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 analysts.
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
said.
Staff writer Ken Bredemeier contributed to this
report.
Aus: The Washington Post |