Iraq’s oil: A neo-con dream gone bust

Crude-oil prices hit a record US$75 per barrel in late April, a level nearly three times the prices seen just prior to the US-led invasion of Iraq in March 2003. Although oil prices have slipped a few dollars since then, the bullish price environment is not something the Bush administration banked on when it launched the military campaign to oust Saddam Hussein from power three years ago.

Indeed, there was an expectation that after Saddam’s ouster Iraq would pump more oil, not just so it could finance its own reconstruction, but also to keep oil prices stable and preferably lower. A US-friendly post-Saddam Iraq realizing its potential as a major oil producer would, it was also hoped, strengthen US leverage in the Middle East. But the story of Iraq’s oil over the past three years has not been quite what was expected by the administration of President George W Bush and neo-conservative advocates for Saddam Hussein’s removal.

Those who had a cautious assessment about the prospects for Iraq’s oil were prescient. Not long after Saddam’s regime fell in April 2003, Iraq’s oil industry, already deteriorating from under-investment for more than 20 years, suffered from widespread looting of its infrastructure. Meanwhile oil production temporarily ground to a halt in the chaos as the apparatus of the Iraqi state collapsed. By mid-2003, Iraqi insurgents began to target the oil infrastructure – especially by attacking pipelines – in sabotage attacks that have been ongoing for the past three years.

According to the Institute for the Analysis of Global Security, there have been at least 309 reported attacks on Iraq’s oil pipelines, installations, and oil-security personnel. In particular the export pipeline that links the large northern oilfield of Kirkuk to the Turkish Mediterranean port of Ceyhan – which normally transits about 40% of Iraq’s oil exports – is frequently sabotaged and is currently not operating.

Insurgent attacks have been the main factor in poor output levels for both oil production and exports, while the state of Iraq’s worn-out oil infrastructure, corruption and poor power output have exacerbated the situation. Despite Cheney’s claiming in April 2003 that Iraq could increase oil production to 3 million barrels per day (mbpd) by the end of that year, Iraq’s oil output is still lower than prewar levels. According to Energy Intelligence, Iraq’s oil production is at 1.8mbpd, compared with 2.5mbpd just over three years ago, while oil exports are down to 1.4mbpd compared with about 2mbpd just over three years ago.

Asia Times