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IRAQ: Oil Giant Makes its Absence Felt
By Mehru Jaffer
VIENNA, Apr 24 (IPS) - OPEC, the exclusive cartel of eleven oil-producing
and exporting countries stands at the crossroads as it tries to balance
supply in a world where the demand for oil seems unlimited.
Adding to the uncertainty is the future of Iraq within the organization
that comprises of member nations from Africa, Asia, the Middle East and
Latin America
"For the first time in its 43 year old history a decision is taken by
OPEC in the absence of Iraq," Abdullah bin Hamad Al-Attiyah, Qatar's
minister of energy and industry told a roomful of reporters at Vienna's OPEC
Secretariat.
He met with journalists after a day-long consultative meeting where it
was decided to cut back OPEC's contribution by two million barrels a day by
June first. Al-Attiyah called this a unique situation especially since
little is known as to what is going on in Iraq.
There is uncertainty over who will be responsible for marketing the oil
in Iraq. The Security Council has to first say goodbye to the UN resolution
that allowed Iraq to exchange oil for food in the past before the United
States, in control of Iraqi oil fields now, can dream of pocketing the
profits.
Iraq is a founding member of OPEC but has not been contributing its quota
to the cartel since 1990 after its invasion of Kuwait, a fellow member
country, followed by sanctions imposed upon it in 1991.
However Dr. Amer Mohammad Rasheed Baghdad's minister of oil till January
this year remained a familiar face at all OPEC meetings and an official from
the Iraqi embassy in Vienna represented the country at an earlier OPEC
meeting held here in March.
It was Baghdad that hosted the first meeting in 1960 which led to the
birth of OPEC as a permanent intergovernmental organisation of oil producing
countries. In 1965 OPEC moved its headquarters from Geneva to Vienna where
oil ministers meet regularly but under tight security. The membership of
Iraq within OPEC is now a question mark in capital letters.
"We wait to welcome any future minister of oil of a free and democratic
Iraq to the OPEC premises as soon as possible. There is no question of
discussion about the state of oil in Iraq with the Americans as it is not
America that is a member of OPEC," Al-Attiyah said.
Anxious to continue control over the world's oil production, OPEC is
concerned about news trickling in from the oil fields of Iraq that crude
from the country could return to the market within weeks.
Today's decision to return to OPEC's lower but original official output
target of 25.4 million barrels a day from 27.4 million barrels a day follows
on the heels of information that Iraq's Rumeila oil fields have started to
release limited amounts of crude into storage tanks in Basra, Iraq's
southern city.
OPEC's collective contribution is about 40 percent of the world's output
and it sits on more than three quarters of the total crude oil reserves. The
cartel now hopes that by curbing over-supply it will help to stabilise the
price of crude at 24 dollars a barrel, equal to about 160 litres of oil.
Iraq has the potential of being the world's second largest supplier of
crude after Saudi Arabia. It already has 112 billion barrels of crude in
reserve and OPEC is nervous over the world market's expectation of more oil
from Iraq.
The demand for oil is on the rise in a world that already guzzles 78
million barrels a day. In anticipation of Iraqi crude OPEC has decided to
return to its original official output target.
Once United Nations sanctions against Iraq are lifted, the country is
expected to start selling up to two million barrels a day within weeks.
According to reports from Iraq, the immediate flow will go to feed
refineries and power plants within the country before it is sold abroad.
Uncertain over how much crude the Iraqi fields will ultimately yield,
OPEC fears that a glut in the supply of oil could drown markets, forcing
prices to slump. OPEC would like to see prices balanced between 22 dollars
to 28 dollars per barrel.
In January OPEC increased its average from 24.5 million barrels a day by
1.5 million barrels a day to make up for production failures caused by
unrest in Venezuela and the war in Iraq, two member countries with most of
the additional crude contributed by Saudi Arabia the world's largest owner
of crude oil.
From 9.1 million barrels a day, Saudi Arabia's quota is now reduced to
8.2 million barrels a day. Ali al Naimi, Saudi Oil Minister told reporters
that producers were defending crude at 25 dollars a barrel and hoped that
the target would remain stable for the next decade.
"The big players in the oil market need to rally around the current price
levels to have enough investment in the next ten years, to meet demand that
is why we need to keep the 25 dollar target not lower, not higher," Al Nuami
said.
The minister feels that it is in the interest of all oil producing
countries, non-OPEC states, the International Energy Agency and oil
companies as well as consumers if prices remain around 25 dollars a barrel.
But a sluggish world economy, the spread of the SARS disease and
uncertainty over Iraq is not the only frown on OPEC's brow. "It is also
elections, strikes and the quota from Nigeria," oil specialist Valerie
Marcel told IPS referring to domestic troubles faced by yet another member
country. (END/2003)
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