BLACK OIL – RED THREAD OF WORLD INTERESTS

SOPHICO SOCHINAVA

Each day it becomes clear that war with Iraq is imminent. Disputes around prolongation of inspectors’ working date in Iraq or meeting with scientists who work on Iraqi disarmament only lead to protraction of the conflict.

The world is well aware that war would become a logical end of the events. Along with other issues that the world considers with great tension there arises another one: What are the interests of America and other great powers in applying pressure to the Gulf region? We can not explain everything by “black gold” of Iraq. Many think that these processes are caused by problems of strategic stability. The evidence, however, suggests that Western concerns with Iraq have far less to do with its alleged threat to world peace and everything to do with control of the region’s oil supplies.
The year 2003 will be difficult and poignant not only for Georgia. The whole world awaits economic or political advice with great tension. The reason and essence of US-Iraq, Russia-Georgia, Europe-Asia and Arab-Israel conflicts is oil.
The US secretary Colin Powel has approached a last stage of his mission. The aim of the mission is obtaining support of other countries in case of war. Yet in Iraq the UN inspectors interviewed Iraqi scientists in one of Baghdad hotel. Before the interview with the scientists, the US blamed Iraq for blocking this meeting. Iraq said approximately 500 scientists worked on country’s disarmament. However, Baghdad conceals identity of these scientists.
On January 25 the World Economic Forum was held. As expected, the US used this meeting for discussing Iraqi problem. In the Forum, Powel said Washington would hope for the support of many countries even if there were no sanction from the Security Council. “I can not name our ally states, but I assure you that we will not be alone”, secretary of states said.
Disagreement around these issues in the world has become evident. Some permanent members of the Security Council, among them Europeans demanded prolongation of date for inspectors’ work. “What is the use of extending time? What else can inspectors do?” – said Powel excitedly adding: “European colleges have not yet said when they wish to interview inspectors. What will we hear in the nearest two or three months if Iraq does not wish to co-operate.”
The Bush administration is supposed to agree to prolong inspectors’ working date, but for no more than several months. Chairman of External Affairs Committee of American Senate has also expressed his opinion saying that inspectors needed more time. In Davos Powel said that even after inspectors’ report the US would not hurry to attack Iraq. However, this is a matter of time.
In Baghdad everybody thinks that America’s only interest in the Persian Gulf is oil. According to Platts Guide, Iraq has oil reserves of 112 billion barrels, second only to Saudi Arabia, which has some 265 billion barrels. Iraq estimates that its eventual reserves could be as much as 300 billion barrels.
The opinion that the US reason for a war with Iraq is oil has found a response in the Arabian World as well as outside. During the gulf war in 1991 Iraq was sure America would not defend Kuwait if this country would be, for instance, cabbage importer. Paradoxical as it may seem, but the same statement was made by Investigating Commission that held unofficial trial. People who made an order to bomb Iraq were brought to trial. The Commission was headed by general Clark, a former minister of the US Justice Department. The trial was attended by lawyers from other world.
The sentence passed by the trial said: “We think that the real reason of war with Iraq was nostalgia for the “golden age” when America and some European countries exploited Middle East resources. Large oil companies are in good relations with the feudal lords that control Saudi Arabia, United Emirates and other countries, but they can exert no pressure on Iran, Yemen, Libya and Algeria”. And in a world where the US has economic rivals, with their own growing demand for oil, a war to secure control of the “greatest prize” makes sound sense to the Bush administration.
Today, similar accusations of America can be heard. Here is what one of British Parliament member said: “You should not be a genius to understand that the US and Israeli plans are aimed at the weakening of Arabian World. Afterwards the US will take the opportunity of protecting its “illegal child” Israel”.
