BAGHDAD – Three days after Saddam Hussein’s landmark April 8 speech which spelled out Iraq’s decision to halt exports of oil for one month, Minister of Oil Amir Muhamad Rasheed said this was in agreement with the official motto “Iraq and Palestine is one cause and trench to confront the joint foe represented by the US-Zionist administration.” The measure was supposed to “hurt the US economy and put pressure on the Zionist entity to withdraw from occupied Arab territories.”
According to Iraq’s Oil Ministry, the proportion of Iraqi crude imported by the US is between 10 percent and 15 percent, “through a number of companies Iraq is dealing with.” According to Petroleum Intelligence Weekly, Iraq is the sixth largest oil supplier to the US. The ministry swears the oil market has been affected by Iraq’s decision, “because of the withdrawal of more than 2 million oil barrels a day.” Oil sources in Jordan say that Iraq is currently producing around 2.6 million barrels a day, of which 2 million are exported: these account for 4 percent of internationally traded supplies.
According to the Iraqi oil minister, “The ugly crimes perpetrated by the Zionist entity against Palestinians will prevent OPEC [Organization of Petroleum Exporting Countries] states from increasing their production.” He is right on this one. He also hopes OPEC states “will adopt more active measures, decreasing or halting oil exports, to support the Palestinian cause and halt savage massacres.” On this one, he is wrong.
The massacres perpetrated by Israel’s army – already being compared around the Arab world and in China to the Holocaust – may have ceased, at least for a while. But no OPEC member dared follow Iraq’s steps to withdraw, even temporarily, from the oil market.
In another widely broadcast speech last week, titled “Arabs shouldn’t submit to American-Zionist blackmail” by Iraq Daily, Saddam emphasized that “all means are legal to a people whose land is occupied” and who are suffering from aggression. He says “Iraq has stopped its oil flow for one month after it heard from Iran its suggestion to halt oil flow for one month. It is worthy that those who suggest something should apply it.” Iran though, has not followed Iraq’s move.
Saddam also appreciates Iran’s suggestion that oil countries should provide “one month of oil export revenue out of twelve for the Palestinians.” His main point is that when “America and the Zionist entity realize that Arabs are supporting Palestinians in solidarity with the region’s countries, including the neighbors of Arabs, then it is as if we have sent armies to support Palestinians.”
Asia Times Online was repeatedly assured by Iraqi authorities in Europe and then in Baghdad that a visit to oil industry installations in Basra or Kirkuk would be approved. The oil minister was in principle in favor of a face-to-face interview – “the next day.” On one of these “next days” we finally learned that everything was cancelled: the visits, of course, and even the pre-agreed interview. It’s virtually impossible for a regime like the Ba’ath Party’s to understand that this paranoia about all foreign media certainly does not advance the Iraqi cause.
No OPEC member country joined – or will join – an oil embargo. Libya and Iran gave only rhetorical support. They would join the embargo only if it were backed by all Arab oil producers. Since the Gulf War, the largest OPEC member, Saudi Arabia, and Kuwait have totally abandoned the use of oil as a political weapon.
Oil prices did indeed rise, but only marginally (a dollar or two), to around US$25 a barrel due to the Iraqi move. Saudi Arabia (10 percent of world production), Kuwait (2.6 percent) and the Emirates (2.7 percent) have an enormous excess capacity of 6 million barrels a day. They could easily step up their production to compensate for the Iraqi loss. But they won’t. The Arab street would never forgive them, after watching the destruction in Jenin, Ramallah and Bethlehem on al-Jazeera or Abu Dhabi TV. After the Iraqi decision, US oil giants which have contracts to import Iraqi oil took no time to request extra supplies from Saudi Aramco: they were all turned down.
Middle East oil analysts like Henry Azzam, from Jordinvest, suggest that to put pressure on the US to press Israel to behave in a civilized manner, “the best strategy to follow is to keep the lid on oil production in order to push oil prices higher.” An oil embargo – although very unlikely – would be suicidal for the Arab oil producers and hurt “the noble cause they are defending.”
