Iraq-Mideast Conundrum

22 June 2001

Pressure is mounting as UN Security Council members race to revamp the 11-year-old sanctions regime against Baghdad before their self-imposed Jul. 3 deadline. Pushed by its main regional ally, Saudi Arabia, the US is finding it increasingly difficult to win success on the Iraqi front without becoming actively involved in the Middle East conflict. At the same time, however, Riyadh is helping the US pile the pressure on Baghdad.

As part of a two-pronged move, Saudi Arabia wrote to UN Secretary-General Kofi Annan on Jun. 4 saying that it had expropriated Iraq’s IPSA pipeline across Saudi Arabia, 11 years after closing it. The Iraqis built the $2.7 billion line — at the time their biggest investment outside Iraq — to open a new export outlet to the Red Sea amid plans to hike oil production and export capacity.

At the opening ceremony in January 1990, seven months before Iraq’s invasion of Kuwait, then Saudi oil minister Hisham Nazer called it a “strategic achievement” for both countries. Although Iraq’s Southern Oil Co. owned the pipeline and was responsible for it inside Iraq, Saudi Aramco oversaw operations and maintenance inside the kingdom in return for a set fee.

Regional analysts say the expropriation was politically motivated, aimed at turning the screws as Iraq battles to free itself from the UN sanctions regime. The only justification given by Saudi Arabia was that Iraq “did not maintain its neighborly relations, did not respect fraternal ties” from 1990 onwards.

The second move in the two-pronged approach came on Jun. 5, when Crown Prince Abdullah visited Damascus for talks with Syrian President Bashar al-Assad. Syrian sources say the prince offered to reopen the Trans-Arabian Pipeline (Tapline) to allow Saudi crude to start flowing to Syria again. Tapline, which pumped Saudi oil to Jordan and Lebanon, as well as Syria, was built in 1950, but finally shut down in 1990.

The idea that Mideast Gulf states should help compensate Iraq’s neighbors for economic losses — including cheap Iraqi oil — resulting from their support for “smart sanctions” emerged during US Secretary of State Colin Powell’s Mideast tour early this year. Syria gets about 150,000 b/d from Iraq at preferential rates, which frees up most of its own oil for export.

But sources say Damascus refused the Saudi offer, preferring to keep Iraqi imports flowing. The Saudi Press Agency then denied that an offer had been made. The offer, and the denial, underlines how sensitive the issues are, and how delicate the balancing act in which Saudi Arabia is engaged. While lending the US a helping hand on Iraq, Riyadh is increasing pressure on Washington to drop its no-intervention stance in the Israeli-Palestinian conflict. After being snubbed in May, when the Saudi crown prince turned down an invitation to Washington, the US sent Central Intelligence Agency chief George Tenet to the region last week to set out proposals for a ceasefire in the occupied territories. Powell himself plans to visit the region again soon.

Iraq nonetheless remains defiant. While Security Council members continue to wrangle over various drafts of the new oil-for-food resolution, Baghdad has launched a diplomatic campaign in the Arab world, and is gearing up for changes internally. Iraqi diplomats toured most Arab capitals this week, winning some support from Syria, Jordan, and heavyweight Egypt. Jordan issued its most categorical rejection of “smart sanctions” to date, with Prime Minister Ali Abu al-Ragheb saying its position had been communicated to the UN.

At home, Saddam Hussein seems to be gearing up for a lengthy confrontation with the UN over its attempts to control illegal oil revenues, and what is viewed domestically as permanent UN custodianship of the country. Iraqi press reports talk of reorganization within the regime and the military, amid calls to the population to prepare themselves for the termination of the oil-for-food program. Iraq has vowed to halt the program permanently unless the 10th phase that begins on Jul. 3 includes the same terms as previous phases.

Both France and the UK issued revised drafts of a proposed resolution this week, and diplomats say more will follow next week as all 15 council members prepare for an open debate on Iraq on Jun. 26. The French version focuses on the “lifting of civilian sanctions,” including foreign investment in the Iraqi oil sector and the “respect of Iraq’s neighbors’ sovereignty,” one diplomat says. The latest Anglo-US version suggests new methods for controlling Iraq’s oil revenues and pricing mechanisms, with the aim of cutting income from smuggling.

Russia, which requested the open debate, has still to reveal a clear-cut position. Moscow surprised fellow council members last month when it agreed to a one-month extension of the program’s ninth phase. But it is questionable whether it can afford to earn Baghdad’s wrath. Diplomats tell Energy Compass that US officials have given no signal that Washington is ready to drop smart sanctions if members can’t reach consensus by the time they vote on the proposals next week. The suspension of Iraqi oil exports — except to neighboring countries — has had little effect on oil prices, amid vague suggestions that the crude will start flowing again after Jul. 3.

By Ruba Husari, London

(Published in Energy Compass, 22 June 2001)

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