Middle East Oil Caldron Bubbles Iraq Dangles Huge Oil Fields as UN Sanction-Busting Bait. Two of the Middle East's Oldest Antagonists Are Maneuvering to Further Their Strategic Interests in the Volatile Region. Iraq Is Offering Huge Oil Contracts to Any Nation Willing to Break United Nations Sanctions. Its Erstwhile Enemy Iran Is Amassing a Large Military Force near the Critical Strait of Hormuz, Possibly Threatening the Free Flow of Oil

Article excerpt

IRAQ is playing its oil card.

In a dramatic bid to undermine the United Nations trade sanctions against it, the Arab nation is offering access to billions of barrels of oil to the first country to break ranks.

At a meeting in Baghdad last week, oil-industry executives from around the world were surprised by the detailed announcement of the biggest oil- field auction in more than half a century.

Iraq's oil minister, Dr. Safa Jawad al Haboubi, laid out a roster of oil fields able to produce 4.5 million barrels per day, and with proven reserves greater than all of those of North America. It's the biggest block of proven, low-cost petroleum fields outside of Saudi Arabia, oil analysts say.

Normally tight-lipped about petroleum deals,

23013the Iraqi's used the public forum to provide unusually detailed documentation of the oil fields' capabilities in order to guarantee attention and credibility in this effort to "reintegrate itself into the world oil market," said a senior Iraqi oil official.

The ploy is likely to either heighten tensions between the US and other sanction-abiding nations or provoke a rapid disintegration of the sanctions, since the costs to sanction participants are now increasingly resented, say industry analysts.

Iraq's oil minister seasoned the bait by noting that "serious negotiations" were already under way. Their hands tied by sanctions, oil company officials from sanction-abiding nations, such as Canada, Australia, and Brazil, grumbled while French and Italian firms bargained. No United States companies were here.

Ministry officials and company representatives regularly slipped out of the conference (the first international oil meeting held in Iraq in decades) to hold private meetings and "silent auctions."

Iraqi officials signaled clearly that the rule is "first come, first served" -- the first countries whose oil companies signed would be the first to win access to the oil fields. The only hurdle is the set of sanctions, over which the US and Britain are becoming increasingly isolated.

Stakes in this highly politicized oil lottery are global, because the volumes offered are huge, the costs dramatically low, and the technical or geological risk all but nil. The only comparable event was the opening of Saudi Arabia to Aramco 60 years ago.

Behind the veil

Lifting the long tight veil of secrecy over technical oil data, Iraq's Ministry of Oil detailed a shopping list of 33 fields that are open for negotiation. All had long since been discovered. Some were explored and delineated 25 years ago by the Iraq Petroleum Company (IPC -- it was nationalized after 1972).

Others, like the super giant Majnoun field, had been found and tested just before the Iran-Iraq war in 1980 forced suspension of further work.

The French are in the vanguard of negotiations, say Iraqi officials, while US and British firms are conspicuously absent from the new oil bazaar in Baghdad, blocked by sanction-related regulations from any discussions whatsoever at risk of criminal prosecution while their competitors enjoy "a free hand."

M. Christope de Margerie, head of Middle East affairs for the French oil company, Total-Cie. …