Iraq and Iran – Another Example of Weakness Leading to More Violence

Daily, weekly, monthly, and yearly, we can see that Iran and Islam are again rattling the sabre of confrontation. It is clear that weakness begets war. As that old Anglo white warmonger capitalist-conservative Churchill stated, ‘Nations which go down fighting rise again, those who surrender tamely are finished.’ Tamely surrendering to fascist Islam, running out of Iraq and Afghanistan to placate chattering socialist morons at home and in the media, or the opportunistic cowardly and fainéant, will only embolden civilization’s enemies.

For those who are historically-challenged it might do you some good to understand that appeasement, weakness and cowardice are not intelligent options with dealing with a fascism. Perhaps the screaming socialists might want to read the history of the 1400 years of Arab-Islamic jihad against the world; the rise and fall of Nazism, Communism, or the destruction of various oriental empires to understand that fascist violence mandates military strength and preparedness. Kow-towing to Asian, Muslim or fascist sensitivity is remarkably unintelligent.

Iran wants a confrontation. Its regime of mad Mullahs needs external enemies to solidify domestic control. The big unknown in Iran is how much real support does the regime have? It is not too wise to expect that a majority or even a significant minority of Iranians desire a Western friendly regime or massive institutional change. Don’t expect that a large segment of the population wants to replace the Mullahs with something that is pro-Western or pro-reform. After all the British incorrectly surmised that most Germans wanted to be rid of Hitler. This was simply untrue.

In dealing with a state like Iran you have to implement 3 main ideas. 1. Employ international sanctions, including cutting off all financing and use diplomatic pressure to force the Iranians to stop their nuclear program and renounce violence against Israel. Make the sanctions real, and make them hurt. 2. Seal off the borders between Iran and Afghanistan and Iraq, and patrol all waters just outside the Iranian line of sovereignty. Make your military muscle obvious. 3. Prepare plans for a large scale military strike using land, sea and air forces, and a pincher movement from Afghanistan and Iraq into Teheran.

None of these is even being considered and the Iranians know it.

Europe and Russia flaunt sanctions just like they did during the 1990s in Iraq. For 10 years the UN led by the wonderful transparent democrats in Germany, France, Russia and China made billions of dollars in illegal fees and revenues in Iraq while 300.000 Iraqi’s were murdered; and the country became a nexus of money, terror, fascism and illegal weapons of all varieties and manufacture. The same debacle goes on today in Iran. The Europeans and Russians talk about sanctions but are hypocritically increasing their trade and investment. They could care less about the threat Iran poses to the region or the fact that Iran funds terror world wide.

Even more dangerous is the real possibility that the US congress might actually force a pullout from the Middle East in 2008 or 2009. The repercussions of cutting and running from the Middle East will be felt for two generations.

Running from Beirut in 1983; Iraq in 1991; and Somalia in 1994-5, only emboldened Islam. It did not deter it. Giving Iraq over to fascists and Iranian agents will herald a gigantic defeat for Western civilization. Iran sensing that the West is weak and perhaps on the brink of strategic defeat in Iraq and elsewhere, is now looking to embolden its own tactical advantage and leverage.

Perversely from the Western viewpoint we are on the cusp, for the first time in Iraq’s bloody and violent history, of attaining a semblance of a Constitutional democracy that is pro-Western. It is not sensible to withdraw from Iraq and lose forward ground bases against Iran. If Iran is truly the threat that most of the world thinks it is, what geopolitical or military logic is there in throwing away your forward base of operations in Iraq? You can’t invade and destroy the Iranian regime from Kuwait. Check a map. You need to quickly effect a pincer movement from east and west towards Teheran. This is yet another good reason why we need to stay in Iraq and Afghanistan.

For the chattering moral relativists and socialist defeatists logic is irrelevant. The war is lost, all wars are bad, and can’t we all just get along ?

As Victor Hanson commented:
“Prewar forecasts warned a worried public that we might lose 3,000-5,000 soldiers just in removing Saddam. Three years later, we have removed him and sponsored a democracy to boot, and at far less than those feared numbers. But we react as if we had faced unexpected numbers of casualties.

Despite the fact that al Qaedists were in Kurdistan, Al Zarqawi was in Saddam’s Baghdad, terrorists like Abu Abas and Abu Nidal were sheltered by Iraqis, and recent archives disclose that hundreds of Iraqi terrorists were annually housed and schooled by the Baathists, we are nevertheless assured that there was no tie between Saddam and terrorists. Those who suggest there were lines of support are caricatured as liars and Bush propagandists.

Apparently, we are asked to believe that the al Qaedists whom Iraqis and Americans kill each day in Iraq largely joined up because we removed Saddam Hussein.”

For Iran the hyperbole is the same. Endless dialogue with mad fascists is the preferred program. If Iranians kidnap UK servicemen, well that is okay. If Iran threatens Israel with a nuclear Armageddon that is fine – those Jews are fascist Shylock’s anyways. Iran should have the bomb why not? We do.

From such simpleton logic flows the case against being resolute against Iranian Mullah inspired fascism. Like the pre-war forecasts in Iraq so the prewar forecasts for a strike on Iran would be the same - except even more exagerrated. By putting the casus belli for the Iraq war all on WMD the Bush administration 'dumbed down' the 23 good reasons to go to war, in the expectation of an easy, cheap and internationally sanctioned victory. By trying to take a short cut, the Bushies short-circuited any claims to the moral high ground and have destroyed their own credibility, so much so, that an attack on Iran is almost a political impossibility.

This may change if the Iranians are still found killing American soldiers in Iraq in a few months time but even then, I doubt very much that the left wing US media or the political opportunists sniffing a victory in the 2008 US elections would take much notice or allow another 'pre-emptive' strike, even after a few hundred American boys have been murdered by the Iranian regime.

As with pulling out of Iraq in 1991, we just had to return and do a dirtier and hader job later. So it will be with Iran. We can ignore it, rationalise it, put our hands over our ears and hum madly, but at some point a war
with Iranian fascism is inevitable. To win such a conflict we need to stay in Iraq and Afghanistan, that much is obvious. In the longer term breaking Iran; destroying OPEC and imposing ourselves on the Middle East is a necessity. Our economies, civilization, security and moral standards demand it.

I even have a good name for the next war, the one with a resurgent Persia, we can call it: ‘The neo-imperialist crusade to end Persian fascism and the pagan Arab empire.’ That sounds like a winner.

Retrieved from "http://www.articlesbase.com/business-articles/iraq-and-iran-another-example-of-weakness-leading-to-more-violence-383052.html"

(ArticlesBase SC #383052)

Betting on Crude Oil to Fall

The continued weakness in the Oil markets is playing havoc across the commodity exporting nations. Russia’s recent emergency measures have confirmed the problems.

With memories of Russia’s effective wiping out of state debt back in 1998 very much to the fore, the chances of anyone coming to their aid is slim. The same can be said for Venezuela, Argentina, Iran etc.

Crude Oil is now pushing to a two year low and, if anything, the outlook looks ever more painful.

Not only this but Airlines and others who hedged their fuel costs earlier this year at $100, $120 per barrel or even higher will now be asked for cash margin on these forward purchased contracts. In the current poor economic situation who would lend to an airline to make a margin call? This could lead to enforced liquidation, if indeed this has not already happened to some. That may well drive the markets much lower. This is not a prospect that leads to a happy prognosis on individual state security.

BA has managed to confound analysts by reporting much higher Turnover than expected but in the same breathe reported a loss of £49m. A £65m profit was expected. Obviously the higher fuel costs were not being offset by the BA surcharges. With Crude Oil now down at around $50 (I would recommend a bit of hedging at these levels) the cut in costs is running against the fall in current passenger numbers. Octobers passenger numbers were down 4.4% on last year. Not exactly surprising. Nevertheless the reported loss can truly be said to be a sign of the past rather than any indication at all of the future. BA is likely to be a last-man-standing airline so selling out at this stage would not appear to be on the cards.

Many complained that the high oil prices were due to speculators pushing the price up. I wonder if those same commentators will cheer the speculators who are supposedly spread betting on crude oil to fall in price.

FinancialSpreads.com and paddypowertrader have both reported a surge in clients selling oil. The latter has confirmed a 25% increase in the number of accounts shorting crude (betting on oil to go down).

Crude prices have slumped more than 60% in value since hitting record highs of $147 per barrel in July 2008. They are now at their lowest levels since January 2007.

So whilst Russia et al may be experiencing problems, individual investors seem to be on the side of the consumer and driving down the price of oil.

So far OPEC has failed to control the market and the speculators have been winning.

