When did Iraq attack Saudi Arabia?

Edition 02/2003
Iraq conflict

Blood for oil?

Iraq is the country with the second largest oil reserves in the world after Saudi Arabia; overall, two thirds of the world's oil reserves lie in the Persian Gulf region. This led numerous commentators to suspect that a major motive for the Iraq war was political control of oil supplies. "Energy Perspectives" spoke to Dr. Friedemann Müller, head of the “Global Issues” research group at the Berlin Foundation for Science and Politics.

Energy perspectives: In your publications, you resolutely contradicted the thesis that the Iraq war was about “blood for oil”. What are the main reasons?

Dr. Müller: Politics is always more complex than it can be described in three words. This is no different from real life. The OPEC (Organization of Petroleum Exporting Countries) has made a new dress in 2000, hardly noticed by the public. Firstly, it has undertaken not to use quantitative limits for political goals and, secondly, to keep the oil price within a price corridor of 22 to 28 dollars per barrel if possible. The USA and the American oil companies, but also the Europeans, could not have wished for a better constellation. Aside from the fact that the war cost and is still many times as much as Iraq's annual oil revenues promise in five or ten years' time, the war has not changed the price of oil - it is now back in the OPEC corridor - nor that Security of supply in the USA improved, the USA still offered additional opportunities to cut off supplies to others

The price of a barrel of crude oil from 1970 to today (source: MWV)
Energy perspectives: So did supporters - and opponents - of the Iraq war consider energy policy as irrelevant?

Dr. Müller: Of course, very different considerations were made when planning the war, including whether a military conflict would have an impact on the world oil market and energy supply 2000) 3 percent of world production and less than the margin that Saudi Arabia can increase in production in the short term. In addition, the USA gets only 13 percent of its supplies from the Gulf and in the future it will probably rely even more on supplies from its own hemisphere (Canada, Mexico, Venezuela). This is due in equal measure to the security of supply policy and the efforts to keep transport costs low. In this respect, energy policy did not have a central influence on war planning.

Energy perspectives: Already in the first hours of the war, the largest oil field in Iraq, Rumaila, and later numerous other production sites were secured by American soldiers. The Iraqi oil ministry also enjoyed constant protection. Why?

Dr. Müller: The US feared that Iraq would pursue a scorched earth policy similar to that in 1991, when hundreds of Kuwaiti oil fields burned and some could only be extinguished after many months. If it is the case that the oil ministry has been better protected than, for example, the famous museum in Baghdad, I consider this to be an inexcusable mistake. However, the Americans have never kept quiet about the fact that the oil revenues "that belong to the Iraqi people" (Colin Powell et al.) Should be used as quickly as possible to build up the country. For this you need the information available in the Ministry of Oil.

Energy Perspectives: The history of Iraq in the last century was strongly shaped by petroleum. Could you give a brief overview?

Dr. Müller: As with the neighbors and oil heavyweights Saudi Arabia, Iran and Kuwait, oil and Islam played the central role. However, compared to Saudi Arabia and after the revolution also Iran, Iraq was a secular state with a comparatively pronounced middle class until Saddam came to power, whose Bath party began to strangle the relatively developed society. While oil production in the 1970s (up to 3.5 million barrels per day) still roughly corresponded to the large reserves, it fell to 0.3 million F / T after the war in 1991 and was only built slowly under the UN sanctions to a maximum of 2.5 million F / T. As a result, as well as corruption and the inefficient economic system, the country is impoverished.

Energy perspectives: In contrast to the Yugoslavia conflict, China's statements before the Iraq war were very cautious. Are there any signs of new alliances?

Dr. Müller: Since becoming a net oil importer in 1993, China has been dependent on imports from the Gulf at a dramatically increasing rate. There will be no alternative providers from whom China can meet its needs in the future either. The USA, on the other hand, has an undisputed military power in the Gulf with its fleet - at least since 1991. This means that the USA can turn off the oil tap on anyone who is dependent on Gulf oil. This is particularly painful for China because in the long run this is an insoluble problem in terms of power politics. The only thing left for China is to keep silence on this issue. The US is also not interested in publicly speaking about it. It is enough that they have this tool at their disposal.

Energy perspectives: Now that the UN sanctions imposed in 1991, which severely restricted Iraqi oil exports, are now being lifted, unlimited trade in Iraqi oil is possible again. How will this work out?

Dr. Müller: Iraq is a member of OPEC, but membership has been suspended since 1991. Negotiations are underway to re-admit a full member. Of course, the main issue here is integrating Iraq into the quota system. Of course, Iraq will demand a substantial increase in its quota compared to production in the 1990s. OPEC will concede this, since all OPEC forecasts attribute a growing share of world supply (currently 41 percent, increase to 50 expected) anyway. But every barrel will be haggled here. Regardless of the outcome of these negotiations, it is clear that Iraq will not be able to produce more than 2001, i.e. approx. 2.5 million F / T, and no more than 5 million F / T in 2004, because investments will not flow faster and rebuilding the infrastructure will take a long time. For the next 15 years, Iraq will not be able to catch up with Saudi Arabia as an oil producer, even if it frees itself from all OPEC constraints.

Energy Perspectives: Will Recent Events Change the Importance of OPEC?

Dr. Müller: OPEC has changed several times since it was founded in the 1960s: in 1973 (first oil crisis) when it rose to become a power that terrified the western industrialized countries, in the first half of the 1980s when it with its high price policy (the Iran-Iraq war led to further oil shortages) provoked alternative providers, therefore lost market share and gave up its instrument of volume limitation, and finally in 1999/2000 when it was able to take up this instrument again due to a lack of alternative providers, but this time in imposed politically and economically moderating rules of the game in his own interest. It is now that everyone - Europeans and Americans, multinational oil companies and other investors - welcomes this policy because it promotes predictability. In this respect, OPEC is currently not being attacked from any side. As its market share in world oil supply increases, it will be able to stabilize its current importance.

Energy perspectives: What are the long-term energy policy consequences of the results of the war for the USA and the countries of Europe and Asia?

Dr. Müller: Unless there are further destabilizing events in the Gulf region as a result of this war, the consequences will be minor. The development of the oil industry in Iraq, as well as the overall economic development, will proceed more slowly than most thought and than would be desirable in the interests of the people. Iraq's contribution to world oil supplies will remain below 5 percent this decade and will therefore not reach a dramatic level. The multinationals' dispute over contracts will be limited in view of the risk of a malfunctioning state system. But if the establishment of a state system fails permanently, there is a risk of destabilization of the region. The world market cannot cope with a failure of more oil than that produced in Iraq, especially Saudi oil. This would trigger a global crisis.

Energy perspectives: Can conclusions be drawn from what has happened for energy research and development in industrialized countries?

Dr. Müller: The Iraq crisis and the war have made it clear - for example in the form of the oil price that has risen up to March - that the world economy does not depend on any supply as much as it does on a stable oil supply. This is to a large extent connected with the Persian Gulf region. Reducing this dependency would also serve to reduce an even more dangerous risk, namely the impending climate change. The long-term exit from fossil fuels is the challenge of the 21st century. This requires perseverance and pressure on international politics. Making these connections clear can be helped by energy research. The goal must be an energy structure that can do without fossil fuels.