Analysis: Saddam's oil tap

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Analysis: Saddam's oil tap UPI, Fri 1 Dec 2000

Saddam Hussein's decision to halt Iraq's 2.4 million barrels a day in oil exports -- close to 5 percent of world market volume -- was a characteristic attempt to play the bully. But his sense of timing was brilliant. Saddam struck just as winter began to bite in the oil-hungry northern hemisphere and stock slumps in the New York markets suggest that the world's dominant economy was suddenly looking unusually vulnerable to bad news. He turned off the oil tap just as the United States is distracted by its election crisis and Bill Clinton becomes a lame duck President. And he timed his move for the moment when the Israel-Palestine crisis makes it hardest for other Arab oil exporters to go the extra mile to boost their own output. Even more subtly, he closed the tap to oil supplies through the Turkish port of Ceyhan and Iraq's gulf port of Mina al-Bakr. But there was no order to close the newly re-opened pipeline that is pumping a reported 150,000 barrels a day into Syria. That means that Saddam Hussein can keep up his blockade for some time. He already has an economic war chest of $11 billion from this year's sales. Even at the friendly discount Iraq is reportedly offering to Syria, the pipeline is worth $4 million a day, or well over $1 billion a year. With that kind of bankroll and cash flow, Saddam can withstand an economic siege throughout the winter - while the West's energy consumers fear shortages and freezes. It all makes Saddam Hussein a force to be reckoned with, in world markets as in the Middle East. And it comes as the nine-year regime of UN sanctions and isolation has been crumbling fast.

Commercial flights abroad, thinly disguised as humanitarian, have become almost routine. Last month's Baghdad international trade fair was a striking success More than 1,500 firms from a total of 45 countries -- including traditional US allies like France and Germany -- unveiled their wares. And Russia sent a delegation of 250 politicians and business executives. US officials reckon there is a psychological aspect to what they see as Saddam's latest round of economic warfare. Saddam is hoping to panic the markets. The Clinton administration is determined to calm them. "We have good, fast contingency plans," US Energy Secretary Bill Richardson said. He said other Arab oil exporters were prepared to increase their output -- although this would take time -- and hinted that the massive US strategic oil reserve might be tapped again, as it was in September.

International Energy Agency executive director Robert Priddle said Iraq's move "should not be exaggerated." Healthy stocks are available close to consumer markets, he said. And the IEA, which controls emergency inventories among 24 industrialized nations, was ready to step in "very quickly" if required, Priddle said. Iraq blamed the United Nations, whose Committee 661 runs the scheme under which Iraq can sell oil, but the proceeds go to a UN-run bank account in New York, to be used to buy food, medicines and basic imports. The UN refused Iraq's latest price proposals, claiming it was unrealistically low for current market conditions. The suspicion is that Saddam is prepared to sell his oil cheaply, to increase his market leverage -- and to make room for a 50-cent-per barrel surcharge he is trying to impose. "The Americans and Britons in Committee 661 are responsible for any negative effects," said the official statement over Iraqi radio, as monitored and translated by the BBC. "Their bad action will rebound on them" The immediate cause of the row was Iraq's demand that its oil customers should pay a 50-cent surcharge on each barrel direct into Iraqi bank accounts. Fearing that this would mean breaking UN sanctions, no shipper has yet paid up and some tankers sailed away from Ceyhan empty yesterday. "No one has risked it yet, but that's not to say someone might try it -- perhaps someone working for a Russian or Chinese contract holder" one Iraqi trader was quoted as saying by market-watchers. Russia and China have expressed sympathy for the lifting of UN sanctions and both countries have Iraqi contracts under the oil-for-food regime. Beyond breaking out of his isolation, Saddam Hussein appears to have two other concerns in mind. A high-level Iraqi delegation is due in New York next month to discuss sanctions and the UN demand for a resumption of weapons inspections. US and British officials assume that this week's trip to Moscow by deputy premier Tariq Aziz -- who said Iraq would not accept any new inspections -- presaged a new Iraqi attempt to end the inspections. Saddam's other concern is to win UN permission, and the right to import advanced technology, to develop some big new oil fields with a capacity upwards of a million barrels a day discovered since the sanctions regime began. French oil corporations already have opened preliminary talks on exploiting the new fields, once the UN gives its approval -- which neither the US nor Britain want to do. The question is: Will energy shortages and cold voters this winter persuade London and Washington to change their minds? --

http://www.worldenergynews.com/?action=display&article=4658840&template=energy/index.txt&index=recent



-- Martin Thompson (mthom1927@aol.com), December 01, 2000


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