US seeks less dependence on Saudi oil

<a href=www.middle-east-online.com>Middle East Online

IISS says Washington encourages privatisation of Iraqi oil sector as alternative to Saudi Arabian supply.

LONDON - Washington has encouraged the privatisation of the Iraqi oil sector as it seeks to reduce its dependence on Saudi Arabia for oil since the September 11 attacks, the London-based IISS security think-tank said Tuesday.

Since the al-Qaeda attacks in Washington and New York in 2001, the United States has also sought oil-supply alternatives to the Middle East, particularly to Saudi Arabia, the International Institute for Strategic Studies said in its annual evaluation and forecast of world affairs.

"The neo-conservative gameplan that would reshape Iraq in the aftermath of the US military campaign into a market-reforming economy" has prominent supporters inside the US administration, IISS's strategic survey said.

"This influential group... takes the position that change in Iraq could be steered to bring more democratic principles to the Middle East, while leveraging expanding Iraqi oil production to undermine the dominance of other oil producers and render OPEC less important," it said.

"This is a highly optimistic and arguably unrealistic scenario," IISS said.

"While no one can say with certainty how democratic change in Iraq might alter the region, autocracy has always been a dominant feature of the Middle Eastern political landscape," the report said.

More than 60 percent of the world's proven oil reserves are concentrated in the Middle East region, which currently answers a third of the global demand. One quarter of all oil reserves are found in Saudi Arabia.

Iraq, Iran, Syria, Sudan and Libya, - so-called "countries of concern" to the United States - produce about 10 percent of the world's oil supply, the IISS report said.

A second trend in Washington "calls for a major grassroots initiative in energy source diversity", such as encouraging renewable energies, the report said.

A change in Iraq's status meanwhile could unleash competition among oil producers within the Organisation of Petroleum Exporting Countries (OPEC) that has been dormant for years, the IISS said.

Elsewhere OPEC faces a different picture with Venezuela's capacity constrained by well shut-ins, reservoir damage, and with civil unrest in Nigeria.

How the oil landscape will look in the five-to-10-year horizon is hard to predict, given the wide range of variables including geology, global environment politics, technological change and the shifting geopolitical relationships of the post-September 11 world, the survey said.

"Russia and the newly independent states of its southern flank are ranked second in undiscovered oil potential after the Persian Gulf, holding about 27 percent of the world's oil reserves," IISS said.

The region ranks first globally in undiscovered natural gas, it added.

But, IISS said, Russia has a long way to catch up with Saudi Arabia's oil in terms of exports.

"Thus, although Russia will be increasingly important to the US plans to diversify oil supply, a more varied strategy is still needed," the survey concluded.