Neighbours should not bicker over a few barrels of oil

Despite their problems in governing the country, Iraq's politicians apparently possess one unique talent: X-ray vision.
A policeman stands guard at the Rumaila oilfield in Basra.
A policeman stands guard at the Rumaila oilfield in Basra.

Despite their problems in governing the country, Iraq's politicians apparently possess one unique talent: X-ray vision. Oday Awwad, a member of parliament, invited fellow MPs to visit the border to validate his claim that Kuwait was stealing oil by drilling into Iraqi territory.

There will be nothing to see at the border, of course, other than a distant row of Kuwaiti oil wells. This is theatre to distract attention from the politicians' failings, combined with similar rhetoric such as the accusation from another MP that Kuwait and Saudi Arabia were responsible for an epidemic of drug use in Iraq.

Relations between Kuwait and Iraq have fallen to their lowest point since the overthrow of Saddam Hussein. And this rivalry is concentrated in the narrow stretch of land between Iran and Kuwait, which contains most of Iraq's oil production, its second city, Basra, its main port and its key oil export terminals. Iraq has further complained that Kuwait's new Mubarak port, on the north side of Bubiyan Island, will impede access to its waterways and take business away from its planned Grand Faw port.

The allegation that Kuwait was stealing Iraqi oil is not new, of course. Saddam Hussein made the same claim as part of the casus belli for his 1990 invasion of Kuwait, and repeated it in 2000.

It would certainly be possible for Kuwait to siphon oil from Iraq. The supergiant Rumaila and Zubair fields in Iraq extend a short way into Kuwait, where they are known as Ratqa and Abdali. But why would Kuwait, with abundant oil of its own, carry out such a provocative operation, news of which would be likely to leak out?

Iran, too, shares fields with Iraq. One of the exploration blocks in Iraq's upcoming tender, in the marshlands on the Iranian border, may link Iran's giant Azadegan and Yadavaran fields with Majnoon and Nahr Umr in Iraq. The whole complex could be one of the world's three largest conventional fields. In December 2009, Iranian troops occupied an oil well they claimed belonged to them at a field further north.

The issue of shared fields could be easily resolved. In many parts of the world, such as the North Sea, independent experts assess how much of a field lies in each country's territory, and so how much each is entitled to extract. The field may even be operated jointly to maximise efficiency. Such "unitisation" is not common in the Middle East, the Mubarak field between Iran and Sharjah being a rare example. But it would put an end to debates over "slant drilling".

The argument over shared fields is only one element of these regional tensions. Another of Saddam's complaints against Kuwait was that it was demanding repayment of the loans it had made to fight the Iran-Iraq war. A battered Iraq, at a time of low oil prices, simply could not pay. Today, Kuwait continues to demand US$19 billion (Dh69.78bn) of outstanding reparations from the Gulf War, with $33bn already disbursed.

Saddam Hussein also accused Kuwait of producing above its Opec quota, and so waging economic warfare against Iraq by bringing down oil prices. In a reversal of the roles, if Iraq's current ambitious plans begin to bear fruit, it will have to reach agreement on oil production levels with Iran, Kuwait and other Opec colleagues.

Kuwait's position is driven by memories of the Iraqi invasion, and by its fractious domestic politics. But as a small country, it should remember that it has more to gain than lose from a friendly, stable northern neighbour. A report from an independent expert could easily refute the "slant drilling" accusations.

Imports of Iraq's gas, much of which is being wastefully burnt off, would help solve the emirate's recurring summer power shortages. Eleven times richer than Iraqis, Kuwaitis should consider forgiving the outstanding war reparations. And Kuwait should forestall Iranian influence in Basra, rather than providing Iraqis with an easy foreign scapegoat.

Iraq should similarly tone down the anti-Kuwaiti rhetoric. On Friday, the editor of its semi-official Al Sabah newspaper was sacked because of writing about the negative effects of the Mubarak port. Iraq could benefit from Kuwaiti investment, and the use of its infrastructure; its tiny coastline constrains its own port capacity, and makes southern oil exports, from floating terminals, very vulnerable to bad weather, border disputes or sabotage.

Higher Iraqi production would reduce oil prices and harm the ramshackle Iranian economy. Iran's eminence noir Qassem Suleimani, the head of an elite division of the revolutionary guard, therefore skilfully uses Iraqi clients to keep the vital south of the country in ferment.

Instead of grandstanding over the supposed siphoning-off of a few barrels, Iraq and Kuwait would do better to build durable political and economic relationships to benefit from the wealth beneath the sands and marshes.

 

Robin Mills is an energy economist based in Dubai and author of The Myth of the Oil Crisis and Capturing Carbon

Published: August 2, 2011 04:00 AM

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