26 September 2002
If Necessary, Oil-Rich Iraq Can Rebuild Itself, Energy Expert Says
(Daniel Yergin comments on post-Saddam Iraq at Heritage Foundation) (790) By James Fisher-Thompson Washington File Staff Writer Washington -- The notion that a war against Iraq might prove costly for the developed world because of the need to help rebuild the Middle Eastern nation once dictator Saddam Hussein is removed from power is unfounded, says energy expert and noted author Daniel Yergin. Yergin told a September 25 panel, discussing the economic reconstruction of Iraq in a post-Saddam world, that Iraq's own oil "will play a large role, a very large role . [as] a very powerful facilitator of reconstruction." His comments were part of an all-day seminar titled "The Future of a Post-Saddam Iraq: A Blueprint for American Involvement," sponsored by the Heritage Foundation, a conservative Washington think tank. Yergin told his audience that "Iraq would have no problem" paying for its development in a post-Saddam world. Once its production stepped up, he said, "it would be in a position to earn 20, 25, maybe 30 billion dollars a year from oil exports .[and] that's a lot of money for a country of 19 million people." Iraq is not resource-poor like Afghanistan and can draw on considerable income once its oil industry and revenues are no longer misused and diverted by Saddam, said Yergin, who is chairman of Cambridge Energy Associates, a consulting firm that analyzes oil trends worldwide for governments and international business clients. Yergin is also the Pulitzer-prize-winning author of "The Prize" -- a history of the last 100 years of the oil industry and its political, economic, and social effects on the modern world. While mismanagement is causing the country to lose around 100,000 barrels a day in oil production, he said, "we think its [oil production] capacity today is [still] around 2.7 or 2.8 million barrels a day;" worth more than $80 million per day at today's prices. Yergin compared that to the situation in Afghanistan, which has no energy products to sell and "is struggling to find ways to make money" while depending on international donors to help it reconstruct its war-shattered economy. (A United Nations-backed military coalition, led by the United States, helped liberate Afghanistan after its Taliban regime actively supported the al Qaeda terrorist network, responsible for terrorist attacks that killed 3,000 people -- including 400 foreigners -- in New York City, at the Pentagon, and in the Pennsylvania countryside on September 11, 2001.) He said, "For many decades Iraq has been a land of oil power and also a land of oil dreams. It sits on what are currently estimated are 112 billion barrels of reserve, which makes it in scale the second-largest [oil deposit] in the world after its neighbor Saudi Arabia." That may even be an underestimation, the energy expert added, considering that "it's been in isolation for the last 20 years or so," turned into a pariah state under Saddam's leadership. Even with its vast mineral riches, Iraq has managed to "marginalize" itself economically, Yergin said. "Its battles with the U.N., its retroactive pricing, its self-declared embargos have made it an unreliable supplier, a risky one." Despite that, in recent years, Yergin said, Iraq has continued to be "a major [oil-] producing country" -- a certain amount of oil is allowed to be exported despite a U.N. embargo under the "food-for-oil" program, for example. However, he added, Iraq "is a country that has not lived up to its potential. Its capacity has been damaged by poor production and lack of investment," something that is unlikely to change while Saddam remains in power. Touching on the possible effects a war would have on oil distribution worldwide, Yergin said that if Saddam refuses to abide by U.N. resolutions requiring him to dismantle his weapons of mass destruction and a war results, "it may take a year or so to sort things out on a large scale and then, as we calculated, it would take upwards of three years to get back to 3.5 million barrels of [oil production] capacity a day and another two years to get to 4.5 million a day -- that would be equivalent to the current production of West Africa, to give you some sense of the scale of it." Even though "the [world] market needs more oil," Yergin said he did not envision a major disruption of supplies or a major shift in prices worldwide until Iraq's production came on line again. "If there are hostilities, as long as they are restricted to Iraq, it's pretty manageable for the world oil market to accommodate. We're talking about losing one million barrels a day, perhaps, but there are six million barrels in unused [production] capacity that can be put into use." In addition, Yergin said, "the strategic [oil] reserves controlled by the industrial governments continue to expand and can be and would be put into the market very quickly if need be." (The Washington File is a product of the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
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