End of Iraq sanctions would aid U.S., hurt gulf allies

October 13, 1994|By Richard O'Mara | Richard O'Mara,Sun Staff Writer

If the United Nations were to lift its sanctions against Iraq and allow it to resume oil sales in the world market, a number of benefits would flow to American consumers, at least for the short term, experts agree.

But the consequences for the other major Persian Gulf oil producers besides Iraq would not be pleasant.

In the United States, gasoline prices and electricity bills could be expected to drop, if only briefly.

"Inflation would decline," said Henry Schuler. "That would reduce pressures on interest rates. Employment would rise. All those nice things."

But Dr. Schuler, the director of the Energy and National Security Program at Washington's Center for Strategic and International Studies, does not think falling oil prices would be the best thing to happen, even for the United States.

The two main exporting countries of the Persian Gulf, Saudi Arabia and Kuwait, would be threatened by a drop in the price of oil. And the United States might eventually be damaged, owing to its close identification with the people who run those kingdoms, he said.

"Declining or collapsing oil prices would only increase the difficulties for the al-Saud and al-Sabah families [the rulers of Saudi Arabia and Kuwait]. They are already in financial &r difficulties from their expenditures from the last gulf war, and I expect we will be submitting a bill for this troop deployment," said Dr. Schuler.

A serious drop in oil prices, he said, "would lead to destabilization of those regimes," a process, he added, "which is already under way" from other causes.

Should Iraqi oil begin flowing again, the Organization of Petroleum Exporting Countries cartel would have to make accommodations for it on their own, since non-OPEC producers like Russia, Britain and Mexico, could not be expected to.

"A correcting mechanism," is the way Charles F. Doran, describes it. He is Andrew W. Mellon Professor of International Relations at the Johns Hopkins School of Advanced International Studies. He is an expert in oil politics.

"If Iraq gets back to its old level of production and you don't want the price to plunge, then other countries would have to cut back," he said.

Considering Iraq's capacity to produce, the only countries capable of offsetting its output through production cutbacks would be Saudi Arabia and Kuwait, which together currently pump about 10.4 million barrels a day. But because of their indebtedness and potential for destabilization, neither is in a position to see its income reduced. Thus their vehement support for the continuation of the sanctions against Iraq.

Iraq is a formidable producer of oil, second only in proven reserves to Saudi Arabia. According to John Kennedy, editor of the Houston-based Oil & Gas Journal, if Iraq comes on line again, by the end of the century it will be able to pump about 4 million barrels a day. It was pumping almost 3 million a day in 1989, the year before it invaded Kuwait.

Saudi Arabia at that time was bringing up 5 million barrels a day, and Kuwait about 1.6 million. That's 3.8 million barrels less than their present combined output today. The difference is about equal to Iraq's capacity.

Today Saudi Arabia produces 8.4 million barrels a day, and Kuwait 2 million. The price per barrel today, $17, is more or less the same as it was in 1989.

According to Dr. Schuler, the United States is not benefiting from its close association with the rulers of Saudi Arabia and Kuwait and is at odds over the sanctions against Iraq with some of its principal allies, such as Germany, Russia and France.

These countries want to do business with Iraq. They complain that the United States is preventing that by cooperating with the gulf states in maintaining the sanctions, preventing Iraq's recovery.

"I think they [Kuwait and Saudi Arabia] are pressuring the United States to keep the sanctions on," said Dr. Schuler. "The ruling families are scared to death that a revitalized Iraq, once again wealthy and able to purchase arms, will seek vengeance for their role in the gulf war."

Whatever the motivations, the perceived identity of interests between the United States and the al-Sabah and al-Saud families, said Dr. Schuler, recalls earlier unhappy relationships with monarchs in the Middle East.

He referred to the relationships between the United States and the shah of Iran, and with King Idris of Libya. "It also recalls the relationship with King Faisal II, of Iraq," he said. "We promised them all protection from external aggression."

But in all cases that aggression came from within. Faisal II was executed after a military coup in 1958. Idris was overthrown in 1969. The Shah fled Iran in 1979.

None of those countries is friendly toward the United States today.

The opposition to monarchical rule in the gulf states is growing in all sectors of the population, said Dr. Schuler. These include Islamic fundamentalists, middle-class people and liberal reformers.

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