Iraq and the O Word

Alan Greenspan, former head of the US Federal Reserve Bank, committed the ultimate crime. He mentioned the 'O word' in connection with America's intervention in Iraq. For such a major public figure to suggest that oil had anything to do with the American decision to invade Iraq in 2003 is heresy of the first order. The Bush administration was quick to criticise Greenspan, and he was even quicker to 'clarify' his statement so that it did not contradict the official line that the need to destroy weapons of mass destruction and to bring democracy to Iraq were the only reasons for American intervention in that country.

Of course to most reasonable people Greenspan's assertion seems no more than a statement of the obvious. No doubt many considerations, strategic, political, and economic, weighed on President Bush and his associates when deciding whether to attack Iraq, but oil was undoubtedly among those considerations. The idea that any responsible statesman would invade one of the world's major oil-producing states without giving thought to what impact this would have on world oil trade is obviously absurd.

The Bush administration that first took office in January 2001 has closer links to the US oil industry than any previous government in American history. It was bound to be willing to help that industry in overcoming its problems, especially if those problems posed a threat to America's international power.

Independent private oil companies, such as the American companies, are facing difficult times. The world's oil is running out and most of those dwindling supplies are controlled by state-owned national oil companies. Some of these national companies are run by American allies like Saudi Arabia and Kuwait, but others belong to hostile states such as Iran and Venezuela. National oil companies either exclude all foreign oil companies or only permit their participation on terms favourable to the host country.

Of the ten top oil companies in the world ranked by oil reserves under their control, only one is an independent oil company. That one is Lukoil of Russia, and many analysts would question its degree of independence from control by the Russian government. America's largest oil company, ExxonMobil, only comes in at number twelve in this ranking, having only a twentieth of the reserves held by the number one oil company, Saudi Aramco, the national oil company of Saudi Arabia.

Desperate to find new oil reserves, the world's independent oil companies are venturing into the far corners of the world. However, such exploration is increasingly expensive and as yet has failed to find any major new oil fields. How much more convenient it would be for independent oil companies if they could have largely unfettered access to an established oil-producing country where the power of the national oil company had been severely limited. Many people believe that this is the scenario that the Bush administration has been trying to achieve in Iraq to benefit US oil companies.

Iraqi oil production peaked at the end of the 1970s at more than three million barrels per day. Then the consequences of the Iran-Iraq war of 1980-88 and the war over Kuwait in 1990-91 severely crippled Iraqi output for many years. On the eve of the US invasion in 2003 Iraqi oil production was around 1.5 million barrels per day. Today output is over two million barrels per day, but further expansion is held back by insurgent sabotage and antiquated infrastructure.

In an Iraq under American control, a friendly government could be installed and it would then distribute lucrative contracts to independent oil companies, mostly American, to exploit the country's oil wealth. Foreign oil companies which did not meet with American approval, such as those of China and Russia, would be kept out of Iraq. Although a nominal Iraqi national oil company would probably be preserved, real power and profits would belong to US oil companies.

If this is indeed the American scenario for the future development of Iraq's oil industry, it is only making slow progress. The poor security situation in the country does much to discourage oil company activity, although most of Iraq's oil reserves are in the Kurdish north and the Shiite south, areas with less violence than elsewhere. Even the legal basis for a pro-American oil regime in Iraq has not yet been laid.

On those rare occasions when the draft Iraqi oil law is even mentioned in Western media, attention is concentrated on the provisions to share oil royalties equitably among the different regions of Iraq. It is held that this will increase national reconciliation and return peace and prosperity to Iraq. Less attention is given to the provisions which provide unusually favourable terms to foreign oil companies operating in Iraq. Some critics say foreign companies may obtain control of two thirds of Iraq's oil fields. No doubt such companies will have to meet American as well as Iraqi approval before they can operate in the country.

Much to the fury of the Bush administration, Iraq's parliament preferred to take a holiday this summer rather than pass the new oil measure into law, It may become law in the next few months and foreign oil companies are already making plans to take advantage of its generous provisions in their favour. However, do most Iraqis really wish to be the only country in the Middle East that has largely handed over its oil industry to foreign private companies, reverting to a situation that last existed in the 1950s?

Hitting Iran: Surgical Strike or Regional War?

