Russia and one or two other nations were of the view that even if the US was not satisfied with Iraq’s compliance with the UN resolution it must report to the Un before taking any military action against Iraq. However, it is very much doubtful if the US would oblige Russia and the other nations in this regard.
As reported in a section of the national press on November 4, President Saddam Hussein, while giving interview to an Egyptian weekly ‘Elosoba’ had accused the US of wanting to extend its hegemony over the Arab world by starting with control of Baghdad and then striking those capitals which rejected that hegemony. As stated by the Iraqi President, Tehran and Damascus would be struck and divided next and problems would be created for Saudi Arabia to divide into small entities governed by watchmen in the US pocket. According to the Iraqi President, the aforesaid US plan was aimed, firstly, at ensuring Israel’s superiority by transforming it into a great empire in the region and, secondly, at controlling Arab oil.
Another news story published in Dawn, dated November 4 under the caption ‘US plans to destroy Opec cartel’, reported that the leader of the London-based Iraqi National Congress (INC), Ahmed Chalabi, had met executives of three US oil multinationals to negotiate the carve-up of Iraq’s massive oil reserves following Saddam’s removal. According to the news story, disclosure of talks between the oil executives and the INC — which enjoyed the support of Bush administration officials — was bound to exacerbate differences with Russia, France and China, who feared that they would be squeezed out of a post-Saddam oil industry in Iraq.
Iraq, which has the world’s second largest oil reserves after Saudi Arabia, had reportedly signed several multi-billion-dollar deals with foreign oil companies from Russia, France and China. Russia, which is owed billions of dollars by Iraq for past arms deliveries, had the strongest interest in Iraqi oil development, which included a $3.5 billion, 23-year deal to rehabilitate the Iraqi oil fields. Since the aforesaid agreement was signed in March, 1997, Russia’s Lukoil had prepared a plan to install equipment with capacity to produce 100,000 barrels per day from West Qurna’s Mishrif formation. The French interest was, also, intense. TotalFina Elf had been in negotiations with Iraq on development of the Nahr Umar field.
According to the above-mentioned report, planning for Iraq’s post-Saddam oil industry was presently being done by a coalition of neo-conservatives in Washington, think tanks with close links with the Bush administration and INC officials who had long enjoyed their support. The planners were reported to have, also, one other objective in mind, which was to make the Opec cartel totally ineffective. They were of the view that Opec was ‘evil’, since it was incompatible with American interest. They believed that, with a regime change in Iraq, three to five million barrels (per day) of crude production could be easily added to the world crude supply. Later, after about five years, Iraq could be conveniently pumping upto 10 million barrels of crude per day, which would be enough to destroy the monopoly power of Opec.
It, also, needs to be borne in mind that the US is the world’s largest oil consumer. Its share in the total world oil consumption comes to about 25 per cent or about 20 million barrels of oil per day. Until last year, the US was importing about 52 per cent of all its oil requirements. The feeling in that country was that, in order to ensure its oil security, it should not depend on any one country or region to meet its oil requirement. It, therefore, relied on Opec for only about half of the above quantity or roughly 26 per cent of its total oil consumption, whereas it had increased its oil imports from Canada, Mexico and Venezuela in the recent years. Every one of these countries supplied nearly as much crude to the US, as it imported from Saudi Arabia which was the world’s top producer of crude oil. After the terrorist attack of 9/11, the desire in US to further reduce dependence on Opec had become more intense.
Furthermore, the US needs cheaper oil to boost its economy. In 1998, when the international crude prices had witnessed a nosedive and dropped to about $10 a barrel, the government as well as the corporate sector and the general consumers in the US were able to save billions of dollars per month, as a result of which the US stock market flourished and the economy remained strong. Once again, the US was in need of less expensive crude oil to get out of its ‘double-dip recession’. The objective could be achieved by having a friendly government in Iraq which would allow the US oil companies to develop the country’s oil fields and pump a much larger quantity of oil for export. The aforesaid arrangement could help in bringing down crude prices from their higher level by increasing its supply and, at the same time, it would guarantee to the US a reliable source for an uninterrupted supply of crude oil to meet its requirement.
Ironically, the above-mentioned scenario does not suit Russia. On the contrary, it runs counter to its interest. Apart from the consideration that Russian oil companies may be squeezed out of a post-Saddam oil industry in Iraq, it may be pointed out that higher crude prices in 2000 and most of 2001 had been the main factor behind Russia’s rebound, after the financial crisis of August, 1998. Russia’s GDP grew impressively by 8.4 per cent in 2000 and in the subsequent year, also, it was estimated to have grown around 5.5 per cent, as a result of better crude prices.
Besides, although oil exports constitute only about 25 per cent of Russia’s total exports, every $1 drop in the international crude prices costs Russia about 0.3 per cent in GDP, $2 billion in export revenue and $1 billion in federal revenue.
Until last year, Russia was producing 7 million barrels of crude per day out of which it exported 4.7 million barrels per day. Its production cost worked out to $10.30 per barrel (compared to $5.40 per barrel of Saudi Arabia). Therefore, an international crude price of $10 a barrel would be disastrous for Russia, although it could manage with a price of $15 a barrel, by accepting a much lower GDP growth than at present.
As a matter of fact, a bottom-low international crude price would be acceptable neither to the Opec nor to the oil exporters outside Opec, because the economy of all those countries was linked with revenue earned from oil. It may be recalled that, a couple of years back, the Opec had pledged to maintain crude prices at $22-28 a barrel.
it would be significant to note that the US plan to disarm and remove Saddam Hussein was opposed by nearly all the Opec members, together with Russia. Other members like France and china opposed the US plan, because Iraq had reportedly signed multi-billion-dollar deals with the oil companies from these countries.
In any case, it would be best for the US and the world community to allow the latest UN resolution about Iraq to take its natural course and let the weapons inspectors do their work peacefully. All possible efforts may be made to avoid a war on Iraq, which would lead to bloody and unexpected consequences. As far as crude oil was concerned, the US oil companies had plenty of opportunity to develop the oil resources elsewhere such as Russia and the Central Asian Republics, to the advantage of all the countries.