www.corpwatch.org By Michael Renner Foreign Policy in Focus February 14, 2003 Only in the most direct sense is the Bush administrations Iraq policy directed against Saddam Hussein. In contrast to all the loud talk about terrorism, weapons of mass destruction, and human rights violations, very little is being said about oil. The administration has been tight-lipped about its plans for a post-Saddam Iraq and has repeatedly disavowed any interest in the countrys oil resources. But press reports indicate that U.S. officials are considering a prolonged occupation of Iraq after their war to topple Saddam Hussein. It is likely that a U.S.-controlled Iraq will be the linchpin of a new order in the world oil industry. Indeed, a war against Iraq may well herald a major realignment of the Middle East power balance.

Oil Forever

The Bush administrations ties to the oil and gas industry are beyond extensive; they are pervasive. They flow, so to speak, from the top, with a chief executive who grew up steeped in the culture of Texas oil exploration and tried his hand at it himself; and a second-in-command who came to office with a multi-million dollar retirement package in hand from his post of CEO of Halliburton Oil. Once in office, the vice president developed an energy policy under the primary guidance of a cast of oil company executives whose identities he has gone to great lengths to withhold from public view.

Since taking office, the president and vice president have assembled a government peopled heavily with representatives from the oil culture they came from. These include Secretary of the Army Thomas White, a former vice president of Enron, and Secretary of Commerce Don Evans, former president of the oil exploration company Tom Brown, Inc., whose major stake in the company was worth $13 million by the time he took office.

The Bush administrations energy policy is predicated on ever-growing consumption of oil, preferably cheap oil. U.S. oil consumption is projected to increase by one-third over the next two decades. The White House is pushing hard for greater domestic drilling and wants to open the Arctic National Wildlife Refuge to the oil industry. Even so, the administrations National Energy Policy Development Group, led by Vice President Cheney, acknowledged in a May 2001 report that U.S. oil production will fall 12% over the next 20 years. As a result, U.S. dependence on imported oilwhich has risen from one-third in 1985 to more than half todayis set to climb to two-thirds by 2020.1

Since the 1970s, the U.S. has put considerable effort into diversifying its sources of supply, going largely outside of OPEC and outside the Middle East. The current administration is advocating greater efforts to expand production in such far-flung places as the Caspian area, Nigeria, Chad, Angola, and deep offshore areas in the Atlantic basin and is looking to leading Western Hemispheric suppliers like Canada, Mexico, and Venezuela.2 West Africa is expected to account for as much as a quarter of U.S. oil imports a decade from now.3

But there is no escaping the fact that the Middle Eastand specifically the Persian Gulf regionremains the worlds prime oil province, for the U.S. and for other importers. Indeed, the Cheney report confirms that by any estimation, Middle East oil producers will remain central to world oil security. The Middle East currently accounts for about 30% of global oil production and more than 40% of oil exports. With about 65% of the planets known reserves, it is the only region able to satisfy the substantial rise in world oil demand predicted by the Bush administration.4 The Cheney report projects that Persian Gulf producers alone will supply 54-67% of world oil exports in 2020.5

Saudi Arabia is a pivotal player. With 262 billion barrels, it has a quarter of the worlds total proven reserves and is the single largest producer.6 More importantly, the Saudis have demonstrated repeatedlyafter the Iranian revolution, and following Iraqs invasion of Kuwaitthat they are prepared to compensate for losses from other suppliers, calming markets in times of turmoil. Today, Riyadh could raise its production of 8 million barrels per day (b/d) to 10.5 million b/d within three months, making up for any loss of Iraqi oil during a U.S. military assault.7

Iraq: From Pariah to Fabulous Prize

The pariah state of Iraq, however, is a key prize, with abundant, high-quality oil that can be produced at very low cost (and thus at great profit). At 112 billion barrels, its proven reserves are currently second only to Saudi Arabias. The Energy Information Administration (EIA) of the U.S. Department of Energy estimates that additional probable and possible resources could amount to 220 billion barrels. And because political instability, war, and sanctions have prevented thorough exploration of substantial portions of Iraqi territory, there is a chance that another 100 billion barrels lie undiscovered in Iraqs western desert. All in all, Iraqs oil wealth may well rival that of Saudi Arabia.8