Military action is a last resort, we are told. Intense diplomacy is the way forward. Sanctions will curb the Iranian nuclear threat. However, with politicians in both the United States and Iran taking up unyielding positions, the risk of military conflict between the two countries remains high. Undoubtedly the USA and its allies have contingency plans for a military attack on Iran. President Bush has made clear his resolve that the Iranians will not be allowed to build up a nuclear capacity that might allow them to develop nuclear weapons.

Supporters of a pre-emptive attack on Iran's nuclear facilities like to present that option as a modern version of Israel's air strike on the Osirak nuclear reactor in 1981. Then Israeli bombers carried out a surgical strike on Iraq's first nuclear reactor while it was still under construction. The facility was heavily damaged and Saddam Hussein's nuclear plans were put back by years. Embroiled in war with Iran, the Iraqi dictator could do little to retaliate against Israel, while the international community restricted itself to diplomatic condemnation of the raid.

All that was more than twenty-five years ago. Today any serious attack on Iran's nuclear sites would require a much bigger military operation than the Osirak raid. Widely scattered, well defended, and with many important facilities hidden underground, Iranian nuclear sites could only be destroyed by a concerted attack from overwhelming air power, including aircraft and missiles. There are a dozen confirmed or suspected nuclear facilities in Iran, of which those at Bushehr, Arak, Natanz and Isfahan are the most important. The Iranians have sworn to protect these facilities with all their forces. At the very least, American attackers would need to destroy Iranian air defences (radars, missiles and airfields) to ensure their own safety.

Iran has threatened to respond to any attack with missile strikes on Israel and on American bases in the Persian Gulf area. Thus attacks on Iranian air defences would need to be extended to include the destruction of Iranian long-range missile forces. Similarly, Iran has threatened to attack tankers in the Gulf and close its entrance at the Strait of Hormuz so as to deal a major blow to world oil trade. To pre-empt this possible mode of retaliation, American attackers would also have to neutralise Iranian naval forces, both the regular navy and the 'mosquito fleet' of the Iranian Revolutionary Guard Corps.

Thus it is obvious that any major American attack on Iranian nuclear facilities could not just be a case of hitting a few sites in a surgical strike. A large scale onslaught on all Iran's air, naval and missile forces, plus command and control systems, would be necessary to remove Iranian defences and to prevent any serious military retaliation by that country.

The current Iranian government appears to think that it can use its co-religionists, the Shias of Iraq, as a threat to restrain the Americans from attacking Iran's nuclear facilities. They believe Iraqi Shias will rise up and attack American and other coalition forces if Iran is attacked. This may be a dangerous miscalculation, as the Iraqi Shias have disappointed Iranian expectations in the past. During the Iran-Iraq war in the 1980s the Shias of Iraq, the majority population, did not rise up in any numbers to support Iran. This reluctance might be attributed to the efficiency of Saddam Hussein's repressive apparatus, but it gives pause for thought.

Similarly, a country is not an automatic friend of Iran just because it has a Shia majority in its population. This is shown by the ambivalent relationship between Iran and Azerbaijan, with the latter country now largely seen as being in the Western camp. Indeed there has been talk of establishing US bases in Azerbaijan on Iran's north-western border.

Shias now have a degree of political dominance in Iraq that they have not enjoyed for more than 350 years. While some Shia militants might be ready to launch attacks in the aftermath of an American assault on Iran, many Iraqi Shias might well refuse to do so, fearing to lose all their poltical gains since 2003. If Iran actually sent troops into Iraq there is no guarantee they would be well received by the local population.

If those wishing to attack Iran are presenting a misleading picture of the nature of such a strike, many Iranians cling to possibly false hopes that fear of Shia reaction in Iraq will discourage the Americans from taking military action. The result of miscalculations on both sides may well be that what is billed as a surgical strike will instead produce a regional war which will do incalculable damage to the world economy.

Nevertheless a military showdown may be avoided. Twice before Iran has found itself on the brink of war with the United States. First in 1988 during the so-called 'tanker war' in the Gulf, and secondly after the Iranian-backed terrorist attack on American military personnel at Khobar in Saudi Arabia in 1996. On both occasions the Iranians turned away from conflict. Despite the strident rhetoric of President Ahmadinejad and his colleagues, we must hope that moderates in the Iranian government will also prevail on this occasion.