Global Policy Forum

By P. Jayaram

The U.S. is talking of war with Iraq not because Baghdad has allegedly amassed weapons of mass destruction but to control the country's huge oil reserves, say Indian analysts and oil industry sources.

The move, analysts say, was an effort to "reconstruct" the Middle East and could have far-reaching consequences for India. "Control of Iraq's oil production will allow American companies better leverage in getting sub-contracting projects in that country and stopping Baghdad from resuming full oil production," a top executive of an oil company told IANS on condition of anonymity.

Leading defence analyst K. Subrahmanyam said: "They (U.S.) want an excuse to reconstruct the whole of the Middle East. (Iraqi President) Saddam Hussein is the first one. "Last year it was Osama (bin Laden), this year it is Saddam, next year it will be somebody else."

Subrahmanyam said Washington had realised it would finally have to deal with Pakistan and Saudi Arabia. "In Pakistan, they are going to stay on. In Saudi Arabia, they have to find alternative sources of oil before they can act. That's why Iraq is important," he said.

Iraqi Ambassador to India Salah Al-Mukhtar said the U.S. wanted to attack Iraq to control its oil reserves. This was also the reason behind Washington launching a war on terrorism in Afghanistan -- to control the oil- and gas-rich Central Asian nations, he told IANS.

Industry analysts say a change of regime in Iraq, as the U.S. wants, would adversely affect India. "We have more to lose from a change in government, as the Saddam Hussein regime is favourably inclined towards India. This relationship has allowed India to get into the Iraqi oil upstream," said Ardhendu Sen, senior fellow of Tata Energy Research Centre. "A regime more favourably inclined to the U.S. could upset the equation and would mean India having to renegotiate."

According to Middle East watcher K.R. Singh, while oil is an important factor in U.S. designs on Iraq, the security interests of Israel were an equally important issue.

Sources said control over Iraq and its oil wealth would allow American firms to manipulate global market prices by deciding on production levels and to keep out countries like India, which is engaged in developing oil fields in that country.

Analysts said Iraq -- with proven reserves of 112 billion barrels of crude oil, next only to Saudi Arabia -- could throw the global oil market into a tailspin by resuming full-fledged production if U.N. sanctions against it were lifted.

Besides India, countries like France, Russia, China, Italy, Vietnam and Algeria have signed or sought to sign agreements to develop Iraqi oil fields, rebuild refineries and undertake exploration activities.

Iraq is permitted to produce 3 to 3.5 million barrels of oil a day under a U.N. oil-for-food programme, but actual production is about 1.5 to 2 million barrels. This ensures that crude oil prices are kept high, as a steep drop is not in the interest of U.S. companies, which have been engaged in deep water exploration, a source said.

"If prices fall, it could jeopardise their deep water exploration, as it would not be viable due to the high costs involved. "By keeping Iraqi supplies disrupted, the U.S. is able to ensure that Saudi Arabia and Kuwait are benefited, as they are able to raise their production to meet the shortfall and earn more revenue."

The source noted that U.S. President George Bush and Vice-President Dick Cheney have strong links with the oil industry and alleged that the threat to attack Iraq was aimed at helping American oil companies.

In 1973, Iraq nationalised all oil companies. By displacing Saddam Hussein and installing a friendly regime, U.S. and British companies would be able to re-enter the country and get a major share of its oil industry.

India, which looks at Iraq as an assured source of oil, is opposed to military action against Baghdad and wants sanctions against that country to be removed in tandem with compliance with U.N. Security Council resolutions. India and Iraq have historically had strong political ties. Iraq has been one of the moderate Islamic states and is perhaps the only Arab country to support India's stand on Jammu and Kashmir vis-a-vis Pakistan.

Before the 1991 Gulf War, India was Iraq's largest bilateral trading partner and a large number of Indian companies had presence there. In the oil sector too, India had a major presence. The current tension in the Middle East has steeply pushed up crude oil prices and adversely impacted India -- a major importing country.