AUS DEM SPIEGEL
Ausgabe 19/2003

Iraq An end to Saudi dominance

In the wake of the ouster of Saddam, the contours of a new order in the Middle East are becoming increasingly clear. The future regime in Baghdad is intended to replace unreliable Saudi Arabia as the US' most important ally in the region. The oil industry is at the center of reconstruction efforts.


Hardly anyone noticed Gary Vogler, a wiry man in his mid-forties with a crisp crewcut, as he walked into the Oil Ministry in Baghdad last Tuesday. Vogler, accompanied by a US soldier wearing combat gear and a bullet-proof vest, took a seat in the office of Undersecretary Masin Juma and was served a glass of tea.

In the dark hallways of Iraq's largest ministry, he had passed government officials with blank eyes and thick file folders under their arms, officials who seemed to be in a great hurry to get to important meetings and conferences.

Juma complained to his American guest and overseer that Saddam's last oil minister, Amir Mohammed Rashid, had left his 7,500 bureaucrats without any leadership: "Almost all have returned to work, but no one knows quite what to do." To a certain extent, this also applies to their boss, who surrendered to the victors just last week.

But the time of disorientation has now ended. That's because with Vogler, a manager of few words whose last position was with US oil giant Exxon, the ministry once again has a strong man at its helm (since last week). This was quite evident in the first order he presented to the undersecretary: Until further notice, all employees of the ministry are to be forbidden from independently making any operational or staffing decisions. The instructions issued by the coalition forces are to be followed without question, and each employee is to continue performing his or her job.

Now that their war with Saddam Hussein has been won, the victors have adopted a coarse tone, one that is self-confident to the point of arrogance. Last week, Vogler's boss, Jay Garner, head of the Office of Reconstruction and Humanitarian Aid in Iraq, told his compatriots: "We should look in the mirror and be proud, stick out our chests, suck in our guts and say: 'God damn it, we're Americans!'"

US President George W. Bush also told sailors returning home on board the aircraft carrier "Abraham Lincoln" that the fighting has ended. According to Bush, the threats from Iraq have been overcome and another victory has been won in the war on terrorism.

But long before the champagne corks began popping at Garner's headquarters in Saddam's former Salam Palace, the Bush administration had already begun to turn its attention to the future. The Americans, to avert any potential opposition to their intended reordering of the Middle East, did not even shy away from sacrificing some of their own people.

According to reports issued late last week, for example, Garner was to receive a new boss, career diplomat Paul Bremer. In Washington, demonstrations against the invaders, the shooting of 19 Iraqis by US troops in Faludja, and ongoing supply problems in Iraq first produced panic and then doubt in the organizational talents of its previous administrator.

Just how important its intended restructuring of the Middle East is to the Bush administration was evident in the fact that the President sent two of his key cabinet secretaries to the Gulf at the same time: Secretary of Defense Donald Rumsfeld, whom the Iraq campaign has elevated to the zenith of his power, and Secretary of Energy Spencer Abraham.

Rumsfeld issued the surprising announcement that the United States would withdraw its 10,000 troops from Saudi Arabia this year, leaving only training units behind. In the future, the US military's principle bases in the Gulf will be the Udeid air force base in the Emirate of Qatar and, if the victorious US military has its way, four bases Washington plans to establish in Iraq.

For some time, large segments of the Saudi Arabian population have rejected the presence of non-Muslim American troops in the land of Islam's holiest sites. But what at first glance appears to be a strategic withdrawal designed to improve what have since become highly fragile relations between Riyadh and Washington also represents a threat to the Saudi royal family, which is highly unpopular among Saudi Islamists and Shiites. Economically speaking, the balance of power in the Gulf region could also shift away from Saudi Arabia.

In contrast to Rumsfeld's appearance under the lights of international camera teams, talks between US Secretary of Energy Abraham and his colleagues in Riyadh and the Qatari capital, Doha, remained largely unobserved. His mission there was to diffuse the concerns of neighboring states, which quite justifiably fear that, now that the Americans have prevailed in Iraq, one of the "most daring hostile takeovers of all time" ("The Wall Street Journal") is about to take place.

When the war ended, 115 billion guaranteed and 200 billion presumed barrels of oil reserves were transferred from Saddam's hands to within Washington's sphere of influence, theoretically enough to satisfy the US' voracious thirst for oil until the year 2040.

To dispel suspicions that the United States may have gone to war precisely because of these tempting prospects, Washington is trying, as inconspicuously as possible, to reorganize the Iraqi oil industry and reconnect it the global market.

This time, in contrast to the period following 1991, the industry has survived the war relatively unscathed. Nonetheless, Iraqi oil facilities have suffered tremendously under twelve years of UN sanctions. Leaking pipelines, malfunctioning pumping stations and a completely defunct communications network have allowed what is potentially the world's second-largest oil-producing economy to sink well below its capacity prior to the first Gulf war.