If Russia continues to experience financial difficulties they may have little choice but to continue producing at the same rates and OPEC will have more problems controlling the price.

Is it time to join the speculators or just enjoy cheaper petrol?

NB. Financial spread betting carries a high level of risk and may not be suitable for all classes of investor. Only trade with money that you can afford to lose. Make sure you fully understand the risks involved. If necessary, seek independent financial advice.

Retrieved from "http://www.articlesbase.com/investing-articles/betting-on-crude-oil-to-fall-650028.html"

(ArticlesBase SC #650028)

The Big, Bloody Business of Big, Bloody Oil

“Mark my words.  It will not be six months before the world tests Barack Obama, like they did John Kennedy.  The world is looking.  We’re about to elect a brilliant 47 year old senator president of the United States of America.  Remember I said it standing here, if you don’t remember anything else I said.  Watch, we’re gonna have an international crisis, a generated crisis, to test the mettle of this guy.”
Joe Biden, October 2008, at a Seattle fundraiser.

During his speech at the now famous Seattle fundraiser, Mr. Biden named the Middle East and Russia as the possible (likely) generators of the crisis.  As his words became widespread, he received lots of criticism from his fellow democrats, who warned him that by saying those things in public he was jeopardizing Senator’s Obama’s chances at the Presidency.  Mr. Biden’s comments were the target of jokes from late night comedians, and parodied in a skit on Saturday Night Life.  What most people seemed to forget, or wanted to forget, was that Mr. Biden‘s words were the result of his many years of experience in international affairs.  As a seasoned politician, he could foresee the results of this election.  He knew we would have a generated crisis, and he knew it would generate in the Middle East or Russia.

Mr. Biden was accurate in predicting which countries would generate the crisis, but he could have been even more specific:  The crisis would be generated by the oil producers, the only beneficiaries of all the geopolitical turmoil around the world.  It makes no difference whether it’s the Middle East, Russia or Venezuela.  They all act together in unison as one bloc, with one objective in mind: to keep the price of oil high.

Fast forward to the end of December 2008, and Mr. Biden‘s prescient words came to pass.  Now, at the beginning of January 2009, the crisis generated by the oil producers is in full swing.  Russia, the Middle East and Venezuela are having a field day, rubbing their hands in glee at the results.  They finally managed to reverse the steep drop in the price of oil that started in July 2008.  At that time, oil reached an all-time high of around US$150.00 a barrel, enriching the coffers of the oil producing nations and wrecking the rest of the world’s economies.  Since then, the price of oil dropped to below US$40.00 a barrel.  That meant both a respite for the rest of the world, and a serious problem for the oil producers, who need oil to be priced above US$80.00 a barrel.  Anything lower than that and they cannot sustain their dictatorships.  OPEC scheduled emergency meetings to prop the price of oil.  First, they tried cutting down production.  That didn’t help much this time, because high priced oil already caused the deepest recession around the world since the Great Depression.  The world had curtailed their use of oil and the cuts in production were barely felt.  Another emergency meeting, another production cut.  The price of oil kept going down.  By then, it was obvious that no amount of production cuts would raise the price of oil.  They had to resort to the one tried and true marketing/public relations device that never fails in raising the price of oil.

Terrorism.

First, they attacked India.  As the sole terrorist survivor of the Mumbai massacres revealed, the original planned date for the attacks was September 27.  That was changed to November 27, after the US election.  A major terror attack like the one in Mumbai coming a month before the Presidential election would have had an impact on the result, and not the oil producers’ desired impact.

Oil did go up slightly, but that was only the beginning.  Attacks in Pakistan, Afghanistan and Iraq went barely noticed.  The continuous barrage of rockets from Gaza targeting the civilian population of Israel hardly made the news.  However, that was were they concentrated their attacks.  Creating geopolitical turmoil increases the price of oil, and attacking Israel is what delivers the most bang for their buck.  Always.  Iran contacts its proxies Hamas and Hezbollah, green lights the attacks, and waits for the oil profits to roll in.  It’s a cost efficient method, too.  The UN and the WITOTs (Willing Idiots Targets Of Terror) condemn Israel, give money and aid to Iran’s proxies, and conveniently forget why the geological turmoil was generated in the first place and by whom.

To condemn Israel for defending its civilian population from terror attacks is the political equivalent of condemning a rape victim to death because she had sex outside the marriage.

Had the oil producers not attacked Israel, today oil would be below US$20.00 a barrel.  US$20.00 a barrel is not a comfortable price for Russia, Iran and Venezuela, the generators of the current crisis.  At US$20.00 a barrel, their economies crumble like dust in the wind.

Hamas and Hezbollah are called “proxies” of Iran.  However, because terrorism is about oil business, and to attack Israel was a business decision, it’s more accurate to call them “subcontractors“.

Joe Biden knew we would have a generated international crisis, and knew where it would come from.  Looking at the correlation of the price of oil and terror attacks,  we can all notice a pattern repeating itself.  What comes next after attacking Israel, and getting the UN, WITOTs and oil producers to condemn Israel‘s response, is a major terror attack somewhere in the world.  Somewhere where they can use extreme cruelty against defenseless people, and claim they did it because they were “angry” at Israel.

Watch the price of oil skyrocket. 

I’m concerned this major terror attack is imminent upon us.  It’s part of the script, scheduled after attacking Israel.
US$80.00 a barrel, here it comes.
All in the name of oil.
Never ever let anybody convince you that terrorism is about something other than raising the price of oil.
It’s not.

Retrieved from "http://www.articlesbase.com/politics-articles/the-big-bloody-business-of-big-bloody-oil-718592.html"

(ArticlesBase SC #718592)

Oil Prices Climb on Speculation That Opec and Russia Will Cut Production

Speculation that oil prices are beginning to bottom helped push crude contracts higher yesterday (Wednesday), as traders closed out short positions and rumors surfaced that both Russia and the Organization of Petroleum Exporting Countries (OPEC) are planning to cut production next week.

Light, sweet crude for January delivery rose $1.45, or 3.4% to settle at $43.52 on the New York Mercantile Exchange, after climbing by as much as 7% earlier in the day. Futures have plunged roughly 70% since hitting a record-high $147.27 a barrel in July. However, they may be set for a rebound as traders close out short positions and production cuts offset slackening demand.

Traders who took short positions on crude contracts, or placed bets that prices would fall, are buying contracts to cover those bets now that oil has dropped more than 20% in the past two weeks. Their exit from the market has been expedited by the belief that prices are nearing a bottom, as well as suggestions that both OPEC and Russia will cut production next week.

Russia will air proposals on oil production cuts no later than December 17, Sergei Shmatko, the nation’s energy minister, told Interfax.

“Right now we need to see where we stand with respect to OPEC’s stated position,” Shmatko said. “I know that OPEC is preparing serious plans to cut production.”

Shmatko added that OPEC President and Algerian Oil Minister, Chekib Khelil was keen “to see Russia in OPEC,” but that Russia rather see “non-OPEC suppliers consolidate their position in order to keep the market stable.”

OPEC members are scheduled to meet in Algeria on Dec. 17 to discuss further production cuts. Oil has fallen more than 30% since the cartel last slashed its production quota, a 1.5 million barrel per day (bpd) reduction on Oct. 24. Analysts anticipate the OPEC that the next supply cut could be anywhere between 1.5 million bpd and 2.5 million bpd.

“The expectation of an OPEC cut is going some way toward curbing the downward momentum in prices,” Toby Hassall, an analyst at investment firm Commodity Warrants Australia, told The Associated Press. “A cut of 1.5 million to 2 million barrels a day seems like a reasonable range.”

Demand for oil has plunged over the past six months, with the onset of what is shaping up to be a severe global downturn. In its last monthly oil outlook, issued Nov. 17, OPEC trimmed its 2009 demand forecast by 530,000 to 86.68 million bpd. The Paris-based International Energy Agency is expected announce a cut to its 2009 forecast in its monthly report, set for release tomorrow.

Still, many analysts believe the market has “overshot” the downside to oil, and that further production cuts will be enough to create a floor for prices.

“We’re probably in the early stages of forming a base at the moment, and the price will likely edge up toward $60 or $70 by the middle of next year,” Hassall said. “We probably overshot on the downside the same way we overshot to the upside earlier this year.”

To continue reading click here.

