OPEC and Iraq, the West better be warned?
by Cyril Widdershoven

    As international pressure mounts on OPEC to pump oil to stem surging fuel prices, members of the petroleum producers’ cartel said they had agreed to raise their official output by around 800,000 bpd. Already on Saturday, the day before the meeting in Vienna, the oil ministers of Iran and Algeria said they would back an increase of around 500,000 bpd  - or 2 percent above OPEC’s current production. However, at the end of this month’s OPEC ministerial meeting, the result was there, an increase of around 800,000 bpd has been promised, hopefully bringing the price of oil directly to a lower level on the international markets. Saudi Arabia even promised that OPEC would add ‘at least’ that many fresh barrels to thirsty oil markets. Nigeria would support adding as much as 800,000 bpd to the group’s daily output target, according to a Nigerian source. While oil-importing nations are sure to welcome any increase, energy analysts warned that an addition of just 500,000 barrels per day would do nothing to roll oil prices back from 10-year highs. “It would not make a difference,” New York based consultant Gary Ross stated. “An increase of that amount is already priced into the market”, he said. On a diplomatic level, European finance ministers expressed concerns that surging prices could crimp world economic growth, and they discussed taking the exceptional step of sending an envoy to the OPEC meeting in Vienna to ask for an increase in output. ”Clearly, there is not enough oil…contrary what OPEC claims,” said Roger Diwan, a managing director of The Petroleum Finance Company, a Washington based consultancy. Diwan argued that Saudi Arabia, which has often expressed a desire to see prices at around $25 a barrel, would press for an increase of more than 500,000 bpd. If other OPEC members were not able to meet boost output accordingly, the Saudis could use their ample reserves to help make up for any shortfalls. Lately, not only Iran and Libya have slightly changed their attitudes, Algeria’s oil minister Chakib Khelil said his country would accept a daily hike of 500,000 bpd, though it had not decided whether to increase beyond that. Obaid bin Saif Al-Nasseri, oil minister of the UAE, said he would support any increase.

     However, not only developments within OPEC are troubling international operators and governments, Iraq has become again an instable factor of importance. The reason is new; Saddam Hussein may have cancer. As the Middle East is abuzz with rumors that Iraqi president Saddam Hussein suffers from lymphatic cancer, diplomats are working overtime. Saddam is reportedly under the care of French, German and Swiss doctors in a villa-turned hospital outside of Baghdad. Hussein’s son Qusai is heading a family committee that would run the country if his father is unable. The state of Saddam’s health is difficult to assess, however, the implications are obvious and of regional importance. Hussein’s state directly affects the total constellation of the powerhouse in Iraq; ill health directly gives the opposition more leeway to move and to act. Several analysts agree that if history is a guide, we can expect a purge and a power transfer to follow in the next few months. The Iraqi opposition broke the cancer story in July, and the London-based Al-Sharq al-Awsat revived it, along with additional information from an anonymous Iraqi doctor on 3 September. It is not the first time that this rumor has surfaced, Saddam’s health has been under scrutiny for the last 5 years. New events now suggest that Saddam is consider weak by others. Several new people have emerged, and there is a growing tendency to related Iraqi power to Qusai, as Iraq’s next leader. The rumors have merit, Saddam lost his father and a sibling to cancer, according to the Toronto Star. Last July, 17, Saddam only gave a very short speech on the anniversary of the Ba’ath Party Revolution. Political unrest, possible reemergence of several factions and domestic instability have to be expected. An unstable Iraq is of course of great concern to neighboring power brokers, such as Turkey, Iran and Saudi Arabia. Instability in the Gulf, possible coups and military confrontations, inside and outside, only will put additional pressure on the ongoing rise of crude oil. Instability, insecurity of energy supplies, and a extension of Iraq’s outcast position in international politics and energy markets will be unwelcome. Iraq’s re-integration in OPEC or into the international oil markets is one of the hopes on which several analysts are putting their predictions. Inclusion of the huge potential available in Iraq, historically and practically, would mean a major boost of controlling the unexpected and unwelcome rise of crude oil (and indirectly natural gas). Additionally, it would enhance the international position of OPEC, lower prices would mean a more gentle approach of international E&P companies in relation to the possibility of new oil field exploration. The Caspian, deepwater Africa and others would not profit from Iraq’s re-emergence. OPEC would, and most probably customers in the developed and developing world also.

However, Saddam’s rule is not over yet, the future will show what the developments will be. As we all know, even if the Iraqi ruler has cancer, history has shown that leaders are not giving up that easily. Syria, Jordan and several Gulf rulers have shown the way to go.

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