them far greater flexibility and profitability.

The dominant private companies (ExxonMobil and Chevron-Texaco of the U.S., Royal Dutch-Shell and BP of Britain and the Netherlands, TotalFinaElf of France), which are largely the result of recent megamergers, sell close to 29 million barrels per day in gasoline and other oil products. But production from fields owned by these super-majors came to 10.1 million barrels per day in 2001, or just 35% of their sales volume.17

Although these corporations have poured many billions of dollars into discovering new fields outside the Middle East, their proven reserves stood at just 44 billion barrels in 2001, 4% of the worlds total and sufficient to keep producing oil for only another 12 years at current rates.18 The situation is similar for other oil companies. Thus, the oil-rich Middle East, and particularly Iraq, remains key to the future of the oil industry.

If a new regime in Baghdad rolls out the red carpet for the oil multinationals to return, it is possible that a broader wave of denationalization could sweep through the oil industry, reversing the historic changes of the early 1970s. Squeezed by a decade of sanctions, the current regime has already signaled that it is prepared to provide more favorable terms to foreign companies.19 Such an invitation by Baghdad would be in tune with larger changes that are afoot, as a growing number of oil producing countries are opening their industries to foreign direct investment.20

Rivalries and Quid Pro Quos

Several European and Asian oil companies have in recent years signed deals with Iraq that, if consummated, would give them access to reserves of at least 50 billion barrels and a potential output of 4-5 million barrels per day (another estimate says that Russian companies alone have signed deals involving about 70 billion barrels). In addition, a number of contracts have been signed for exploration in the western desert.21

Russian, Chinese, and French companies in particular have tried to position themselves to develop new oil fields and to rehabilitate existing ones, once UN sanctions are lifted. Russias Lukoil, for instance, signed an agreement in 1997 to refurbish and develop the West Qurna field (with 15 billion barrels of oil reserves). Chinas National Petroleum Corporation signed a deal for the North Rumailah reservoir. And Frances TotalFinaElf has set its eyes on the giant Majnoon deposits (holding 20-30 billion barrels).22

Iraq has sought to use the lure of oil concessions to build political support among three permanent Security Council nationsFrance, Russia, and Chinafor a lifting of sanctions. Although the international consensus in favor of sanctions has badly eroded, this gamble has failed to pay off in the face of determined U.S. and British opposition. (In December 2002, Iraq cancelled a contract with three Russian companies, out of frustration that the firmsin deference to sanctionshad not commenced oil exploration work.)

As long as Saddam Hussein stays in power, U.S. and British companies will be kept out of Iraq, but ongoing sanctions will also thwart existing oil development plans.

Regime change in Baghdad would reshuffle the cards and give U.S. (and British) companies a good shot at direct access to Iraqi oil for the first time in 30 yearsa windfall worth hundreds of billions of dollars. U.S. companies relish the prospect: Chevrons chief executive, for example, said in 1998 that hed love Chevron to have access to Iraqs oil reserves.23

In preface to the passage of Security Council Resolution 1441 on November 8, there were thinly veiled threats that French, Russian, and Chinese firms would be excluded from any future oil concessions in Iraq unless Paris, Moscow, and Beijing supported the Bush policy of regime change. Ahmed Chalabi, leader of the Iraqi National Congress (INC), an exile opposition group favored by the Bush administration, said that the INC would not feel bound by any contracts signed by Saddam Husseins government and that American companies will have a big shot at Iraqi oil under a new regime.

U.S. and British oil company executives have been meeting with INC officials, maneuvering to secure a future stake in Iraqs oil.24 Meanwhile, the State Department has been coaxing Iraqi opposition members to create an oil and gas working group involving Iraqis and Americans.25

Nikolai Tokarev, general director of Russias Zarubezhneft, a state-owned oil company, reflected in late 2002: Do Americans need us in Iraq? Of course not. Russian companies will lose the oil forever if the Americans come.26 Fears of being excluded from Iraqs oil riches and losing influence in the region have fed Russian, French, and Chinese interest in constraining U.S. belligerence. These countries nonetheless are eager to keep their options open in the event that a pro-U.S. regime is installed in Baghdad, avoiding the risk of ending up on the wrong side of Washington, as the New York Times put it.27

