USA: When It's Over, Who Gets the Oil?

WASHINGTON -- A U.S.-led ouster of President Saddam Hussein could open a bonanza for American oil companies long banished from Iraq, scuttling oil deals between Baghdad and Russia, France and other countries and reshuffling world petroleum markets, according to industry officials and Iraqi opposition leaders.

Although senior Bush administration officials say they have not begun to focus on the issues involving oil and Iraq, American and foreign oil companies have already begun maneuvering for a stake in the country's huge proven reserves of 112 billion barrels of crude oil, the largest in the world outside Saudi Arabia.

The importance of Iraq's oil has made it potentially one of the administration's biggest bargaining chips in negotiations to win backing from the UN Security Council and Western allies for President George W. Bush's call for tough international action against Saddam. All five permanent members of the Security Council -- the United States, Britain, France, Russia and China -- have international oil companies with major stakes in a change of leadership in Baghdad.

"It's pretty straightforward," said James Woolsey, a former CIA director who has been one of the leading advocates of forcing Saddam from power. "France and Russia have oil companies and interests in Iraq. They should be told that if they are of assistance in moving Iraq toward decent government, we'll do the best we can to ensure that the new government and American companies work closely with them."

But he added: "If they throw in their lot with Saddam, it will be difficult to the point of impossible to persuade the new Iraqi government to work with them."

Indeed, the mere prospect of a new Iraqi government has fanned concerns by non-American oil companies that they will be excluded by the United States, which almost certainly would be the dominant foreign power in Iraq in the aftermath of Saddam's fall. Representatives of many foreign oil concerns have been meeting with leaders of the Iraqi opposition to make their case for a future stake and to sound them out about their intentions.

Since the Gulf War in 1991, companies from more than a dozen countries, including France, Russia, China, India, Italy, Vietnam and Algeria, have either reached or sought to reach agreements in principle to develop Iraqi oil fields, refurbish facilities or explore undeveloped tracts. Most of the deals are on hold until the lifting of UN sanctions.

But Iraqi opposition officials made clear in interviews last week that they would not be bound by any of the deals.

"We will review all these agreements, definitely," said Faisal Qaragholi, a petroleum engineer who directs the London office of the Iraqi National Congress, an umbrella organization of opposition groups that is backed by the United States. "Our oil policies should be decided by a government in Iraq elected by the people."

Ahmed Chalabi, the congress's leader, went even further, saying he favored the creation of a U.S.-led consortium to develop Iraq's oil fields, which have deteriorated under more than a decade of sanctions. "American companies will have a big shot at Iraqi oil," Chalabi said.

The Iraqi National Congress, however, said it had not taken a formal position on the structure of the Iraqi oil industry in the event of a change of leadership.

While the Bush administration's campaign against Saddam is presenting vast possibilities for multinational oil giants, it poses major risks and uncertainties for the global oil market, according to industry analysts.

Access to Iraqi oil and profits will depend on the nature and intentions of a new government. Whether Iraq remains a member of the Organization of Petroleum Exporting Countries, for example, or seeks an independent role, free of the OPEC cartel's quotas, will have an impact on oil prices and the flow of investments to competitors such as Russia, Venezuela and Angola.

While Russian oil companies such as Lukoil have a major financial interest in developing Iraqi fields, the low prices that could result from a flood of Iraqi oil into world markets could set back Russian government efforts to attract foreign investment in its untapped domestic fields. That is because low world oil prices could make costly ventures to unlock Siberian oil far less appealing.

Bush and Vice President Dick Cheney have worked in the oil business and have long-standing ties to the industry. But despite the buzz about the future of Iraqi oil in the industry, the administration, preoccupied with military planning and making the case about Saddam's potential threat, has not taken up the issue in a substantive way, U.S. officials say.

The Future of Iraq Group, a task force set up at the State Department, does not have oil on its list of issues, a department spokesman said last week. An official with the National Security Council declined to say whether oil had been discussed during consultations on Iraq that Bush has had over the past several weeks with President Vladimir Putin of Russia and Western leaders.

On Friday, a State Department delegation concluded a three-day visit to Moscow in connection with Iraq. In early October, U.S. and Russian officials are to hold an energy summit in Houston at which more than 100 Russian and American energy companies are expected.

