Eleven years after Iraq invaded Kuwait, Saddam Hussein continues to complicate world oil markets and governments.
"Iraq's regime still represents a danger and a threat not only to Kuwait but also to the states of the entire region,'' Kuwait's foreign minister, Sheikh Sabah al-Ahmad al-Sabah, told Al-Qabas newspaper.
The White House says it may consider a major air strike if Iraq continues to take aim at US forces patrolling the region. If an air strike does occur, the immediate impacts on energy prices may be muted, because the oil market is oversupplied by about 2-3 million b/d.
More worries
However, most analysts agree that, if the problem in Iraq becomes more serious, i.e., another Persian Gulf War-type crisis, the picture is less rosy. Dramatic highs and lows in oil prices are bad for the economy and for whoever is in elected office, Democrat or Republican.
Two previous administrations have sought to break the lingering military and diplomatic stalemate. But success has proved elusive. President George W. Bush's policy-makers unveiled a "smart sanctions" plan that sought to relax some of the most controversial economic sanctions, provided Iraq allowed stronger military weapons inspection. That deal failed but could resurface this fall with slightly modified diplomatic wording.
One certainty is that Iraqi sanctions will continue to be a political issue within the US.
Republican critics
Some members of the president's own party have been vocal critics of the current "oil-for-aid" sanctions regime, which allows restricted Iraqi oil sales to reach the international oil market under the tight control of the United Nations.
Sen. Frank Murkowski (R-Alas.), former chairman of the Senate Committee on Energy and Natural Resources, wants to pass legislation that would prevent US companies from buying Iraqi crude purchased under the UN program.
"We spend billions every year to keep him in check. We fill up our planes with Iraqi oil, send our pilots to fly over and get shot at by Iraqi artillery, and then fill up their planes on Iraqi oil. With our money he pays his Republican Guards to keep him safe and funds his international terrorist activities. This has got to stop," said Murkowski.
The US imports about 1 million b/d of Iraqi crude.
Murkowski said he does not oppose continuation of the UN program. But he said America can replace the oil it would be giving up from other sources in the short term and by allowing expanded production of oil from US public lands, such as Alaska's Arctic National Wildlife Refuge coastal plain in the long term.
Some of the strongest opponents of the Murkowski measure, besides the White House, come from pro-industry Democrats and Republicans who do not represent large producing oil states.
Their argument is that Iraqi crude oil is being traded on the world oil market and will continue to be traded. Banning US imports would not in any way affect the volume of oil Iraq sells.
They also say that a number of US refineries are optimized to run on that specific grade of crude. If those refineries are forced to buy other crudes, gasoline production could drop and market flexibility could be restricted.