At present, of course, this is mere potentialthe Iraqi oil industry has seriously deteriorated as a result of the 1980-88 Iran-Iraq War, the 1991 Gulf War, and inadequate postwar investment and maintenance. Since 1990, the sanctions regime has effectively frozen plans for putting additional fields into production. It has also caused a severe shortage of oil field equipment and spare parts (under the sanctions regime, the U.S. has prevented equipment imports worth some $4 billion). Meanwhile, questionable methods used to raise output from existing fields may have damaged some of the reservoirs and could actually trigger a decline in output in the short run.9

But once the facilities are rehabilitated (a lucrative job for the oil service industry, including Vice President Cheneys former employer, Halliburton) and new fields are brought into operation, the spigots could be opened wide. To pay for the massive task of rebuilding, a post-sanctions Iraq would naturally seek to maximize its oil production. Some analysts, such as Fadhil Chalabi, a former Iraqi oil official, assert that Iraq could produce 8-10 million b/d within a decade and eventually perhaps as much as 12 million.10

The impact on world markets is hard to overstate. Saudi Arabia would no longer be the sole dominant producer, able to influence oil markets single-handedly. Given that U.S.-Saudi relations cooled substantially in the wake of the September 11, 2001, terrorist attacksrifts that may widen furthera Saudi competitor would not be unwelcome in Washington. An unnamed U.S. diplomat confided to Scotlands Sunday Herald that a rehabilitated Iraq is the only sound long-term strategic alternative to Saudi Arabia. Its not just a case of swapping horses in mid-stream, the impending U.S. regime change in Baghdad is a strategic necessity.11

Washington would gain enormous leverage over the world oil market. Opening the Iraqi spigot would flood world markets and drive prices down substantially. OPEC, already struggling with overcapacity and a tendency among its members to produce above allotted quotas (an estimated 3 million barrels per day above the agreed total of 24.7 million b/d), might unravel as individual exporters engage in destructive price wars against each other.12

A massive flow of Iraqi oil would also limit any influence that other suppliers, such as Russia, Mexico, and Venezuela, have over the oil market. Lower prices could render Russian oilmore expensive to produceuncompetitive, which would cloud the prospects for attracting foreign investment to tap Siberian oil deposits.13 Russias weak economy is highly dependent on oil export revenues. Its federal budget is predicated on prices of $24-25 per barrel.14 Aleksei Arbatov, deputy chairman of the Russian parliaments defense committee, predicts that if a new Iraqi regime sells oil without limits, our budget will collapse.15

Oil Company Interests

To repair and expand its oil industry, Iraq will need substantial foreign investment. Thus, for eager oil companies, Iraq represents a huge bonanzaa boom waiting to happen, according to an unnamed industry source.16

Prior to the OPEC revolution in the early 1970s, a small number of companies (referred to as the majors or Seven Sisters) called the shots in the industry, controlling activities from exploration and production to refining and product sales. But they lost much of their reserve base, as nationalization spread through the Middle East and OPEC nations.

Today, state oil companies own the vast majority of the worlds oil resources. Even though private companies still do much of the exploring, drilling, and pumping, in many countries they have access to the oil only under prices and conditions set by the host government. Although oil companies have managed to adjust to this situation, a directly owned concession would offer them far greater flexibility and profitability.

The dominant private companies (ExxonMobil and Chevron-Texaco of the U.S., Royal Dutch-Shell and BP of Britain and the Netherlands, TotalFinaElf of France), which are largely the result of recent megamergers, sell close to 29 million barrels per day in gasoline and other oil products. But production from fields owned by these super-majors came to 10.1 million barrels per day in 2001, or just 35% of their sales volume.17

Although these corporations have poured many billions of dollars into discovering new fields outside the Middle East, their proven reserves stood at just 44 billion barrels in 2001, 4% of the worlds total and sufficient to keep producing oil for only another 12 years at current rates.18 The situation is similar for other oil companies. Thus, the oil-rich Middle East, and particularly Iraq, remains key to the future of the oil industry.

