WATCHING WASHINGTON MIDDLE EAST UPHEAVAL
What energy analysts long have predicted as inevitable-an upheaval in the Middle East-finally has occurred.
Iraq's invasion of Kuwait last week brought quick condemnation from the United Nations security council and the U.S. government.
Iraq had complained Kuwait was overproducing oil in order to undermine the Iraqi economy and that Kuwait stole 2.4 billion bbl of oil from South Rumailah field on the border. Iraq said it will withdraw its army as soon as order is restored.
GULF THREAT, U.S. RESPONSE
Saud Nasir al-Sabah, Kuwaiti ambassador to the U.S., said the Iraqi invasion threatens the entire Persian Gulf. "The intentions of the Iraqis are hostile and they intend to go on," he warned. "Iraq wants control of the whole area."
Kuwait has asked the U.S. for military assistance. After the initial drive on Kuwait City, Iraqi forces turned south to seize Kuwaiti oil fields.
President George Bush immediately froze Iraqi assets in the U.S. and Kuwaiti assets as well so Iraq could not use them.
The U.S. will consider breaking diplomatic relations with Iraq.
Bush ordered the aircraft carrier Independence and its six ship battle group from the Indian Ocean toward the Persian Gulf, where six Navy ships already are on station. But Bush said the U.S. is not contemplating military action.
Asked if the invasion will affect oil supplies, Bush replied "This a matter that concerns us."
It also concerned world oil markets. The loss of Kuwait's 1.5 million b/d of production quickly sent crude prices sharply higher.
The latest Energy Information Administration data show the U.S. imports 588,000 b/d of oil from Iraq and a very small amount from Kuwait.
Ironically, only a few days before the invasion Sen. David Boren (D-Okla.) chaired a Senate finance subcommittee hearing that explored what the U.S. could do to increase domestic production and thus back out imported oil.
Boren said, "We are importing more energy than we are producing here at home. Imports today are higher than during the Iranian crisis in 1979 and the Arab oil embargo in 1973, and yet no one seems concerned."
WHAT IF ... ?
Boren noted Iraq had massed its forces on the Kuwaiti border. "What would happen to the price of oil-and all energy-if that situation erupted into a shooting war? What would happen if Iraq didn't stop with Kuwait but continued south to challenge the United Arab Emirates or possibly even Saudi Arabia? When will we take the steps necessary to preserve some measure of domestic energy security?"
In fact, Iraq's totalitarian president, Saddam Hussein, may have done more inadvertently to improve U.S. energy security than the U.S. government has been willing to do.
Oil analysts predict the invasion likely will result in sustained, higher prices for oil on world markets.
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