Adamant: Hardest metal

Iraqi oil production will have an impact on the Venezuelan economy

Venezuela's Electronic News
Posted: Monday, June 23, 2003
By: Jose Gabriel Angarita

VenAmCham economist Jose Gabriel Angarita writes: The price of OPEC oil went down again last week, to an average of $26.17 per barrel, compared to $27.54 per barrel the week before, according to figures published in El Universal today. The source is the OPEC Secretariat in Vienna.

The oil cartel is trying to keep prices in a band ranging from $22-28 per barrel, but expects a major decline when Iraq fully recovers its production capacity and expands its exports. Information has emerged that, following the recent military conflict, Iraq resumed oil exports through the port of Ceyhan this Sunday, putting an end to a two-month interruption due to the war.

Iraq, the country with the world's second-largest oil reserves, has signed contracts with companies from the United States, Spain, France, Turkey, and Italy to market its crude, meaning that oil exports will be gradually increasing. That will raise world oil supply and put downward pressure on prices. However, current Iraqi production stands at 750,000 barrels per day, the target for the end of June is 1 million barrels per day, and 2 million barrels per day should be flowing by the end of the year, though analysts view the latter figure as over-optimistic.

There is no question that when Iraqi production takes its place on the international market, it will have an impact on the Venezuelan economy, since income from crude oil exports, the leading source of foreign exchange for the Venezuelan economy, will go down. In that case, the National Treasury will find itself in an even more difficult position given the large number of internal and external spending commitments it must honor, as a result of the policy of massive public borrowing in the last five years.

The Iraq War as Danse Macabre-- Saddam and the WMD Mystery

CounterPunch
By HAROLD A. GOULD

The great question that lingers in the aftermath of the war America waged against Iraq is: Where are the weapons of mass destruction over which the war was allegedly fought? This is clearly the topic of the moment. A recent Washington Post article (June 13th) is the latest of numerous articles and commentaries which suggest that hard evidence for the existence of WMDs was at best meager and at worst mostly speculative. In the end, the most that has been found are two tractor trailers that might have been mobile chemical laboratories (although a recent Guardian article says they were for inflating hydrogen balloons used for artillery deployments), and a scattering of rusty barrels that might have or may not have contained weaponizable substances. Such slim pickings do not a massive stockpile of WMDs make! Especially when none of the bulky and hard to conceal delivery systems needed to launch toxic or nuclear attacks have ever been found. If subsequent investigations fail to reveal anything more tangible than this--i.e., if it turns out that the UN inspectors whose judgements the Bush administration so cavalierly dismissed were in fact accurate, and that Saddam's assertions that Iraq no longer possessed WMDs were true--then Mr. Bush and his neoconservative entourage will have much to answer for down the road.

The Bush administration clearly knows in private that their original rationale for waging preemptive war on such a massive scale was based upon enhanced intelligence data. So much so that revelations of its extent may yet bring down Tony Blair's prime-ministership in England. This is attested by the fact that the White House spin-doctors, including Mr. Bush himself, are subtly--or not so subtly?--altering the premises of their original scenario. They are now flooding the airways and the printways with a torrent of claims that, after all, it doesn't really matter if the smoking gun (or should we say, the noxious odors!) which was their original justification for undertaking a war adamantly opposed. by the international community has never been found. It is sufficient, they are asserting, that Saddam Hussain was a bad guy who constituted a "threat" to his neighbors and a menace to his own people.

This is a point with which some us can agree. One devoutly wishes that if preemptive war were going to be waged its primary motivation was to liberate an oppressed people rather than this being a retrospective byproduct of a war which its perpetrators themselves had little intention of waging for any sort of humane or compassionate reasons. Obviously, there is no country in today's world, superpower or not, that will blanketly employ this criterion for determining who's good and who's bad, and who is deserving of a preemptive American strike and who is not. It could be after all just as well be applied to dozens of countries in every part of the globe! Why not North Korea? Why not Iran? Why not Venezuela? Why not even China, for that matter, considering their human rights record? The answer, of course, is self-evident. In international politics, idealism has precious little to do with who gets singled out for the moral retribution over their human rights record! The decision to wage war is rarely by shimmering morality; it is determined by naked self-interest and by what you think you can get away with. Certainly this was the case with Iraq.

Apart from the apparently wide gap between truth and wishful thinking which fueled the Iraq campaign, there is, however, a further, greater irony in all this. It is: Why Saddam, if indeed he no longer possessed the stores of WMDs which the Bushies said he did, was he willing to prevent this fact from becoming known to the satisfaction of Washington and the UN and thus avoid reaping the wild wind? Why, in short, was Saddam willing to risk the destruction of his regime and his country essentially in the name of a quixotic bluff?

The answer probably lies in a mixture of factors, and may contain some insights into other, similar crises that may come down the road.

