www.middle-east-online.com First Published 2003-03-10, Last Updated 2003-03-10 17:04:46 By Perrine Faye - LONDON

Escalating war worries drive boil prices to new two and half year high despite OPEC's efforts to calm oil market.

Oil prices nosed higher in early trading here on Monday as war worries escalated at the start of a crucial week in the Iraq crisis and efforts by OPEC energy ministers to try to calm the market fell on deaf ears.

The price of a barrel of benchmark Brent North Sea crude oil for April delivery climbed to a new two and a half year high of 34.55 dollars, before easing back to 34.15 dollars, up five cents from the previous close.

In New York, the reference light sweet crude April-dated futures contract shot up 78 cents to 37.78 dollars a barrel on Friday.

Prices resumed their upswing as the UN Security Council prepared to debate a vote on a US-British resolution giving Baghdad until March 17 to disarm or face war, as France wooed opposition among African states.

Washington warned it could launch strikes before next Monday's deadline if the United Nations rejected the resolution.

"It looks as if it could be a very strong week for crudes and the products as war fears mount," said GNI-Man Financial analyst Lawrence Eagles

"Iraq will continue to dominate market talk, especially as it would appear as if the US will have to go to war without a UN mandate," he added.

Jittery oil traders found little solace in remarks from oil ministers attending a meeting of the Organisation of Petroleum Exporting Countries (OPEC) in Vienna to discuss production quotas.

Venezuela and Algeria, two members of the 11-strong cartel, said they believed OPEC had enough room for manoeuvre to avoid a supply shortage in the event of war.

But UAE oil minister Obaid Al-Nasseri said it would be difficult for the oil cartel to increase production as it is already at almost full capacity, a concern shared by analysts.

Eagles said of the OPEC ministers, "Politically they are important but in practical terms few observers believe that there is any significant spare capacity outside of Saudi Arabia."

The oil minister for Iran, the second-biggest producer within OPEC, also poured cold water on any hopes among oil-importing nations that the cartel might agree to pump more oil at their formal meeting on Tuesday.

Bijan Namdar Zangeneh said it was "not at all justifiable to increase OPEC production," in remarks carried by the official Iranian IRNA news agency.

"There is no shortage of oil in the market and present prices are not at all indicative of the market situation," he said in Tehran before leaving for Vienna.

OPEC ministers are therefore expected to agree to maintain the cartel's overall output ceiling of 24.5 million barrels per day, rolling over a 6.5-percent increase introduced at the start of February to compensate for disruption to supplies from strike-hit Venezuela.

Commerzbank analyst Jon Rigby agreed that this was the most likely outcome because "there isn't a great deal of new capacity to be introduced."

"The second thing is that the market is probably reasonably well supplied at the moment, simply because we are now moving towards the second quarter when demand typically falls for seasonal reasons (spring in the northern hemisphere).

"Also, Venezuelan production is starting to increase again and OPEC had increased production to compensate for Venezuela. All those things point to the fact that an increase in OPEC quotas is unlikely," he added.

