PACKET #3. Jul Total OPEC ENERGY POLITICS

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1 PACKET #3 Document #1: World Oil Production Million barrels per day Aug 2002 Jul 2002 Avg 2001 Avg 2000 OPEC - Crude Oil Saudi Arabia Iran Iraq United Arab Emirates Kuwait Neutral Zone Qatar Nigeria Libya Algeria Venezuela Indonesia Total OPEC Document #2: ENERGY POLITICS Baghdad's huge oil reserves hang in balance of debate By Evelyn Iritani and John Daniszewski, Los Angeles Times, 11/8/2002 OS ANGELES - One issue that could influence the outcome of the United Nations debate on Iraq isn't even on the official agenda. It's the thorny question of who will control Iraq's hundreds of billions of dollars' worth of oil reserves. In addition to being permanent members of the UN Security Council, the United States, Britain, France, China, and Russia are home to the world's leading energy companies, all of which are anxious to get access to Iraq's oil, the world's second-largest reserves behind Saudi Arabia.

2 While the politics of arms control and regime change dominate the public debate, an equally impassioned struggle is taking place over the economic stakes in the US-led campaign to oust Iraqi President Saddam Hussein. ''Everybody knows why the United States is doing this,'' said Nikolai P. Tokarev, general director of Zarubezhneft, a Russian state-owned company that has been involved in oil production and sales in Iraq since ''The only reason is the US desire to establish full control over the oil-gas complex of Iraq.'' British and US companies dominated Iraq's oil industry until it was nationalized in the 1970s. British Petroleum held nearly one-quarter of the shares of Iraq Petroleum Co. In recent years, Iraq has turned to Russia and France for help in restoring an oil sector damaged by war with Iran, the Persian Gulf War, and more than a decade of economic sanctions. A key concern for Russia, France, and China is whether a new government would honor Iraq's existing agreements. Russia's Lukoil has the largest stake in Iraq, having signed a 23-year, $3.5 billion contract in 1997 to develop the giant West Qurnah oil field. TotalFinaElf, a French state-owned company, has been negotiating to explore the Majnoon field, whose reserves are estimated at 20 billion to 30 billion barrels. China National Petroleum Corp. has a contract to develop part of the Rumaila area, which was substantially damaged during the 1991 Persian Gulf War. ''Hussein's replacement with somebody else, particularly someone who is appointed by the US government, will mean that Russia may be ousted from Iraq sooner or later,'' said Viktor A. Kremenyuk, deputy director of the USA-Canada Institute in Moscow. ''Therefore, it becomes clear that resolving the Iraq problem is all about the rivalry around one of the richest oil countries in the world.'' Though the leading UN players have a huge stake in the future of Iraq's oil industry, observers are divided over how oil politics might affect the vote on a new UN Security Council resolution on Iraq, which is expected today. ''There was a theory floating around that one of the things the US would do to garner support from the Russians, Chinese, and French in the Security Council is to honor the deals that were agreed to'' by the present Iraqi government, said John Kingston of Platts, an energy information service in New York. ''But I don't see any signs of that. '' The Bush administration denies that it is masterminding a US-led division of Iraq's lucrative oil reserves to benefit American multinational companies or its allies. ''The only interest the United States has in the region is furthering the cause of peace and stability,'' White House spokesman Ari Fleischer told reporters last week. ''And what has brought the region to the point where the United Nations is making decisions about what the appropriate means are to enforce Saddam Hussein to comply with UN resolutions is his defiance of UN resolutions, not his country's ability to generate oil.'' Exiled Iraqi dissidents, who have been drawing up plans for a government after Hussein is ousted, have said they will want to examine existing energy contracts. ''We have to look at who helped to free Iraq and who took Saddam's side at our time of need,'' said Salah Shaikhly, an economist and former deputy planning minister in Iraq who now sits on the leadership council of the Iraqi National Accord based in London. ''The fact that Britain and the United States were there for us should give them some slight leverage.'' Officials at Exxon Mobil Corp. and ChevronTexaco Corp., two of America's leading oil companies, refused to comment on their interest in Iraq.

3 Iraq is sitting on about 11 percent of the world's oil supply, about 112 billion barrels, and that oil can be produced cheaply, for about $1.50 a barrel. Fadhil Chalabi, a former official of Iraq's Oil Ministry, estimates that it will take $5 billion to restore the fields to prewar production levels of 3.5 million barrels a day and an additional $30 billion to increase levels to as much as 10 million barrels a day. Oil has been selling at around $27 to $30 a barrel. Iraq's full-scale reentry to the global markets would probably bring down prices, which would be good for big importers such as the United States, China, and Singapore. China is the world's second-largest consumer of energy, behind the United States. But lower oil prices would create problems for UN members that are heavily dependent on oil revenues, such as Russia and Mexico Document #3:

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6 Document #6: Document #7: Now this potential conflict is about a change of regime and weapons of mass destruction. (2003)