One factor that might be taken into consideration is Saddam Hussein's personal mind set. He was always a political gambler who had enjoyed a remarkable run of luck. "The strongest suggestion that Hussein had a substantial WMD program," notes Richard Cohen (Washington Post, June 17th) was his refusal to come clean. But it is also possible that he wanted the world -- particularly his neighbors (Iran) and his domestic opposition (Shiites, Kurds, etc.) [not to mention the United States] to think that he did." He had survived the onslaught mounted against him in 1991 by President Bush's father when nothing seemed more improbable. In the intervening decade, Saddam adroitly held UN inspectors at bay; endured a missile strike ordered by President Clinton in 1998 after he kicked the inspectors out of the country, successfully circumvented economic sanctions, and sustained his image on the Arab street as a revolutionary Islamic hero. In the face of the major divisions that emerged among the great powers over the American call for an Iraq crusade, it would not be surprising if Saddam believed that he could remain intransigent, dodge the bullet one more time, and retain his military-economic apparatus intact. Such are the instincts of dedicated gamblers, especially when driven by ideological certitudes!

Another related factor which addresses Saddam's staying power was his apparent belief that history if not the gods were in his corner. He depicted himself as the modern incarnation of Saladin, the great medieval warrior whose military victories over the Christian world laid the foundations of an Arab imperium that eventually stretched from India to the Atlantic Ocean, from Central Asia to North Africa, and the Balkans. One must never dismiss the power of apocalyptic fantasies in the hands of charismatic political dreamers. History is littered with their exploits, and their tragedies, ranging from the Mahdi in the Sudan to Wovoka among the American Plains Indians. In Saddam's case his imageries and his short-term successes won him a wide following in the Arab world and fed his illusions of omnipotence and invincibility. This illusion of political omnipotence undoubtedly contributed to what can only be characterized as a fool-hardy gamble that he could somehow survive even if he could not avoid a direct military confrontation with the world's only superpower.

It is in this context that some observations which American CIA Director, George Tenet, made in a 2000 public briefing. He spoke of what he believed to be the driving force behind Saddam's pursuit of chemical weapons. Iraq, he said, sought a bioweapons capacity "both for credibility and because every other strong regime in the region either has it or is pursuing it."

If the WMDs are never found, then what has taken place must be understood as one of the more bizarre manifestations ever witnessed of mutual deceit being pursued on a truly international scale. On one side we have the Bush administration, determined to wage war upon Iraq and Saddam Hussein for a host of genuine and spurious reasons, willing to distort and embellish the intelligence data to whatever degree necessary to justify it, and prepared to take whatever sweat might follow once the dimensions of the deception become public in the aftermath.

On the other side we have the Saddam Hussein regime, willing to risk everything for the sole purpose of clinging to a mythologized political image of itself as the premier radical Arab power with the capacity and the guile to successfully defy the authority both of the American superpower and the United Nations.

If the facts as we currently know them hold up, the Iraq war will undoubtedly take its place as a classic case of a symbiotically intertwined danse macabre between two nation-states whose addiction to the trappings of political power and jingoistically driven self-importance outweighed all considerations of measured reflection on the costs and consequences of impulsive political behavior. Thousands of dead and wounded innocents and billions of dollars worth of ruined infrastructure are the price that has been paid for the free play of this dueling exercise in over-inflated national egos.

Harold Gould is a Visiting Scholar in the Center for South Asian Studies at the University of Virginia. Email: 102062.477@compuserve.com.

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Analysis: Oil Privatization key for Iraq

By Ariel Cohen
Special to UPI
Published 6/17/2003 12:00 PM

WASHINGTON, June 17 (UPI) -- As the Bush White House and the Temporary Administration in Baghdad headed by L. Paul Bremer are planning the future of post-├║Saddam Iraq, economic issues also loom large on the horizon. After security is achieved and remnants of the ancien regime are eradicated, a postwar economic strategy needs to be developed and implemented, which will be beneficial for Iraq, for the countries of the Middle East, and for the developing world, which suffers disproportionally from high oil prices.

The full reintegration of Iraq's oil industry into the global marketplace would allow a more abundant and stable energy supply and a greater revenue flow for the Iraqi budget, foster a higher living standard for the Iraqi people, and provide numerous business opportunities for the region and the world. Private ownership of the oil industry is the key for such reform.

Saddam's regime has succeeded in bankrupting the country, even though it boasts the world's second largest oil reserves after Saudi Arabia. The oil sector provided more than 60 percent of the country's gross domestic product and 95 percent of its hard currency earnings. Yet GDP for 2001, at the market exchange rate, was estimated to be only about one-third its 1989 level. Iraq also is hobbled by its $200 billion foreign debt. This devastation was wrought by such policies as the nationalization of the country's chief export commodity, oil; extensive central planning of industry and trade; the 1982-├║1988 war against Iran; and the invasion of Kuwait, which precipitated the 1991 Gulf War. Iraq's economy has been grossly mismanaged. Sound economics are needed to help the Iraqi people rebuild their lives and their country after two decades of wars and four decades of repression under the previous regime.