If a new regime in Baghdad rolls out the red carpet for the oil multinationals to return, it is possible that a broader wave of denationalization could sweep through the oil industry, reversing the historic changes of the early 1970s. Squeezed by a decade of sanctions, the current regime has already signaled that it is prepared to provide more favorable terms to foreign companies.19 Such an invitation by Baghdad would be in tune with larger changes that are afoot, as a growing number of oil producing countries are opening their industries to foreign direct investment.20

Rivalries and Quid Pro Quos

Several European and Asian oil companies have in recent years signed deals with Iraq that, if consummated, would give them access to reserves of at least 50 billion barrels and a potential output of 4-5 million barrels per day (another estimate says that Russian companies alone have signed deals involving about 70 billion barrels). In addition, a number of contracts have been signed for exploration in the western desert.21

Russian, Chinese, and French companies in particular have tried to position themselves to develop new oil fields and to rehabilitate existing ones, once UN sanctions are lifted. Russias Lukoil, for instance, signed an agreement in 1997 to refurbish and develop the West Qurna field (with 15 billion barrels of oil reserves). Chinas National Petroleum Corporation signed a deal for the North Rumailah reservoir. And Frances TotalFinaElf has set its eyes on the giant Majnoon deposits (holding 20-30 billion barrels).22

Iraq has sought to use the lure of oil concessions to build political support among three permanent Security Council nationsFrance, Russia, and Chinafor a lifting of sanctions. Although the international consensus in favor of sanctions has badly eroded, this gamble has failed to pay off in the face of determined U.S. and British opposition. (In December 2002, Iraq cancelled a contract with three Russian companies, out of frustration that the firmsin deference to sanctionshad not commenced oil exploration work.)

As long as Saddam Hussein stays in power, U.S. and British companies will be kept out of Iraq, but ongoing sanctions will also thwart existing oil development plans.

Regime change in Baghdad would reshuffle the cards and give U.S. (and British) companies a good shot at direct access to Iraqi oil for the first time in 30 yearsa windfall worth hundreds of billions of dollars. U.S. companies relish the prospect: Chevrons chief executive, for example, said in 1998 that hed love Chevron to have access to Iraqs oil reserves.23

In preface to the passage of Security Council Resolution 1441 on November 8, there were thinly veiled threats that French, Russian, and Chinese firms would be excluded from any future oil concessions in Iraq unless Paris, Moscow, and Beijing supported the Bush policy of regime change. Ahmed Chalabi, leader of the Iraqi National Congress (INC), an exile opposition group favored by the Bush administration, said that the INC would not feel bound by any contracts signed by Saddam Husseins government and that American companies will have a big shot at Iraqi oil under a new regime.

U.S. and British oil company executives have been meeting with INC officials, maneuvering to secure a future stake in Iraqs oil.24 Meanwhile, the State Department has been coaxing Iraqi opposition members to create an oil and gas working group involving Iraqis and Americans.25

Nikolai Tokarev, general director of Russias Zarubezhneft, a state-owned oil company, reflected in late 2002: Do Americans need us in Iraq? Of course not. Russian companies will lose the oil forever if the Americans come.26 Fears of being excluded from Iraqs oil riches and losing influence in the region have fed Russian, French, and Chinese interest in constraining U.S. belligerence. These countries nonetheless are eager to keep their options open in the event that a pro-U.S. regime is installed in Baghdad, avoiding the risk of ending up on the wrong side of Washington, as the New York Times put it.27

Rival oil interests were a crucial behind-the-scenes factor as the permanent members of the UN Security Council jockeyed over the wording of Resolution 1441, intended to set the conditions for any action against Iraq. It is likely that backroom understandings regarding the future of Iraqi oil were part of the political minuet that finally led to the resolutions unanimous adoption. U.S. promises that the other powers would get a slice of the pie, hinted at in broad terms, were apparently inducement enough to win their nod. It is thus unlikely that French, Russian, and Chinese companies will be completely locked out of a post-Saddam Iraq, though they could find themselves in a junior position.

From Surrogates to Direct Control

Throughout the history of oil, sorting out who gets access to this highly prized resource and on what terms has often gone hand in hand with violence. At first it was Britain, the imperial power in much of the Middle East, that called the shots. But for half a century, the U.S.seeking a preponderant share of the earths resourceshas made steady progress in bringing the Persian Gulf region into its geopolitical orbit. In Washingtons calculus, securing oil supplies has consistently trumped the pursuit of human rights and democracy.

