The Future of Iraq's Oil

Friday, 11 April 2003 22:07 by: Anonymous
New York Times | Editorial

Friday 11 April 2003

Iraq is no longer a republic of fear, but it is still a republic of oil. Some 112 billion barrels lie beneath its soil, more than a tenth of the world's known reserves. How the Bush administration handles the management of that resource as it gains control of the country will go a long way toward determining not just the future of Iraq but also America's worldwide reputation. Any effort to manipulate Iraq's oil for the benefit of the United States and American oil companies rather than the benefit of the Iraqi people will squander whatever political gains Washington has won in the war.

Thanks to good planning and quick military action, coalition forces secured Iraq's southern oil fields before they could be sabotaged, and the allies are now establishing control over northern oil areas as well. If they, too, are captured intact, limited oil production may resume in a few months.

In the short term, oil revenues must be used to provide for the humanitarian needs of a population that has suffered from almost 13 years of sanctions and more than three weeks of wartime dislocation. They should not be used to pay for the costs of the war, but should be used to help build a livable peace. In the longer term, the future of the Iraqi oil industry, including its possible privatization, must be decided by the Iraqi people themselves once a legitimate, internationally recognized new government has been established.

The Bush administration has repeatedly pledged that Iraq's oil wealth will be used exclusively to benefit the Iraqi people. That is the right principle. By adhering to it, Washington can dispel lingering suspicions about America's motives for invading Iraq. But with tens of billions of dollars at stake, there are likely to be heavy pressures from interested parties to lock up lucrative long-range contracts during the period of American occupation. There will also be proposals for using Iraq's oil production capacity to break the power of OPEC, which was founded in Baghdad in 1960.

Iraq's oil sales are still governed by the international sanctions imposed after its 1990 invasion of Kuwait. Current rules require that all sales must be made through the United Nations, which also controls how the resulting revenues can be spent. Oil exports halted when the invasion began, but the U.N. secretary general, Kofi Annan, has temporary authority to spend the billions of dollars on hand from recent exports for emergency relief.

Before Iraq invaded Kuwait, it produced around 3.5 million barrels of oil per day. The rate had fallen to about 2.2 million barrels per day before the war began last month. Iraqi oil is of high quality, cheap to produce and abundant. But repeated wars and sanctions have dried up oil exploration and investment. New investment will be needed to restore and possibly expand production.

By developing its oil wealth on an equitable basis and shedding the expensive burdens of militarism and dictatorship, Iraq can exceed the prosperity it briefly knew a quarter century ago. America should direct its occupation efforts toward achieving that goal.
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