Who will have the biggest stake if war on Iraq happens? - Who will benefit from oil in post-Saddam Iraq?

www.middle-east-online.com First Published 2003-01-24, Last Updated 2003-01-24 10:28:25

US Secretary of State says Iraq's oil will be held for country's people in event of US occupation of country.

By Maher Chmaytelli - CAIRO As the United States builds up its forces in the Gulf ahead of a possible strike on Iraq, the oil-related aspect of the crisis over Iraqi disarmament has come to the fore this week.

Britain's Guardian newspaper said the US military has drawn up plans to protect Iraq's oil fields in the event of a war and prevent a repeat of the 1991 Gulf War, when the Iraqi army set Kuwait's wells ablaze.

The US State Department and the Pentagon disclosed the preparations during a meeting in Washington last month with members of Iraqi opposition parties, the left-wing newspaper reported Thursday.

One of those at the meeting said a plan to protect the oil wells was "already in place," hinting special forces will secure key installations at the start of any ground campaign to topple the Iraqi regime, it said.

US Secretary of State Colin Powell said in remarks released on Wednesday that Iraq's oil would be held for the country's people in the event of a US occupation of the country.

Powell told reporters from major US regional newspapers that Washington was studying what to do with the Iraqi oil industry in the event of occupation but said no conclusions had yet been reached.

"If there is a conflict with Iraq and we and the leadership of the coalition take control of Iraq, the oil of Iraq belongs to the Iraqi people," he said.

Washington and London have insisted that oil was not a factor in the confrontation with Iraq, which has the second largest oil reserves in the world after Saudi Arabia.

But an influential US senator warned France and Russia on Thursday that if they wanted access to Iraqi oil fields in a post-Saddam Iraq, they must be ready to stand shoulder-to-shoulder in any US-led military intervention.

The comment was reported by a spokesperson for Senator Richard Lugar, the Republican chairman of the Senate foreign relations committee.

"The case he (Lugar) made is that the Russians and the French, if they want to have access to the oil operations or concessions or whatever afterward, they need to be involved in the effort to depose Saddam as well," spokesman said.

Baghdad in the 1990s signed agreements with French, Russian and Chinese companies to develop giant fields as part of a long-term plan to raise production capacity to six million barrel per days (bpd).

Iraq currently produces some 2.5 million bpd, and its loss in the event of war has prompted fears of an oil price shock.

Algerian Oil Minister warned this week that OPEC may not be able to compensate an expected shortfall of supplies of around five million bpd if a war on Iraq breaks out before the end of the strike crippling Venezuela's production.

"There is a question over OPEC capability to supply the market needs because the maximum available (extra) capacity is only three million bpd ... from Saudi Arabia and UAE," Khelil told the Saudi newspaper Al-Watan.

Although OPEC agreed on January 12 to increase oil production by 1.5 million bpd as of February 1, prices have remained above the 30 dollars per barrel mark.

Experts said the OPEC increase covers only the amount which the cartel was already pumping in excess of its previous production ceiling.

A former Saudi oil minister and one of OPEC's founders, Sheikh Ahmed Zaki Yamani, warned Monday in Doha the price of crude may soar to 100 dollars a barrel if Iraq sets oil fields ablaze in the event of a US-led war.

In other energy-related news in the region, the Financial Times reported that Saudi Oil Minister Ali al-Nuaimi, who has held the post since 1995, wanted to retire if the government is reshuffled in May.

Analysts said that Western energy majors companies were pressing for the replacement of Nuaimi, who was seen as a main obstacle to foreign investment in mega gas projects in Saudi Arabia worth 25 billion dollars.

In other economic news, the World Bank's executive directors have endorsed a new country assistance strategy and 305-million-dollar lending package for the fiscal years 2003-2005 to fight poverty and unemployment in Jordan.

A World Bank official said that Jordan could receive additional assistance during this period if the pace of ongoing reforms is accelerated.