Rival oil interests were a crucial behind-the-scenes factor as the permanent members of the UN Security Council jockeyed over the wording of Resolution 1441, intended to set the conditions for any action against Iraq. It is likely that backroom understandings regarding the future of Iraqi oil were part of the political minuet that finally led to the resolutions unanimous adoption. U.S. promises that the other powers would get a slice of the pie, hinted at in broad terms, were apparently inducement enough to win their nod. It is thus unlikely that French, Russian, and Chinese companies will be completely locked out of a post-Saddam Iraq, though they could find themselves in a junior position.

From Surrogates to Direct Control

Throughout the history of oil, sorting out who gets access to this highly prized resource and on what terms has often gone hand in hand with violence. At first it was Britain, the imperial power in much of the Middle East, that called the shots. But for half a century, the U.S.seeking a preponderant share of the earths resourceshas made steady progress in bringing the Persian Gulf region into its geopolitical orbit. In Washingtons calculus, securing oil supplies has consistently trumped the pursuit of human rights and democracy.

U.S. policy toward the Middle East has long relied on building up proxy forces in the region and generously supplying them with arms. After the Shah of Iran, the Wests regional policeman, was toppled in 1979, Iraq became a surrogate of sorts when it invaded Iran. Washington aided Iraq in a variety of ways, including commodity credits and loan guarantees, indirect arms supplies, critical military intelligence in Baghdads long battle against Iran, a pro-Iraqi tilt in the tanker war, and attacks on Irans navy.

Beginning in the 1970s, but particularly in the wake of the 1991 Gulf War, the U.S. supplied Saudi Arabia and allied Persian Gulf states with massive amounts of highly sophisticated armaments. After the Gulf War, U.S. forces never left the region completely. By prepositioning military equipment and acquiring access to military bases in Saudi Arabia, Kuwait, Bahrain, and Qatar, Washington prepared the ground for future direct intervention as needed.

In the Persian Gulf and adjacent regions, access to oil is usually secured by a pervasive U.S. military presence. From Pakistan to Central Asia to the Caucasus and from the eastern Mediterranean to the Horn of Africa, a dense network of U.S. military facilities has emergedwith many bases established in the name of the war on terror.

Although the U.S. military presence is not solely about oil, oil is a key reason. In 1999, General Anthony C. Zinni, then the head of the U.S. Central Command, testified to the Senate Armed Services Committee that the Persian Gulf region is of vital interest to the U.S. and that the country must have free access to the regions resources.28

Bush administration officials have, however, categorically denied oil is one of the reasons why they are pushing for regime change in Iraq. Nonsense, Defense Secretary Donald Rumsfeld told 60 Minutes Steve Kroft in mid-December 2002. It has nothing to do with oil, literally nothing to do with oil.

But oil industry officials interviewed by 60 Minutes on December 15 painted a different picture. Asked if oil is part of the equation, Phillip Ellis, head of global oil and gas operations for Boston Consulting replied, Of course it is. No doubt.

In fact, oil company executives have been quietly meeting with U.S.-backed Iraqi opposition leaders. According to Ahmed Chalabi, head of the Iraqi National Congress, The future democratic government in Iraq will be grateful to the United States for helping the Iraqi people liberate themselves and getting rid of Saddam. And he added that American companies, we expect, will play an important and leading role in the future oil situation in Iraq.

EndNotes

  1. National Energy Policy Development Group, Reliable, Affordable, and Environmentally Sound Energy for Americas Future (Washington: U.S. Government Printing Office, May 2001), pp. x and 1-13.

  2. Ibid., pp. 8-3 and 8-7.

  3. James Dao, In Quietly Courting Africa, White House Likes Dowry, New York Times, September 19, 2002.

  4. Production and reserves are from BP Statistical Review of World Energy 2002; exports are from OPEC Annual Statistical Bulletin 2001 (Vienna: 2002), Table 26.

  5. National Energy Policy Development Group, Reliable, Affordable, and Environmentally Sound Energy for Americas Future (Washington: U.S. Government Printing Office, May 2001), p. 8-4.