washingtontimes.com

     LONDON (AP) — OPEC representatives won't have their usual influence on oil prices when they meet tomorrow to review the group's output quotas for crude, analysts say.      Members of the Organization of the Petroleum Exporting Countries already are pumping at or near full production capacity, as worsening fears of a U.S.-led war on Iraq have pushed prices to 12-year highs.      A conflict almost certainly would cut off Iraq's crude exports, currently totaling about 2 million barrels a day. With Venezuela's oil exports still recovering from a strike, OPEC would be hard-pressed to cover a shortfall in Iraqi shipments.      "That's one of the reasons now why the market is so incredibly nervous," said Orrin Middleton, an energy analyst at Barclays Capital. "The real problem is how much can OPEC really do?"      OPEC supplies about a third of the world's oil, but some analysts estimate it has only 1.4 million barrels a day in readily available spare capacity. The United States and other large importing countries are coordinating plans to tap into their strategic petroleum reserves as the ultimate cushion against a major supply disruption, should fighting erupt in Iraq.      OPEC, whose delegates meet tomorrow in Vienna, Austria, can help by suspending its formal production quotas and producing with maximum effort. But at the moment, analysts say, international politics has robbed the cartel of much of its influence.      "For once OPEC is in the back seat, looking out the window. The U.S. is in the front seat, driving the war wagon," said Leo Drollas, chief economist at the Center for Global Energy Studies.      When OPEC oil ministers last met two months ago, they decided to increase the group's production target by 6.5 percent to 24.5 million barrels a day, in the hope of keeping prices at or below $28 a barrel.      Prices have climbed steadily since then. On Feb. 27, futures contracts of U.S. light, sweet crude spiked to a post-Persian Gulf war high of $39.99 a barrel in New York. April contracts of U.S. crude were trading Friday at $37.30 a barrel, while Brent futures for April delivery were at $33.75 in London.      OPEC's members are cashing in on these high prices by pumping well above their official quotas. In February, the group's 10 members, excluding Iraq, produced 24.7 million barrels a day, according to a Dow Jones Newswires survey. Iraq doesn't participate in OPEC's production agreements because the United Nations oversees its exports.      Energy Secretary Spencer Abraham and Claude Mandil, executive director of the International Energy Agency, expressed gratitude Friday for OPEC's willingness to break its own quotas. The agency is the energy watchdog for the Organization for Economic Cooperation and Development, a club of rich oil-importing nations.      "The U.S. government and IEA appreciate the actions of producer nations, which have already increased production to mitigate the effects of the Venezuelan disruption," Mr. Abraham and Mr. Mandil said in a joint statement issued at the agency's headquarters in Paris.      "In light of tight markets, we also appreciate producers' willingness to increase production if necessary to address any further supply disruption."      Mr. Mandil has consulted with officials at OPEC's headquarters in Vienna, in a sign of closer cooperation between importing countries and the cartel. Mr. Abraham planned to visit the city tomorrow on separate business and indicated that he might seek talks with key oil ministers.

www.balochistanpost.com Monday, March 10, 2003 By Linda Diebel, The Toronto Star

"Islam shall be the State religion of Pakistan and the Injunctions of Islam as laid down in the Holy Quran and Sunnah shall be the supreme law and source of guidance for legislation to be administered through laws enacted by the Parliament…" The Constitution, Article 2

WASHINGTON: Any day now, there will be bombs falling on Baghdad.

Conventional bombs like nothing the world has ever seen.

"The Third Mech will be driving down the main drag in Baghdad.''

"The bombs will still be ringing in their ears when the 'Third Mech' shows up,'' says U.S. military analyst John Pike, of Iraq's Saddam Hussein and whatever's left of his so-called elite Republican Guard after the first days of aerial pulverization.

Pike, director of GlobalSecurity.org, describes an assault on Saddam's regime that begins with "shock-and-awe'' aerial bombardment, and quickly moves into crush mode with the Third Infantry Division (Mechanized) rolling up from the Kuwaiti desert and U.S. Marines storming the port city of Basra.

"Chances are 90 per cent it will go pretty quickly, and 10 per cent it will turn into one big holy mess,'' predicts Pike.

But, before turning to the combat debut of bombs that weigh about 9,000 kilos and can take out an entire battalion, consider why the United States is going to war.

Consider who drew up U.S. goals and objectives in the Persian Gulf, when, and why.

Consider oil.

This particular operation — Pentagon working title: "OpPlan 10-03-Victor" — has been on the drawing board for a year, according to defence officials. The immediate goal is disarming Iraq and getting rid of Saddam. It's expected to begin soon, this week or next. Hard to hold back more than 300,000 U.S. and British troops, in place and pumped to go.

But the long-term goal, say big-picture analysts, has been in the works for far more than the 23 years since former U.S. president Jimmy Carter linked American security — "the vital interests of the United States'' — to the Persian Gulf and its oil, and threatened military intervention.

