If oil was the question, war wasn't the answer

'No blood for oil" was a popular refrain used by antiwar demonstrators in Washington late last month. The message assumes President Bush launched the invasion of Iraq to get access to its oil.

The Bush administration denies this charge. And motives aren't always transparent when not stated.

But if oil was one of his goals, among others, the war has been far from a success. Iraqi oil isn't likely to provide much relief to tight world supplies and high gasoline prices anytime soon.

Iraq's oil output, hit frequently by sabotage, remains below its prewar level. Revenues from oil exports are inadequate to pay for Iraq's reconstruction. In arguing for removal of Saddam Hussein prior to the war, then-Deputy Secretary of State Paul Wolfowitz predicted the oil would pay the bill. Rather, US taxpayers are picking up the tab.

Nor is it plain whether American oil companies will eventually benefit from the war. They opposed launching it.

"Nothing is clear now about [Iraqi] oil policy in the long run," says Fadhil Chalabi, executive director of the Centre for Global Energy Studies in London. "Nobody can tell what will happen to Iraqi oil. The Americans did nothing but create a mess of everything."

Most experts say Iraq is years from making a major contribution to the world oil supply. It's not that Iraq doesn't have plenty of oil. Dr. Chalabi, who was No. 2 in Iraq's oil ministry in 1976 before he left the country, notes that officially Iraq has 120 billion barrels of recoverable oil in its reserves. But a technical study undertaken by his think tank doubles those reserves, putting their size close to those of Saudi Arabia.

Iraq could quickly triple its current output to 5 million to 6 million barrels a day, many oil analysts have concluded. But Matthew Simmons, president of Simmons & Co. International in Houston, doubts that. Two large existing fields, Kirkuk in the north and Rumaila in the south, are "both over the hill," he notes in an e-mail. Further, it's "murky" whether exploration in western Iraq will discover more oil, he writes. Extensive searches in neighboring areas of Syria, Jordan, and northern Saudi Arabia have not turned up great oil fields.

As long as Iraq is wracked by insurgents and political uncertainty, no major oil company will risk billions of dollars to find and develop new oil resources there. "Everything depends on political developments," says A.F. Alhajji, an oil economist at Ohio Northern University in Ada. Even when political stability returns, history indicates it will take at least three or four years to boost output significantly.

Another complication is Iraq's draft constitution. It was stapled together in August and is subject to a referendum on Oct. 15. It calls for Iraq's federal government to manage existing oil fields in cooperation with the regions, sharing oil revenues. But any oil fields not yet in production will be the sole responsibility of the region in which they may be found.

"It's very confusing," says Chalabi, a relative of Iraq's present vice prime minister for oil and energy, Ahmed Chalabi.

If Iraq becomes a loose federation, foreign oil companies probably will negotiate with regional governments, not the central one. Some speculate that a Kurdish regime in the north might welcome American oil firms. But in the Shiite area in the south, where two-thirds of current oil reserves are located, the provincial government or governments might prefer to deal with Chinese, French, or other non-American oil firms. The influence of Iran's Shiite government is already considered substantial in southern Iraq.

China, keen to find oil resources, was negotiating with Saddam's government prior to the war.

From a geopolitical standpoint, the Iraq situation is fuzzy.

American senior policymakers have long seen military force as an effective way to ensure a supply of Middle East oil, holds Michael Klare, a professor of peace and world security studies at Hampshire College in Amherst, Mass. Oil is seen as a source of power. The United States is expected to retain permanent military bases in Iraq even if the insurgency dies down.

In August 2002, Vice President Dick Cheney listed the need to retain control over Gulf oil supplies as one reason to topple Saddam Hussein.

"Whoever controls Iraq's oil controls Iraq's destiny," says Dr.Alhajji. Oil revenues kept Saddam in power. But if Iraq becomes heavily dependent on oil revenues, he wonders, would this support democracy or tempt another Saddam to sneak into power? And if it is a democracy, he figures the government will squeeze foreign oil firms for the bulk of their revenues. "An Iraqi democratic government will not give its oil away," he says. Oil firms usually enjoy "more lucrative" profits in nations run by dictators.

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