Iraq's Stormy Petrol

In biblical times when the country was called Mesopotamia, the name became almost a synonym for a rich and fertile land, blessed by nature. Now the place is called Iraq. It is an oven-hot, barren landscape with a population of 9,750,000 and only one significant natural resource: oil. But today's energy-hungry technology has made Iraq's expansive oilfields the focus for half the world's attention.

Two weeks ago, in response to that attention, Iraq's zealously left-wing government nationalized some of the Western-owned oilfields. In the capital city of Baghdad, crowds cheered the militancy of President Ahmed Hassan Bakr; in Moscow, Izvestia hailed him as the Arab of the hour. For all their intoxicating dose of nationalism, the Iraqis now faced the practical problem of pumping and selling their oil, which amounts to 10% of the Middle East's total. Perhaps their great friends, the Soviets, could help?

Foreign Minister Abdul Baki flew to Moscow and huddled with Premier Aleksei Kosygin and other Soviet ministers. When the talks ended last week, the Russians and Iraqis had decided to negotiate bilateral economic agreements, but they failed to announce what Iraq wants: an oil deal. In Paris the French Cabinet considered, but did not immediately accept, Iraq's offer of a special arrangement with the French company that is part owner of the oilfields. Beirut newspapers began carrying front-page ads offering Iraqi oil at "realistic and competitive prices."

Iraq was in trouble. About two-thirds of Baghdad's budget comes from oil. By seizing the assets of the Iraq Petroleum Co. (IPC), worth an estimated $500 million, Bakr & Co. endangered the bulk of their future revenues. Now the government must produce and market oil in the face of legal threats from one of the world's most powerful consortiums, IPC, which is owned by Standard Oil (New Jersey), Mobil, Royal Dutch/Shell, British Petroleum, Compagnie Franchise des Petroles and minority investors. The four senior partners are influential enough to block sales of Iraqi crude to other major oil companies. IPC also stands ready to act under international law to sequester cargoes of "stolen" Iraqi oil. British Petroleum has already seized tankers carrying oil from its wells in Libya, which were nationalized earlier this year.

Growing Hostility. IPC's row with Baghdad has been long simmering. A decade ago, Iraq took over some of IPC's concessions; since then it has drilled for oil with Soviet help and become increasingly hostile to the international consortium. Last year, relations were rubbed raw by a slowdown in the growth of world demand for oil. In Iraq's northern fields--the ones now nationalized--IPC cut production by 11%; but in the southern fields, nearer to Persian Gulf shipping points, it raised output by 74%. Despite the fact that Iraq's revenues rose 64% to $909 million, the Baghdad government was miffed by the new arrangement. It insisted that the cuts in the north were IPC's retaliation for the loss of concessions a decade earlier.

Late last month, IPC presented a package of new proposals. They included "best efforts" to raise output each year until 1977, further capital investment and payment of $263 million against various Iraqi claims. According to IPC, the government refused to discuss the offer. Its vindictive reply was nationalization.

Iraq's go-for-broke game is being watched closely in the U.S., Europe and Japan. All of them rely increasingly for their energy needs on members of the Organization of Petroleum Exporting Countries (OPEC). Iraq is trying to persuade OPEC members in the Persian Gulf to show solidarity by limiting exports. It is unlikely to find much support. Says Amir Notaghi, a deputy minister in the Iranian government: "It is not in our interests, or in the interests of the Gulf states, to support Iraq's call for an oil blockade in the West." Even so, Iraq's militancy is another unpredictable element in the delicate negotiations between OPEC and Western oil companies over what the oil states call "participation."

OPEC is demanding an immediate 20% interest in production, and no one expects its member countries to stop at that figure. If Iraq can produce and sell oil at anything close to the former volume and price, some other OPEC members may be tempted to nationalize too. Fortunately for the West, an amicable solution still seems possible. At week's end IPC was reported to have agreed to submit the dispute to arbitration, and to refrain from any legal action while mediation is in progress.

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