Rush to revive Iraqi oil has other nations wary-- U.S. leaders vow any riches will be spent to rebuild Mideast country

Posted on Sun, Jun. 08, 2003 TIMOTHY L. O'BRIEN New York Times

Attention, shoppers: Iraqi oil is for sale.

On Thursday, exactly two weeks after the U.N. Security Council lifted 13 years of economic sanctions against Iraq and gave the United States a firm grip on one of the world's most bounteous oil spigots, Baghdad put 10 million barrels of crude up for bid.

Although Baghdad is still mired in crime and no weapons of mass destruction have surfaced in Iraq, Washington is helping market Iraqi oil with all due haste. A former Shell Oil executive heads a panel supervising Iraq's oil fields and crude will now be sold directly to refiners, thus eliminating a middleman role once dominated by Russian oil traders. French refiners also once enjoyed a healthy foothold in Iraq before their government wound up on the wrong side of the U.N. war debate, giving a leg up to enthusiastic U.S. and British refiners, which couldn't deal directly with Iraq during the sanctions era.

Call it a coup de petrole.

And since Iraq has the world's second-largest pool of known oil reserves, the Bush administration's handling of the money that flows from those fields is certain to ripple far beyond Iraq's borders -- particularly because some two-thirds of Iraq's estimated oil bounty remains untapped.

Although Iraq's oil industry is being overhauled in a way that creates welcome opportunities for Fortune 500 oil giants, U.S. authorities promise that oil riches will be spent on Iraqi reconstruction and humanitarian aid. Even so, Iraqis and others Middle Eastern countries remain wary about possible U.S. shenanigans with Iraqi oil and are watching sales to see whether the United States waged a war of liberation or a war of occupation.

"People in the region and beyond have a great suspicion of U.S. intentions; and with the U.S. and the U.K. in control of the second-biggest pot of oil in the Gulf region those suspicions will be reinforced," said Judith Kipper, co-director of the Middle East Studies Program at the Center for Strategic and International Studies. "I think they're unfounded suspicions because the U.S. won't play games with Iraqi oil."

"But since the U.S. and Britain have been busy trying to get U.N. sanctions against Iraq lifted, and haven't been perceived as being as busy restoring public services in Iraq, the perception that this is about oil is reinforced," Kipper added. "And in the Middle East, perception is everything."

Iraq's oil numbers are humbling. The country has 112.5 billion barrels of known reserves, second to Saudi Arabia's 262 billion. The United States, Mexico, and Canada combined have only 64 billion barrels, and that supply is aging. Venezuela (78 billion barrels), Africa in its entirety (77 billion barrels), Russia (65 billion barrels, including the Caspian), and the Asia-Pacific region (44 billion barrels) are comparative half-pints.

Other Middle Eastern oil titans like Iran, Kuwait and the United Arab Emirates have oil reserves in the 90-billion- to 98-billion-barrel range. But those fields pump at a much fuller tilt than Iraq's outmoded, jury-rigged operations.

Once Iraqi oil pumps are back to speed, and the country's untapped fields are probed, it could become an even greater force within OPEC and the world oil markets. As Vice President Dick Cheney observed in warning of Saddam Hussein's oil aspirations, whoever sits atop the Middle Eastern oil market has a "stranglehold" on the global economy.

Oil analysts say it will be at least five years before Iraq's oil output ramps up fully; it will cost at least $5 billion, they say, to rehabilitate its oil fields.