Iraqi Oil Lies Below Surface of U.N. Talks

One issue that could influence the outcome of the United Nations’ debate on Iraq isn’t even on the official agenda. It’s the thorny question of who will control the hundreds of billions of dollars’ worth of oil beneath the ground.

In addition to being permanent members of the U.N. Security Council, the United States, Britain, France, China and Russia are home to the world’s leading energy companies, all of which are anxious to get access to Iraq’s oil, the world’s second-largest reserves behind Saudi Arabia.

While the politics of arms control and regime change dominate the public debate, an equally impassioned struggle is taking place over the economic stakes surrounding the U.S.-led campaign to oust Iraqi President Saddam Hussein.

“Everybody knows why the United States is doing this,” said Nikolai P. Tokarev, general director of Zarubezhneft, a Russian state-owned company that has been involved in oil production and sales in Iraq since 1967. “The only reason is the U.S. desire to establish full control over the oil-gas complex of Iraq.”

British and U.S. firms dominated Iraq’s oil industry until it was nationalized in the 1970s. British Petroleum held nearly one-quarter of the shares of Iraq Petroleum Co.

In recent years, Iraq has turned to Russia and France for help in restoring an oil sector damaged by war with Iran, the Persian Gulf War and more than a decade of economic sanctions.

A key concern for Russia, France and China is whether a new government would honor Iraq’s existing agreements. Russia’s Lukoil has the largest stake in Iraq, having signed a 23-year, $3.5-billion contract in 1997 to develop the giant West Qurnah oil field. France’s TotalFinaElf has been negotiating to explore the Majnoon field, whose reserves are estimated at 20 billion to 30 billion barrels.

And China National Petroleum Corp. has a contract to develop part of the Rumaila production area, which was substantially damaged during the 1991 Persian Gulf War.

“Hussein’s replacement with somebody else, particularly someone who is appointed by the U.S. government, will mean that Russia may be ousted from Iraq sooner or later,” said Viktor A. Kremenyuk, deputy director of the USA-Canada Institute in Moscow. “Therefore, it becomes clear that resolving the Iraq problem is all about the rivalry around one of the richest oil countries in the world.”

Though the leading U.N. players have a huge stake in the future of Iraq’s oil industry, observers are divided over how much oil politics might affect the Iraq vote expected this week.

“There was a theory floating around that one of the things the U.S. would do to garner support from the Russians, Chinese and French in the Security Council is to honor the deals that were agreed to” by the present Iraqi government, said John Kingston of Platts, an energy information service in New York. “But I don’t see any signs of that. That might be tough for people to swallow.”

The Bush administration denies that it is masterminding a U.S.-led division of Iraq’s lucrative oil reserves to benefit American multinational companies or its allies.

“The only interest the United States has in the region is furthering the cause of peace and stability. And what has brought the region to the point where the United Nations is making decisions about what the appropriate means are to enforce Saddam Hussein to comply with U.N. resolutions is his defiance of U.N. resolutions, not his country’s ability to generate oil,” White House spokesman Ari Fleischer said last week.

Exiled Iraqi dissidents, who have been drawing up plans for a post-Hussein government, have said they will want to examine existing energy contracts benefiting Hussein and his entourage at the expense of the Iraqi people.

When asked whether the current bartering at the Security Council will have an impact on future oil deals, Salah Shaikhly, an economist and former deputy minister in Iraq who is a leader of a London-based opposition group, replied, “We have to look at who helped to free Iraq and who took Saddam’s side at our time of need. As the saying in the West goes, people should be equal. But some should be slightly more equal than others. The fact that Britain and the United States were there for us should give them some slight leverage.”

Officials at Exxon Mobil Corp. and ChevronTexaco Corp., two of America’s leading oil companies, refused to comment on their interest in Iraq.

“We’re not speaking on the topic at all,” said Cynthia Langlands, a spokeswoman for Exxon Mobil.

The importance of Iraqi oil to the United States and its allies increased dramatically after the Sept. 11 terrorist attacks because of concerns about the security of their oil supplies and their dependence on Persian Gulf suppliers, particularly Saudi Arabia, according to Fadhil Chalabi, executive director of the Center for Global Energy Studies in London and a former Iraqi Oil Ministry official.

Iraq is sitting on about 11% of the world’s proven oil reserves -- about 112 billion barrels -- and that oil can be produced cheaply, for about $1.50 a barrel.

Chalabi estimates that it will take $5 billion to restore the fields to their previous production levels of 3.5 million barrels a day and an additional $30 billion to increase those levels to as much as 10 million barrels a day. Oil has been selling at around $30 a barrel.

“The oil is abundant, cheap to produce and can be delivered on pipelines to eastern Mediterranean ports, thereby bypassing the Gulf,” said Chalabi, whose center is organizing a gathering in December to discuss the future of Iraq’s oil industry.

Iraq’s reentry in a big way into the global markets would probably bring down prices, which would benefit big importers such as the United States, China and Singapore. China is the world’s second-largest consumer of energy behind the United States.

But lower oil prices would create problems for U.N. members that are heavily dependent on oil revenues, such as Russia and Mexico.

Syria, a Security Council member with close ties to Hussein’s regime, stands to be a big loser if economic sanctions against Iraq are lifted.

Syria has developed a lucrative business selling goods to Iraq and is importing up to 250,000 barrels a day of discounted oil from that nation, according to Nimrod Raphaeli, a senior analyst with the Middle East Media Research Institute in Washington.

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Iritani reported from Los Angeles and Daniszewski from Moscow. Special correspondent William Wallace in London contributed to this report.