Iraq's Power Games with the US: A Global Market Dilemma

Strategic Insights -

Iraqi President Saddam Hussein has been playing a delicate game with the outgoing US President Bill Clinton and the incoming President-elect George W. Bush, all while maneuvering the global market with oil prices in flux. Saddam began this game in September when he accused Kuwait of stealing Iraqi oil, followed by a switch to the euro for oil payments. The UN swiftly granted Baghdad its euro wish, allowing smuggling of both crude and refined products to increase to about 100,000 barrels per day. This has generated over $1.2 billion in annual income outside the UN framework.

Key Takeaways:

  • Saddam Hussein's power games with the US will significantly affect the global market, with oil prices potentially moving up or down as a result.
  • Iraq has increased smuggling of crude and refined products to about 100,000 b/d, generating over $1.2 billion in annual income outside the UN framework.
  • The State Oil Marketing Organisation (SOMO) has demanded a 50 US cents/b surcharge on oil exports, but later reduced it to 30 cents/b.
  • The UN has renewed the oil-for-aid deal, but SOMO's price cut for Kirkuk crude and the surcharge proposal remain contested.
  • Iraqi crude oil has been pumped to Syria through an old pipeline, bypassing the UN framework.
  • The UN has not yet responded to this development, and the deadlock with Saddam's regime persists.

Statistics:

  • 100,000 b/d: The increased smuggling of crude and refined products.
  • $1.2 billion: The annual income generated by smuggling outside the UN framework.
  • $528m: The cash allocation granted to Baghdad for spending on the Iraqi oil industry.
  • 600m euros: The cash allocated to Baghdad for the oil industry.
  • 150,000 b/d: The volume of Iraqi crude oil temporarily pumped to Syria.
  • 200,000 b/d: The potential volume of Iraqi crude oil to be pumped to Syria through the old pipeline.
  • 50 cents/b: The initial surcharge demanded by SOMO.
  • 40 cents/b: The reduced surcharge demanded by SOMO after the initial proposal was refused.
  • 30 cents/b: The final surcharge proposed by SOMO.

Sources:

  • "Iraq begins pumping oil to Syria through a pipeline" - Associated Press, Dec. 11, 2000
  • "Baghdad to receive $528 million cash payment from UN" - Reuters, Dec. 5, 2000
  • "Iraq's Saddam begins pumping oil to Syria via old pipeline" - Bloomberg, Dec. 11, 2000