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The world's biggest oil bonanza in recent memory may be just around the corner, giving U.S. oil companies huge profits and American consumers cheap gasoline for decades to come.
And it all may come courtesy of a war with Iraq.
While debate intensifies about the Bush administration's policy, oil analysts and Iraqi exile leaders believe a new, pro-Western government -- assuming it were to replace Saddam Hussein's regime -- would prompt U.S. and multinational petroleum giants to rush into Iraq, dramatically increasing the output of a nation whose oil reserves are second only to that of Saudi Arabia.
"There already is a stampede, with the Russians, French and Italians already lined up," said Lawrence Goldstein, president of the Petroleum Industry Research Foundation, a New York think tank funded by large oil companies.
Until now, debate over the economic impact of a U.S.-led attack on Iraq has focused mostly on short-term dangers. Pundits have worried that just as during the Gulf War, a new Iraq war would disrupt oil exports from the Persian Gulf and cause a sharp spike in petroleum prices.
If Hussein attacks oil facilities in neighboring gulf states, for example, or Arab oil producers institute a boycott, Americans could wind up paying more than $2 per gallon for gasoline, some experts predict.
The long term, however, looks radically different, according to oil analysts.
In their view, a new Iraq oil boom could begin within two years of the war's end -- roughly the time it took to repair damaged facilities in Kuwait after the 1991 Gulf War. Once production reaches its full capacity, they say, the enormous increase in supply could weaken OPEC, the oil producers' cartel led by Saudi Arabia, lower international oil prices for the foreseeable future and shift the balance of power among the world's major oil producers.
"OPEC is already significantly fractured, and this would already add to its internal frictions," said Reuel Marc Gerecht, a fellow at the American Enterprise Institute who formerly was a U.S. diplomat and CIA agent in the Mideast.
"It would definitely diminish the Saudis' influence (over the United States) and would cause the Iranian regime a lot of trouble."
WORLD'S SECOND-LARGEST RESERVES
Iraq has 113 billion barrels of proven reserves, second worldwide only to Saudi Arabia, which has 262 billion barrels. But because of its two decades of war, Iraq's oil potential remains relatively unexplored. The U.S. Energy Department estimates that Iraq has as much as 220 billion barrels in undiscovered reserves, bringing the Iraqi total to the equivalent of 98 years of current U.S. annual oil imports.
American firms are barred by U.S. law from making contracts with Iraq and have had to watch as the rival firms of other nations sign contracts with the Iraqi dictator to pump oil after U.N. sanctions are lifted. Assuming Hussein is overthrown and U.S. and U.N. sanctions are lifted, Goldstein said, "you'll see the U.S. companies will be very, very interested."
Muhammad-Ali Zainy, a former Iraqi government oil official, estimates that after an overthrow of Hussein, oil production would rise from its current output of about 2.5 million barrels per day to as much as 7 million barrels per day by the end of the decade.
"Given Iraq's dire financial situation, any Iraqi government after Saddam Hussein will need massive amounts of money and will try to produce as much as it can," said Zainy, now a senior energy analyst at the Center for Global Energy Studies in London.
Just how low prices could go as a result of increased Iraqi production is unclear. Some analysts have predicted that oil could plummet from its current level of about $30 per barrel -- a price that includes a $5 "war premium" caused by short-term jitters -- to as low as the level of late 1998 and early 1999, when it briefly hit $10 per barrel.
For domestic oil producers, however, such a collapse could be unwelcome.
"I don't think it's really in the interest of the United States to have OPEC disintegrate and have a crash in oil prices," Zainy said. "The United States is a large (oil) producer; there are interest groups, oil corporations and independent oil producers that want a reasonable price level."
WHITE HOUSE, FIRMS KEEP MUM
The Bush administration and U.S. oil firms have stayed quiet on the subject of Iraqi oil, perhaps leery of accusations that an attack on Iraq is motivated by U.S. desires to have greater control of world oil. A spokesman for oil giant Chevron-Texaco, based in San Francisco, declined to comment whether the company is interested in postwar Iraq, saying the issue is "too speculative."
The Iraqi government has taken the propaganda bull by the horns, accusing Washington of waging an imperialist grab for oil.
"The U.S. administration wants to destroy Iraq in order to control the Middle East oil, and consequently control the politics as well as the oil and economic policies of the whole world," said a letter from Hussein read to the U.N. General Assembly on Sept. 19.
Some domestic U.S. critics, while reluctant to appear sympathetic to Hussein, partially echo his claims.
"The administration doesn't want oil to be part of the war discussion because it undercuts the reasoning that the rush to war is because of an imminent (Iraqi) military threat," Michael Klare, professor of peace and world security studies at Hampshire College in Amherst, Mass., and author of "Global Petro-Politics," wrote in the March issue of Current History magazine.
"If the real motives were made clear -- that this is a grab for oil and an attempt to break the back of OPEC -- it would make our motives look more predatory than exemplary."
The oil card is clearly a factor in the current tug-of-war between Baghdad, Washington and key members of the U.N. Security Council that oppose the Bush administration's push for a military move on Iraq. In recent years, seeking to curry favor, Hussein has given huge contracts to oil firms from France, Russia and China, which all have veto power in the Security Council.
FRENCH HEAVILY INVOLVED
The French oil giant TotalFinaElf has the largest position in Iraq, with exclusive negotiating rights to develop Majnoon, a field near the Iranian border with estimated reserves of 10 billion barrels. Moscow has a $3.5 billion, 23-year agreement for several huge Iraqi fields that gives a lead position to a Russian oil consortium led by LukOil.
While that may partly explain those countries' reluctance to sign on to the Bush administration's drive for a "regime change," some observers warn that such resistance could backfire.
Iraqi opposition leaders suggest that unless France, Russia and China support the U.S. line in the Security Council, their oil companies may find themselves blacklisted.
"We will examine all the contracts that Saddam Hussein has made, and we will cancel all those that are not in the interest of the Iraqi people and will reopen bidding on them," said Faisal Qaragholi, operations officer of the Iraqi National Congress, the opposition coalition based in London that plays a central role in the American anti-Hussein strategy.
Ahmed Chalabi, the INC leader, has gone even further, proposing the creation of consortium of American companies to develop Iraq's oil fields.
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