When does a country stop being an axis of evil? In the oil business, that's a delicate question that demands frequent visitation. From a geopolitical perspective, evil comes and evil goes: Russia, Iran, and Iraq have, at one time or another, been labeled by the US as enemies.
But those nations also control vast petroleum deposits, a bounty the energy-thirsty US cannot reasonably ignore until cars can run on solar power or landfill waste.
From Russia with oil
While once a Cold War foe, Russia today is an important US friend. And with Middle East tensions building, Russian oil reserves represent a promising, albeit costly, energy insurance policy. To help cement newly forged political and business bonds, Russian oil executives are slated to meet with US companies in Houston this October (OGJ, June 18, 2001, p 35).
So even a recent high profile-although largely symbolic-$40 billion economic deal between Russia and Iraq is unlikely to fray ties between Washington and Moscow. White House officials acknowledge the Russians want to get a competitive advantage by rebuilding Iraq's war-torn oil industry and civilian infrastructure. Iraq owes Russia billions for arms deliveries made decades ago.
Nevertheless, US officials are downplaying the agreement. They say Russia knows it must follow international sanctions against Iraq in place since the 1991 Gulf War.
If and when sanctions are lifted, Iraq says it will increase its oil production capacity from today's 2.8 million b/d to 10 million b/d.
But for now those numbers represent fantasy.
Outside of tightly controlled crude sales under the United Nation's oil-for-aid program, Iraq is off limits to major investment, even though with 112 billion bbl it holds the second largest proven oil reserves in the world (behind Saudi Arabia) and also has roughly 220 billion bbl of probable and possible resources.
Besides Russia, other countries, including China and France, have reportedly pledged to formalize multibillion-dollar deals with Iraq. Even US firms have held informal talks through intermediaries. Yet all that talking may prove moot if the US escalates military action that succeeds in ousting Iraqi President Saddam Hussein.
Iran consideration
Some US companies, meanwhile, are hopeful that Iran could become available nearer-term, assuming it takes months or years for Iraq's political situation to settle. A White House executive order prevents US companies from pursuing big deals in Iran; President George W. Bush also renewed a law designed to punish other countries that make large investments in either Iran or Libya.
Nevertheless, some companies see evidence of a diplomatic thaw. In what one executive called "promising," Iran turned over to Saudi Arabia 16 suspected Al Qaeda fighters earlier this month.
But US companies still face formidable challenges. The White House remains divided over Iran. Some policy-makers are still skeptical that the current Iranian government can be trusted.
And then there's Congress. Lawmakers will likely want a role determining how and when US businesses will be allowed back into Iran or Iraq.
