Of Course Iraq War Crisis Is About Oil, Say Industry Experts

by Humberto Marquez

Iraq's deputy prime minister, Tarik Aziz, has charged that the ultimate aim of Washington's policy in the Arabian Gulf is Óto take over Iraqi oil."

White House spokesman Ari Fleischer maintains that Óthe only interest the United States has in the region is furthering the cause of peace and stability."

Iraq, one of the 11 members of OPEC, holds an estimated 11 percent of the planet's oil reserves, the second largest amount in the world after Saudi Arabia. War would give the U.S. control over the world's energy markets and undermine the power of the Organization of Petroleum Exporting Countries (OPEC), the experts say.

What the United States is seeking, "before putting a hand on Iraqi oil, is to advance its war against terrorism and to ensure the Middle East as a free petroleum supply zone," Alberto Quiros, former president of the Maraven company, a branch of the state-run Petroleos de Venezuela, told IPS. Venezuela is the sole Latin American member of OPEC and the United StatesŐ largest supplier.

In a conversation with IPS, Mahzar Al-Shereidah, a Venezuela-based oil industry analyst, says he believes "the main confrontation of the United States is not with Iraq. That is just a pretext, or an opportunity. The dispute is with the European Union, Japan, Russia and China, so that they accept Washington's hegemonic role."

"In the war in Afghanistan, the United States became a major actor in Central Asia, with military bases in countries that have ports on the Caspian Sea. It is deploying its power in the Gulf through the 'petro-monarchies,'" said Al-Shereidah, in reference to the monarchic regimes in the Gulf's oil-producing nations.

"An operation that would allow the placement of a puppet government in Iraq would give the United States the keys to 65 percent of the world's petroleum reserves," added the expert.

In Al-Shereidah's opinion, that scenario "would mean the liquidation of OPEC," the cartel encompassing the Gulf's leading oil producers. The organization controls a third of the global petroleum supply and possesses 75 percent of crude reserves.

The OPEC membership is made up of Algeria, Indonesia, Iran, Iraq, Kuwait, Liberia, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela.

According to the oil news agency Platts, Iraq holds reserves of 112.5 billion 159-litre barrels of crude. Saudi Arabia has an estimated 262 billion barrels.

Iran, Kuwait, Qatar and United Arab Emirates -- fellow oil producers in the Gulf -- hold combined reserves of 300 billion barrels, while Venezuela has 77 billion and Nigeria 24 billion barrels of crude.

Among the non-OPEC oil producing nations, Russia has reserves estimated at 49 billion barrels, the United States 30 billion, Mexico 27 billion, and China 24 billion barrels of crude.

Says former Venezuelan oil executive Quiros, "It's clear that the region's status as oil producer makes that part of the world more important for the war against terrorism. That is why the United States is in such a hurry to prevent terrorism from contaminating the entire oil-producing zone around the Gulf."

But Al-Shereidah asserts that "Washington is accelerating the conflict with Baghdad because it is an historic opportunity to lay the groundwork for a new global system that favors its position and subordinates its competitors" in Europe and Asia.

A new system of international relations is emerging, one based on a quartet of giant countries that are confronting Islamic fundamentalism: the United States, Russia, India and China, says Giandomenico Picco, former adviser to the UN secretariat, in the publication The Middle East Economic Survey.

This group differs markedly with the modern European and Japanese approach of consensus building and of solutions based on international law and negotiations and instead is inclined to the use of force, according to Picco.

Another factor weighing in the analysis are the oil-industry links of key government figures, beginning with President George W. Bush himself, a former petroleum executive and founder of the Arbusto Energy firm in 1978. His father, the former president, has lifelong oil-industry ties.

Vice President Dick Cheney led Halliburton, a company dedicated to digging oil wells, Interior Secretary Gale Norton served as an attorney for big oil companies, and National Security Advisor Condoleezza Rice was an executive at Chevron, with one of the company's tanker vessels bearing her name for several years. Close associates of the presidentŐs father, like James A. Baker and Brent Scowcroft, are similarly connected.

Some other major actors in the world's oil sector have not hidden their apprehensions about current trends. The head of the Russian company Zarubzhneft, Nikolai Tokarev, fears that an Iraq without Saddam Hussein would hand the country's entire oil and natural gas supply to the United States.

Baghdad has negotiated operating contracts with Russia's Lukoil, France's TotalFinaElf, and the China National Oil Company, among others.

Quiros, however, says, "Bush's oil-related past has been blown out of proportion. I don't think he's working with a plan to make Iraq produce petroleum for U.S. companies. And an annulment of existing contracts is farfetched."

But Al-Shereidah gave his opinion that "no U.S. or British oil company is operating in Iraq. It is inconceivable that in the future they would accept less than 60 percent of its output, even if leaving a smaller portion, say 40 percent, for the rest."

Following an eventual U.S. victory in any war, Iraqi production, which totalled 2.4 million barrels of oil daily in 2001, could put an end to the dominance of Saudi Arabia, which extracts 8.7 million barrels a day, according to the London-based Centre for Global Energy Studies and the British magazine, The Economist.

The two agree that Iraq's petroleum reserves, seized from U.S. and British firms in the 1960s, could be developed with new technology and far surpass current output.

Growing Iraqi oil production would push prices down, and its ability to flood the market would be eased by low production costs.

Most of Iraq's crude can be extracted at a cost of $1.50 per barrel, compared to nearly $5 a barrel in Venezuela and $10 of Brent North Sea crude.

Currently, Iraq's hands are tied by a UN-imposed embargo that limits oil exports as part of the "oil for food" program.

If the United States attacks Iraq, petroleum prices would immediately rise, and could even double the current rates of $23 to $27 a barrel, warn experts.

In a war scenario, if conflict is limited to Iraq, prices would rise to around $40 a barrel, but if its Gulf neighbors are affected, prices "could reach triple digits," says former Saudi oil minister, Ahmed Zaki Yamani.

In the Western Hemisphere, that panorama would to a certain extent benefit oil producers like Venezuela and Mexico, says Quiros.

"The Mexicans would benefit less due to smaller reserves and greater domestic consumption. In the Venezuelan case, it is a shame that we have neglected investment for greater oil output," said the former oil executive.