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US Stand on Iraq influence by Oil (fwd)

This might contain some useful info, although he's got his facts wrong
when he says the food-for-oil deal allows sale of 2bn barrels and 5.2bn
barrels of oil -- he means $2bn worth and $5.2bn worth.


---------- Forwarded message ----------

Monday November 16, 8:38 PM
US stand on Iraq influenced by oil
PARIS, Nov 16 (AFP) - World oil prices remain a key factor in Washington's
reluctance to lift UN sanctions against Iraq, analysts said Monday.
"A strong smell of petrol pervades the Pax Americana installed in the Gulf
in the 1990s," said Ghassan Salame, Middle East analyst at the CNRS French
Scientific Research Centre.
Iraq, which has more than 10 percent of the world's reserves of crude oil,
began negotiating oil deals with French, Russian, Chinese and Italian firms
in recent years. Talks are most advanced with French and Russian companies,
while US firms remain almost absent.
But Salame told AFP that as long as the eight-year UN oil embargo against
Iraq remained in force, Baghdad "will not be able to sign long-term
contracts with leading world oil conglomerates."
"The embargo would have to be lifted," he said. "Even the Chinese and the
Russians wouldn't dare sign deals with Iraq today, because the United States
is not ready to compromise over this", the lifting of sanctions.
Nicolas Sarkis, editor of the Paris-based newsletter "Arab Oil and Gas",
said Iraq has proven reserves of at least 112 billion barrels, or almost 11
percent of world reserves, as well as several giant oil-fields, discovered
but not yet exploited.
"Iraq could increase its production to six million barrels per day (mbd) in
the six years that follow the lifting of sanctions," Sarkis told AFP.
Its current export capacity is estimated at between 1.3 and 1.6 mbd against
3.5 mbd before the 1991 Gulf War. Its OPEP quota at the time was 3.14 mbd.
After the United Nations slapped an oil embargo against Iraq in 1990, in
retaliation for its invasion of Kuwait, Baghdad in December 1996 was
authorised under the "oil-for-food" deal to export two billion barrels per
semester to buy food and medicine for its people. The authorisation was
raised to 5.2 billion last February. [see note above --SW]

"But today it's not in the interests of Washington's regional allies,
notably Saudi Arabia which is the United States' third biggest supplier, to
lift the embargo because they would be obliged in consequence to cut back
their sales," Sarkis said.
He said also that a decision to lift the embargo against Iraq would trigger
an immediate drop in oil prices that would have a negative impact of small
US producers.
"While the Americans want low oil prices, neither they nor anyone else wants
to see prices crash to eight or nine dollars over a long period," Sarkis
"The United States wants to continue importing oil at a relatively low price
but does not want to penalise small local US producers.
"These small firms, which are influential in Congress, have high production
costs and any influx of cheap oil imports would cause them major problems,
including the shutdown of oil-wells, which has already happened."
Oil prices have already fallen 40 percent over the last year in constant
terms, and are now on a par with prices in the 1970s. The fall in prices and
in profits, according to specialists, is consequently expected to have
severe repercussions on future investments in the oil sector.
Meanwhile Washington is under pressure from lobbies such as USA Engage --
which groups more than 500 firms, including oil companies -- that want a
lifting of sanctions against Iran to enable them to compete for that market
against other foreign firms.

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