Oil plays starring role in plans for post-Hussein Iraq
It sounds simple enough: If America overthrows Saddam Hussein's Iraq, that nation's vast oil reserves could serve as a kind of bank account to fund rebuilding and humanitarian relief.
But that plan - the subject of ongoing White House discussion - faces a host of potential complications, from oil-field sabotage to wrangling by Iraqis and Western powers over stakes in the industry.
One thing is certain: Even if oil is not America's prime motive in confronting Iraq (as some Bush critics allege), the resource figures centrally in US plans.
The rapid takeover of Iraq's oil fields will be a key early objective of US troops in any military action, to forestall sabotage that could send oil prices soaring, experts say. And Iraq's oil reserves, the world's second-largest, would become crucial to the operation of a new Iraqi government.
"The morning after, oil becomes the driving issue," says Robert Ebel, an energy expert at the Center for Strategic and International Studies in Washington.
Oil firms from the US, Europe, and Russia may compete for concessions in an industry with huge cash flow. Much of Iraq's oil lies so near ground level it costs less than $2 per barrel to produce.
Well aware of the pitfalls of an Iraq war being perceived as an "oil grab," Secretary of State Colin Powell recently told the press that Iraq's oil will be held "in trust" to benefit the Iraqi people. The humanitarian and rebuilding needs could be great.
Studies of Iraqi oil questions are under way at the departments of State, Defense, and Energy.
To many observers, Mr. Powell's statement about the oil being held held "in trust" by a new regime left key questions unanswered. "What kind of rule? How will the oil industry be run? Who will determine its production?" asks Walid Khadduri, editor of the Middle East Economic Review in Cyprus.
Powell said "we are studying different models" and that it is a legal obligation under international law to use oil revenues for the benefit of Iraqis. He said he lacked the expertise to say whether the money could be used to defray occupation or humanitarian costs.
Nor did he say anything about Iraq using oil revenues to service Iraq's foreign debts of $110 billion or its even larger war reparations owed to Iran and Kuwait.
The Iraqi opposition has its own ideas.
Step 1 will be to get an elected government with an oil ministry to run the industry and determine oil policy, says Faisal Qaragholi, executive senior director of the London-based Iraqi National Congress, a coalition of opposition groups. In a telephone interview, he said any existing petroleum contracts or concessions made by the Hussein regime will be "restudied" to see if they should be continued.
Mr. Qaragholi said that in any new oil deals, the US and its allies "would definitely be favored, because they stood by the Iraqi people." Those nations which support Hussein "should look at where they stand," he warned.
There has been much speculation as to whether the US, in its bid for the support of Russia, China, and France for its tough Iraqi policy, has promised to help these nations get concessions.
Russia was given "some promises," says Ariel Cohen, an economist at the conservative Heritage Foundation, citing discussions he had with some "high-level" Russian officials. "But I don't think these [promises] were strong enough" to satisfy Russia.
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