This war, say analysts, is about power and oil. It's about control of the Gulf states by means of strategic Iraq and, by extension, a final post-Cold War shakeout to give the U.S. more economic clout over China and Russia by controlling the oil spigot.

This is the moment, Thomas Barnett, from the U.S. Naval War College, wrote recently in Esquire magazine, "when Washington takes real ownership of strategic security in the age of globalization.''

The Persian Gulf has the world's biggest oil reserves. After Saudi Arabia, Iraq has the second-largest proven reserves.

"The only precedent to what is shaping up now is the Roman Empire,'' says Michael Klare, professor of peace and world security studies at Hampshire College. "There is only one power. I don't think Britain, France or Spain even came close in other centuries to the United States today.

"If the United States controls Persian Gulf oil fields, it will have a stranglehold on the world economy,'' adds Klare.

Washington is betting, Klare believes, that "controlling Gulf oil, combined with being a decade ahead of everybody else in military technology, will guarantee American supremacy for the next 50 to 100 years.''

These ideas aren't new.

For years, a small and powerful group, with corporate and political links, pushed the idea of controlling Persian Gulf oil. They did it publicly, at think-tanks and in the media. Now, this coterie of like-minded strategists controls both the Pentagon and the strategic aims of President George W. Bush's White House.

"You've got a team in the White House that is unafraid of world public opinion because they know it is unreliable, self-serving and hypocritical,'' says George Friedman, chair of the intelligence organization, Stratfor.

Originally, this was the "Kissinger plan,'' says James Akins, former U.S. ambassador to Saudi Arabia. He lost his state department job for publicly criticizing administration plans to control Arab oil back in 1975 when Henry Kissinger was secretary of state.

"I thought they were crazy then and they're crazy now,'' Akins tells the Star, adding that Congress studied plans to control Persian Gulf oil and concluded the idea was absolute madness.

"I thought this whole thing was dead. But now you've got all these `neo-cons' in power, and here we go again,'' says Akins, a Washington-based consultant. "They figure once they take over Iraq, they don't have to worry about the Saudis.''

Akins adds: "These people with their imperial ideas see themselves as part of the Great American Empire."

The players have moved steadily through the Republican presidencies of Ronald Reagan and Bush's father, George H.W. Bush and Bush himself.

They include: Vice-president Richard Cheney, a former oilman, like Bush, and defence secretary during his father's Persian Gulf War in 1991; Defence Secretary Donald Rumsfeld, once Reagan's personal emissary to the Middle East when Saddam was a U.S. friend and staunch ally; Rumsfeld's deputy Paul Wolfowitz, who began publicly calling for war against Iraq after the 9/11 terror attacks; and Richard Perle, chair of the Pentagon's Defence Policy Board, nicknamed the "Prince of Darkness'' for his political stick-handling.

They are joined by think-tankers, from fellows at the Project for the New American Century and the military and intelligence-oriented Centre for Strategic and International Studies (CSIS). Bush recently chose a CSIS forum, rather than the White House, to deliver a major prime-time speech to the American people to make the case for war. The CSIS board includes, among other heavy-hitters, Kissinger, former national security adviser Zbigniew Brzezinski and former CIA director James Schlesinger.

Bush often mentions Iraqi oil, a jarring focus for a president on the brink of war.

"We will seek to protect Iraq's natural resources from sabotage from a dying regime and ensure they are used for the benefit of Iraq's own people,'' he said in last week's radio address.

Colin Robinson, an analyst with the Washington-based Centre for Defence Information, says: "The United States can stand well-accused of trying to dominate the whole region for its oil. But conspiracy theories are usually too complicated for everybody to carry them off."

Friedman says the 1991 war left unfinished business, the "status quo'' of Saddam in power. Not so this time, he says, in a war which, as U.N. diplomats dither, has already begun.