U.S. policy toward the Middle East has long relied on building up proxy forces in the region and generously supplying them with arms. After the Shah of Iran, the Wests regional policeman, was toppled in 1979, Iraq became a surrogate of sorts when it invaded Iran. Washington aided Iraq in a variety of ways, including commodity credits and loan guarantees, indirect arms supplies, critical military intelligence in Baghdads long battle against Iran, a pro-Iraqi tilt in the tanker war, and attacks on Irans navy.

Beginning in the 1970s, but particularly in the wake of the 1991 Gulf War, the U.S. supplied Saudi Arabia and allied Persian Gulf states with massive amounts of highly sophisticated armaments. After the Gulf War, U.S. forces never left the region completely. By prepositioning military equipment and acquiring access to military bases in Saudi Arabia, Kuwait, Bahrain, and Qatar, Washington prepared the ground for future direct intervention as needed.

In the Persian Gulf and adjacent regions, access to oil is usually secured by a pervasive U.S. military presence. From Pakistan to Central Asia to the Caucasus and from the eastern Mediterranean to the Horn of Africa, a dense network of U.S. military facilities has emergedwith many bases established in the name of the war on terror.

Although the U.S. military presence is not solely about oil, oil is a key reason. In 1999, General Anthony C. Zinni, then the head of the U.S. Central Command, testified to the Senate Armed Services Committee that the Persian Gulf region is of vital interest to the U.S. and that the country must have free access to the regions resources.28

Bush administration officials have, however, categorically denied oil is one of the reasons why they are pushing for regime change in Iraq. Nonsense, Defense Secretary Donald Rumsfeld told 60 Minutes Steve Kroft in mid-December 2002. It has nothing to do with oil, literally nothing to do with oil.

But oil industry officials interviewed by 60 Minutes on December 15 painted a different picture. Asked if oil is part of the equation, Phillip Ellis, head of global oil and gas operations for Boston Consulting replied, Of course it is. No doubt.

In fact, oil company executives have been quietly meeting with U.S.-backed Iraqi opposition leaders. According to Ahmed Chalabi, head of the Iraqi National Congress, The future democratic government in Iraq will be grateful to the United States for helping the Iraqi people liberate themselves and getting rid of Saddam. And he added that American companies, we expect, will play an important and leading role in the future oil situation in Iraq.

EndNotes

1. National Energy Policy Development Group, Reliable, Affordable, and Environmentally Sound Energy for Americas Future (Washington: U.S. Government Printing Office, May 2001), pp. x and 1-13.

2. Ibid., pp. 8-3 and 8-7.

3. James Dao, In Quietly Courting Africa, White House Likes Dowry, New York Times, September 19, 2002.

4. Production and reserves are from BP Statistical Review of World Energy 2002; exports are from OPEC Annual Statistical Bulletin 2001 (Vienna: 2002), Table 26.

5. National Energy Policy Development Group, Reliable, Affordable, and Environmentally Sound Energy for Americas Future (Washington: U.S. Government Printing Office, May 2001), p. 8-4.

6. BP Statistical Review of World Energy 2002. Ultimately recoverable estimate is from U.S. Department of Energy, Energy Information Administration (EIA), Saudi Arabia Country Analysis Brief, October 2002, www.eia.doe.gov.

7. Past Saudi production increases are from BP Statistical Review of World Energy 2002; potential for current increase is from Jeff Gerth, U.S. Fails to Curb Its Saudi Oil Habit, Experts Say, New York Times, November 26, 2002.

8. U.S. Department of Energy, Energy Information Administration (EIA), Iraq Country Analysis Brief, October 2002, . Iraqi oil officials agree, estimating reserves at 270-300 billion barrels in Iraqs Oil Industry: An Overview, Platts, .

9. U.S. Department of Energy, Energy Information Administration (EIA), Iraq Country Analysis Brief, October 2002, www.eia.doe.gov.

10. Fadhil J. Chalabi, Iraq and the Future of World Oil, Middle East Policy, vol. vii, no. 4, October 2000, .

11. and Blood, Sunday Herald, October 6, 2002, www.sundayherald.com.

12. OPEC overproduction data is from Neela Banerjee, As Its Members Flout Oil Quotas, OPEC Considers New Approach, New York Times, December 12, 2002.

