human being on Wed, 25 Sep 2002 07:21:49 +0200 (CEST)

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<nettime> fwd: "In Iraqi War Scenario, Oil Is Key Issue"

// a lot of developments in the oil sector lately, with
// impacts on global markets, international relations
// changing based on energy agreements, war rhetoric
// relating to the rise in oil prices, O.P.E.C. under
// contestation as a cartel, and as a counterforce to
// political power based on oil economics, and denials
// relating ties between the aims of the U.S. in Iraq
// with its oil rich landscape. to the paradoxical point
// whereby in senate testimony, an administration pundit
// made oil as the primary rationale, worse-case-scenario,
// and a reason for action, and action now- else blackmail.
// oilmail. and without it, e-mail will not be delivered...

In Iraqi War Scenario, Oil Is Key Issue
U.S. Drillers Eye Huge Petroleum Pool

By Dan Morgan and David B. Ottaway
Washington Post Staff Writers
Sunday, September 15, 2002; Page A01

A U.S.-led ouster of Iraqi President Saddam Hussein could open a  
bonanza for American oil companies long banished from Iraq, scuttling  
oil deals between Baghdad and Russia, France and other countries, and  
reshuffling world petroleum markets, according to industry officials  
and leaders of the Iraqi opposition.

Although senior Bush administration officials say they have not begun  
to focus on the issues involving oil and Iraq, American and foreign oil  
companies have already begun maneuvering for a stake in the country's  
huge proven reserves of 112 billion barrels of crude oil, the largest  
in the world outside Saudi Arabia.

The importance of Iraq's oil has made it potentially one of the  
administration's biggest bargaining chips in negotiations to win  
backing from the U.N. Security Council and Western allies for President  
Bush's call for tough international action against Hussein. All five  
permanent members of the Security Council -- the United States,  
Britain, France, Russia and China -- have international oil companies  
with major stakes in a change of leadership in Baghdad.

"It's pretty straightforward," said former CIA director R. James  
Woolsey, who has been one of the leading advocates of forcing Hussein  
from power. "France and Russia have oil companies and interests in  
Iraq. They should be told that if they are of assistance in moving Iraq  
toward decent government, we'll do the best we can to ensure that the  
new government and American companies work closely with them."

But he added: "If they throw in their lot with Saddam, it will be  
difficult to the point of impossible to persuade the new Iraqi  
government to work with them."

Indeed, the mere prospect of a new Iraqi government has fanned concerns  
by non-American oil companies that they will be excluded by the United  
States, which almost certainly would be the dominant foreign power in  
Iraq in the aftermath of Hussein's fall. Representatives of many  
foreign oil concerns have been meeting with leaders of the Iraqi  
opposition to make their case for a future stake and to sound them out  
about their intentions.

Since the Persian Gulf War in 1991, companies from more than a dozen  
nations, including France, Russia, China, India, Italy, Vietnam and  
Algeria, have either reached or sought to reach agreements in principle  
to develop Iraqi oil fields, refurbish existing facilities or explore  
undeveloped tracts. Most of the deals are on hold until the lifting of  
U.N. sanctions.

But Iraqi opposition officials made clear in interviews last week that  
they will not be bound by any of the deals.

"We will review all these agreements, definitely," said Faisal  
Qaragholi, a petroleum engineer who directs the London office of the  
Iraqi National Congress (INC), an umbrella organization of opposition  
groups that is backed by the United States. "Our oil policies should be  
decided by a government in Iraq elected by the people."

Ahmed Chalabi, the INC leader, went even further, saying he favored the  
creation of a U.S.-led consortium to develop Iraq's oil fields, which  
have deteriorated under more than a decade of sanctions. "American  
companies will have a big shot at Iraqi oil," Chalabi said.

The INC, however, said it has not taken a formal position on the  
structure of Iraq's oil industry in event of a change of leadership.

While the Bush administration's campaign against Hussein is presenting  
vast possibilities for multinational oil giants, it poses major risks  
and uncertainties for the global oil market, according to industry  

Access to Iraqi oil and profits will depend on the nature and  
intentions of a new government. Whether Iraq remains a member of the  
Organization of Petroleum Exporting Countries, for example, or seeks an  
independent role, free of the OPEC cartel's quotas, will have an impact  
on oil prices and the flow of investments to competitors such as  
Russia, Venezuela and Angola.

