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More evidence that the 23 million people in Iraq are held hostage to oil greed. Layton, president of Equinox Oil Co. in The Woodlands, Texas, said the oil-for-food program must be stopped. "I certainly understand the logic in helping the Iraqi people," he said. "But the price to the world's security of helping the Iraqi people the way we are doing it now is far too great a price to pay." !!! -Rania Masri, http://leb.net/IAC/ -------------------------------------------------- U.S. producers say Iraq to blame for world oil glut The Clinton administration and some industry experts strongly disagree. Low prices threaten the producers. By John Donnelly KNIGHT RIDDER NEWS SERVICE February 21, 1999 WASHINGTON -- Stephen Layton, a Texas oilman, has laid off 60 workers in the last year, a third of his workforce. Bob Nance of Billings, Mont., did not drill a new well in 1998, the first time that has happened in 31 years. Danny Biggs no longer pumps oil from a quarter of his rigs in Kansas. Gasoline is cheap, the U.S. economy purrs along, but this is the Great Depression if you live off oil in America. And with the price at historic lows, increasingly desperate oil producers have decided their best fight is to take on America's biggest demon, Saddam Hussein. They want to cut off his oil. The reason: Iraq is being allowed to pump much more oil at a time when the market is swimming in it, which America's independent producers contend is keeping down the price per barrel. The Clinton administration strongly disagrees with the producers, saying Iraq is not to blame for the global oil glut. U.S. officials have even proposed removing all limits on Iraq's oil production, as long as the United Nations controls the money from such sales. Congress, however, has grown increasingly hostile to the administration's Iraq policy, forcing it to fund Iraqi opposition movements last year. Analysts say lawmakers now have an additional incentive to take aim -- a domestic constituency demanding help. "There's a depression going on in the oil industry now . . . and this administration is partly responsible for that," said Sen. Don Nickles (R., Okla.). The only way to bring Saddam Hussein to his knees is to cut off his cash flow," added Sen. Frank Murkowski (R., Alaska), chairman of the Energy and Natural Resources Committee. "I recognize the humanitarian concerns of the people of Iraq, but the sooner that Saddam Hussein is out of there, the better for them," said Murkowski, whose committee will hold a hearing next week. After the Gulf war, the United Nations imposed economic sanctions that prevented Iraq from freely selling its oil. In 1996, Iraq agreed to a U.N. plan that controlled the oil proceeds, and Baghdad began to pump more oil. Iraq now may sell up to $10.5 billion in oil a year, with two-thirds of the proceeds going toward humanitarian programs. Iraq cannot pump anywhere near that much oil because its rigs are old and need spare parts. It is producing roughly 2 million barrels a day, up from 1.2 million a year ago, and up from 887,000 in December 1996. But in a recent six-month period, Baghdad fell $1 billion under its U.N. allowance. What is Iraq's effect on the global oil market? How is money from oil sales being distributed? And how much can Iraq sell in the future? The answers paint a picture of today's not-so-simple politics of oil, connecting Saddam with U.S. producers such as Texas oilman Layton, exposing greedy market grabbers, raising national security questions, and providing glimpses into the wealth of trouble inside Iraq. Outside of Saudi Arabia, Iraq has more known reserves of oil than any other nation. Before the Iran-Iraq war that began in 1980, the Iraqis pumped nearly 3.5 million barrels of oil a day, funding a huge military buildup and vast social and educational programs. Before invading Kuwait in 1990, Baghdad pumped about 2.9 million barrels a day. The Gulf war collapsed Iraq's market. In 1991, production dropped to about 300,000 barrels a day, not enough for the country's own needs. Iraq, once a member of the Organization of Petroleum Exporting Countries, saw other OPEC countries take its share. Saudi Arabia took the most, jumping from 5 million barrels a day in 1989 to 8.1 million in 1991, a level it retains today. Kuwait, given a three-year exemption from OPEC limits, quickly built back its production, going from 190,000 barrels a day in 1991 to 2 million in 1994. Since December 1996, when Iraq reluctantly agreed to the oil-for-food plan, the Iraqis have distributed $3.7 billion worth of food with high efficiency, keeping about a three- to six-week supply in warehouses, said John Mills, spokesman for the U.N. program. The plan has had a dramatic effect on the average daily rations given to all Iraqis, from 1,200 calories a day in 1996 to about 2,000 a day now, said Mills. "Before oil-for-food, it was at near-starvation levels," he said. The distribution