Watching the World Saddam the puppet master

With David Knott from London [email protected] The oil industry has spent half the year preparing for the return of Iraqi oil exports to international markets. Yet the prospect of Iraqi exports has once more faded. Traders were expecting within the next few weeks about 600,000-800,000 b/d of Iraqi oil to reach the markets under a deal between Baghdad and the United Nations. U.N. Resolution 986 calls for $2 billion worth of oil to be sold in 6 months, with revenues being used to buy badly

Sept. 16, 1996

3 min read

The oil industry has spent half the year preparing for the return of Iraqi oil exports to international markets. Yet the prospect of Iraqi exports has once more faded.

Traders were expecting within the next few weeks about 600,000-800,000 b/d of Iraqi oil to reach the markets under a deal between Baghdad and the United Nations.

U.N. Resolution 986 calls for $2 billion worth of oil to be sold in 6 months, with revenues being used to buy badly needed food and medical supplies for Iraqi civilians.

But the recent incursion by Iraqi troops into Kurdish territory in northern Iraq and the subsequent salvo of U.S. cruise missiles were swiftly followed by U.S. cancellation of the U.N. deal.

Surely this latest standoff surprised nobody. Neither Baghdad nor Washington would benefit from the oil-for-food deal, and President Saddam Hussein has sought to avoid it while appearing within Iraq to have been a victim of U.S. treachery.

Motives

At several stages of the Iraqi/U.N. negotiations, Saddam has pulled the strings of government leaders around the world, making them do little dances that serve only to make Saddam look good within Iraq.

Now President Bill Clinton is in the opening rounds of a presidential election and needs to be seen as tough and straight-shooting if he is going to keep his current job.

By loosing off a few dozen missiles he has gone a little way to satisfying popular opinion, which demands that Saddam be punished.

By preventing the oil exports, Clinton has given oil prices a short term boost. This will be popular with U.S. oil producers-if not refiners-but perhaps producers currently are the most in need of appeasement.

U.K. Prime Minister John Major has applauded the missile strike. But Major is also facing an election, and his government is seen as failing to tackle tough issues. For Major, too, a little hard-man rhetoric could be beneficial.

Opposition to Clinton's volley of missiles has come mainly from France and Russia. They have voiced the opinion, commonly held around the world, that Clinton's action will only harm Iraqi civilians, not Saddam.

Hidden motives

Behind French and Russian complaints there is also a motive. France's Elf Aquitaine and Total and Russia's Lukoil have all negotiated oil field developments for when the full U.N. embargo against Iraq is lifted (OGJ, July 17, 1995, p. 22).

Saddam is desperate to hang on to power. His compromise in accepting U.S. conditions in the U.N. oil-for-food deal was seen as a way of appeasing public sentiment in Iraq.

Now Saddam can pull his most effective string. The missile strike against southern Iraq is the perfect fuel for his domestic propaganda machine.

Leo Drollas, chief economist at London's Centre for Global Energy Studies, maintains that Saddam was merely probing for weaknesses among UN members during the oil-for-food negotiations.

"Saddam was never very keen on having U.N. monitors wandering around his fiefdom," said Drollas. "He has been getting oil out anyway, bringing in enough cash to keep his own group happy. This is the key."