13. Dan Morgan and David B. Ottoway, In Iraqi War Scenario, Oil Is Key Issue, Washington Post, September 15, 2002.

14. Stratfor, War in Iraq: Whats at Stake for Russia? November 22, 2002 (distributed electronically).

15. Arbatov quoted in Sabrina Tavernise, Oil Prize, Past and Present, Ties Russia to Iraq, New York Times, October 17, 2002.

16. Quote from James A. Paul, Iraq: The Struggle for Oil, August 2002, Global Policy Forum website, www.globalpolicy.org.

17. Calculated from OPEC Annual Statistical Bulletin 2001 (Vienna: 2002), Table 77.

18. Ibid.

19. U.S. Department of Energy, Energy Information Administration (EIA), Iraq Country Analysis Brief, October 2002, www.eia.doe.gov.

20. The Iraq Oil Industry After Sanctions, Middle East Institute conference proceedings summary, February 29, 2000, as reposted on the Global Policy Forum website, www.globalpolicy.org.

21. Deutsche Bank estimates, reported in U.S. Department of Energy, Energy Information Administration (EIA), Iraq Country Analysis Brief, October 2002, www.eia.doe.gov. The higher estimate is from Zarubezhneft, a Russian state-owned company. See Sabrina Tavernise, Oil Prize, Past and Present, Ties Russia to Iraq, New York Times, October 17, 2002.

22. U.S. Department of Energy, Energy Information Administration (EIA), Iraq Country Analysis Brief, October 2002, www.eia.doe.gov.

23. Speech by Kenneth T. Derr, www.chevrontexaco.com.

24. Chalabi quote is from Dan Morgan and David B. Ottoway, In Iraqi War Scenario, Oil Is Key Issue, Washington Post, September 15, 2002. Peter Beaumont and Faisal Islam, Carve-Up of Oil Riches Begins, The Observer (United Kingdom), November 3, 2002.

25. Stratfor, War in Iraq: Whats at Stake for Russia? November 22, 2002 (distributed electronically).

26. Sabrina Tavernise, Oil Prize, Past and Present, Ties Russia to Iraq, New York Times, October 17, 2002.

27. Serge Schmemann, Controlling Iraqs Oil Wouldnt Be Simple, New York Times, November 3, 2002.

28. Zinni quote is from James A. Paul, Iraq: The Struggle for Oil, August 2002, Global Policy Forum website, www.globalpolicy.org. Testimony of April 13, 1999. Michael Renner is a Project Director with the Worldwatch Intsitute in Washington, DC. serves as project director for the Institutes annual Vital Signs publication. His book, Fighting for Survival: Environmental Decline, Social Conflict, and the New Age of Insecurity, is one of the most frequently-cited sources in the literature on redefining security. This article originally appeared in the January 2003 issue of Foreign Policy in Focus and is reprinted with permission.

CorpWatch PO Box 29344 San Francisco, CA 94129 USA Tel: 415-561-6568 Fax: 415-561-6493 URL: www.corpwatch.org Email: corpwatch@corpwatch.org

www.nationnews.com Gas Hike - Saturday 15, February-2003

Gasolene goes up by eight cents per litre from $1.39 to $1.47, diesel by six cents per litre from $1.07 to $1.13 and kerosene by ten cents per litre from 63 cents to 73 cents, the Energy Division of the Ministry of Economic Development said yesterday in a Government Information Service release.

The Energy Division added the hike was a result of increases in the world market price of crude oil influenced mainly by events in the Middle East and the general strike in Venezuela.

“The price of crude oil has risen from US$27.57 per barrel to over US$30 per barrel since the last price adjustment of petroleum products on June 1, 2002.”

The release also noted that a contingency plan had been developed to ensure the security of supply of petroleum products to the country.

“The Barbados National Terminal Company Limited will be pre-ordering three to four months’ supply of products from Trinidad. A public awareness programme for conservation will shortly be developed in conjunction with industry organisations, and permission will be given to suppliers to access the open market for supplies in the event that there is no guarantee of supply.

“The [company] will also clean and convert a 10 000 barrel diesel tank to store gasolene and additional supplies of diesel and fuel will also be stored in the event that there is no guarantee of supply.”