Investment News

Retrieved from "http://www.articlesbase.com/investing-articles/oil-prices-climb-on-speculation-that-opec-and-russia-will-cut-production-679719.html"

(ArticlesBase SC #679719)

Untapped: the Scramble for Africa's Oil

The following is an excerpt from the book Untapped
by John Ghazvinian
Published by Harcourt, Inc.; April 2007;$25.00US; 978-0-15-101138-4
Copyright © 2007 John Ghazvinian

Since 1990 alone, the petroleum industry has invested more than $20 billion in exploration and production activity in Africa . A further $50 billion will be spent between now and the end of the decade, the largest investment in the continent's history -- and around one-third of it will come from the United States . Three of the world's largest oil companies -- the British-Dutch consortium Shell, France's Total, and America's Chevron -- are spending 15 percent, 30 percent, and 35 percent respectively of their global exploration and production budgets in Africa. Chevron alone is in the process of rolling out $20 billion in African projects over a five-year period.

The overwhelming majority of this new drilling activity has taken place in the so-called "deep water" and the "ultradeep" of the Gulf of Guinea , the roughly 90-degree bend along the west coast of Africa that can best be visualized as the continent's "armpit." Its littoral zone passes through the territorial waters of a dozen countries, from Ivory Coast in the northwest down to Angola in the south, and a good deal of its geology shares the characteristics that have made Nigeria a prolific producer for decades. Indeed, a number of unexpectedly productive fields have been discovered in the Gulf over the past decade. But although the Gulf of Guinea has lately been sub-Saharan Africa 's most exciting region for the oil industry, it is hardly the only "prospective" part of the continent (to borrow the industry term). The parched semideserts of southern Chad and southern Sudan have recently added hundreds of thousands of barrels a day to global markets, and a growing chorus of voices is now touting the East African margin as the industry's "next big thing."

But be it east or west, jungle or desert, it is a safe bet that where the drillers go, the politicians, strategists, and lobbyists are not far behind. Washington in particular has taken a keen interest in Africa 's growing significance as an oil-producing region since the headline discoveries of the late 1990s. In December 2000 the National Intelligence Council, an internal CIA think tank, published a report in which it declared unambiguously that sub-Saharan Africa "will play an increasing role in global energy markets," and predicted that the region would provide 25 percent of North American oil imports by 2015, up from the 15 percent or so at the time. (This would put Africa well ahead of Saudi Arabia as a source of oil for the United States .) In May 2001 a controversial and fairly secretive energy task force put together by U.S. Vice President Dick Cheney declared in its report: " West Africa is expected to be one of the fastest-growing sources of oil and gas for the American market."

In the following months, a group of congressmen, lobbyists, and defense strategists came together under the umbrella of the African Oil Policy Initiative Group, and began preaching the message that the Gulf of Guinea was the new Persian Gulf, and that it should become a strategic priority for the United States, even to the point of requiring an expanded military presence. A series of well-placed articles in the American media followed, some breathlessly announcing the inauguration of a new Middle East off the shores of Africa . Before long, the influential Center for Strategic and International Studies had chimed in with a couple of reports, its most recent, in July 2005, claiming that "an exceptional mix of U.S. interests is at play in West Africa's Gulf of Guinea ."

During these years, a number of prominent lawmakers in Washington began getting excited about the possibility of shifting some of America 's oil dependence from the Middle East to Africa . One former senior official charged with African affairs recalls Kansas Senator Sam Brownback rushing up to him one afternoon in October 2002, positively glowing with excitement. "What do you think about bases in Africa ?" Brownback asked. "Wouldn't that be great?"

--------------------------------------------------------------------------------

But does Africa measure up to the hype? After all, the entire continent is believed to contain, at best, 10 percent of the world's proven oil reserves, making it a minnow swimming in an ocean of seasoned sharks. Africa is unlikely ever to "replace" the Middle East or any other major oil-producing region. So why the song and dance? Why all the goose bumps? Why do so many influential people in Washington let themselves get so carried away when they talk about African oil?

The answer has very little to do with geology. Africa 's significance as an oil "play," to borrow the industry lingo, lies beyond the number of barrels that may or may not be buried under its cretaceous rock. Instead, what makes the African oil boom interesting to energy security strategists in both Washington and Europe (and, increasingly, Beijing ) is a series of serendipitous and unrelated factors that, together, tell a story of unfolding opportunity.

To begin with, one of the more attractive attributes of Africa 's oil boom is the quality of the oil itself. The variety of crude found in the Gulf of Guinea is known in industry parlance as "light" and "sweet," meaning it is viscous and low in sulfur, and therefore easier and cheaper to refine than, say, Middle Eastern crude, which tends to be lacking in lower hydrocarbons and is therefore very "sticky." This is particularly appealing to American and European refineries, which have to contend with strict environmental regulations that make it difficult to refine heavier and sourer varieties of crude without running up costs that make the entire proposition worthless.

Then there is the geographic accident of Africa 's being almost entirely surrounded by water, which significantly cuts transport-related costs and risks. The Gulf of Guinea , in particular, is well positioned to allow speedy transport to the major trading ports of Europe and North America . Existing sea-lanes can be used for quick, cheap delivery, so there is no need to worry about the Suez Canal , for instance, or to build expensive pipelines through unpredictable countries. This may seem a minor point, until you look at Central Asia, where the Baku-Tbilisi-Ceyhan pipeline, stretching from Azerbaijan through Georgia and into Turkey , and intended to deliver Caspian crude into the Mediterranean, had to navigate a minefield of Middle East politics, antiglobalization protests, and red tape before it could be opened. African oil faces none of those issues. It is simply loaded onto a tanker at the point of production and begins its smooth, unmolested journey on the high seas, arriving just days later in Shreveport , Southampton, or Le Havre .

A third advantage, from the perspective of the oil companies, is that Africa offers a tremendously favorable contractual environment. Unlike in, say, Saudi Arabia, where the state-owned oil company Saudi Aramco has a monopoly on the exploration, production, and distribution of the country's crude oil, most sub-Saharan African countries operate on the basis of so-called production-sharing agreements, or PSAs. In these arrangements, a foreign oil company is awarded a license to look for petroleum on the condition that it assume the up-front costs of exploration and production. If oil is discovered in that block, the oil company will share the revenues with the host government, but only after its initial costs have been recouped. PSAs are generally offered to impoverished countries that would never be able to amass either the technical expertise or the billions in capital investment required to drill for oil themselves. For the oil company, a relatively small up-front investment can quickly turn into untold billions in profits.

Yet another strategic benefit, particularly from the perspective of American politicians, is that, until recently, with the exception of Nigeria , none of the oil-producing countries of sub-Saharan Africa had belonged to the Organization of Petroleum Exporting Countries (OPEC). Thus they have not been subject to the strict limits on output OPEC imposes on its members in an attempt to keep the price of oil artificially high. The more non-OPEC oil that comes onto the global market, the more difficult it becomes for OPEC countries to sell their crude at high prices, and the lower the overall price of oil. Put more simply, if new reserves are discovered in Venezuela , they have very little effect on the price of oil because Venezuela 's OPEC commitments will not allow it to increase its output very much. But if new reserves are discovered in Gabon , it means more cheap oil for everybody.

But probably the most attractive of all the attributes of Africa's oil boom, for Western governments and oil companies alike, is that virtually all the big discoveries of recent years have been made offshore, in deepwater reserves that are often many miles from populated land. This means that even if a civil war or violent insurrection breaks out onshore (always a concern in Africa ), the oil companies can continue to pump out oil with little likelihood of sabotage, banditry, or nationalist fervor getting in the way. Given the hundreds of thousands of barrels of Nigerian crude that are lost every year as a result of fighting, community protests, and organized crime, this is something the industry gets rather excited about.

Finally, there is the sheer speed of growth in African oil production, and the fact that Africa is one of the world's last underexplored regions. In a world used to hearing that there are no more big oil discoveries out there, and few truly untapped reserves to look forward to, the ferocious pace and scale of Africa 's oil boom has proved a bracing tonic. One-third of the world's new oil discoveries since the year 2000 have taken place in Africa . Of the 8 billion barrels of new oil reserves discovered in 2001, 7 billion were found there. In the years between 2005 and 2010, 20 percent of the world's new production capacity is expected to come from Africa . And there is now an almost contagious feeling in the oil industry that no one really knows just how much oil might be there, since no one's ever really bothered to check.

All these factors add up to a convincing value proposition: African oil is cheaper, safer, and more accessible than its competitors, and there seems to be more of it every day. And, though Africa may not be able to compete with the Persian Gulf at the level of proven reserves, it has just enough up its sleeve to make it a potential "swing" region -- an oil province that can kick in just enough production to keep markets calm when supplies elsewhere in the world are unpredictable. Diversification of the oil supply has been a goal -- even an obsession -- in the United States since the Arab oil embargo of the 1970s. Successive U.S. administrations have understood that if the world is overly reliant on two or three hot spots for its energy security, there is a greater risk of supply disruptions and price volatility. And for obvious reasons, the effort to distribute America 's energy-security portfolio across multiple nodes has taken on a new urgency since September 11, 2001. In his State of the Union address in January 2006, President Bush said he wanted to reduce America 's dependence on Middle East crude by 75 percent by 2025.