  6. BP Statistical Review of World Energy 2002. Ultimately recoverable estimate is from U.S. Department of Energy, Energy Information Administration (EIA), Saudi Arabia Country Analysis Brief, October 2002, www.eia.doe.gov.

  7. Past Saudi production increases are from BP Statistical Review of World Energy 2002; potential for current increase is from Jeff Gerth, U.S. Fails to Curb Its Saudi Oil Habit, Experts Say, New York Times, November 26, 2002.

  8. U.S. Department of Energy, Energy Information Administration (EIA), Iraq Country Analysis Brief, October 2002, . Iraqi oil officials agree, estimating reserves at 270-300 billion barrels in Iraqs Oil Industry: An Overview, Platts, .

  9. U.S. Department of Energy, Energy Information Administration (EIA), Iraq Country Analysis Brief, October 2002, www.eia.doe.gov.

  10. Fadhil J. Chalabi, Iraq and the Future of World Oil, Middle East Policy, vol. vii, no. 4, October 2000, .

  11. and Blood, Sunday Herald, October 6, 2002, www.sundayherald.com.

  12. OPEC overproduction data is from Neela Banerjee, As Its Members Flout Oil Quotas, OPEC Considers New Approach, New York Times, December 12, 2002.

  13. Dan Morgan and David B. Ottoway, In Iraqi War Scenario, Oil Is Key Issue, Washington Post, September 15, 2002.

  14. Stratfor, War in Iraq: Whats at Stake for Russia? November 22, 2002 (distributed electronically).

  15. Arbatov quoted in Sabrina Tavernise, Oil Prize, Past and Present, Ties Russia to Iraq, New York Times, October 17, 2002.

  16. Quote from James A. Paul, Iraq: The Struggle for Oil, August 2002, Global Policy Forum website, www.globalpolicy.org.

  17. Calculated from OPEC Annual Statistical Bulletin 2001 (Vienna: 2002), Table 77.

  18. Ibid.

  19. U.S. Department of Energy, Energy Information Administration (EIA), Iraq Country Analysis Brief, October 2002, www.eia.doe.gov.

  20. The Iraq Oil Industry After Sanctions, Middle East Institute conference proceedings summary, February 29, 2000, as reposted on the Global Policy Forum website, www.globalpolicy.org.

  21. Deutsche Bank estimates, reported in U.S. Department of Energy, Energy Information Administration (EIA), Iraq Country Analysis Brief, October 2002, www.eia.doe.gov. The higher estimate is from Zarubezhneft, a Russian state-owned company. See Sabrina Tavernise, Oil Prize, Past and Present, Ties Russia to Iraq, New York Times, October 17, 2002.

  22. U.S. Department of Energy, Energy Information Administration (EIA), Iraq Country Analysis Brief, October 2002, www.eia.doe.gov.

  23. Speech by Kenneth T. Derr, www.chevrontexaco.com.

  24. Chalabi quote is from Dan Morgan and David B. Ottoway, In Iraqi War Scenario, Oil Is Key Issue, Washington Post, September 15, 2002. Peter Beaumont and Faisal Islam, Carve-Up of Oil Riches Begins, The Observer (United Kingdom), November 3, 2002.

  25. Stratfor, War in Iraq: Whats at Stake for Russia? November 22, 2002 (distributed electronically).

  26. Sabrina Tavernise, Oil Prize, Past and Present, Ties Russia to Iraq, New York Times, October 17, 2002.

  27. Serge Schmemann, Controlling Iraqs Oil Wouldnt Be Simple, New York Times, November 3, 2002.

  28. Zinni quote is from James A. Paul, Iraq: The Struggle for Oil, August 2002, Global Policy Forum website, www.globalpolicy.org. Testimony of April 13, 1999. Michael Renner is a Project Director with the Worldwatch Intsitute in Washington, DC. serves as project director for the Institutes annual Vital Signs publication. His book, Fighting for Survival: Environmental Decline, Social Conflict, and the New Age of Insecurity, is one of the most frequently-cited sources in the literature on redefining security. This article originally appeared in the January 2003 issue of Foreign Policy in Focus and is reprinted with permission.

