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http://www.hinduonnet.com/stories/2002091706991000.htm The Hindu September 17, 2002 U.S. attack on Iraq — at whose cost? By Sudha Mahalingam The U.S. will suffer the least in terms of access to oil... Japan, China and India will be left holding the can when supplies get disrupted. -Now, the U.S. has trained its sights on the Caspian Sea region, believed to be the next energy frontier. The Americans are sparing no efforts — military, economic or diplomatic — in their quest for new oil sources. The American administration has successfully stationed over 4,000 troops in the oil and gas-rich Central Asian Republics of Kazakhstan, Tajikistan, Uzbekistan, Kyrgystan and even Georgia, in the course of its war on terror. Direct American aid to the Central Asian Republics is on the rise and U.S. investments in the region are estimated to be upwards of $20 billion. EVEN AS the United States and allied airplanes prepare to launch pre-emptive strikes on southern Iraq, the American strategic stockpile of petroleum is brimming over. The U.S. will have enough oil to see it through the impending war. Last November, the U.S. President, George W. Bush, had ordered the filling up of the Strategic Petroleum Reserve to its full capacity of 700 million barrels. Since January, the stockpile has been adding 150,000 barrels a day. But that was not the only smart move Mr. Bush made. Even before the ghastly attacks on the twin towers of the World Trade Center last September, long before Iraq entered U.S. radar range as a possible target of attack, the U.S. had been fine-tuning its energy policy in an attempt to access new sources of oil and gas. On May 17, 2001, Mr. Bush announced his controversial new energy policy whose main thrust was to minimise American dependence on Gulf oil, even if it meant dumping the Kyoto Protocol and drilling in the pristine snows of Alaska. This resolve was reinforced by the events of 9/11. Outside the U.S. administration, there was some loud thinking about life without Saudi oil, especially after September 11. After all, 15 of the 18 hijackers who crashed their planes on U.S. civilian targets that day were Saudis. Currently, the U.S. imports half of its hydrocarbon requirements from foreign sources and this figure is set to go up to two thirds by 2020. Only 30 per cent of American oil imports come from the Gulf region, the rest being supplied mostly by Mexico, Venezuela, Colombia and others, which means that just 15 per cent of the total U.S. energy requirements are supplied by the Gulf countries. Now, the U.S. has trained its sights on the Caspian Sea region, believed to be the next energy frontier. The Americans are sparing no efforts — military, economic or diplomatic — in their quest for new oil sources. The American administration has successfully stationed over 4,000 troops in the oil and gas-rich Central Asian Republics of Kazakhstan, Tajikistan, Uzbekistan, Kyrgystan and even Georgia, in the course of its war on terror. Direct American aid to the Central Asian Republics is on the rise and U.S. investments in the region are estimated to be upwards of $20 billion. On the one hand, the Americans are making elaborate and expensive plans to ensure that the oil pipelines from Central Asia do not pass through Russian territory, and on the other go to great lengths to woo Vladimir Putin as their energy ally. They see little contradiction in such moves. If there is one country that can single-handedly tip the scales against oil from the Gulf, it is Russia which is quietly increasing its annual production by half a million barrels a day. All these measures will ensure that the U.S. will suffer the least in terms of access to oil during the impending war on Iraq. Even Europe imports only 35 per cent of its oil requirements from the Gulf and may get off relatively lightly, thanks to the common E.U. stockpile. Clearly, Japan, China and India will be left holding the can when supplies get disrupted. Japan imports 75 per cent of its oil and gas from the Middle East, but can draw from the E.U. stockpile in the event of an emergency. Asia as a whole imports 60 per cent of its oil from the Middle East, with China and India making up most of the demand. Oil supply disruption is inevitable in the event of a sustained attack. Iraq is already on parole — the U.N. sanctions committee has devised the food-for-oil programme, ostensibly on humanitarian considerations, but equally to keep the global oil taps flowing at full force. After all, Baghdad is an important member of the OPEC, adding 2.2 million barrels a day to the global supply. However, during the first six months of this year, the conflict between the U.N. Sanctions Committee and Iraq's State Oil Marketing Organisation squeezed Iraqi exports to a mere 1.24 million barrels a day. Earlier this year, Mr. Bush's infamous "axis of evil" speech had left both Iran and Iraq bristling. They responded by threatening to use oil as a weapon against the U.S. and its allies. Between April 8 and May 7 this year, Iraq suspended its oil exports entirely as a protest against Israeli action against Palestine. Saddam Hussein had followed a scorched earth policy during the Gulf War, damaging oil installations in Kuwait. He might well repeat it now. Even if he destroys only Iraqi oil wells, the global oil supply will drop by at least a million barrels a day. This time around, can the world depend on Saudi Arabia, the only OPEC country with spare oil capacity in the region, to oblige by increasing production and keeping prices in check? The Saudis have kept the OPEC on a tight leash these last six months so much so that the prices have been consistently within the OPEC price band. The best-case scenario is one of acute price volatility and the worst-case, sharp price hikes. By all indications, oil-importing countries are in for some nasty shocks. Imagine what it can do to India which imports over 70 per cent of its hydrocarbons and pays a whopping Rs.70,000 crores annually at current consumption levels. During the 1980-88 Iran-Iraq war India was importing 70 per cent of its oil requirements from these two countries. In 1991, when Iraq invaded Kuwait, India was importing 2.25 million tonnes of crude from Iraq under a tripartite Rupee-Rouble agreement involving the then Soviet Union. The war threw a spanner into this mutually beneficial arrangement and India had to go scurrying for alternative financing arrangements to meet the hike in crude prices. At that time, crude price rose from $16.3 a barrel in July to $34.6 a barrel in October 1990. For the next six months, India's petroleum import bill more than doubled. This time around, India is importing only a small proportion of Iraqi oil per se, but the bulk of our needs comes from the Gulf members of the OPEC. Already prices have hardened in the last few weeks. Any sustained price hike can play havoc with the Indian economy. It can slow down recovery and fuel inflation. Worse, it can disrupt remittances from the Gulf. NRI remittances in 2001 were $2.75 billion, a third of our total capital inflows, and a substantial chunk of it is bound to have emanated from the Gulf. But the war could do worse. The Straits of Hormuz through which 14 million barrels of oil pass everyday is just two miles wide at its narrowest. Either Iran or Iraq, or both, could block the Straits of Hormuz and choke off supplies from the entire region. The E.U. and the Americans can draw from their strategic reserves and stave off shortages, but that luxury is unavailable to India and China. An energy-intensive development paradigm has rendered India extremely vulnerable to even modest increases in the price of petroleum products. That the price hikes will come at a time when the Indian petroleum sector is liberalised and integrated with the international market is even more unfortunate. The Government can theoretically shrug its shoulders and blame the markets and curse the U.S. for its cussedness, but can hardly escape the consequences of the impending war. By all indications, we are in for very rough times ahead. (The writer is Senior Fellow, Institute of Defence Studies & Analyses, New Delhi.) __________________________________________________ Do You Yahoo!? Yahoo! Finance - Get real-time stock quotes http://finance.yahoo.com --------------------------- ANTI-NATO INFORMATION LIST ==^================================================================ This email was sent to: archive@jab.org EASY UNSUBSCRIBE click here: http://topica.com/u/?a84x2u.bacIlu Or send an email to: [EMAIL PROTECTED] T O P I C A -- Register now to manage your mail! http://www.topica.com/partner/tag02/register ==^================================================================
