By Mahmoud Al-Abed
It will not be in Iraq’s best interests to cut oil production, and it is unlikely that the Iraqis will carry out such a plan, despite the unpredictability of President Saddam Hussein’s actions.
On Wednesday, State Department spokesman Richard Boucher warned Iraq not to exploit concern over surging oil prices for political gain, but downplayed fears Saddam Hussein could further spike the market by cutting production.
Boucher also said the United States would be ready in the "highly unlikely" event that Saddam Hussein cuts oil production in order to push up the already surging prices.
The question is whether Iraq, which has a multitude of bills to pay as a consequence of its 1990 invasion of Kuwait, can afford to give up the billions it can earn from the current hike in oil prices.
If prices remain within the present band, Iraq would be relieved from its debts sooner than it ever hoped. After all, selling oil at $12 a barrel is not by any means like selling it at more than $35.
The United Nations, which monitors Iraqi oil sales and controls the income under the oil-for-food plan, said Iraq has collected $5.1 billion since June 9, the start of the current oil phase, which ends in December.
The oil market was worried after Iraq accused Kuwait of stealing its oil a few days ago. This was the same excuse Iraq used to invade its oil-rich neighbor a decade ago. The Gulf Crisis itself led oil prices to rise to $41.15 a barrel.Experts warned that Iraq might take the cut-off action.
John Lichtblau, chairman of the Petroleum Industry Research Foundation, which is funded by oil companies, said the price jumps "could continue somewhat because there's some fear that the Iraqis might do something."
"What is new is that Iraqi exports have become more important because they're needed" in the face of low world oil reserves as in the United States where the oil stocks have hit a 24-year low.
Lichtblau said that if Saddam were to cut off the Iraqi exports, "it would be a problem, whereas before it wouldn't have.”
According to the expert, this would have a disproportionate impact on prices. “Nobody knows what Saddam will do."
President Saddam can do a lot, as he solely runs the show in Iraq but the US put the world at ease.
Saudi Arabia and other oil producing nations had excess production capacity that could cover any shortfall in supplies, Boucher said.
And Washington's own Strategic Petroleum Reserve had 570 million barrels, enough to cover any shortfall in Iraqi supplies for a year and a half, he added.
However, even if Iraq’s threats to Kuwait were seriously dealt with on the part of the superpower, it’s not wise that US resorts to force, simply because that would mean the prices would rocket higher.
The world can feel comfortable on that point too, as US military leaders have described Iraq’s threats as “mere rhetoric.”
But according to Baghdad, US threats to Baghdad are not rhetoric, blaming them for the insurgence in oil prices and instability in the world market.
Recent threats by Washington against Iraq after Baghdad had accused Kuwait of stealing oil "have encouraged speculations, abnormally increased demand for crude, and prevented a return to a calm market despite an OPEC production hike," Ath-Thawra newspaper, mouthpiece of the ruling Baath party, said Thursday.
In the final analysis, Baghdad has taken many unwise decisions over the years, but it is unlikely it would dig itself into a deeper hole this time.
© 2000 Al Bawaba (www.albawaba.com)
