Worth posting here.
M
mtholyoke.edu
YOUSSEF M. IBRAHIM, "Iran and Iraq Too Big for Companies to Ignore," New York Times, September 30, 1997
--------------------------------------------------------------------------------
LONDON -- On any evening in the last three years, a visitor to
Baghdad, Iraq's capital, could spot senior officials of the French
oil company, Total SA, in the lounge of the plush Al-Rasheed Hotel
where they have permanent suites.
Similarly, all around Tehran, French oil experts can be encountered in
the luxurious restaurants of Shemiran, the northern suburb of the
Iranian capital where the air is clearer and where oil companies of
every nationality keep their executives in villas equipped with swimming
pools.
"How can any major oil company in the world ignore Iran or Iraq? Iran
has the second-largest gas reserves after Russia. Iraq is sitting atop the
second largest oil reserves in the world after Saudi Arabia," said Walid
Khadduri, executive editor of the Cyprus-based Middle East
Economic Survey, a prestigious energy newsletter, in a telephone
interview on Monday night.
"Oil companies are in the business of exploring, finding, producing and
buying oil and gas," Khadduri said, referring to the major national gas
deal Total signed with Iran on Sunday. "It is their raison d'etre. From
an oil company point of view, maintaining a relationship with these two
giants is basic strategy, not to mention common sense."
France's $2-billion agreement with the National Iranian Oil Co. to
produce 2 billion cubic feet of natural gas from the South Pars field has
been in the making for some years, oil industry officials said on
Monday night, despite the United States' so-called "dual containment"
strategy, which is designed to isolate these two countries and quash
their main source of revenue: selling oil and gas.
Indeed, the announcement of the huge deal has raised questions as to
whether Washington's policy of economic sanctions to isolate countries
like Iraq, Iran, Libya, Cuba and others has been effective beyond
preventing American companies from tapping those countries'
resources while competitors, mostly from Europe and Asia, help
themselves.
Oil industry experts say even though the world, at the moment, is
sufficiently supplied with oil, the demand curve in the future is rising,
indicating that sooner, rather than later, a new global shortage is likely.
This is especially so as large, churning, economies such as those of
China and India continue to expand, implying greater consumption of
electricity, new cars on the roads and higher standards of living with
more home appliances consuming more energy. It is this knowledge
that drives oil companies to forge ties with giants like Iran and Iraq.
Indeed, Total announced on Monday that it was on the verge of
signing an oil production agreement with Iraq to exploit the giant Nahr
Umar oil field in the south, as soon as "the United Nations lifts the
embargo" imposed on the country after it invaded Kuwait in 1990. At
last count, Khadduri pointed out, "Sixty companies are negotiating oil
deals with Iraq at the moment," all to be executed the moment the
embargo is lifted.
Last year and this year, Russia and China signed deals to tap Iraqi oil
fields, with few objections by the United States, presumably because
both said they would respect the U.N. embargo. Russia will develop
the West Qurna oil field, Iraq's largest oil pool. China will concentrate
on the Ahdab field near Kut, also in oil-rich southern Iraq.
But signing a deal means experts are working on the fields even if
production does not physically begin. It also means investments flowing
into the country in hard currency along with equipment and
employment opportunities.
The principal lure of Iraq, experts point out, is that it possesses 110
billion barrels of proven oil reserves. That puts it right behind Saudi
Arabia. Similarly, oil companies have been swarming all over Iran.
After the Clinton administration forced the Conoco oil company to
cancel a huge deal with Iran 3 years ago over developing the Sirri oil
and gas field, Total took it over. Companies from Italy, Germany,
Austria, Japan and other Asian countries are most active in Iran, driven
by the recognition that its gas reserves are needed by many of its
neighbors, including Turkey, Pakistan, India and eventually, Europe,
which at the moment depends on Algerian, Russian, Norwegian and
Dutch gas but is interested in diversifying its sources.
All of which leaves the American strategy of "dual containment" against
Iraq and Iran -- in addition to the pressure exerted against Libya,
another energy supplier -- appear to be increasingly ineffective.
As more countries, including allies of the United States, perceive
economic sanctions as punishing them, it has become obvious in the
last three years that American dictates have little resonance,
particularly as they run counter to the globalization of the world
economy, a concept also promoted by Washington.
"The thing about this containment policy is that it is slipping
everywhere," said Mehdi Verzi, senior oil analyst for Kleinwort
Benson, the London investment concern, in an interview on Monday
night. "You cannot ignore a country like Iran with 60 million people
and three times the proven gas reserves of the United States itself,"
Verzi said. "The sheer economic logic of using Iran as a transit route by
its neighbors to transport oil and gas is overcoming political obstacles
caused by U.S. sanctions legislation," he added. "This will not be the
last of such projects," Verzi said.
Oil industry officials interviewed on Monday night said that there are
probably as many oil companies negotiating with Iran now as there are
talking with Iraq. One senior official in a major oil company who
insisted on anonymity said that companies talking with Iran "will not
reveal themselves" in order not to provoke Washington. "But you can
be sure they are talking and dealing," he asserted. Those dealing with
Iraq, including Total, admit it, but say that they will only start producing
once U.N. sanctions are lifted. |