Copyright © 2007 John Ghazvinian
 

Of Iran and Oil

Among the few countries that have a substantial influence over the prices of crude oil and natural gas, Iran is probably the most feared by the international community due to its strategic, geographic and geopolitical position in the Middle East and Central Asia.

Regularly coming into economic conflict with the United States over the last few years, Iran has successively rebuffed calls for it to expand the production level of the OPEC, threatened to take control of the Strait of Hormuz - where half of the world’s oil production is transported weekly, allegedly supported terrorist groups in Lebanon and Palestine and, in 2007, threatened to bomb half of the off-shore oil and natural gas platforms in the Caspian Sea if the Americans didn’t remove their troops from Azerbaijan.

There are a wide range of factors that influence oil prices, from piracy in the Indian Ocean to a rise in Chinese demand. But Iran now holds a special spot on the list since geopolitics have moved it center-stage.

It’s important to remember that Iran is the world’s fourth largest oil producer and also possesses the world’s second largest natural gas reserve. By such standards, Iran could hold half of the world hostage in terms of energy. So why hasn’t it happened yet?


Iran needs the Western world to buy its oil and its natural gas because, just like every country across the globe that relies on natural resources for the survival of its economy, the Islamic Republic needs to eat, needs to finance its infrastructures, needs to pay for its nuclear program and its military equipment.

The problem is that Iran has allied itself with one of the most feared countries in the world in terms of energy and military power, the one and only motherland: Russia. The same Russia that has been providing Iran with unique missile guiding systems, with the latest Sukhoï and MIG combat planes, with access to some information on civil nuclear engineering, and the same country that was given an offer to join the OPEC two months ago by the same man who represents the Islamic Republic: Mahmoud Ahmadinejad.

Furthering this process, Iran recently offered Russia, Venezuela and a few Caspian Sea countries a place in the formation of a new cartel to control natural gas markets, using the same model as the OPEC. The day following this announcement, oil prices soared by $10 and natural gas prices followed by about the same amount.

From a technical point of view, Iran cannot by itself determine the new crude oil prices, it requires the agreement of a majority of the OPEC council. From a practical point of view, it can influence it greatly, and at a very impressive speed.
Over the course of 2008, crude oil price went up six times, leading to a ceiling price of $147 per barrel before going down again. Every single time, the rise in prices was the direct result of an action taken by Iran: testing new mid-range missiles, announcing the possibility of a cut in OPEC production, announcing civil nuclear tests, etc.

Overall, Iran has a considerable influence over crude oil and natural gas prices, but it’s never been very technical. One must understand the nature of Iranian provocation, and not respond to it by creating a “risk premium” or “fear premium” of $15. The western world still needs to learn how to do that, and it could take a few lessons from Russia on the matter.
Find out more on http://www.eastern-intelligence.com

The United Nations, India and the Gulf War (1990-2001)

Historical Background

Throughout history, the Gulf region has been rife with all kinds of coups, disputes, crises and wars. The overthrow of Mossadeq (1951), the Suez Crisis (1956), the Six Days War (1967), the Iran-Iraq War (1980-88) were some of the crises that marred the region since the Second World War.

The Gulf crisis of 1990 was the result of many long-standing disputes between Iraq and Kuwait, besides other causes such as the emergence of Iraq as a great military power after the Iran-Iraq War, Saddam’s ambitions in the absence of democratic ideals in the Arab world and the intra Arab-Gulf relations.

When Iraq became independent in 1932, it began to assert territorial claims against Kuwait. Iraq claimed that Kuwait has been under the Ottoman Empire as a district of Basra, and that since Iraq is the successor of the empire, Kuwait naturally becomes a part of Iraq. Before 1990, Iraq had attempted to incorporate Kuwait into Iraq on at least two occasions. The first occurred in the late 1930s when King Ghazi of Iraq made demands to unify Kuwait with Iraq. But that demand soon died down when King Ghazi mysteriously died in an accident on 4 April, 1939.

The second occasion occurred in 1961 when Britain and Kuwait formally terminated their relationship under the treaty of January 1899.[1] Iraq, under General Abdul Karim Qasim again made an attempt to incorporate Kuwait into Iraq. On 2 July, 1961, the United Nations Security Council met to discuss the problem. Under paragraph 2, Article 35 of the United Nations, both Iraq and Kuwait submitted their complaint to the UN. The UN Security Council, however, could neither diffuse the crisis nor pass any resolution due to the use of its veto by the Soviet Union. The Soviet Union went along with the Iraqi view and stated that, “The Security Council’s most immediate task in this situation is to condemn the actions of the colonial power and to take measures which lead to the immediate withdrawal of United Kingdom troops from Kuwait.”[2] In the absence of any proper agreements in the UN, the Arab League stepped in and came up with an alternative solution to the problem. It accepted Kuwait’s independence and vowed to defend Kuwait against any external threats or aggression. Iraq, however never really accepted Kuwait’s independence.

With the passage of time, the dispute simmered down. The outbreak of the Iran-Iraq War almost completely overshadowed the Kuwait-Iraq issue and the matter was laid to an uneasy rest during the war. Although several meetings were held between Kuwait and Iraq, the matter could not be settled and it continued until 2 August, 1990 when the dispute took a completely new turn.

In the months preceding the invasion, Saddam made several threatening charges against Kuwait among which are the extraction of Iraqi crude oil by Kuwait in the Rumailah oilfield and Kuwait’s illegal possession of Warba, Bubiyan and Failaka Islands. Saddam accused Kuwait of ‘overproduction’ of oil, which Iraq regarded as “… a kind of war against Iraq.” This overproduction, Saddam claimed, depressed oil prices and raised the revenue of Kuwait which did nothing to help Iraq. He warns Kuwait that its overproduction was “a poison dagger in Iraq’s back,” and that it was “an evil against Iraq… an American plot to deplete Iraq’s oil revenues…” Saddam also threatened to use force “… to put things right… cutting a few throats is better than cutting the means of living.”[3]


The Crisis
Things finally came to a head after the failed Jeddah meeting of 31 July and 1 August, 1990 between Iraq and Kuwait, when, on 2 August, 1990, 100,000 Iraqi troops and 300 tanks rolled into Kuwait with little resistance. Iraq announced soon after that it would withdraw when the situation stabilises and when the “Free Provisional Government of Kuwait” asks them to withdraw.[4] This announcement proved to be a complete sham because on 28 August 1990, Kuwait was formally annexed to Iraq and declared as the 19th Iraqi province. By 4 November, it was announced that Kuwait “no longer exists and that the world should forget about Kuwait’s independence.”

After several resolutions were passed by the UN Security Council condemning the action and imposing sanctions on Iraq, Resolution 678 was finally passed on 29 November 1990 that authorises the coalition forces to “restore international peace and security in the area” by the use of “all necessary means.” The Council, in what it termed a “pause of goodwill” gave Iraq until 15 January 1991 to end its occupation of Kuwait.

In the intervening period, many diplomatic efforts for a peaceful resolution to the crisis were undertaken. The Nonaligned Movement (NAM), the League of Arab States, the European Community, France and four permanent members of the Security Council (Colombia, Cuba, Malaysia and Yemen) forwarded their peace plans, but due to lack of international support, no viable solutions could be found. The 9 January 1991 talks between the US Secretary of State, James Baker and Iraq’s Deputy Prime Minister Tariq Aziz did not make any headway either. A last minute effort by the UN Secretary General was also “unfortunately unsuccessful.” As the Secretary General’s efforts yielded no results and as the deadline came to an end, he remarked, “No one, and no nation can, except with a heavy heart – resort to the other ‘necessary means’ implied by the resolution 678 (1990), knowing in advance that tragic and unpredictable consequences can follow.”

What followed next was the transformation of “Operation Desert Shield” to “Operation Desert Storm.” From 17 January, for the next six weeks, Iraqi military facilities and other installations were bombed. This had serious effect on Iraqi military strength, for, when the ground offensive began at 4am local time on 24 February 1991; the US-led coalition forces met little resistance and easily succeeded in liberating Kuwait on 27 February 1991.


