Mistrust fuels Kuwait-Iraq oil dispute

By William Maclean

LONDON (Reuters): A mere few months of geological work could unearth the facts in a row between Iraq and Kuwait about alleged theft of oil from beneath the Gulf War desert.

But mutual mistrust means the two countries will find it hard to agree terms for an independent probe into the sands of one of the world's most sensitive frontiers, analysts say.

"You need a high level of trust between countries to tackle issues like these. You don't have that here," said Manouchehr Takin of London's Center for Global Energy Studies.

Without an expert ruling, the issue is set to remain a political football.

Iraq has accused its small neighbor of stealing oil by drilling in a field straddling the border, reviving uneasy memories of the turbulent prelude to Iraq's 1990-1991 occupation.

The charge dates back to mid-July 1990 when Iraq brought up the issue just two weeks before it invaded Kuwait, saying Kuwait had stolen Iraqi oil worth over US$2 billion during the 1980s.

Iraq now appears to be using the issue to raise pressure for a cut in a big Kuwaiti compensation claim for oil lost in the occupation and the Gulf War that ended it, analysts say.

Baghdad last week said it would take unspecified steps to stop the alleged theft, prompting Kuwait to call for allied support and declare its welcome for any impartial probe.

"The accusations of Kuwaiti theft will agitate Iraqi public opinion, especially since rising prices make oil increasingly valuable," said Mustafa Alani, an Iraqi analyst.

The irony is that a tried and trusted method exists to solve such disputes -- provided politics are kept at a distance.

Border rows, a common feature of the global oil industry, are normally solved by independent experts allocating each party a share of oil under a formula called a unitization agreement.

Such pacts require a study of output history, seismic surveys and computer reservoir modeling. The arrangements work well, for example, between Britain and Norway in the North Sea.

Even in the Gulf, a patchwork of disputed land and water boundaries, there has been progress this year in addressing vexed border issues such as those between Saud Arabia and Yemen.

But the Iraq-Kuwait row has proved intractable, surviving even Iraq's recognition of a UN post-war border demarcation.

Baghdad's accusation concerns a large oilfield that Iraq calls Rumailah, whose southern tip nudges over the border into Kuwait, where it is called Rutqa. Kuwait pumped 15,000 barrels per day (bpd) from the field in the 1980s.

Iraq say Kuwait is now tapping oil from Iraqi territory by drilling at an angle under the boundary, something Iraq says Kuwait also did in the 1980s. Kuwait denies all charges.

Lawyer Rodman Bundy, a Paris-based expert on boundary disputes, said that if a country performed horizontal drilling across a border without the agreement of its neighbor then it would have serious questions to answer in international law.

But vertical drilling by a country on its own land would pose no such difficulty. Kuwait says this is what it is doing.

"From the legal point of view, the question is can Iraq point to any principle of international law obligating the parties to coordinate in the further development of a field that straddles a border? I don't think it can," said Bundy.

Iraq has nursed a fresh sense of grievance about the area since the UN commission responsible for the 1993 demarcation transferred a total of 11 former Iraqi oil wells to Kuwait.

The demarcation commission, in effect, found that it was Iraq that had gone beyond its borders in its oil operations.

Although the UN demarcation runs both northeast and south of an informal boundary used pre-war, the commission was careful to say it had not set a new boundary or reallocated land.

Instead the commission said it had merely demarcated for the first time the precise coordinates of the international boundary reaffirmed in minutes agreed between the two countries.

A study by the U.S. embassy in Kuwait in 1995 argued that the geology of Rumailah/Rutqa made it unlikely Kuwait had drained Iraqi oil. Any attempt by Kuwait to boost production in that way would have flooded its own wells with water, it said.

Even if the oil row is settled, so volatile are the ties between the two countries that the border itself may resurface as a flashpoint in the future, Alani said in a recent report.

"The Iraq-Kuwait border cannot be considered a settled issue, and it is possible a future Iraqi government will reject the agreement and derecognize the border," he said.