Analysts of Economist that can hardly be blamed for sympathies towards Saddam Hussein regime, have concluded the following: America’s main purpose in its anti-Iraq campaign is clear enough – to rid the world of the mass destruction weapon that he has or might have, but the most important thing is also what will happen in the world market in case of Iraqi oil glut. If Iraq manages to extract large quantity of oil, this might put an end to the domination of Saudi Arabia in the market. It would be important for America as it is the biggest consumer and the biggest net importer of oil (11 million barrels a day, which is a seventh of global production). Therefore, Americans realised that safety can be achieved only after gaining access to the oil reserves of other countries”. Thus, it would be naive to say that Western countries have no interest in oil.
In accordance with other considerations, embargo was put on Iraq’s oil export with the purpose of world security. Adherents of this consideration think that Hussein is the main factor of anti-Iraq campaign, but not oil. They say profits from oil realisation is not spent for good purposes, otherwise the Bush administration would not make any alarm. They say oil market is congested and America can do without Iraqi oil.
This way or that, America tries to achieve diversification of energy sources. In other word, fuel from the whole world will go into the US. Analysts are sure that oil reserves in the world are greater than it was 10 years ago. They think that the reserves will not be exhausted soon.
Iraq, being in the second place by oil reserves, can easily satisfy needs of the world for oil, but war and a whole number of sanctions served to weaken oil industry. It can be recovered only by means of foreign investments. War opponents ask the same question: has the interest of great powers in Baghdad oil become the main factor of such pressure on Iraq?
In the end of 1970s Iraqi crude oil output had reached 3.5 million barrels per day. The oil output might reach 6 million. If this happens, Iraq will hold the fourth place in oil extraction after Saudi Arabia (8,8 million barrels), the US (7,2 million barrels) and Russia (7.1 million barrels). Since 1920 foreign companies from more than a dozen nations, inclusive of France, Russia, China, India, Italy, Vietnam and Algeria, have negotiated contracts and reached agreements to develop Iraqi oil fields. After this Iraq has been fighting for a greater share of profit and in general, for the right to take control on Iraqi oil. After military overturn of 1973, Iraqi Petroleum was nationalised. Baghdad’s profit from oil extraction grew significantly allowing Saddam Hussein to implement a number of reforms and expand armament. Iraq has been subjected to United Nations sanctions since invasion of Kuwait in 1990. After the war of 1991 oil industry has been badly damaged by economic sanctions. After intrusion of Iraqi troops, oil extraction has reduced by 90% more. Sanctions banned all exports and investments in the industry. In 1996 Iraq faced humanitarian catastrophe. The UN offered to allow Iraq to sell $4 billion worth of oil every year to permit Iraq import only food, medicine, and other humanitarian goods for essential civilian needs. This programme was known as “oil for food” program.
By 1998 Iraq confronted another difficulty – oil price fell lower as 10 dollars. This time, the UN allowed purchase of spare parts for oil pumps and drills abroad. Besides, export quota of Baghdad increased by 10.4 billion dollars per year. By 2000 it was abolished. Compared with 1990 indices, oil extraction increased by 75%.
For the past years Iraq has been negotiating with international companies that after the lifting of UN sanctions tried to lay hands on a great part of Iraqi oil. Iraq concluded agreements with Russia, Vietnam, France, Syria and other countries. Baghdad renewed the agreement with Russia that was cancelled by an oil minister in December (a new agreement was concluded in January). This step is viewed as expression of Iraq’s gratitude towards Russia for its refusal to support resolution of the US and England in the UN Security Council.
Because of the war probability, the Russian government fears that concessions agreed between Baghdad and numerous enterprises will be renegotiated upon, and that US companies will enter to take the greatest share of those existing contracts. Besides, ecologists think that in case of a new war the catastrophe of 1991 might repeat. That year Hussein ordered Iraqi troops to explode 600 oilwell and opene pipelines. 8 million barrels of oil overflowed into the Gulf. Americans say they will not repeat the same mistake and seize oil reserves in accordance with war plans so that to save them for “Iraqi people”.