In recent weeks, British and U.S. warplanes strayed outside "no-fly'' zones to bomb Iraqi surface-to-air missiles. Robinson describes these zones, set up by the U.S. and Britain after Desert Storm as "barely legal'' in terms of international law.

As well, U.N. officials report violations of the demilitarized zone between Iraq and Kuwait by U.S. soldiers.

But the real devastation should begin within days.

"We've got everything we need. We're just waiting on the word, the decision from the president," Maj.-Gen. Buford Blount, commander of the 3rd Infantry Division, told the Washington Post last week from Kuwait.

First comes aerial bombardment, an extraordinary 1,500 bombs every 24 hours during the time it takes heavy mechanized divisions to move up from Kuwait to Baghdad.

Big heavy bombers, from Diego Garcia in the Indian Ocean, buttressed by screaming navy and air force jets will pound Iraqi sites, picked by aerial drones and U.S. and British Special Forces already in Iraq.

Defence contractors are eager to test out new gadgetry. One new bomb is the 9,000-kilo MOAB (Massive Ordnance Air Burst).

"Well, it's very efficient,'' says Friedman. "Let's say you've got a large concentration of Republican Guard units, instead of having to do repeated bombing sorties, you can take out a battalion (500 to 600 troops) with one bomb.''

Friedman's sources in theatre tell him there are "terrific fights between defence department officials and field commanders who are raring to go now.''

He says time is the enemy of troops in the field. Sandstorms at the end of March, for example, could play havoc with laser targeting systems.

Without the anticipated "northern front'' through Turkey, there are plans for C-130s to ferry troops to northern Iraq, as well as missions for U.S. Marines and Special Forces to secure oil sites throughout Iraq.

"The U.S. military cannot be defeated on the conventional battlefield,'' says military analyst Pike.

But what about the variables?

How much of a threat is Saddam? What about chemical and biological weapons?

"We gonna find out,'' says Pike.

Meanwhile, Iraqi exiles, opposed to Saddam, have been meeting with U.S. and British oil executives, promising access and leases in return for political power.

And, the U.S., as Friedman points out, on the brink of world hegemony, is going to find out who its friends are.

"I do so enjoy Canadians (against the war) getting so obsessed with human rights, and then pay no attention to places like Venezuela,'' says Friedman, who thinks Venezuela's Hugo Chavez is next on Bush's military agenda.

"I read the Canadian press and I wonder what planet your country is on.

"We have allies, and we are going to see who they are,'' he concludes. "If France, if Canada, can't support us in opposition to Saddam Hussein, you can't say you are our allies. Canada consistently says it's an ally of the United States of America ... we'll see, won't we?''

www.taipeitimes.com NY TIMES NEWS SERVICE Monday, Mar 10, 2003,Page 12

For months, the OPEC has scrambled, with little success, to keep a lid on oil prices. With war threatening as the cartel's ministers meet in Vienna, Austria, this week, prospects for the global economy are so cloudy, analysts say, there is not much left for OPEC to do.

The oil producers are not alone in their plight. Around the world, and especially in the US, the problem of planning for the unknowable is upsetting the decisions of consumers, businesses and investors. That is hampering an economy struggling to better last year's meager growth, weighing on stock prices and subduing consumer spending.

Oil is a significant component of all those calculations. Crude oil prices have hit their highest levels since the Persian Gulf War of 1991, and S&P's estimates that high energy prices have cost the economy US$50 billion in consumer purchasing power, or 0.5 percentage point of growth, just since last fall. The Energy Department predicts that by April, consumers will be paying record-high prices for gasoline in much of the US.

In any effort to assess how prices will move -- and how the economy will react -- the echoes of history are inescapable. Just like in the fall of 1990, the massing of American troops near Iraq and fears that oil supplies from the Persian Gulf will be disrupted have pushed the price of oil well above US$30 a barrel for weeks.

But moste similarities end there, according to industry analysts. While few experts expect a war to lead to shortages of oil, most doubt there will be a replay of the events of the Gulf War.