The increase comes short of two months after Parliamentary Secretary in the Ministry of Economic Development, Senator Tyrone Barker, said Barbadians did not have to fear an increase in oil prices since he believed normalcy would return to Venezuela.

www.theage.com.au Saturday 15 February 2003, 18:30PM

OPEC oil production rose 2.2 per cent to 25.663 million barrels per day (bpd) in January from December despite the turmoil in Venezuela, the Middle East Economic Survey (MEES) reports.

Output from the cartel's 10 members without Iraq increased 1.2 per cent or 263,000 bpd to 23.11 million bpd from 22.85 million bpd in December.

Baghdad accounted for just over half of OPEC's overall increase in January, the industry newsletter says in its Monday edition.

Gulf states Kuwait, Saudi Arabia and the United Arab Emirates together lifted production by 580,000 bpd while Iraq pumped 2.55 million bpd, a level not seen since since the first quarter of 2002, MEES notes.

"High Iraqi production is only being achieved at the price of damage to reservoirs - particularly in the north," MEES says.

Iranian production fell slightly on lower exports at 2.263 million bpd as domestic consumption remained steady on 1.45 million bpd.

MEES says the general strike in Venezuela saw average production drop to 620,000 bpd in January from one million bpd in December and three million bpd before the strike began at the end of 2002.

World oil prices climbed to their highest level in more than two years as traders bet on a war in Iraq despite diplomatic efforts at the United Nations.

New York's reference light sweet crude contract for March delivery rose 44 cents to 36.80 dollars a barrel, the highest level since September 2000.

The price of London Brent North Sea crude oil for April delivery, the new benchmark contract, rose seven cents to 32.53 dollars a barrel.

www.freelancestar.com

LEXINGTON--"Homeland security" is such a straight forward-sounding concept since the Sept. 11 attacks that not many people would say they have trouble understanding what it means. But one of the more sobering implications coming out of preparations for war with Iraq is that, in some instances, there is nothing straightforward about it.

One of the serious issues raised by the crisis is the danger of a catastrophic cutoff of oil from the Middle East. Yet in all the talk about war, too little attention has been paid to energy security. That's curious, because protecting ourselves against politically inspired and unanticipated disruptions in oil supplies from abroad is crucial to the smooth running of our economy.

Consider that America imports 60 percent of its oil, with a quarter of the imports coming from Middle East producers like Saudi Arabia, Kuwait, and the United Arab Emirates. Who can predict what looms on the horizon? Terrorist attacks on oil fields throughout the Middle East and beyond? Massive sabotage of pipelines? Terrorist attacks on oil tankers in the Persian Gulf?

It's easy to pretend we can shield ourselves from disaster. The United States, as some suggest, could avoid trouble by stepping up domestic production and buying more oil from our neighbors in Canada, Mexico, and Venezuela. But the fact is, we face the same predicament as the rest of the industrial world: Europe, Japan, and Asia rely much more heavily on oil from the Middle East.

We're all in the same boat because there's only one country with existing excess capacity, one country in a position to increase production quickly should some other supplier be knocked out of action. That big producer is Saudi Arabia, a country that doesn't always have our best interests at heart.

Keep in mind that over the past 30 years, we have suffered Middle East supply disruptions caused by the Arab-Israeli War of 1973, the fall of the Shah of Iran in 1979, and Iraq's invasion of Kuwait in 1990. The time for complacency has clearly passed.

But how to protect ourselves against a huge supply shutdown? Short term, the answer is building up America's Strategic Petroleum Reserve. President Bush wisely wants to build up the reserve from its current level of 600 million barrels to 700 million barrels, enough to supply U.S. needs for more than a month; his new budget request to Congress would provide almost $200 million to meet that goal. Congress should take prompt action to increase the reserve, since it could be used quickly to fill the gap in the event of an oil disruption.

Long term, we must do all we can, consistent with a market-based environmental policy, to increase domestic production. And we should of course diversify our supply sources, especially from oil-producing countries in Latin America, Africa, and the Caspian Sea region of the former Soviet Union. These regions contain enormous quantities of oil, and President Bush wisely has made broadening the sources of America's oil supplies a touchstone of his energy and foreign policies.

The administration has made it clear that the effort to liberate Iraq is just that--and not a war for oil. American oil companies have invested comparatively little in the turbulent Middle East, allocating the largest share of their exploration and production budgets to countries like Nigeria, Angola, Brazil, and Kazakhstan.