The United Nations and the Gulf Crisis

Soon after the Iraqi invasion of Kuwait, the Security Council met in an emergency meeting to discuss the matter. The Council, at its 2932 meeting on 2 August 199o adopted Resolution 660. The resolution stated that the Security Council was “alarmed by the invasion of Kuwait… by the military forces of Iraq,” and it “condemns the Iraqi invasion of Kuwait” and demanded that “Iraq withdraw immediately and unconditionally.” This resolution was adopted with 14 votes with one abstention (Yemen). The League of Arab States (LAS), Gulf Cooperation Council (GCC), Organisation of Islamic Conference (OIC), Nonaligned Movement (NAM), Nordic States, Western European Union (WEU), NATO, OPEC, World Bank and ICAO have, in their own terms also condemned the invasion.

As Iraq failed to comply with the Security Council Resolution 660, the UN Security Council, on 6 August adopted Resolution 661 which imposes mandatory arms and economic sanctions on Iraq. Iraq, however, calls it “iniquitous and unjust,” “precipitous,” and aimed at starving the Iraqi people.[5] This resolution was adopted with Cuba and Yemen abstaining.

Iraq continued to stand defiant and on 7 August 1990 declared its “comprehensive, eternal and inseparable merger” with Kuwait. With no sign of Iraqi withdrawal or compliance with resolutions 660 and 661, Resolution 662 was adopted on 9 August 1990 which declared the annexation of Kuwait “null and void.” Two other resolutions were adopted by the end of the first month of the crisis. On 18 August the Security Council adopted Resolution 664 which demanded the release of foreign nationals held in Iraq. Resolution 665, adopted on 25 August, calls upon member states to cooperate with the exiled Kuwaiti Government and to stop and search all ships travelling to or leaving Iraq.

Resolution 666, adopted on 13 September 1990 addressed the humanitarian situation in Iraq. It directed the Sanctions Committee to pay particular attention to “children under 15 years of age, expectant mothers, maternity cases, the sick and the elderly” in the determination of food supplies among the civilian population.

The closure of all diplomatic missions in Kuwait by Iraq prompted the Security Council to adopt Resolution 667 on 16 September which expressed the Council’s outrage and its demands for “the immediate release of those foreign nationals as well as all nationals,” and “protect the safety and well-being of diplomatic and consular personnel and premises in Kuwait.”

Resolution 669 of 24 September 1990, “entrusts the (Sanctions) Committee… with the task of examining requests for assistance under the provisions of Article 50” of the UN Charter.[6] The very next day, on 25 September, Resolution 670 confirmed that the sanction against Iraq “applies to all means of transport including aircraft.” It called upon member states to impose an air embargo on Iraq and Kuwait.

On 29 October 1990, the Council, in its Resolution 674 demands that Iraq “desist from taking any third state nationals hostage” and to stop its mistreatment and oppression of either Kuwaitis or foreign nationals. On 28 November 1990, yet another resolution was adopted by the Council. Resolution 677 condemns the Iraqi attempt to alter the demographic composition of the Kuwait population and the destruction of population records.

Iraq’s refusal to comply with any of the Council’s resolutions finally led to the passing of Resolution 678 on 29 November 1990 which authorises the use of “all necessary means” to uphold and implement the resolutions. This resolution was adopted with 12 in favour, 2 against (Cuba and Yemen) and 1 abstention (China). Although the words “the use of force” were not used, it was clearly implied, as the United States maintained. The US said after the voting, “Today’s resolution is very clear. The words authorise the use of force.”[7] The Council gave “Iraq one final opportunity as a pause of goodwill” till 15 January 1991 to comply with the resolutions. This resolution was the first resolution since 27 June 1950 when the Security Council adopted a resolution that authorises the use of force in Korea.

What followed was a flurry of diplomatic activities undertaken by different countries and regional organisations. The UN Secretary General Perez de Cuellar’s last-ditch efforts to persuade Iraq to withdraw failed. Then, the dateline of 15 January 1991 expired. On 16 January, nothing happened; like the lull before a storm. Then all hell broke loose on 17 January with allied forces pounding Iraqi positions. The start of air campaigns was reported by the US to the Security Council on the same day.[8] Saddam Hussein announced on Iraq radio that the “Mother of all Battles” had started. On 22 January 1991, the UN Secretary General appealed to Iraq to comply with the Council resolutions. Later on, he urged Iraq to put “this tragic situation on the road to a peaceful solution.”[9] Several private meetings of the Security Council were held during February and March. But these meetings could not yield any fruitful results.

On the morning of 24 February 1991, ground offensive started and soon, on 27 February, Kuwait was liberated. On 27 February, Iraq announced that it agreed to comply with the UN Security Council Resolution 660 of 1990 and all other resolutions.[10] Iraq also informed the Security Council of the withdrawal of all Iraqi forces from Kuwait, while adding that “American and other pro-aggressor forces” are continuing their attack on the withdrawing Iraqi forces.[11] The coalition operations were stopped at midnight 27-28 February 1991. By 4 March 1991, the Kuwaiti Government resumed its functions in Kuwait City.

Looking back at Resolution 678, we can find some inconsistencies and discrepancies in its provisions. The wordings of the resolution – “use (of) all necessary means” was too vague in the first place, and this led to a number of interpretations. The US interpreted it as the authorisation of the use of force. It can be said that it was a US victory when the resolution was passed. In a speech before the resolution was put to vote, the US representative to the Security Council said, “If Iraq does not reverse its course peacefully, then other necessary measures, including the use of force, should be authorised.”[12] It can also be seen that the resolution was not in conformity with Chapter 7 of the UN Charter though the resolution stated that it acts “under Chapter VII of the Charter of the United Nations.” For instance, Article 42 (under Chapter VII) states that forces may be used only when the economic sanctions are inadequate. Article 46 states that “Plans for the application of armed force shall be made by the Security Council with the assistance of the Military Staff Committee.” These provisions were not followed at all under resolution 678. It did not give enough time for the sanctions to take effect. This was also the Indian view.[13] The resolution also did not mention any Military Staff Committee. Moreover, with the abstention of China from the resolution, it failed to have the required concurrence of the five permanent members.

On 27 February 1991, it was President Bush who ordered the ceasefire and who proclaimed ‘victory’. The Secretary General, on 28 February said, “We hope it is the beginning of the end of this terrible tragedy.”

On 2 March 1991, resolution 686 was adopted by a vote of 11 in favour, 1 against (Cuba) and 3 abstentions (China, India and Yemen). While reaffirming that all the resolutions adopted before continue to have “full force and effect”, it laid down several preconditions for the ceasefire which Iraq was obliged to immediately implement. It also recognised that during the implementation of resolution 686, the right to use “all necessary measures” under resolution 678 will “remain valid.”

Resolution 687 was adopted on 3 April 1991 which finally and formally declared a ceasefire. This resolution was adopted by 12 votes to one (Cuba) with two abstentions (Yemen and Ecuador). Some of the main provisions of the resolution included guarantee of boundary and allocation of islands between Iraq and Kuwait, deployment of a United Nations observer unit to monitor the demilitarised zone, destruction, removal, or rendering harmless, under international supervision, of all chemical and biological weapons and all ballistic missiles, UN inspection of Iraq’s biological, chemical and missile capabilities, return of all Kuwaiti property seized by Iraq, payment of compensation by Iraq, continuation of sanctions, repatriation of all Kuwaiti and third-country nationals, renouncement of the practice of terrorism and declaration of ceasefire.

Iraq called this resolution “unjust” and “iniquitous” and was “an unprecedented assault” on Iraq.[14] But Iraq, having no other choice, had to accept the resolution on 6 April 1991.[15] This resolution was also criticised in the following words: “It was not a negotiated agreement but a unilaterally formulated one, imposed on Iraq. The peace was dictated. The Council exceeded its powers because its Charter nowhere empowers the UN to impose a settlement on parties to a dispute.”[16] With the Iraqi acceptance of the resolution, the ceasefire formally came into effect.

Post-War Situation and the UN

Soon after the ceasefire, the UN took steps to actively participate in reconstruction and rehabilitation efforts in Iraq and Kuwait. Several UN missions and teams went to Iraq and Kuwait to assess the humanitarian situation there. Their reports highlighted hunger, thirst, disease, desolation, destruction and death. According to one report, 170,000 children under five would die in 1991 because of the war and economic sanctions. It was remarked, “The situation was absurd. While UN and other agencies were struggling with totally inadequate resources to meet the humanitarian needs of the Iraqi people, another UN body, the Security Council was insisting that Iraq be denied the opportunity to sell its own oil in order to buy food, medicines and other supplies.”[17]

A direct effect of the ceasefire resolution, particularly the continuation of sanctions was that “There now began a massive onslaught on the Iraqi civilian population – denied the means to rebuild a totally shattered social and industrial infrastructure, denied uncontaminated drinking water, denied medical facilities, and denied food in adequate quantities. The US policy represented one of the most comprehensive campaigns of biological warfare – denying relief to a diseased and starving people – in modern times.”[18]

Some more resolutions were adopted later that year – 688 (5 April); 692 (20 May); 697, 699 and 700 (17 June); 706 and 707 (15 August); 712 (19 September); 713 (25 September); 715 (11 October) – dealing with the post-war situation and reparation in Iraq.

