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Will Oil Be Enough to Help a Post-Saddam Iraq? - 2002-10-08


If Iraqi President Saddam Hussein is toppled in a war with a U.S.-led military coalition, some analysts say the country's enormous oil reserves can be used to help stabilize and reconstruct Iraq after years of economic suffering by its people. Other analysts argue that Iraq's debt is so high, that oil alone will not solve all the nation's economic problems even if the Iraqi leader is removed from power.

Oil industry analysts say Iraq has 112 billion barrels of proven oil reserves, second only to Saudi Arabia in potential oil wealth.

At a recent forum sponsored by the Washington-based American Enterprise Institute, many analysts said such wealth could be used to rebuild Iraq if the government of Saddam Hussein is ousted.

The deputy director of the Washington Institute for Near East Policy, Patrick Clawson, says after a war it would take Iraq less than three years to nearly double its oil production from the current 2.5 million barrels per day.

But despite that increase, he says Iraq will never be able to repay the debts owed by the government of Saddam Hussein.

Mr. Clawson says Iraq has an unsustainable burden of debt and potential war compensation payments totaling more than $250 billion. "It would be fitting for the United States to announce now that in a post-Saddam environment it would support a dramatic reduction in Iraq's debt and of its compensation obligations. I think that would be much more important for thinking about the future of Iraq's economy than some of the speculation that we are going to have to step up with providing foreign aid to Iraq. No. If Iraq is relieved of this clearly unsustainable debt and compensation burden Iraq will be well positioned to pay its own way in the world," Mr. Clawson said.

S. Rob Sobhani is president of Caspian Energy Consulting and has served as a foreign policy advisor to several agencies of the U.S. government.

Mr. Sobhani says to boost Iraq's economy and oil production after the ouster of Saddam Hussein, the first thing that must happen is the reform of the country's legal system so potential investors will have trust in the government. "I think the foundation of any post-Saddam economy has to be the rule of law. No capital investment will go into Iraq if there is not the rule of law," he said.

Ibrahim Alolom is a petroleum engineer who has worked in Kuwait and has extensive experience in oil field development.

He predicts that after a war against Iraq, a multi-national peacekeeping force will have to be deployed for up to five years in the country for two main reasons. "The first one is for a sort of life insurance for continuing the social and political changes. Second, it is a great incentive for attracting the international oil companies," he said.

Some analysts have suggested Iraq's huge oil reserves be privatized, to avoid a situation where any one individual, political party or family could control them.

However, Patrick Clawson of the Washington Institute for Near East Policy says since oil was first discovered in Iraq in 1927, there is plenty of evidence such a proposal will not work. "For 75 years modern Iraqi nationalism has defined itself around the issue of control of oil and resistance to foreign oil intervention. You walk into that country and announce that what you are going to do is privatize the oil company, you are going to be stuck there for decades until you leave (defeated) with your tail between your legs. That is a formula for disaster," he said.

Mr. Clawson says Iraq's nationalistic history will make it difficult for even a democratic government in a post-Saddam era to relinquish control of the country's vast oil reserves.

Other analysts say, however, if Iraq has political stability and access to the latest in production equipment, income from increased oil output could pump billions of dollars into rebuilding and modernizing the country for decades to come.

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