All eyes fixed on Iraqi oil
April 30, 2003 By Hussain Hindawi and John R. Thomson WashingtonTimes.com-UNITED PRESS INTERNATIONAL
Iraq is a wealthy country, with the second-largest oil reserves in the region and, unique among Arab nations, large water supplies.
Although it may take two years to increase oil output to the 3.6 million barrels per day prior to the 1991 Gulf war, current levels of 2.5 million t o 2.8 million barrels per day are enough to keep bread on the nation's table.
Industry professionals estimate an unproven reserve in excess of 150 billion barrels in the long term. Added to proven reserves of 112 billion barrels, Iraq's petroleum potential rivals that of the world's largest producer, Saudi Arabia.
The importance of Iraq's water resources cannot be exaggerated.
The Tigris River runs from the north through the center of Baghdad to the Persian Gulf. With the mighty Euphrates, the Tigris creates the rich Fertile Crescent in the southern half of the country. The area's rich marshlands, the center of the majority Shi'ite Muslim community, were drained by the regime after the Shi'ites tried to overthrow Saddam Hussein after the 1991 Gulf war.
In the process, agricultural capacity as well as the country's most important tourist attraction were eliminated. But Iraq's agricultural potential is so great that it again may become a net exporter of food to the Middle East in three to five years.
The political arena is where the postwar battle of Baghdad is being waged.
In Babylonian times, 2,600 years ago, the government that replaced King Nebuchadnezzar bore some resemblance to democracy, but except for a brief period in the 1920s, modern Iraq has had no experience with democracy.
Across the centuries, the land and people of Iraq have been conquered by invaders. Foreign-born and domestic despots have been the rule. The current challenge is whether indigenous faction leaders can lead their people to a solution that is both representative and effective, as well as democratic.
Iraq has one advantage: Its ethnic and religious groups had a long history of peaceful coexistence before Saddam Hussein set tribe against tribe and sect against sect. That and the high education level of Iraqis may give the country a reasonable chance to achieve a workable political framework.
A separate issue is whether the United States and its allies will strike the right balance of guidance or control during the months, or perhaps years, of peacekeeping in Baghdad and the other main population centers: Basra, Kirkuk and Mosul.
Many observers expect the United States to dominate postwar Iraq, creating long-term consequences throughout Arab nations and the entire Muslim world. Some Iraqi analysts do not rule out an armed Iraqi national resistance that could inflict such heavy losses that Washington would withdraw, as it did 30 years ago from Vietnam.
Saddam, apparently hoping for such a scenario, told a visiting Vietnamese delegation shortly before the war that his country was unable to stop an American attack, but could and would survive.
Analysts reminded Washington of what happened when World War I British forces invaded that portion of the German-allied Ottoman Empire that became Iraq. Hundreds of British troops died during a June 1920 revolt, leading to Britain's withdrawal and eventual recognition of an independent Iraq.
The newspaper Al Thawra, the leader among Iraq's government-controlled press, contended several months ago that the "Americans and British are trying, more than 80 years after the [1920 revolt], to impose a mandate on the Iraqi people under illusory and foolish pretexts."
However, several Iraqi intellectuals, including Islamists and leftists, have refrained from prejudging U.S. intentions toward their country.
After the April 21 arrival in Baghdad of U.S. postwar civil administrator Jay Garner, 65, a retired general, most Iraqi intellectuals remain skeptical of President Bush's commitment to help the Iraqi people create a pluralistic and democratic government that guarantees freedoms and maintains control over the country's natural resources.
Gen. Stanley Maude, commander of the British force that occupied Baghdad in March 1917, spoke similarly to the Iraqi people on entering the capital: "I am designated to invite you, through your representatives, to participate in administering your interests; and to assist the British political representatives accompanying the army to support you, north and south, east and west, in achieving your national aspirations."
Gen. Maude said the British aim in opposing German territorial ambitions was to "liberate the people with final and total freedom, and establish governments and national administrations chosen by the national residents."
After recognizing Iraq's nominal independence, Britain sent a garrison of 150,000 troops. Iraq did not achieve real independence until the 1958 military overthrow of King Faisal.
Meanwhile, U.S. ideals expressed in the Declaration of Independence won admiration among the Arab elite — until the CIA-backed coup in Iran overthrowing Mohammed Mossadegh in 1952.
Concerns over American intentions deepened after the first Ba'athist coup in 1963, in which an estimated 5,000 leftist and democratic Iraqis perished. The role of U.S. intelligence services was well-known, prompting Ali Saleh al-Saadi, secretary-general of the Ba'ath Party, to say years later: "We came to power on an American train."
Until Iraq's 1990 invasion of Kuwait, the Arab image of the United States was negative, particularly regarding the Palestinian issue and a perceived Washington bias toward Israel. This, combined with Washington's strong economic interest in secure sources of oil, prompted criticism of a U.S. double standard regarding democracy.