In retrospect, it can be said that the Gulf War was not an UN war at all. The UN was marginalised on all occasions. It was the US that ran the whole operation. The US, it seemed, was clearly intent on using force right from the beginning. Even before the invasion of 2 August 1990, the US having knowledge of the threat did not warn the UN and made no efforts to stop it. It never directly negotiated with Iraq after the ‘storm’ nor was the UN asked to act as mediator.[19]

When the war finally came, the UN Secretary General remarked that “… the war in the Gulf is not UN war, and the World Body has no control over it… we are informed through the Security Council about military operation but after they have taken place.”[20] He also said, “We cannot consider it as an UN war in the sense that there is no UN flag. They are not in blue UN helmets. There is no UN control over military operations.”

Several peace plans came forward from different quarters, even from Iraq. However, none of them could succeed in bringing the war to an end, for; they are rejected by the US. The UN could do nothing. “The Americans had used the Security Council when it suited them, calling it into session again and again when Iraq invaded Kuwait and accepting resolutions critical of Iraq in order to ratify its own condemnation of Iraq. But once the war began, the Americans with enthusiastic British support, did all they could to stop the Security Council playing any part, and when they failed to hold the line, made sure its proceedings were in secret. Perez de Cuellar, who should have been a man at the centre of events, was never consulted and never informed of what was going on.”[21]

India and the Gulf Crisis
Historically, there have always been good relations between India and Iraq. Therefore when Iraq invaded Kuwait on 2 August 1990, India was in a big dilemma. Neither did India want to offend Saddam Hussein nor did it want to go against the UN. India decided to toe the middle line for sometime by making a statement that, “India was opposed to the use of force in any form of relations between states.”

The major policy objective of India under Prime Minister VP Singh was the repatriation of the 170,000-180,000 Indians stranded in Kuwait. From August, Air India started massive airlifting operations and by October, almost 160,000 Indians were returned home. The VP Singh government later denounced the Iraqi invasion and demanded the immediate withdrawal of Iraqi force from Kuwait. However, India did not take any further steps to resolve the crisis. After resolution 661 was adopted, India’s import of crude oil from Iraq stopped. This greatly affected India’s earnings and India had to as the UN for assistance.[22]

On November 1990, there was a change of government in India. VP Singh was replaced by Chandrasekhar of Janata (S). The Chandrasekhar government too remained a passive spectator to the Gulf Crisis. There were no active diplomatic efforts on the part of India to diffuse the crisis. However, there were some shifts in the Indian stand now. There was a general impression that India was toeing the US line. India now blamed Saddam Hussein and Iraq for the crisis.

Just before the air campaign, the Foreign Minister VC Shukla and the Deputy Foreign Minister Digvijay Singh visited several countries to bring about some solution to the problem, but to no avail. When the war finally came, India maintained a conspicuous silence. The Indian peace proposal fell on deaf ears. The late Rajiv Gandhi also put forward his peae-package while criticising the government for reducing India to a “hapless spectator.” His main focus was on the replacement of the US-led coalition by a UN force and the withdrawal of Iraqi forces.[23]

Adding to the confusion was the discourse that US planes were being refuelled at Bombay since 9 January 1991. It caused a great political turmoil in India, when major political parties started to point their fingers at each other. The Congress, the Janata Dal and the left parties severely criticised the government for being an ‘ally’ of the US. The BJP on the other hand, backed the government arguing that India must support the UN and extend all help to the coalition forces.[24]

Some analysis pointed out that the government’s decision to permit the refuelling was because of the improved relations between the US and India. Besides, the economic situation in India had forced it to ask an IMF loan of 1.8 billion dollars. Then, three days after the loan was sanctioned, the refuelling started. No one believed that this was a coincidence.[25]

Though the government resisted and dogged the salvo of criticisms for some time, the Congress’s threat to withdraw support led the government to stop the refuelling facility provided to the Americans.

The Nonaligned Movement also came in for a lot of criticisms for its actions (or more appropriately, inactions). Iraq and Kuwait are both members of the NAM. The first high-level meeting of NAM to discuss the Gulf Crisis was held on 11 September 1990. This meeting was attended by the Indian Foreign Minister IK Gujral. It was announced that NAM would set up a ‘catalyst group’ to bring the crisis to an end.

The Belgrade meeting of NAM on 11 February 1991 produced no desired results. But it was decided that they should send a team to both the sides. The team to visit Baghdad on 23 February was to be composed of the Foreign Ministers of India, Cuba, Iran and Yugoslavia. The beginning of the ground war however blew the plan into oblivion. NAM could no longer play any role as the focus was on the UN and the US.

India’s role through the war fared no better. When the Iraqi invasion took place, India was not a member of the Security Council; therefore it did not take part in any of the meetings of the UN Security Council and its resolutions. India however expressed its support to the UN. India’s dilemma began only after 1 January 1991 when it became a member of the Security Council. India abstained, along with China and Yemen in the first voting of the first resolution after 678 on 2 March 1991.

India voted for the ceasefire resolution (687) after certain clauses were changed with its insistence. India had reservations with some provisions relating to the boundary between Iraq and Kuwait and also with the provisions relating to the destruction of Iraqi nuclear weapons because India had apprehensions that they would have further implications on the Kashmir issue and India’s own nuclear programme.[26]

Throughout the war, India was criticised for not playing any decisive role, and seems to be only interested in the repatriation of the stranded Indians in Kuwait and in the continuation of its oil supplies. Besides, India did not take any decisive steps as a regional leader and as an important member of NAM to diffuse the crisis. The provision of refuelling facilities and its subsequent withdrawal also showed India’s indecisiveness and reluctance to play any pro-active role in international politics. It also seems that India’s role “… ended up in solving neither Iraq nor Kuwait and certainly not our own country.”[27]

However, to arrive at a balanced assessment of India’s role in the crisis, certain factors must be understood. In the first place, the government in India was a minority government. The Janata (S) had only 68 members out of 473 in the Lok Sabha. The Congress support with 193 members was vital to its survival. Thus, it was unable to act decisively. The subsequent shift in India’s foreign policy towards the US-led coalition should also be seen in the light of the economic situation in India. This shift may also have been caused by certain elements within the government that are pro-US. Moreover, India, through NAM could not act because of the attitudes of the coalition force under the US as well as that of Saddam Hussein.

Post-War Developments (up to 2001): a chronology
1992: The UN Security Council resolutions 706 and 712 (1991) had allowed Iraq to sell petroleum worth up to 1,600 million dollars over a six months period, the revenue from which was to be controlled by the UN. Iraq in 1992 rejected the terms of the resolutions and withdrew from all negotiations on this issue. Resolution 778 was adopted on 2 October 1992 to put pressure on Iraq to accept resolutions 706 and 712. Iraqi request to lift sanctions was rejected.

1993: In 1993, UN weapons inspectors arrived in Iraq. Another team abruptly left Iraq after Iraq refused the setting up of surveillance equipments at its missile testing locations. For the rest of the year, talks between the UN and Iraq remained inconclusive.

1994: In March 1994, another Iraqi request to lift sanctions was again rejected. With this, a division within the Council emerged. Russia, France and China are in favour of lifting the sanctions. On October, in an apparent move to draw attention to its plight, Iraq moved its forces towards Kuwait. Iraq announced later that it would withdraw. Prompted by this, the Council on 10 October passed resolution 949 that warns Iraq to desist from using its forces against its neighbours or the UN. By December, it was announced by the head of UNSCOM that he believed Iraq no longer have any nuclear or ballistic weapons.

1995: In 1995, another resolution (986) was adopted that was aimed at the partial resumption of exports of Iraqi oil. In the celebration of the 50th anniversary of the UN held at New York during 22-24 October 1995, the Iraqi Vice President Tariq Aziz said, “unipolarism” led to “hasty application of… sanctions and the use of armed force.” This has “deprived… people of their basic human rights…” and led to “the death of thousands of children, women and the elderly due to lack of food and medication.”[28]

1996: In early January 1996, Iraq indicated its willingness to enter into a dialogue on a ‘oil-for-food’ agreement with the UN. After several rounds of talks, it was finally agreed that up to 4000 million dollars worth of Iraqi oil would be sold a year to purchase food and medicine. On 27 March, the Council adopted resolution 1051 that established a system to monitor all exports to Iraq that could be used for the production of weapons of mass destruction. This was apparently prompted by the announcement made by the head of UNSCOM Rolf Ekeus that Iraq was in possession of missiles and biological weapons.

