U.S. oil companies stand to reap reward from Saddam's ouster

By Dan Morgan

and David B. Ottaway ~ The Washington Post

WASHINGTON -- A U.S.-led ouster of Iraqi President Saddam Hussein could open a bonanza for U.S. oil companies long banished from Iraq, scuttling oil deals between Baghdad and Russia, France and other countries and reshuffling world petroleum markets, according to industry officials and leaders of the Iraqi opposition.

Although senior Bush administration officials say they have not begun to focus on the issues involving oil and Iraq, American and foreign oil companies have already begun maneuvering for a stake in the country's huge proven reserves of 112 billion barrels of crude oil, the largest in the world outside Saudi Arabia.

The importance of Iraq's oil has made it potentially one of the administration's biggest bargaining chips in its negotiations to win backing from the U.N. Security Council and Western allies for President Bush's call for tough international action against Hussein. All five permanent members of the Security Council -- the United States, Britain, France, Russia and China -- have international oil companies with major stakes in a change of leadership in Baghdad.

Choosing sides

"It's pretty straightforward," said former CIA director James Woolsey, who has been one of the leading advocates of forcing Hussein from power. "France and Russia have oil companies and interests in Iraq. They should be told that if they are of assistance in moving Iraq toward decent government, we'll do the best we can to insure that the new government and American companies work closely with them."

But he added: "If they throw in their lot with Saddam, it will be difficult to the point of impossible to persuade the new Iraqi government to work with them."

Indeed, the mere prospect of a new Iraqi government has fanned concerns by non-American oil companies that they will be excluded by the United States, which almost certainly would be the dominant foreign power in Iraq in the aftermath of Hussein's fall. Representatives of many foreign oil concerns have been meeting with leaders of the Iraqi opposition to make their case for a future stake and to sound them out about their future intentions.

Companies line up

Since the Persian Gulf War in 1991, companies from more than a dozen nations, including France, Russia, China, India, Italy, Vietnam and Algeria, have either reached or sought to reach agreements in principle to develop Iraqi oil fields, refurbish existing facilities or explore undeveloped tracts. Most of the deals are on hold until the lifting of U.N. sanctions.

But Iraqi opposition officials made clear in interviews last week that they will not be bound by any of the deals.

"We will review all these agreements, definitely" said Faisal Qaragholi, a petroleum engineer who directs the London office of the Iraqi National Congress (INC), an umbrella organization of opposition groups that is backed by the United States. "Our oil policies should be decided by a government in Iraq elected by the people."

Ahmed Chalabi, the INC leader, went even further, saying he favored the creation of a U.S.-led consortium to develop Iraq's oil fields, which have deteriorated under more than a decade of sanctions.

"American companies will have a big shot at Iraqi oil," Chalabi said.

The INC, however, said it has not taken a formal position on the structure of Iraq's oil industry in event of a change of leadership.

While the Bush administration's campaign against Hussein is presenting vast possibilities for multinational oil giants, it also poses major risks and uncertainties for the global oil market, according to industry analysts.