LONDON: Oil prices could race to well over $50 per barrel and “ruin” the world economy if Iraqi crude output is severely hit by a US military strike, former Saudi oil minister Sheikh Ahmed Zaki Yamani said in London on Friday.

In the run-up to a possible US and British assault on Baghdad, he rejected arguments for intervention in the region saying it would breed another generation of terrorists.

The Harvard-educated lawyer expressed fears that the relatively low pressure oil wells in Iraq could be rendered useless forever if Saddam Hussein chose to set them on fire.

Sheikh Yamani was speaking at a seminar on oil and Iraq which also heard calls from a former Baghdad oil ministryofficial for the post-Saddamoil industry there to be privatised.

Warnings on future prices came as American light crude prices fell 69 cents to $35.32 — a three week low — amid hopes that diplomatic efforts to secure a UN consensus might put back a war, at least by a few days. The price rose later in the day to $35.80 but is well short of the $41.15 it reached ahead of the first Gulf war in 1990.

Sheikh Yamani — whose Centre for Global Energy Studies (CGES) organised the meeting — expressed concern that Iraqi exports could be cut completely during any assault.

“If the absence is long enough it can’t be corrected by strategic reserves, prices can go to a very horrible ceiling and the price will be above $50 and it will be way above $50. It will ruin the world’s economy.”

How high prices would go would depend on how much volume is brought on to the market from US and European governmental reserves and how serious the damage is to local production.

“$80, $100, $60 its all bad,” Sheikh Yamani added, though he argued that prices would fall to less than $25 if any conflict was short and there was no permanent damage to oilfields.

Asked whether the whole US campaign in Iraq was misguided and would cause more insecurity, he said: “That’s what I believe — what I am afraid of,” he explained adding his view that oil was a “prime objective” of President Bush’s Middle East policy.

Concerns about Iraqi oilfields being taken out of action completely were raised by Gassan Atiyah, managing director of the Iraqi File publication and a former college lecturer there, who said Saddam could “kill the oil for good” because the low pressure wells — unlike those in Kuwait — were susceptible to permanent damage. Sheikh Yamani indicated his agreement.

“It was mentioned by an American company. They said that to set fire to the Iraqi oil fields is a very serious and difficult problem because they have 2,500 wells.—Dawn/The Guardian News Service.