A U.S.-led ouster of President Saddam Hussein could open a bonanza for American oil companies long banished from Iraq, scuttling oil deals between Baghdad and Russia, France and other countries and reshuffling world petroleum markets, according to industry officials and Iraqi opposition leaders.

Although senior Bush administration officials say they have not begun to focus on the issues involving oil and Iraq, American and foreign oil companies have already begun maneuvering for a stake in the country's huge proven reserves of 112 billion barrels of crude oil, the largest in the world outside Saudi Arabia.

The importance of Iraq's oil has made it potentially one of the administration's biggest bargaining chips in negotiations to win backing from the UN Security Council and Western allies for President George W. Bush's call for tough international action against Saddam. All five permanent members of the Security Council -- the United States, Britain, France, Russia and China -- have international oil companies with major stakes in a change of leadership in Baghdad.

"It's pretty straightforward," said James Woolsey, a former CIA director who has been one of the leading advocates of forcing Saddam from power. "France and Russia have oil companies and interests in Iraq. They should be told that if they are of assistance in moving Iraq toward decent government, we'll do the best we can to ensure that the new government and American companies work closely with them."

But he added: "If they throw in their lot with Saddam, it will be difficult to the point of impossible to persuade the new Iraqi government to work with them."

Indeed, the mere prospect of a new Iraqi government has fanned concerns by non-American oil companies that they will be excluded by the United States, which almost certainly would be the dominant foreign power in Iraq in the aftermath of Saddam's fall. Representatives of many foreign oil concerns have been meeting with leaders of the Iraqi opposition to make their case for a future stake and to sound them out about their intentions.

Since the Gulf War in 1991, companies from more than a dozen countries, including France, Russia, China, India, Italy, Vietnam and Algeria, have either reached or sought to reach agreements in principle to develop Iraqi oil fields, refurbish facilities or explore undeveloped tracts. Most of the deals are on hold until the lifting of UN sanctions.

But Iraqi opposition officials made clear in interviews last week that they would not be bound by any of the deals.

"We will review all these agreements, definitely," said Faisal Qaragholi, a petroleum engineer who directs the London office of the Iraqi National Congress, an umbrella organization of opposition groups that is backed by the United States. "Our oil policies should be decided by a government in Iraq elected by the people."

Ahmed Chalabi, the congress's leader, went even further, saying he favored the creation of a U.S.-led consortium to develop Iraq's oil fields, which have deteriorated under more than a decade of sanctions. "American companies will have a big shot at Iraqi oil," Chalabi said.

The Iraqi National Congress, however, said it had not taken a formal position on the structure of the Iraqi oil industry in the event of a change of leadership.

While the Bush administration's campaign against Saddam is presenting vast possibilities for multinational oil giants, it poses major risks and uncertainties for the global oil market, according to industry analysts.

Access to Iraqi oil and profits will depend on the nature and intentions of a new government. Whether Iraq remains a member of the Organization of Petroleum Exporting Countries, for example, or seeks an independent role, free of the OPEC cartel's quotas, will have an impact on oil prices and the flow of investments to competitors such as Russia, Venezuela and Angola.

While Russian oil companies such as Lukoil have a major financial interest in developing Iraqi fields, the low prices that could result from a flood of Iraqi oil into world markets could set back Russian government efforts to attract foreign investment in its untapped domestic fields. That is because low world oil prices could make costly ventures to unlock Siberian oil far less appealing.

Bush and Vice President Dick Cheney have worked in the oil business and have long-standing ties to the industry. But despite the buzz about the future of Iraqi oil in the industry, the administration, preoccupied with military planning and making the case about Saddam's potential threat, has not taken up the issue in a substantive way, U.S. officials say.

The Future of Iraq Group, a task force set up at the State Department, does not have oil on its list of issues, a department spokesman said last week. An official with the National Security Council declined to say whether oil had been discussed during consultations on Iraq that Bush has had over the past several weeks with President Vladimir Putin of Russia and Western leaders.

On Friday, a State Department delegation concluded a three-day visit to Moscow in connection with Iraq. In early October, U.S. and Russian officials are to hold an energy summit in Houston at which more than 100 Russian and American energy companies are expected.

• 107 Energy