Iraq, the current oil crisis and American mismanagement (Book Review)

                   By Shubha Singh

     "The Ultimate Prize - Oil and Saddam's Iraq"; Author: Ranjit Singh Kalha; Publisher: Allied Publishers Pvt Ltd; Price: Rs 695: Pages: 429

     The price of crude oil jumped over $10 per barrel in a day to hit $139 last week and analysts have predicted that it is likely to go up to $150 a barrel by next month. Israeli threats of a strike against Iran, reports that a new project in Nigeria might be delayed or even new projections of huge increase in demand - because of the two new western bugbears - the consuming classes of China and India - are enough to set speculators at work pushing up the already volatile oil prices.

     Speculation and uncertainties of supply are fuelling the crude oil price spiral, but it is the imbalance between demand and supply of crude oil that is behind the steady increase in crude prices in the past year. In a new book titled "The Ultimate Prize - Oil and Saddam's Iraq", Ranjit Singh Kalha, a former Indian envoy to Iraq, explains that it is the disruption of the supply of crude from the Iraqi oil wells to the international oil market that is one of the important factors in the demand-supply mismatch. The Iraqi oil supply at present is not even up to the sharply restricted levels that the UN sanctions imposed on the Saddam Hussain regime in Iraq before the US led invasion of Iraq took place in 2003.

     Iraq has an estimated 11 percent of the world's oil reserves, the second largest proven reserves after Saudi Arabia. Iraqi oil has two other qualities: it lies just under the surface and therefore is easier and cheaper to extract and is of a higher quality. India was hit particularly hard by the oil crisis after the first Gulf War in 1991 as Iraq was one of its main suppliers of crude oil and Indian refineries were configured to use to the higher grade of crude extracted from Iraqi oil wells.

     The American occupation of Iraq has not been able to create the conditions for stabilising the oil industry in the country after the destruction during the Second Gulf War. Before the Iraqi invasion of Kuwait, Baghdad exported 3.5 million barrels of oil per day. Now, with the high ruling prices of crude, Iraqi oil, whose cost of extraction was $1.5 per barrel when Oman's oil extraction costs were $5 a barrel, is even more valuable.

     In his book, Kalha relates how Iraqi oil has been a major factor in the oil politics of the world. Recognising the great strategic value of oil, the British carved a brand new country from the crumbling Ottoman empire. Boundary lines were drawn on the sands to join together three disparate regions that had been held by different ethnic groups and warring tribes to encompass the rich oil producing areas. Kalha explains that oil has remained a defining feature in the politics of the region. The American forces remain in Iraq despite the growing opposition to the war back home in the US, for as Kalha writes "control over Iraqi oil is an economic necessity, a strategic requirement according to US National Security Directives".

     In his absorbing account of Iraq and its history, Kalha reveals how a major oil producing country remains out of the international market - purely through political mismanagement by the Americans. The story is specially relevant in the current scenario when perceived increases in future demand and any anticipated risks to supply of crude oil is keeping the international oil market volatile despite the absence of actual shortages and the American consumer cutting back because of the high petrol prices.

     ("The Ultimate Prize" is being launched by India's External Affairs Minister Pranab Mukherjee June 11 in New Delhi. R.S. Kalha can be contacted at rskalha@hotmail.com)

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