Yes, Iraq has substantial oil reserves, second only to Saudi Arabia. But even if the most optimistic estimates prove to be right, the Iraqi reserves--or major discoveries anywhere else in the world, for that matter--would not guarantee U.S. access to oil.

Once a legitimate government has been established in a liberated Iraq, that government would no doubt determine what role other countries would play in developing Iraq's oil potential. It might well decide that Iraq's future prosperity would be best served by opening its fields to France and Russia, countries with which it already has contracts, or China, now an oil-importing country with rapidly growing demand.

Energy is the lifeblood of our economy. No one can foresee what might lead to a catastrophic cutoff of oil from the Middle East, whether war with Iraq might trigger terrorist attacks against oil fields and facilities throughout the region and beyond. The nation needs to fortify itself against a shock if the oil weapon is used.

Building up the strategic reserve is the answer. We need protection. Now is the time for Congress to act.

BRUCE R. BOLLER is instructor of physics and astronomy at Virginia Military Institute.

Date published: 2/15/2003

www.asahi.com

War on Iraq is sure to have an economic impact.

After the 1991 Persian Gulf War, the United States helped restore Kuwait's oil fields and U.S. oil companies thus gained influence there.

Tension is growing over the possibility of an attack on Iraq. In Europe, opposition to military action against Iraq probably stems from skepticism about the U.S. rush to war. Some skeptics suggest the war is intended to bring Iraq's oil interests under American control.

The U.S. line is that a war is necessary to get Iraq to give up its presumed weapons of mass destruction. We do not believe the United States would wage a war solely over oil interests. But it is also true that war would have a decisive impact on economic conditions that involve Middle East oil.

U.S. President George W. Bush's administration, which includes several people with ties to the oil industry, has begun to shift its diplomatic policy on natural resources. Especially striking has been the way the U.S. government has approached its relations with Saudi Arabia, long a central element of U.S. Middle East policy, since the Sept. 11, 2001, terrorist attack.

Since more than half the Sept. 11 hijackers hailed from Saudi Arabia, an anti-Saudi attitude has gained some ground in the United States. And Saudi Arabia's political regime is hardly a democracy. In the medium and long terms, there is no assurance of political stability in Saudi Arabia.

Iraq is a major oil producer, with the world's largest proven reserves after those of Saudi Arabia. If the United States could bring Iraq within its control, it could be less energy-dependent upon Saudi Arabia. After the 1991 Persian Gulf War, the United States helped restore Kuwait's oil fields and U.S. oil companies thus gained influence there. That could be another reason an attack on Iraq is assumed to be about oil.

The Council on Foreign relations, a New York-based think tank with considerable influence over U.S. foreign policy, recently published a report that points out Iraq's oil belongs to Iraqis and proposes a policy approach after Saddam Hussein that, among other things, advocates creation of an international organization with the Iraqis to restore and develop Iraq's oil fields.

One interpretation is that the authors of the council report, conscious of the suspicions the U.S. is intent on a war with Iraq over oil interests, specifically framed that proposal.

Countries with misgivings about war with Iraq also have oil interests in mind. Russia and China have oil-extraction contracts with Saddam Hussein's government. They are involved in dealing oil that Iraq exports under the United Nations economic sanctions. France is also negotiating with Iraq over oil-production rights.

Some critics go so far as to take the view that these countries would not continue to resist an attack if the United States were to promise to safeguard their oil interests in post-Saddam Hussein Iraq.

Such maneuvering over oil interests attracts world attention because of the volatility of the oil market. What had long been a buyer's market has become a seller's market. On the supplier's side, there are concerns about the political stability of such large-scale oil exporters as Saudi Arabia or Venezuela still under a general strike. On the buyer's side, China, with its rapid economic growth, has become a big oil importer.

Oil prices are already up. And if an attack upon Iraq is followed by a drawn-out war or the oil fields are destroyed, prices will inevitably soar dramatically, draining the world economy.

Does Japan, the world's largest oil importer, with dependence upon Middle East oil growing year after year, dare to sit on the sidelines over what to do about Iraq?

--The Asahi Shimbun, Feb. 13(IHT/Asahi: February 14,2003)