While Russian oil companies such as Lukoil have a major financial  
interest in developing Iraqi fields, the low prices that could result  
from a flood of Iraqi oil into world markets could set back Russian  
government efforts to attract foreign investment in its untapped  
domestic fields. That is because low world oil prices could make costly  
ventures to unlock Siberia's oil treasures far less appealing.

Bush and Vice President Cheney have worked in the oil business and have  
long-standing ties to the industry. But despite the buzz about the  
future of Iraqi oil among oil companies, the administration,  
preoccupied with military planning and making the case about Hussein's  
potential threat, has yet to take up the issue in a substantive way,  
according to U.S. officials.

The Future of Iraq Group, a task force set up at the State Department,  
does not have oil on its list of issues, a department spokesman said  
last week. An official with the National Security Council declined to  
say whether oil had been discussed during consultations on Iraq that  
Bush has had over the past several weeks with Russian President  
Vladimir Putin and Western leaders.

On Friday, a State Department delegation concluded a three-day visit to  
Moscow in connection with Iraq. In early October, U.S. and Russian  
officials are to hold an energy summit in Houston, at which more than  
100 Russian and American energy companies are expected.

Rep. Curt Weldon (R-Pa.) said Bush is keenly aware of Russia's economic  
interests in Iraq, stemming from a $7 billion to $8 billion debt that  
Iraq ran up with Moscow before the Gulf War. Weldon, who has cultivated  
close ties to Putin and Russian parliamentarians, said he believed the  
Russian leader will support U.S. action in Iraq if he can get private  
assurances from Bush that Russia "will be made whole" financially.

Officials of the Iraqi National Congress said last week that the INC's  
Washington director, Entifadh K. Qanbar, met with Russian Embassy  
officials here last month and urged Moscow to begin a dialogue with  
opponents of Hussein's government.

But even with such groundwork, the chances of a tidy transition in the  
oil sector appear highly problematic. Rival ethnic groups in Iraq's  
north are already squabbling over the the giant Kirkuk oil field, which  
Arabs, Kurds and minority Turkmen tribesmen are eyeing in the event of  
Hussein's fall.

Although the volumes have dwindled in recent months, the United States  
was importing nearly 1 million barrels of Iraqi oil a day at the start  
of the year. Even so, American oil companies have been banished from  
direct involvement in Iraq since the late 1980s, when relations soured  
between Washington and Baghdad.

Hussein in the 1990s turned to non-American companies to repair fields  
damaged in the Gulf War and Iraq's earlier war against Iran, and to tap  
undeveloped reserves, but U.S. government studies say the results have  
been disappointing.

While Russia's Lukoil negotiated a $4 billion deal in 1997 to develop  
the 15-billion-barrel West Qurna field in southern Iraq, Lukoil had not  
commenced work because of U.N. sanctions. Iraq has threatened to void  
the agreement unless work began immediately.

Last October, the Russian oil services company Slavneft reportedly  
signed a $52 million service contract to drill at the Tuba field, also  
in southern Iraq. A proposed $40 billion Iraqi-Russian economic  
agreement also reportedly includes opportunities for Russian companies  
to explore for oil in Iraq's western desert.

The French company Total Fina Elf has negotiated for rights to develop  
the huge Majnoon field, near the Iranian border, which may contain up  
to 30 billion barrels of oil. But in July 2001, Iraq announced it would  
no longer give French firms priority in the award of such contracts  
because of its decision to abide by the sanctions.

Officials of several major firms said they were taking care to avoiding  
playing any role in the debate in Washington over how to proceed on  
Iraq. "There's no real upside for American oil companies to take a very  
aggressive stance at this stage. There'll be plenty of time in the  
future," said James Lucier, an oil analyst with Prudential Securities.

But with the end of sanctions that likely would come with Hussein's  
ouster, companies such as ExxonMobil and ChevronTexaco would almost  
assuredly play a role, industry officials said. "There's not an oil  
company out there that wouldn't be interested in Iraq," one analyst  

Staff writer Ken Bredemeier contributed to this report.

 2002 The Washington Post Company
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