Adil Abd al-Chassas, Deputy Director of the North Oil Company in Kirkuk, says that during the past few years his firm has pumped an average of about one million barrels per day, or just under half of Iraq's total pre-war production. Last Wednesday, North Oil pumped a trickle of 35,000 barrels into the nearby Beidji refinery to restart Iraq's oil production and serve the domestic market, one in which consumers often line up at gas stations in vain.

Thamir Ghadhban, Chief of Planning at the Oil Ministry in Baghdad for many years and principally responsible for the most recent ten-year plan, is optimistic about the future. According to Ghadhban, it will be possible to bring oil production back up to the pre-war level of 2.5 million barrels a day this year. In four to five years, says Ghadhban, daily production of more than 6 million barrels could be achieved since, if the victors have their way, UN sanctions will be dropped and so will import restrictions on spare parts.

Six million barrels of crude oil per day: This number has a magical ring to Western oil experts, since it is the critical mark needed to break Saudi Arabia's dominant position on the world market and, with it, the power of the Organization of Petroleum Exporting Countries (OPEC).

Ever since the 1973 oil crisis, politicians and oil companies in the West have been dreaming of destroying the Vienna-based price cartel and allowing the market value for oil to be determined by the free play of supply and demand. The tremendous resources of the conquered land of two rivers could provide them with the means to do so. "Only Iraq," says Fadhil Chalabi, an Iraqi expatriate and Director of the London Centre for Global Energy Studies who, like his cousin Ahmed Chalabi, has now returned to his homeland, "has the long-term capacity to free the global market from Saudi Arabian dominance."

Of course, this would require enormous investments, at least initially. Chalabi estimates that it would cost about six billion dollars to raise Iraqi oil production to 3.5 million barrels a day by 2005, a level somewhat above that in place during the late 1980s.

The question is, who is to provide these initial investments? Chalabi, who served as General Secretary of OPEC in the 1980s and is currently a consultant to the US Department of State, is in favor of generous privatization of the Iraqi oil industry, an approach in line with ideas being put forward by the US administration: "Baghdad's capital requirements during the coming five years will amount to at least 250 to 300 billion dollars; its foreign debt alone comes to about 130 billion."

Chalabi fears that Iraq's oil industry will be very hard-pressed to generate funds of this magnitude, even in the medium term. Therefore, according to Chalabi, Western oil conglomerates would have to be directly involved in reconstruction and in the exploration of new oil fields.

However, the privatization of Baghdad's oil industry would be a highly risky undertaking. In Iraq, the nationalization of oil production on June 1, 1972 was considered – as in most other oil-rich states in the region – a symbol of liberation from Western colonial rule, and was celebrated as a national holiday until last year.

"All Iraqis, whatever their political opinions, view oil as a national asset," says Director of Planning Ghadhban at Baghdad's Oil Ministry. "This issue must be addressed with extreme caution."

According to a secret US plan, an agreement on privatization of the petroleum industry is to be reached with the Iraqis within the coming year. Washington envisions issuing shares in the Iraqi National Oil Company within the next three years.

To avoid any appearance of neo-colonial appropriation, the Pentagon has spent the past few months searching for experts of Iraqi heritage who could modernize Saddam's oil industry in a direction that would meet Washington's approval. So far, however, the search has been unsuccessful: At least two candidates who, like Chalabi, are familiar with the politically explosive nature of the plan have already rejected Washington's overtures.

Instead, it appears that the Iraqi oil industry will be reorganized, at least initially, using a model derived from US industry. The principal actor in this effort will be Philip J. Carroll, the former Chief Executive Officer of Shell Oil, the US subsidiary of Dutch-British conglomerate Royal Dutch/Shell Group.

The former CEO is expected to travel to Baghdad this week and establish a five-member advisory panel, which, not unlike a board of directors in a free market economy, is intended to guide the Oil Ministry through the perilous months ahead.

The most likely immediate objective of the Carroll team will be to create a legal basis that would permit Iraq to restart its oil industry. Ever since the beginning of the war, seven million barrels of Iraq crude oil have been in storage in the Turkish Mediterranean port of Ceyhan. This represents the last shipment from Kirkuk, which was made under the auspices of the UN "Oil for Food" program, and was without a legal owner since the fall of the Saddam regime.

The next issue on the table will relate to what is to become of the agreements and preliminary agreements Saddam had concluded with Russian, Chinese and French oil companies.

"No comment," says Gary Vogler, Washington's administrator at the Oil Ministry in Baghdad. "Long-term decisions of this nature will be reserved for the first freely-elected Iraqi government."

BERNHARD ZAND

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