Most analysts say that key indicators of the oil industry's health -- notably low inventories of oil and petroleum products at American refineries -- suggest that prices will remain steep regardless of military action.

A year-long series of production cuts by OPEC last year gradually reduced global oil supplies as world economies were growing stronger. Then a strike in Venezuela stripped 4 percent of the world's oil supply from the market. So the balance between supply and demand is much tighter than it was on the eve of the Gulf War.

Today, a war in Iraq would remove about 2 million barrels of oil a day from the market, analysts estimate. Some believe that OPEC, which does not disclose its production, has the spare capacity -- concentrated in Saudi Arabia -- to replace that oil. Others say they think the cartel's members are already pumping at full capacity, both in an effort to keep prices from spiraling even higher, at the risk of stifling demand, and to take advantage of the unusually high prices.

Ultimately, the price of oil will likely swing with the progress of a war, analysts say.

www.riyadhdaily.com.sa Economy   Monday - 10 March 2003 The Organisation of Petroleum Exporting Countries (OPEC) meets in Vienna on Tuesday to weigh its options amid the looming threat of war in Iraq, high oil prices and slumping oil inventories. The cartel will also "see what measures are needed to offset a shortage if there is a military strike in Iraq", an OPEC source said on Friday. Although production quotas are expected to be in the focus, however, analysts said OPEC will have little room for maneuver at its latest quarterly conference on output policy, given that spare production capacity is relatively small. "With oil storage levels still sitting well under normal, crude prices well over 30 dollars ... and the cartel’s spare capacity limited almost entirely to just Saudi Arabia, production quotas have effectively been suspended," said a research note by Merrill Lynch director of energy research Michael Rothman. Analyst George Beranek at PFC Energy, a Washington-based consulting group, also noted the divergence between quotas and actual production. "Production is what the market looks for, so at the moment any change in quotas would have little effect," he said. "The question is, do they just agree to disregard the quotas, or formally suspend them?" The price of benchmark Brent crude has soared more than 10 dollars since mid-November-a rise of over 40 percent-as a crippling 63-day strike choked off Venezuela’s output and traders speculated on the prospects of rising prices resulting from any war with Iraq. OPEC raised its collective output quota from 21.7 million barrels per day to 23.0 milloin bpd in January, and again to 24.5 milloin bpd in February, in a bid to rein in prices. But the quota hikes had little impact, partly because actual output by the group’s members already exceeded the quotas, analysts said. OPEC’s stated aim is to keep oil prices-based on a basket of seven crudes-within in a range of 22 to 28 dollars per barrel. But the price of OPEC’s basket has stayed well above the cartel’s upper target of 28 dollars a barrel since mid-December 2002, while US reference light sweet crude recently hit a 12-year high of almost 40 dollars in New York. With a possible war threatening to cut off Iraq’s output of 2-2.5 million bpd, attentions have turned to the ability of other producers to make up any shortfall. But most member countries are already pumping at or near capacity, leaving only OPEC giant Saudi Arabia in a position to boost production significantly, having already increased output from just over eight million bpd in December to 8.95 million bpd last month, according to industry estimates. Lawrence Eagles, an analyst at brokerage GNI-Man Financial said the latest survey of OPEC production pegged output including Iraq at 27.21 million bpd, up 1.56 million bpd since January. The US Department of Energy estimates that OPEC countries excluding Iraq and Venezuela hold between 2.1 and 2.5 mln bpd of excess oil production capacity that could be brought online. "This is the second lowest spare capacity level in the past three decades, trailing only the low reached in 1991 after the loss of Iraqi and Kuwaiti production," it said in a study published last Thursday. But analysts said the group is likely to continue ascribing current high oil prices to speculation about war with Iraq, rather than to extremely low global oil inventories. "We suspect that there will be some commentary that current crude prices are largely a function of factors ‘beyond OPEC’s control’, such as speculation about supply security because of a war against Iraq," Merrill Lynch’s Rothman said.