Fuel prices have already risen 20 percent since the Israeli army started rampaging through the West Bank. The Arab capitals know that if there ever was an oil embargo, Israeli Prime Minister Sharon would be able to say he is the one and only friend of the West in the Middle East. And to top it all, history shows that the 1973 oil embargo did not work: Israel did not leave Arab territories occupied in the 1973 war.
Oil prices certainly won’t go down after the Iraqi decision or the failed, cartoonish coup d’etat against Venezuela’s Hugo Chavez, which the US, embarrassingly, was quick to endorse. Venezuela is the fourth largest OPEC producer, and the world’s fourth largest exporter (2 million barrels a day). It competes with Saudi Arabia, Mexico and Canada as the leading oil exporter to the US. American hawks certainly haven’t forgotten that Chavez was one of the brains behind the OPEC supply cuts that helped oil prices recover from their very low $10 a barrel in 1998.
But the question remains: what is Iraq doing with all these non-exported barrels of oil?
A thorough examination of the labyrinth of Iraqi oil sales – documented or not, and subjected or not to the UN “oil for food” program – yields … another labyrinth. But there’s no doubt Iraq will be trying to sell and smuggle to its neighbors at least part of the oil not available on the international market.
It is impossible to exactly ascertain how much oil Iraq exported in the first months of 2002. The figure of 2 million barrels a day from Jordan oil sources is contradicted by a figure of 1.7 million barrels a day from industry sources in Southeast Asia. Tragic irony or not, the US is itself Iraq’s main oil client: 74 percent of its Iraqi imports come from Basra, and 36 percent from Kirkuk – a total of no less than 700,000 barrels a day. By comparison, it is fair to assume that at least 400,000 barrels a day are consumed internally in Iraq.
In the past few years since the implementation of the United Nations’ “oil for food” program, 59 percent of Iraqi revenues from oil sales went to an escrow account in the Banque Nationale de Paris (BNP) in New York, controlled by the UN. Only 13 percent of the money actually went to Iraq. The Iraqis are trying harder and harder to avoid using the UN-controlled (but in fact US-controlled) BNP account. The Russians, meanwhile, are closing in: a crucial Russian delegation was recently in Baghdad.
From Kirkuk, a pipeline carries oil to Turkey – at least 700,000 barrels a day. This pipeline is subject to Iraq’s one-month embargo. But the bulk of Iraqi oil is usually exported from Basra, by ship, to the Persian Gulf and beyond: around 1.2 million barrels a day. So-called “semi-legal” sales go to Jordan – as much as 200,000 barrels a day, transported by a serpent of tanker trucks that use a special road parallel to the Baghdad-Jordan border highway, and then a hairy Jordanian side road. Fifty percent of this oil is practically “donated” to Jordan at a huge discount. The UN Security Council more or less tolerates the practice, because it alleviates Jordanian economic problems.
The Iraqis’ biggest coup to date to escape the backbreaking UN sanctions is an arrangement with Syria. Hundreds of import contracts are on hold in New York – blocked by the US and Britain. In the past six years, Iraq had access to only 16 percent of the revenues of its sales. But when the Iraq-Syria pipeline was reopened, the UN allowed it, “as a test.” The “test” still goes on, at a rhythm of 250,000 barrels a day. It’s a swap: Syria exports its own oil.
For each barrel sold at around $18 – the price during the first two months of 2002 – Iraq actually only gets $6. Syria, for instance, can pay $10 a barrel in cash. So the UN infernal machine obviously encourages smuggling. There is indeed a lot of smuggling – and not only of oil. Between 40,000 and 100,000 barrels a day float to the Gulf toward Dubai on small cargo ships. An unimpeachable source told Asia Times Online that the reason we did not get our visit to the oil fields and refineries in the south is that Basra is a base for Iranian smuggling boats. They sail at night from Iraq, carrying no flag, and as soon as they are in international waters they start displaying the Iranian flag. The days of the Iran-Iraq war are long gone. Today Iran suggests an oil embargo, Iraq applies it, and a lively smuggling interchange keeps on going between the two. Call it the axis of business.