As for Russia, despite the different and wartime situation that preceded the Russian-Chechen war, some similarity can be observed here, too – a chain of events preceding intrusion of Russian troops into Chechnya. One and the same event reiterates – in 1994 and 1999, in capitals of Moscow, Washington, Europe and Caucasus priority was attached to the significant economic task: which direction would Baku oil pass in – Russian (Novorosiysk) or Turkey (Jeokhan)?
Basaev’s and Khatabi’s hopeless raid in Dagestan in the direction of Caspian oil route has coincided with the period of project approval. (The project was approved in August 2002). For Chechen commanders the functioning of the route had one significance: Chechen pipeline would not fill their private budget and would not be used for punishing armed regiments.
Field commanders and their protectors who, as far as we know, lived peacefully in Moscow, faced two tasks – to cause de-stabilisation in Dagestan and enable the functioning of alternative ways as well as find other sources of money. This time even the name of Osama Bin Laden has been brought to light though nothing had been heard about him in previous conflicts in Caucasus.
Bin Laden agreed to finance only spread of fundamental Islam in Chechen. To experts’ mind, there is no pre-condition for the establishment of such regime in Chechnya. Bin Laden was less interested in liberation movement. Thus, they could not manage to reach an agreement.
It was first serious mistaken plan of Chechen field commanders. Oil route became a central subject. During the war Chechen commanders had to confirm that they controlled this or that route and that stability of the region depended fully on them. It became necessary to revive interests of Russian oil companies towards oil routes. With this purpose they had to create a situation when the advantage of the Baku-Jeikhan route would become notable for Russian oil giants.
This plan worked. Several weeks later after the outbreak of war in Chechnya, President of Azerbaijan Geidar Aliev has once again raised the question of the purposefulness of the route. He also said that one of the world’s greatest oil concern “BP Amaco” was ready to support the significance of Baku-Jeikhan pipeline. Realisation of the project would prevent Russia from pumping large quantities of oil in any pipeline.
In Autumn 1999 Russia that involved in war with Chechnya, faced three alternatives: either to put up with reality, restore Novorosiysk route or build a pipeline outside Dagestan. The most important handicap of the second variant was lengthy war in Chechnya. As for Dagestan, construction of pipeline has been completed here despite the numerous attempts to cause de-stabilisation.
Thus, what is the commercial nature of oil reserves and pumping – the main cause of bloodshed in Chechnya? As Russian experts say, Azerbaijan will be able to produce 0.8 million barrels per day in 2005 and 16 barrels in 2010. Compared with Saudi Arabia reserves, this one is small, but it is enough to make a particular influence on the change of world oil prices.
According to variants of Baku oil experts: to the north – from Baku to Chechnya and then to Novorosiysk. Russian company Transneft plays a great role in the transit of fuel.
The pipeline will pass from Baku to terminal Supsa where consortium AMOK is a dominant one. There are also other companies there – British, Turkish and American ones. Russia is represented by company Lukoil. It will receive 10% of the whole profit.
The southern route supported by America passes from the Turkish port Jeikhan. To Americans’ mind, realisation of this project will make countries of Caspian region less dependent in Russia and reduce the role of Iran in the world oil market.
The oil pipeline “Baku-Jeikhan” solves important problems for the West such as independence of western economies from oil of Arabian countries and OPEC dictatorship. Sometimes even the US finds it difficult to oppose OPEC. Their decisions threaten western economies. As for Turkey, it can strengthen its positions in the Middle East by means of this project that might weaken after termination of export from Iran.
The Y2000 was a real “golden age” for Russian budget. Abundance of currency after oil export enabled Russia to significantly improve economy and on the other hand, revealed the interrelation of Russian economy and “black gold” prices. Yet, Russian experts say that the situation is not normal with the country’s budget being tied to the economic conditions of world oil prices. Oil still remains to be the base of Russian budget. Any advice can lead to the increase and solution of many problems in the oil market as well as cause sudden decrease.
Russia thinks that the purpose of the southern route is far from economy pursuing only one political purpose – to prevent Russia from export of Baku oil even at the expense of unprofitable projects. Russia does its best to confront these methods. Its policy in Caucasus pursues this very purpose.