The way out of the economic morass for the Iraqi economy lies through privatization of its abundant oil assets. If successful, Iraq's privatization of its oil sector, refining capacity, and pipeline infrastructure, could serve as a model for privatization by other OPEC members, thereby weakening the cartel's domination of the energy markets.

Examples of Russia, Great Britain and Norway indicate clearly that private ownership of the oil industry provides higher investment and production growth rates than state management. And the case of Venezuela proves that even relatively well-managed state oil companies are likely to disintegrate if poor political leadership is exercised, as President Hugo Chavez has demonstrated.

The road to economic prosperity in Iraq will not be easily paved, but the Bush Administration can help the future Iraqi government achieve fundamental structural reform with massive, orderly, and transparent privatization of various sectors of the economy, including the oil industry. The United States should offer its guidance on establishing sound economic and trade policies to stimulate growth and recovery.

Privatization efforts in other countries demonstrate that privately held infrastructure, including oil, and oil service companies, attract modern technology and management expertise, produce greater efficiencies, improve production standards, and generate higher revenues than do centrally planned and state-owned industries.

Iraq's oil industry cannot thrive without access to global capital markets. In particular, the Administration should work with the future leadership of Iraq to convince them that the next Iraqi federal government must develop mechanisms for privatizing industries and taxing oil sales. It should develop a taxation or another revenue distribution mechanism, such as a revenue management scheme, which will ensure sharing the energy proceeds equitably among individual Iraqis within the three major ethnic regions: Kurds in the North, Shi'a Arabs in the South, and Sunni Arabs in the central region. Examples of such schemes already exist in Alaska and Singapore, where funds are deposited into individual bank accounts. On the other hand, a Norwegian scheme, in which the nation's windfall oil revenue is managed by the government for the sake of the "society at large" -- not individuals -- is less advisable in the case of Iraq.

Economic reform cannot be neglected for long. In the coming months the United States, its allies, and international financial institutions (IFIs) must provide the necessary technical and financial assistance that enables the Iraqis to create modern legal environment that recognizes property rights and is conducive to privatization.

A key role here can be played by the large and successful Iraqi expatriate community (as well as other Western-educated Iraqis) to provide the personnel, expertise and entrepreneurial know-how that can ensure a successful privatization reform. Contrary to the advice proffered by some in Europe and the United Nations, who advocated continuation of the U.N.-run oil-for-food program, transition to private oil production should be rapid. Prices will need to be deregulated, including in the utilities and the energy sector. Finally, it should be a top priority to liberalize Iraq's trade, with an eye to eventual Iraqi membership in the World Trade Organization. Restoring Iraq quickly to the global economic mainstream is critical to end the damage caused by decades of isolation and to lift living standards.

Economic growth will be an important contribution to the stabilization of Iraq, allowing the United States and other forces stationed there to depart. As the Kingdom of Saudi Arabia looks increasingly shaky as the top global oil supplier due to the mounting concerns about indigenous terrorism, structural reform and comprehensive privatization is a winning strategy for the people of Iraq, its future government, for the region, and for the United States.
-0-
Ariel Cohen, Ph.D., is Research Fellow in the Davis Institute for International Studies at the Heritage Foundation. He specializes in international energy security.

Iraq Aims to Resume Oil Exports in Third Week of June

NewsStand - Monday, June 09, 2003
MENAFN-Agence France-Presse
Kamal Taha
BAGHDAD, June 9 (AFP)

BAGHDAD, June 9 (AFP) - Iraq plans to resume oil exports in the third week of June but does not expect production to return to pre-war levels for at least a year, acting oil ministry chief Thamir Ghadhban said Monday.

"We are processing contracts now with various interested parties and we hope that during the third week of this month the first shipment will be made available to the international market," Ghadhban said.

"Hopefully by the end of this month we will be producing about 1.5 million barrels per day (bpd) of crude oil and about two-thirds of that will be made available for export."

Ghadhban said output had already reached 500,000 bpd in the northern oil fields and 200,000 bpd in the south, but said he did not expect output to reach its pre-war levels for at least a year because of continued looting of the infrastructure and the wartime collapse of the power grid.

He has previously put pre-war production at three million bpd, although most Western analysts estimate it at closer to 2.5 million.

Ghadhban said the oil ministry had already recruited 3,000 security guards to protect facilities and expected to take on more.

The Iraqi bureaucrat said his staff and their advisors from the US-led coalition were reviewing all the existing contracts signed under the old regime, which favoured Chinese, French and Russian firms.

