- The Washington Times - Tuesday, September 16, 2003

An Iraqi delegation will attend an OPEC meeting next week for the first time since U.S. forces toppled the regime of Saddam Hussein, signaling a growing acceptance of Iraq’s new government.

The announcement yesterday — which helped send world oil prices lower — was seen as a sign that the 11-member energy cartel is prepared to accept the U.S.-appointed body overseeing the reconstruction of Iraq, including the oil sector.

The return to OPEC is Iraq’s latest move in efforts to gain international acceptance. Last week, representatives of the Iraqi Governing Council were welcomed at an Arab League meeting in Cairo, suggesting that Iraq’s neighbors are warming to the new government.

OPEC Secretary-General Alvaro Silva told senior members of the Iraqi Oil Ministry in a phone conversation that their minister would be welcome at the meeting in Vienna next Wednesday. In Baghdad yesterday, Oil Minister Ibrahim Bahr al-Uloum confirmed that he would attend.

Iraq, which helped establish the Organization of the Petroleum Exporting Countries in 1960, missed meetings in April, June and July because an internationally recognized government had not been in place in Baghdad. Iraq has not participated in any of OPEC’s oil-production agreements since the 1991 Persian Gulf war.

The cartel dropped its earlier insistence that Iraq’s attendance be conditioned on the United Nations’ acceptance of its government.

“This invitation means that OPEC recognizes the importance of Iraq’s role in the world oil market,” said Robin West, chairman of PFC Energy, a Washington energy advisory firm.

Iraq has the world’s second-largest proven reserves of oil at 112 billion barrels, behind Saudi Arabia. But Baghdad’s oil industry has been devastated by three wars in the past quarter-century and more than a decade of U.N. sanctions.

Before the 1991 war, Iraqi oil exports totaled 3.5 million barrels per day. Under the U.N. oil-for-food program earlier this year, Iraq exported roughly 1.7 million bpd. Production came to a halt, however, during the U.S.-led invasion of Iraq in March.

Since then, the U.S.-led occupation authority has struggled to restore Iraq’s oil industry to prewar levels. Coalition authorities hoped that the country would be producing about 2 million bpd by the end of the summer. But amid continued security threats, Iraq pumped 1.2 million bpd last month.

“The key barrier to the slow rate of increase is the ongoing questions of physical safety for oil field workers and the operation safety of the equipment,” Mr. West said. “The physical safety issue remains a big, big problem.”

Last month, a major pipeline in northern Iraq was attacked and severely damaged for the second time since President Bush called an end to major combat May 1. The pipeline serves as a critical link between Iraq’s Kirkuk oil fields and the Turkish port of Ceyhan.

Analysts said the security situation must be resolved soon, and that it will take years, as well as billions of dollars in investment, to bring Iraq’s oil sector up to its potential.

“Full return of Iraqi production would create global spare capacity and bring [oil prices] near the mid-$20s-per-barrels level,” said Bart Melek, oil industry analyst with CIBC World Markets.

“As to when that will occur, is very much an $87 billion question,” said Mr. Melek, referring to the amount Mr. Bush has said will be needed to help bring stability and security to Iraq.

But the announcement that the country would return to its place at OPEC’s monthly meetings was seen as an acknowledgment that the country eventually would resolve its internal problems and emerge as a dominant force in the world oil market.

The price for sweet crude oil dropped 58 cents yesterday to $27.56 on the New York Mercantile Exchange.

OPEC, which supplies a third of the world’s oil, meets monthly to discuss production levels in an effort to influence global oil prices. OPEC has been concerned that Iraq would not return to the cartel and instead produce as much oil as possible as the country struggles to regain economic health.

It is not clear, however, to what extent Iraq will link up with OPEC.

“Just because they go back to OPEC now doesn’t mean they will stay there,” said James Dobbins, director of the International Security and Defense Policy Center at the Rand Corp., a policy think tank. “They were seeking some legitimacy and they were accorded some.”

But the Iraqi Oil Ministry yesterday hailed the reunion.

“The removal of the Ba’ath regime and its detrimental oil policies toward the oil industry in Iraq and elsewhere has opened the way for new constructive and more positive policies toward OPEC and the international oil community,” the ministry said in a statement.

“As a major producer and exporter of oil with huge potential for expansion, Iraq will certainly play an increasingly dominant role in international oil affairs,” the statement said.

This article is based in part on wire service reports.

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