Threat to Iraq, the American strategy on oil

Dipak Basu The Statesman Asia News Network Calcutta

Invasion of Iraq by the Anglo-American forces is becoming a reality now. Although the international community is against it, the United States is not listening. Questions can be raised as to why there is so much urgency to take on Iraq when the much more important issue of international terrorism is still unsolved.

When Taliban and Osama bin Laden groups are thriving in Pakistan and in countries sympathetic to their cause, what is the reason to attack Iraq. The rationale can be found if we look at the international petroleum market and the possible effect of the invasion of Iraq may have on that market.

The international market for oil (petroleum and its by- products) had undergone a dramatic change in 1974 after the Arab- Israel war. To teach a lesson to the Western countries, the Arab oil producing nations had increased the price of crude petroleum by some 400 percent in 1974.

Other non-Arab countries had joined in the sudden upsurge of wealth that had started flowing from the oil consuming countries to the oil producers. The effects were felt in India, too, which was forced to pay almost 75 percent of its export earnings to finance essential imports of oil.

Developing countries have suffered the most. The development efforts in Africa were stopped owing to lack of support from Western nations which went into recession and inflation simultaneously.

Very soon the vast earning of the oil producers started flowing back to the banking system of the West and from there to the Latin American countries. That was the decade of cooperation between the West and the Middle Eastern oil producing countries, which has not ended with the Islamic revolution in Iran.

Iraq, normally a pro-Soviet country, suddenly became an agent of the Western power and invaded Iran. That attack was financed by Saudi Arabia, Kuwait, and other conservative Arab nations and was equipped by the Western power.

Saudi Arabia was financing anti-socialist terrorists in Nicaragua and Afghanistan. However, the invasion of Kuwait by Iraq changed the equation suddenly. One reason was the invasion was that both Saudi Arabia and Kuwait since 1985 have tried to keep the price of crude petroleum low by producing more, which has harmed the export revenue of Iraq but has helped the economies of developed world significantly to revive from the recession.

The possible effects of the invasion on Iraq on the future price of oil can have some important implications. The U.S. plan does not mean only to disarm Iraq but to have complete change of the regime, destroy the entire apparatus of the ruling Bath Party of Iraq, install an occupation government, as it had in Japan from 1945 to 1951.

General Tommy Lee, the current commander of U.S. forces in the Middle East, just like Gen. MacArthur in Japan in 1945, will be the head of the occupation government in Iraq to make sure that a pro-western government can survive in Iraq in future. The U.S. will also take over the oil fields in Iraq, which will be managed by the Anglo-American oil companies.

The international oil market will be affected very seriously. These would have devastating consequences for Saudi Arabia, Russia, and other major oil producing countries and will also harm India, China, and France.

The policy of the current U.S. administration is to have a low price for oil in the international market, which will remove the fear of inflation in the developed countries. The last two inflations in the Western countries, that took place during the 1970s and 1980s, are the result of the two rounds of major upsurge in the international price of crude petroleum by the Organization of Petroleum Exporting Countries (OPEC) in 1974 and 1979.

There were then serious recessions of the economies and the resultant high unemployment and reduction in the standard of living in the developed world.

The international oil price went down significantly since 1985 due to the lack of demand and over-production by oil producers. The oil price came down from the height it had achieved during the Gulf war crisis of 1990-1991 due to increased production by some countries like Saudi Arabia, when Iraq was not allowed to export oil.

The collapse of the oil price in 1996 took place when Iraq was allowed to export oil for essential imports of food. Since 1999, the oil price has gone up when Iraq has expelled the UN weapons inspectors and refused to swap food for oil.

The removal of Saddam Hussain's government and installation of an American occupation government will increase the production of oil in Iraq by taking away UN sanctions and taking Iraq out of the Organization of the Petroleum Producing countries, which was instrumental in maintaining a relatively high price of oil in the international market through quotas of productions for each member country.

Britain, Norway and Mexico are not members of OPEC, thus blunting the effectiveness of that cartel. Russia, however, is not a member collaborate with OPEC having gained significantly from high oil prices. According to Asia Times of Hong Kong and Pravda of Moscow, the U.S. administration wants the price of oil to drop to $13 per barrel.

The U.S. is encouraging Nigeria to leave OPEC to produce more oil. It is asking Russian companies, who want to be to listed in the New York Stock Exchange, to increase their production. The U.S. now has permanent military bases in Central Asia and is influencing Kazakhstan and Azerbaijan to increase their oil production. In Venezuela recently, a coup was organized against the elected government of President Chavez who has refused to produce oil beyond the quota set by OPEC.

President Bush said after the failure of that coup, "Chavez has learned a lesson". The implication is very clear. The invasion of Iraq, which has the second largest oil reserve in the world, will remove all constraints on production and, as a result, the international price of oil may very well drop far below the target level desired by the U.S.

The consequences for Saudi Arabia and other Gulf oil producers will be devastating as they depend for 90 percent to 95 percent of their national income on oil exports alone. Saudi Arabia has financed the war against Iran and the socialist governments of Afghanistan. It has financed U.S.-led terrorism against the countries in Central America and South East Asia.

Taliban, which was blessed by Robin Rafael, special assistant of President Clinton in 1995, was financed by Saudi Arabia. However, the equation has changed since bin Laden attacked the American Embassy in Nairobi in 1998 and particularly after Sept. 11 last year.