CorpWatch PO Box 29344 San Francisco, CA 94129 USA Tel: 415-561-6568 Fax: 415-561-6493 URL: www.corpwatch.org Email: corpwatch@corpwatch.org

China registers trade deficit

english.eastday.com

China unexpectedly posted a trade deficit for the first time in more than six years as it stored crude oil ahead of a possible war on Iraq and consumers took advantage of tariff cuts to buy more imported cars.

The deficit in January was US$1.25 billion, the first time the nation has posted a shortfall since December 1996, Xinhua news agency said, citing Customs statistics. Imports rose 63 percent to US$31 billion, driven by a 78 percent increase in the volume of oil imported. Exports rose 37 percent to US$29.8 billion.

General motors Corp. and other carmakers took advantage of China's entry into the World Trade Organization to import more cars into the country and also to increase production at plants assembling parts shipped from overseas.

"It is surprising," said Robert Subbaraman, an economist at Lehman Brothers in Tokyo. "My suspicion is there were temporary factors involved. Oil prices have been going up so China might be trying to front load their imports."

As china imported greater quantities of oil, prices rose. The price of crude in New York has risen 73 percent in the past year on concern an Iraq war may disrupt supplies from the Middle East. A workers' strike in Venezuela also reduced output from the world's fifth largest exporter of the fuel.

Crude could extend its gains because of the "war jitters" and increased concern about supplies in the U.S. after inventories last week fell to the lowest since 1975, said Gordon Kwan, an oil and gas analyst with HSBC Securities in Hong Kong.

China will build a 20-million-ton strategic oil reserve to protect itself from a war in Iraq and other conflicts that may disrupt supply from the Middle East, the government said last month. The country plans to stockpile about 149 million barrels, enough to meet oil demand for one month, said Song Chaoyi, a deputy director at the State Development Planning Commission.

As china's economy expands at the fastest pace of any major Asian nation, incomes are rising, increasing the affordability of foreign cars, wines and other goods. At the same time, the local prices of these pro-ducts are falling as tariffs fall following China's entry into the WTO.

Car imports rose more than three-quarters to 127,394 units last year after the country increased its vehicle quotas as part of its WTO commitments. Car and auto part imports totaled US$860 million last month, two-and-a-half times what they were a year earlier, according to Xinhua. China will increase its vehicle import quota 15 percent this year to US$9.12 billion.

Britain remains vigilant amid alerts

www.examiner.ie 15/02/03

BRITAIN remained on terror alert last night after another day of security scares across Britain.

A total of nine suspects have now been arrested near airports in the north and south of England, while Heathrow’s Terminal Two was evacuated after a security alert yesterday. Six of the suspects were subsequently released from custody. Five of them were later handed over to the immigration service. One man caught with a hand grenade getting off a jet at Gatwick airport on Thursday

was still being questioned last night by anti-terrorism officers. Police in West Yorkshire also revealed that on Thursday they arrested two men, aged 25 and 26, and seized a car near the perimeter fence of Leeds/Bradford Airport. They were also being questioned last night.

Roads were closed around Stansted in Essex yesterday while security has been beefed up at airports in Manchester, Bristol and Birmingham since high profile security measures were launched on Tuesday.

Passengers were evacuated in a security alert at Heathrow’s Terminal Two, which was closed for an hour-and-a- half. It reopened in the afternoon, after a suspect package was found. It turned out to be a false alarm.

Scotland Yard revealed that four men in their 20s were arrested on Thursday afternoon in Langley, Berkshire four miles from Heathrow Airport. They were later released from arrest under anti-terrorism laws but were kept in custody and handed over to the Immigration Service.

Two other arrests made on Thursday in the Hounslow area, near Heathrow, were described as not significant. One man was released yesterday and one handed over to the Immigration Service.

Anti-terror squad detectives are still questioning the 37-year-old man from Venezuela caught with a live hand grenade in his luggage at Gatwick. Checks are being made in the capital Caracas to establish his background while he remains at high security Paddington Green police station in London.

Irish passengers flying to Britain were not affected by the terrorist warnings and evacuations at Heathrow airport yesterday.

Aer Rianta said there had been some delays at Dublin airport but no more than any “normal afternoon”