"We will be studying our contracts and evaluating them for contractual, legal and economic viability and take the proper decision in the future in the right time," he said.

But he promised that all foreign oil firms would be treated fairly as Iraq valued its position as a major supplier.

"We will be fair and just to everybody," he said.

"We are an international oil industry and therefore we are very careful and very serious about having amicable relationships with all international oil companies."

Ghadhban said Iraq was keen to reopen a 2.5-billion-dollar pipeline to Saudi Arabia which has been closed since Saddam Hussein's 1990 invasion of Kuwait and said he hoped the Saudi authorities would recognize Iraqi ownership over its entire length now that the strongman has been ousted.

He said it would not be for him to decide the fate of a pre-war agreement under which Jordan received all its import needs from Iraq, half of it for free and the rest at preferential rates.

"The agreement was between governments, not between oil ministers," he said. "That's why it is not a matter for the oil ministry to decide."

Ghadhban reiterated that there were no immediate plans to pull Iraq out of the OPEC oil cartel, although it would ultimately be a matter for a future Iraqi government to decide.

"Iraq is one of the founder members of OPEC with Saudi Arabia, Kuwait, Iran and Venezuela and ... has been and remains a member," he said.

"I am certain that as soon as the government is established, it is going to take the appropriate decision and Iraq certainly has all the means to remain a member."

British and US officials have made clear that they do not foresee handing over power to a sovereign Iraqi government for between one and two years.

In the meantime, US officials have pledged they will do nothing to prejudice the eventual decision.

"We will want to make sure that any decision on their future participation in OPEC is a decision that the representative government takes," US Under Secretary of State for Economics and Business Alan Larson told a Senate committee earlier this month.

"We need to be careful not to be seen as steering that because it does need to be seen as a decision they make in the interests of Iraq."

The news will certainly change the oil prices-- Iraq to resume oil exports in third week of June

Oil ministry chief does not expect output to reach pre-war levels for at least one year due to looting, weak power.

By Kamal Taha - BAGHDAD - Middle East Online
Iraq plans to resume oil exports in the third week of June but does not expect production to return to pre-war levels for at least a year, acting oil ministry chief Thamir Ghadhban said Monday.

"We are processing contracts now with various interested parties and we hope that during the third week of this month the first shipment will be made available to the international market," Ghadhban said.

"Hopefully by the end of this month we will be producing about 1.5 million barrels per day (bpd) of crude oil and about two-thirds of that will be made available for export."

Ghadhban said output had already reached 500,000 bpd in the northern oil fields and 200,000 bpd in the south, but said he did not expect output to reach its pre-war levels for at least a year because of continued looting of the infrastructure and the wartime collapse of the power grid.

He has previously put pre-war production at three million bpd, although most Western analysts estimate it at closer to 2.5 million.

Ghadhban said the oil ministry had already recruited 3,000 security guards to protect facilities and expected to take on more.

The Iraqi bureaucrat said his staff and their advisors from the US-led coalition were reviewing all the existing contracts signed under the old regime, which favoured Chinese, French and Russian firms.

"We will be studying our contracts and evaluating them for contractual, legal and economic viability and take the proper decision in the future in the right time," he said.

But he promised that all foreign oil firms would be treated fairly as Iraq valued its position as a major supplier.

"We will be fair and just to everybody," he said.

"We are an international oil industry and therefore we are very careful and very serious about having amicable relationships with all international oil companies."

Ghadhban said Iraq was keen to reopen a 2.5-billion-dollar pipeline to Saudi Arabia which has been closed since Saddam Hussein's 1990 invasion of Kuwait and said he hoped the Saudi authorities would recognize Iraqi ownership over its entire length now that the strongman has been ousted.

He said it would not be for him to decide the fate of a pre-war agreement under which Jordan received all its import needs from Iraq, half of it for free and the rest at preferential rates.

"The agreement was between governments, not between oil ministers," he said. "That's why it is not a matter for the oil ministry to decide."

Ghadhban reiterated that there were no immediate plans to pull Iraq out of the OPEC oil cartel, although it would ultimately be a matter for a future Iraqi government to decide.

"Iraq is one of the founder members of OPEC with Saudi Arabia, Kuwait, Iran and Venezuela and ... has been and remains a member," he said.

"I am certain that as soon as the government is established, it is going to take the appropriate decision and Iraq certainly has all the means to remain a member."

British and US officials have made clear that they do not foresee handing over power to a sovereign Iraqi government for between one and two years.

In the meantime, US officials have pledged they will do nothing to prejudice the eventual decision.

"We will want to make sure that any decision on their future participation in OPEC is a decision that the representative government takes," US Under Secretary of State for Economics and Business Alan Larson told a Senate committee earlier this month.

"We need to be careful not to be seen as steering that because it does need to be seen as a decision they make in the interests of Iraq."

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