1997: After the deliberate violation of the air exclusion zone by Iraq in April and the subsequent remark of the US president that Saddam is the biggest threat and the refusal of Iraq to allow arms inspectors to work, the Council passed yet another resolution (1115) on 21 June 1997, warning Iraq that more sanctions may come. In October, the Revolutionary Command Council criticised the high proportion of Americans in UNSCOM. Resolution 1137 was adopted that warned Iraq to stop expelling US personnel. In December, Iraq suspended oil exports.

1998: Oil exports from Iraq resumed in January. Security Council resolution 1153 adopted on 20 February doubled the six-monthly income permitted to the Iraqi government to 5200 million dollars. Resolution 1175 of June continued the distribution plan of humanitarian supplies. Iraq was also permitted to improve its oil productions. Just when it seems that things will get better, the ‘discovery’ of VX spoilt it all. In December, the US and UK launched attacks on Iraq. This elicited widespread demonstrations across the Middle East.

1999: In January, after the French proposal of replacement of UNSCOM was opposed by the US, Iraq voted in parliament renouncing all previous commitments made to the Security Council. In March, reports came that the CIA has been using UNSCOM as a cover for operations in Iraq. New demands were made for the replacement of UNSCOM by a new system of monitoring. In December, the Council adopted Resolution 1284 that replaced UNSCOM by the UN Monitoring, Verification and Inspection Commission (UNMOVIC) which was charged with monitoring Iraq.

2000: In January, the IAEA inspectors went into Iraq. The sanctions imposed on Iraq had a deep impact on the civilian population. In February, the ICRC reported that infant mortality had trebled since 1990, and water supplies had deteriorated. Air strikes still continued.[29]

2001: In mid-January, the Iraqi Deputy Prime Minister Tariq Aziz, to mark the 10th anniversary of the Gulf War stated, “Kuwait deserved invasion” and warned that Baghdad would fight back if the US continued its anti-Iraq policy under the new US President George W. Bush.[30] On 16 February, about two dozen US and British warplanes bombed five “military targets” in and around Baghdad in the biggest strike against Iraq since 1998. In response, Iraq announced that “… their aggression will achieve nothing but failure.”[31] This strike came under criticisms from China, Russia, France, India, Egypt, Syria, Canada and Turkey who felt that the US and Britain had overstepped their line. They agreed that strikes must be sanctioned by the Security Council.
Prime Minister AB Vajpayee slams the US for its air raid and said that India was in favour of lifting sanctions, and that the no-fly zones “do not come within the framework of the UN Security Council resolutions.”[32]

Again on 22 February, US warplanes strike Iraqi’s air-defence targets in northern Iraq. These strikes were followed by large demonstrations with the demonstrators calling for jihad.

Conclusion

As the current process of sanctions, strikes, inspection, verification and the likes continue, it is very likely that Iraq could use it in his own favour. Using the “sympathy strategy”, Iraq can get oil deals from France, Russia and China. Moreover, with more frequent attacks on Iraq, more Gulf War allies are now siding with Iraq, Egypt and Syria had already signed trade agreements with Iraq. Even within the Security Council, the crack has become more vocal in their criticism of the embargo imposed on Iraq. The Iraqi people do not have much of a choice except to rally behind Saddam Hussein.[33]

However, the US and UK are still very firm in their commitment to contain Saddam Hussein who had been labelled by them as the most dangerous man in the world. On the other hand, Iraq is determined to stay defiant. Iraq now asserts that UN arms inspectors will never be allowed back into the country.[34] Meanwhile, the UN Secretary General Kofi Annan exhorted the Security Council to find a common ground on Iraq.

It is now very important that both the sides change their attitude before talking about peace. To assure any lasting peace, it is imperative to strike at the roots of instability. For this, the Persian Gulf countries need to be well integrated, embark on confidence building measures, create regional alliance and common security and build up non-offensive defence.[35]

Even after ten years, the crisis in the Gulf is still to be solved. One is left to wonder when it will be. For the moment, however, the end of the crisis is nowhere in sight.

June 2001


END NOTES

[1] Agreement between the British government and the Sheikh of Kuwait regarding the non-reception of foreign representatives and non-cession of territory to foreign powers or subjects, 23 January 1899 in Lauterpacht et al (eds) The Kuwait Crisis: Basic Documents (1991)

[2] Security Council Official Records (SCOR), sixteenth year, 958th meeting, 5 July 1961, paras 55, 65

[3] Iraq TV, 8pm (IST), 17 July 1990. Quoted in Gazi Ibdewi Abdulghafour, The Tragedy: Iraq’s Invasion of Kuwait. Genesis, Consequences and Conflict Resolution (New Delhi: Lancers Books, 1993) p. 67

[4] S/PV, 2932, 2 August 1990

[5] UN Document S/20503, 13 August 1990

[6]  Article 50 of the UN Charter states, “If preventive or enforcement measures against any State are taken by the Security Council, any other state, whether a member of the United Nations or not, which finds itself confronted with special economic problems arising from the carrying out of these measures shall have the right to consult the Security Council with regard to solution of the problems.”

[7] S/PV, 2963, 29 November 1990

[8]  UN Document S/22090, 17 January 1991

[9]  UN Document S/22172, 30 January 1991

[10]  UN Document S/22275 and S/22276, 27 February 1991

[11]  UN Document S/22274, 27 February 1991 and S/22288, 28 February 1991

[12] UN Document S/PV 2963, 29 November 1990

[13] JK Baral and JN Mahanty, “India and the Gulf Crisis: The Response of a Minority Government,” Pacific Affairs, Vol. 65, No. 3, Fall 1992, pp. 368-84.

[14] UN Document S/22496, 6 April 1991

[15] UN Document S/22480, 11 April 1991

[16] Gazi Ibdewi Abdulghafour, The Tragedy, p. 139

[17] Geoff Simons, The Scourging of Iraq: Sanctions, Law and National Justice,( Basingstoke; Macmillan, 2nd Edition, 1998) p. 52

[18] Geoff Simons, Iraq-Primus Inter Pariahs: A Crisis Chronology, 1997-1998 (Basingstoke; Macmillan, 1999) p. 54

[19] Pierre Salinger, “The United States, The nited Nations and the Gulf War,” Middle East Journal, Vol. 49, No. 4, Autumn 1995, pp. 593-613

[20] UN Secretary General Javier Perez de Cuellar in an interview to PTI-TV, 5 February 1991

[21] John Bulloch and Harvey Morris, Saddam’s War: The Origins of the Kuwait Conflict and the International Response (London; Faber and Faber, 1991) p. 200

[22] UN Document  S/21711, 5 September 1990

[23] The Times of India (New Delhi), 21 January 1991.

[24] JK Banal and JN Mohanty, “India and the Gulf Crisis,” p. 374-75

[25] Ibid. p. 377

[26] Ibid. p. 383

[27] Deccan Herald, 19 April 1991

[28] Address by Taha M. Marouf, Iraq Vice President in UN at 50: Statements by World Leaders, New York, 22-24 October 1995 (NY;UN, 1996)

[29] Middle East and North Africa 2001 (London, Europa Publications 2000, 47th Edition 2001, 2000) pp. 578-599

[30] Hindustan Times, (New Delhi) 16 January 2001

[31] Hindustan Times (New Delhi), 17 February 2001

[32] Times of India (New Delhi), 18 February 2001

[33] Times of India (New Delhi) 21 February 2001.

[34] Hindustan Times (New Delhi), 28 February 2001

[35] Farah Naaz, “Security in the Persian Gulf,” Strategic Analysis, Vol. XXIV, No. 12, March 2001, pp. 2257-2271

Oil, Chávez, War and Terror

A half century ago, Juan Pablo Perez Alfonso, the Venezuelan who started OPEC, said, "Ten years from now, twenty years from now, you will see: oil will bring us ruin . . . Oil is the Devil's excrement." Hugo Chávez, who was an infant when those words were spoken, is now learning their truth.

When Chávez took over Venezuela in 1999, the oil price was under $10 a barrel, which he was able to help spike to $147 by July, 2008, a rise coincident with his oil hegemony in Latin America and political alliances with Iran and Russia to oppose "the evil empire" of America and its "Devil" President George W. Bush.

