| -Caveat Lector-
Why the oil
industry was skeptical about the Iraq War:
But it can't
make the oil flow. The cost of making it flow could produce an economic crisis
in the US. And it is this - rather than the daily killing of US soldiers -
which lies behind the Bush administration's growing sense of panic. Washington
has got its hands on the biggest treasure chest in the world - but it can't
open the lid. No wonder they are cooking the books in
Baghdad.
October 12 2003 at
11:09AM
America can't make
Iraq's black gold flow
Oil is slippery stuff, but not as slippery as the figures now being
peddled by Iraq's American occupiers. Up around Kirkuk, the authorities
are keeping the sabotage figures secret - because they can't stop their
pipelines to Turkey blowing up.
And down in Baghdad, where the men
who produce Iraq's oil production figures are beginning to look like the
occupants of Plato's cave - drawing conclusions from shadows on their wall
- the statistics are being cooked.
Paul Bremer, the United States'
proconsul who wears combat boots, is "sexing up" the figures to a point
where even the oilmen are shaking their heads. Take Kirkuk. Only when the
television cameras capture a blown pipe, flames billowing from its wounds,
do the occupation powers report sabotage.
This they did, for
example, on August 18. But the same Turkish pipeline has been hit before
and since. It was blown again on September 17 - I've met an oil executive
who witnessed the explosion - and four times again the following day.
American patrols and helicopters now move along the pipeline but long
sections are indefensible.
| The real irony lies in the nature of
America's new power in Iraq | European oilmen in Baghdad realise now that Iraqi
officials in the oil ministry - one of only two government institutions
that the Americans defended from the looters - knew very well that the
sabotage was going to occur. "They told me in June that there would be no
oil exports from the north," one of them said to me this week.
"They knew it was going to be sabotaged - and it had obviously
been planned long before the invasion in March."
Early in their
occupation, the US took the quiet - and unwise - decision to rehire many
Ba'athist oil technocrats, which means that a large proportion of ministry
officials are still ambivalent towards the US.
Thus the only oil
revenues the US can get are from the south. In the middle of August,
Bremer gave the impression that production stood at about 1,5 million
barrels a day. But the real figure at that time was 780 000 barrels and
rarely does production reach a million. In the words of an oil analyst
visiting Iraq, this is "an inexcusable catastrophe".
When the
Americans attacked Iraq in March, the country was producing 2,7 million
barrels a day. It now also transpires that in the very first hours after
they entered Baghdad on April 9, American troops allowed looters into the
oil ministry. By the time senior officers arrived to order them out, they
had destroyed billions of dollars of irreplaceable seismic and drilling
data.
And while the major oil companies in the US stand to cream
off billions of dollars if oil production resumes in earnest, many of
their executives were demanding to know from the Bush administration -
long before the war - how it intended to prevent sabotage. In fact, Saddam
Hussein had no plans to destroy the oil fields themselves. The Pentagon
got it wrong, racing its troops to protect the fields but ignoring the
vulnerable export pipelines.
Anarchy is now so widespread in
postwar Iraq that it is almost impossible for international investors to
work there. There is no insurance - which is why Bremer's occupation
administrators have secretly decided that more than half the $20-billion
(R140-billion) earmarked for Iraq will go towards security for its
production infrastructure.
Even during the war, a detailed analysis
by Yahya Sadowski, a professor at the American University of Beirut,
suggested that repairing wells and pipes in postwar Iraq would cost $1
-billion, that raising oil production to 3,5 million barrels a day would
take three years and cost another $8-billion investment, plus $20-billion
for repairs to the electrical grid that powers the pumps and refineries.
Bringing production up to six million barrels a day would cost a further
$30-billion - some say up to $100-billion.
In another words -
assuming only $8-billion of the $20 billion can be used on industry - the
Bush overall budget of $87-billion that now horrifies the US congress is
likely to rise towards $200-billion.
Ouch.
Since the 1920s,
only around 2 300 wells have been drilled in Iraq and those are in the
valleys of the Tigris and Euphrates. Its deserts are almost totally
unexplored. Officially, Iraq contains 12 percent of the world's oil
reserves - two-thirds of the world's reserves are in just four other
countries, Saudi Arabia, Iran, Kuwait and the Emirates - but it could
contain 20 percent, even 25 percent.
It's possible to argue that it
was Hussein's decision to switch from the dollar to the euro in November
2000 that made "regime change" so important to the US. When Iran
threatened to do the same, it was added to the "axis of evil". The defence
of the dollar is almost as important as oil.
But the real irony
lies in the nature of America's new power in Iraq. By 2025 America's oil
imports will account for perhaps 70 percent of total domestic demand. It
needs to control the world's reserves - and don't tell me that the US
would have invaded Iraq if its chief export was beetroot - and it now has
control of perhaps 25 percent of the world's reserves.
But it can't
make the oil flow. The cost of making it flow could produce an economic
crisis in the US. And it is this - rather than the daily killing of US
soldiers - which lies behind the Bush administration's growing sense of
panic. Washington has got its hands on the biggest treasure chest in the
world - but it can't open the lid. No wonder they are cooking the books in
Baghdad. - Foreign Service
Published on the Web by IOL on 2003-10-12 11:09:12
© Independent Online 2002. All rights reserved. IOL publishes this article
in good faith but is not liable for any loss or damage caused by reliance
on the information it contains. |
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