"Iraq will burn with its oil," an Iraqi poet predicted more than 60 years ago on hearing the news of Iraq's first petroleum revenues. In subsequent decades, the country's "black gold" proved to be a curse and the cause of manifold miseries, including foreign occupations, military coups, and wars internal and external.
It was oil that allowed Saddam to intimidate, coerce and kill his Kurdish and Shi'ite countrymen and to invade Iran and Kuwait. Earlier, oil had been the overriding reason for Britain's occupation. Oil was also the driving force behind the first Ba'athist coup in 1963 and the second in 1968, supported financially by British and U.S. oil companies.
Are more oil fires in Iraq's future? The paradox, or perhaps the problem, is that there appears to be no end to oil discoveries — so much so that industry analysts believe Iraq may replace Saudi Arabia as having the world's largest proven reserves and highest production.
Just 15 of 74 proven oil fields are in production, and of the 59 that are untapped, 10 rank among the largest in the world. Moreover, of 526 known and evaluated petroleum deposits that have been classified as prospects, 125 have been drilled. It was these fields that French and Russian oil companies coveted and for which they had been vying for signed agreements with the ousted regime.
Extraction of Iraqi oil, limited under international sanctions imposed since 1990, stood at war's end this month at 2.8 million barrels per day, down sharply from an estimated 3.6 million barrels per day in the first half of 1980, before the outbreak of the Iraq-Iran war.
Iraq's Oil Ministry had planned last year to develop 350 wells across the country under contracts with several Russian and French oil firms. Major emphasis was to be on the huge southern oil fields, as part of an ambitious plan to increase production to 6 million barrels per day.
Some analysts view the United States as having mixed motives for toppling Saddam's regime. The stated objective of disarming Iraq of weapons of mass destruction was considered by some convenient cover for Washington to reduce its dependence on Saudi oil, as well as to guarantee U.S. supervision of Iraq's oil wealth.
Paradoxically, U.S. refineries continued to be the largest importer of Iraqi oil while the Bush administration mobilized its forces to oust the regime. A report by the Commerce Department revealed that Iraqi oil shipments to the United States tripled in the fourth quarter of 2002, constituting about 6.4 percent of U.S. oil imports.
Whatever happens, oil will be a central element affecting Iraqi events. Whether an Iraqi leadership loyal to the United States is installed in Baghdad or the Americans administer the country more directly, oil will figure prominently.
Before the outbreak of hostilities, Secretary of State Colin L. Powell said the United States would control the oil resources from the outset, "to manage them for the interest of the Iraqi people." It is widely presumed that U.S. energy companies seek long-term involvement in the rehabilitation and expansion of Iraq's oil industry.
One scenario predicts the United States will increase Iraq's oil production to 8 million barrels per day, with the aim of breaking the power of the 11-member Organization of the Petroleum Exporting Countries (OPEC) by lowering oil prices and reducing dependency on Saudi oil.
This would be a historical irony, since Iraq was one of OPEC's five original founders in 1960, along with Iran, Kuwait, Saudi Arabia and Venezuela.
French analysts fear that contracts between French oil firms and Saddam's regime are moot, recalling former CIA Director James Woolsey's warning that only if the French and Russians cooperated with the United States in replacing Saddam would U.S. companies be inclined to cooperate with counterparts in these two countries.
One Arab observer mused on an either-or situation: "How will Iraq's oil revenues be used? To finance the coalition occupation ... without explicit U.N. authorization? Or to concentrate on improving the lives of Iraqis so they may savor the taste of change?"
In the first case, the United States would be the primary party responsible for all of Iraq, including its oil, giving Washington a chance to weaken, if not destroy, OPEC. It would exploit Iraq's oil reserves as a means to reduce the influence of the other Gulf countries, especially Saudi Arabia, and enable more Iraqi oil to be pumped at lower prices to the American market.
In addition, it would punish countries opposed to the U.S.-British use of force — particularly France, Germany and Russia.
How the new Iraqi government deals with OPEC and existing production and pricing commitments will have significant impacts on the oil industry worldwide. Russia, with $7 billion to $8 billion of aging Soviet-era loans owed to it by Iraq, would have benefited significantly from exploration and production deals between Russian oil companies and Iraq as part of a larger economic agreement.
Just last year France successfully negotiated an agreement to develop the Majnoun field, believed to contain 30 billion barrels of oil. This agreement is in jeopardy, as is France's favored commercial position with Iraq for the past 30 years in which Jacques Chirac, now its president, was a prime player.
• Hussain Hindawi is an Iraqi historian and journalist who currently serves as editor of UPI's Arabic News Service. John R. Thomson has lived in Beirut, Cairo and Riyadh, Saudi Arabia, and reported on Israel's 1967 Six-Day War and the 1991 Gulf war.