But by the first days of 2009, the Devil's excrement has hit the fan, so to speak, as oil dipped to $30 a barrel in Caracas, where it must be $90 to balance the budget. Consequently, the power of Chávez has been visibly shaken but it would be a huge miscalculation to count him out.

Often underestimated as a foolish showboat, Chávez has monopolized Venezuela's oil, money, and power for ten years running. His oil price strategy was effective until only a few months ago and it might work again in 2009 -- to short the market of oil supplies, while spurring prices with theatrical threats of war or oil cut-offs.

Since 1999, Chávez has personally shorted the market by over 2 million barrels per day. Instead of increasing Venezuelan production from 3.6mbd in 1998 to the planned 5mbd for today, he reduced production to 2.4mbd, which reduced world oil supply just as China and India were coming on line with new demand.

By getting Ali Rodriguez, his co-conspirator in a 1992 coup attempt, appointed president of OPEC, Chávez pushed oil producers into his price-gouging strategy and soon had OPEC also shorting the market (Previous to Chávez, Saudi Arabia had tamped down the price hawks in OPEC).

But his most astounding achievement was spiking the ìpolitical risk premiumî paid for oil through threats of war, which can be found by searching for the words "Chávez + War + U.S." in Google, where no less than 7,300,000 stories pop up for review. When oil approached $70 a barrel in 2006, Saudi Energy Minister Ali al-Naimi opined that the war talk accounted for 40% of the oil price. The price of oil has little to do with supply and demand, as al-Naimi saw it.

Wall Street doubts about al-Naimi's analysis shattered as the oil price soared over $100 in March of 2008 coincident with threats from Iran about developing nuclear weapons, wiping Israel off the map and closing the Gulf of Hormuz (where 15mbd are shipped every day); plus threats from Venezuela about cutting off U.S. deliveries, buying $4 billion of Russian weapons to thwart an imagined U.S. invasion, and threatening war against U.S. anti-drug activities in Colombia or if the U.S. did anything provocative toward Bolivia, Nicaragua, Cuba, Iran or Hamas.

In May, 2008, the oil guru Arjun N. Murti of Goldman Sachs predicted a "super spike" where oil would pierce $200. In July, when oil hit $147, Wall Street thought he was right. But he was not. When a Commodity Futures Trading Commission report showed in September, 2008, that speculative bets by index funds didn't push oil prices up, the power of Chávez's oil price gouging strategy was clear but ignored: Wall Street and Washington had already turned toward a much larger looming crisis with the banks and the worst recession since the 1930s.

The global recession of economic activity cut the legs out of the oil price which sank $100 in 100 days to about $40 a barrel by the turn of the year. This put Chávez in a huge quandary. He's got to get the price up to the $80 level or suffer huge consequences in Venezuela where he employs every other person in the country. If Chávez loses the referendum in March that allows him to run for president for life, things could get dicey for him in Venezuela.

Barack Obama, who has other things on his mind, is all Chávez is thinking about. Obama, Chávez says, is the same as Bush, so the war to destroy capitalism and U.S. power must go on. Chávez, who is more heavily armed than anyone outside the Pentagon on this hemisphere, wants a confrontation with Obama to build his support back home -- the same trick Fidel Castro has worked with ten American presidents in a row.

When Israel began bombing the Gaza strip, Chávez joined his strategic partner, Iran's Ahmadinejad, in defending Hamas and condemning Israel and its supporter, the U.S.  But this time, the threat to cut off oil flowing through the Gulf of Hormuz and oil flowing from Venezuela to the U.S., upped the price by only a few dollars a barrel and only for one day.

The unknown factor is whether the one unused weapon in the arsenal of Ahmadinejad and Chávez will be used before they are ousted. That is the weapon Fidel Castro invited to Cuba in 1962 and which almost caused a nuclear war. Can Obama deal as effectively with Ahmadinejad and Chávez as Kennedy dealt with Khrushchev and Castro in 1962? That, as Joe Biden predicted in the campaign, may be the "test" Obama will face from Chávez.

The Myth of the Oil Crisis

There are some things most people today know about oil.

• Global oil output is going to plummet
• Prices are going to rise forever
• The transition to alternative energy will be long and painful
• There will be more ‘oil wars’ and industrial civilization may collapse
• Oil and gas will cause catastrophic climate change

The problem is that these ideas are wrong. Oil ‘ran out’ first in 1885, and perhaps another five times since then. Every time, new finds, new technologies and changes in oil use confounded the pessimists.

Oil prices above $140 per barrel seem to encourage the growing belief that we are approaching ‘peak oil’ and that supply cannot increase any more. But what has changed since 1998 when oil cost $10 a barrel? Just that a long period of under-investment in new energy supplies collided with rapid growth in Asia (and, easily forgotten, the USA). It takes years to turn the energy super-tanker around, to develop new oil fields, even though there is plenty in the ground.

There is a real debate over how much oil the world holds. But ideas of a vast conspiracy involving some mix of OPEC, the US government and ‘Big Oil’ to exaggerate oil reserves are fantasy. Official figures are, if anything, somewhat under-stated, and, as recent massive finds in deep water offshore Brazil show, new exploration frontiers still exist. Out-dated environmental moratoria in the USA could be lifted to yield more domestic hydrocarbons. New technologies continue to wring more out of old fields. Most importantly, ‘unconventional’ oil sources hold many times the volumes of conventional oil - from the famous Albertan ‘oil sands’, to fuels from natural gas

, coal and plants, to ‘cooking’ oil out of shales that hold trillions of barrels in the USA alone.

So there is no need to fight ‘resource wars’ to ‘secure’ oil. Invading oil-rich countries is vastly expensive and makes oil supplies less, not more, secure. The Middle East is a growing part of the world economy, not a nest of terrorists, desperate to cut off oil supplies in order to bankrupt themselves and invite vengeance. Propping up dictators in return for energy ‘favours’ is not a valid long-term strategy either. The West, China, India and the oil exporters will gain far more from co-operating on energy, than following the mirage of ‘energy independence’.

Should ‘we’ invest massively to move to a renewable energy system? Well, we already are -- $100 billion in 2006 alone, and not only in the West, but in China, India, Brazil and other rising powers. It’s hard to grow renewable energy any faster. Renewables are clearly a key part of powering the future, and of fighting global warming, but oil (and gas, and coal) are going to be the main sources of energy for decades to come. Capturing the carbon dioxide from fossil fuels, and storing it underground, is entirely practical and should be a major part of climate change policy. Renewable energy and hydrocarbons are not enemies -- we need to use them both.

So the ‘end of oil’ is not imminent -- neither is the collapse of industrial civilization. Even if oil supplies started declining, we could fill the gap with improved efficiency and new energy sources. It’s neither necessary nor desirable for us to go back to some ‘Year Zero’ of pre-modern society. Oil will never ‘run out’; it will be replaced, probably decades hence, by something better. That is the best and most positive reply to fears about the ‘end of oil’.

©2008 Robin M. Mills

Author Bio

Robin M. Mills is an oil industry professional with a background in both geology and economics. Currently, he is Senior Evaluation Manager for Dubai Energy. Previously, he worked for Shell. Mills is a member of the International Association for Energy Economics and Association of International Petroleum Negotiators. He holds a Master's Degree in Geological Sciences from Cambridge University.

Contribution of Middle East in Oil Production

 According to the U.S. Energy Information Administration (EIA), oil reserves will peak in 2030 if world oil production increases at an average annual rate of three percent. While Crude oil production and reserves are concentrated in the Middle East. The political instability in the Middle East will ensure that the risk of oil market disturbances remains high, particularly since the region accounts for most of the world's oil reserves, production and exports.

The Middle East accounted for 30 percent of world crude oil production last year, while its share of global  proved oil reserves was 65 percent. The combined share of OPEC oil producers in world production and reserves stood at 41 and 78 percent, respectively, last year. Oil consumption, on the other hand, is concentrated in the industrialized countries. Japan's oil consumption is met completely by imports, of which the Middle East accounts for 81 percent. Of the industrialized countries, only the United States, Great Britain and Norway produce a significant amount of crude oil. Of these countries, only Norway is a net exporter of crude oil.

On a regional basis, Europe, NAFTA and Asia (excluding China) account for a majority of world crude oil imports. Around 30 percent of Europe's large net crude oil imports come from the Middle East, while a slightly higher share comes from the Former Soviet Union region. Nevertheless, oil production in the North Sea helps reduce Europe's dependency on imports. Japan and other East Asian countries are the most dependent on Middle East oil.

   

Industrialized countries remain highly sensitive to oil price shocks. Disturbances to the supply of oil could easily trigger a new energy crisis, with serious effects on the world economy.