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OPEC and a Post-War Iraq

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OPEC and a Post-War Iraq

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Now that the war in Iraq appears to be in its final stages, many post-war scenarios and their related questions are arising. One of particular interest is that of Iraq’s oil industry and how that will affect The Organization of Petroleum Exporting Countries (OPEC), an international cartel of eleven countries that relies heavily on oil exports as a source of national revenue. Although a founding member of OPEC, Iraq has been on the outside looking in since invading Kuwait in 1990. A concern for many OPEC members is that the U.S. may use its influence in a post-war Iraqi government to effectively destroy the cartel. Since the object of a cartel is to control supply to maintain a certain price range, and since many believe lower oil/fuel prices may boost the U.S. and world economies, the U.S. may wish, at the very least, to diminish the importance of OPEC. The implications for a country such as Saudi Arabia are tremendous—as an exporter of 7.5 million barrels per day, a decrease of $1 per barrel would translate into an annual loss exceeding $2.7 billion.

U.S. conspiracy theories aside, even members of the Iraqi opposition-in-exile are making statements regarding ending Saudi Arabia’s “monopoly” on the world’s oil supply. This of course would serve the U.S. well, since its relationship with Saudi Arabia has become increasingly strained due to their connection to 9/11.

There are two additional questions: Will the new Iraqi government honor all of the pre-war oil contracts, mostly with French and Russian companies? And will the new government be as protective as previous Iraqi governments in regard to allowing increased foreign investment in their oil industry?

Despite America’s best intentions to make it clear that the war was not about oil, it may end up becoming a major post-war issue. Now that the military operations appear to be over (at least any major battles), that part of the “regime change” operation may have been the easy one. Maintaining law and order, winning the hearts of the Iraqi people, installing a new government, rebuilding a country in ruin, and all the while dealing with an international stage that simply hates it and its success, as well as a lagging domestic and world economy, may indeed prove to be far more difficult for the U.S. to handle. Who will provide a solution for Mr. Bush? Mr. Rumsfeld? Mr. Powell? The UN? Europe?

Source: The Middle East Media Research Institute

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