of medicine has been much poorer, with more than $250 million worth of drugs and equipment now held by thegovernment. Mills blamed a host of reasons, including lack of proper equipment, but others suspect the medicine is being sold for profit on the black market. At the United Nations, there is no move to curtail Iraq's ability to sell oil. In fact, Russia and China have been pushing to lift the nine-year-old sanctions entirely. The debate in the U.S. Congress, though unlikely to immediately influence the issue of sanctions, raises a new problem for President Clinton's Iraqi policy. For now, the administration wants the ceiling on oil sales lifted as a way of showing concern for the Iraqi people. "The oil-for-food program is designed to lock down Saddam's money and force him to spend it on humanitarian goods, food that his people wouldn't get otherwise," National Security Council spokesman David Leavy said. In addition, Leavy said, "I don't think anyone familiar with the situation can argue that Iraq has fueled this oil glut." Oil analysts back him up. "The Saudis took all the Iraqi production," said Fereidun Fesharaki, director of the Program on Resources at the East-West Center in Honolulu. "The demand has gone up, but a lot of countries have added capacity, and to say they [ Iraq ] are now the forces behind the disaster on the market is a bit unreasonable." Henry Linden, director of the Illinois Institute of Technology's Energy and Power Center, believes, however, that the Iraqi oil is helping to reduce prices. "It's simple arithmetic," he said. "Just as OPEC countries cut production by something like 2.6 million barrels a day, it's almost offset by the increase in Iraqi oil production. It may be unintended, but it was readily predictable." Fesharaki isn't so sure. In his view, oil producers historically have a difficult time holding back production, especially when the price falls. Take Iraq's oil off the market tomorrow, he said, "and someone will immediately fill the production." "The world," he said, "is one big swimming pool in oil, and if you take one part away, it will go back to being full anyway." Oil stays cheap because demand has not increased, largely because Asia's economies began collapsing in mid-1997. Two consecutive warm winters also cut into demand. Producers worldwide feel the effect. U.S. producers, who pump more than 6 million barrels a day, second only to Saudi Arabia, cut some 30,000 jobs in 1998, according to the American Petroleum Institute. If wells are not pumped, many will dry up, say producers. Layton, president of Equinox Oil Co. in The Woodlands, Texas, told the Senate Energy and Natural Resources Committee last month that a prolonged slump could close U.S. wells. That would force greater reliance on foreign oil, which now accounts for 55 percent of consumption. "We would submit that Iraq now controls world oil prices," said Layton, who spoke as a representative of 8,000 independent oil and natural gas producers. Later, in an interview, Layton said the oil-for-food program must be stopped. "I certainly understand the logic in helping the Iraqi people," he said. "But the price to the world's security of helping the Iraqi people the way we are doing it now is far too great a price to pay." Nance, head of Nance Petroleum in Billings, which has wells in Montana, Wyoming and North Dakota, felt a little less strongly. Perhaps, he suggested, Iraq could be moved back under OPEC control. Iraq, meanwhile, is having its own difficulties. U.N. Secretary-General Kofi Annan sent four oil experts from Saybolt Nederland, a Dutch consulting firm, to evaluate Iraq's producing capabilities last March and December. The group returned with alarming news. A "significant" number of wells had stopped production, and about 20 percent of them were irreparably damaged because of the lack of water-removal facilities, they said. Overall, they predicted a 4 to 8 percent decline in Iraq's oil-production capability. Spare parts were urgently needed, they said. The Security Council has authorized $600 million for spare parts. So far, Iraq has received less than $15 million worth. Oil experts predict that Iraq over the next year will continue to produce 2 million to 2.5 million barrels of oil a day. It has had no trouble finding buyers. The single largest consumer is the United States, which bought 38 percent of Iraq's output from May to November last year. "What's frustrating for us is that one day you read about us bombing Iraq, and the next day you find out we're the largest purchaser of Iraqi oil," said Biggs, 62, co-owner of Pickrell Drilling Co. of Great Bend, Kan. "That doesn't make much sense to me." -- ----------------------------------------------------------------------------- This is a discussion list run by Campaign Against Sanctions on Iraq. To be removed/added, email firstname.lastname@example.org, NOT the whole list. Archived at http://linux.clare.cam.ac.uk/~saw27/casi/discuss.html