Iraq's prospects for renewing significant oil exports are "pretty slim" because of damage inflicted on oil installations in the Persian Gulf war and the subsequent rebellions, the Middle East Economic Survey reported Monday.
Baghdad's grudging acceptance Saturday of a punitive United Nations cease-fire resolution theoretically opens the way for Iraq to resume oil exports, its economic lifeline. But before the U.N. embargo is lifted, Iraq must destroy its chemical and biological weapons and long-range missiles and agree to pay reparations to Kuwait.The MEES, a respected oil industry newsletter published in Nicosia, said Kuwait proposed 25 percent of Iraq's oil income be put into a fund to make the payments.
Whether or not the final agreed percentage is that high, the stringent conditions of the resolution will ensure that Iraq's economic power will be vastly reduced for some considerable time along with its military might.
Before Saddam Hussein's army invaded Kuwait, Iraq was producing some 3.4 million barrels of oil a day, most of it for export through pipelines across Saudi Arabia to the Red Sea and through Turkey to the Mediterranean. The pipelines were shut under the U.N. embargo.
The MEES said as much as 40 million barrels of oil may be in storage at export terminals and in the pipelines from before the U.N. embargo.
But the newsletter noted that even resuming exports on such a limited scale can only begin once the U.N. sanctions committee gives its approval. It stressed that because of the extensive damage to pumping facilities, it would be extremely difficult to move the estimated 20 million barrels of oil lying in the pipelines.
"The prospects for a restart of Iraqi oil exports on any significant scale are pretty slim," the newsletter said.
"Looking a bit further down the road, the resumption of Iraqi oil exports is likely to be hampered as much by physical and technical constraints as by legal impediments," it added.
Oil industry experts estimated last month that the damage caused by the six-week allied air offensive reduced Iraq's oil production capacity by at least two-thirds.
The damage was concentrated mainly in southern Iraq. The northern Kirkuk oilfields, which were producing around 800,000 barrels a day before August, escaped relatively unscathed from the bombing.
But these were damaged in the Kurdish rebellion in the region. The rebellion has been crushed by Saddam's forces during fighting in which several wells were set on fire.
Before the war, Iraq had a production capacity of an estimated 4.5 million barrels a day and had planned to boost that to above 5 million barrels a day. Iraq's reserves are estimated at 100 billion barrels of oil, second only to Saudi Arabia's 255 billion barrels.
The cost of repairing damage inflicted by the allied bombing will be hefty, and few oil companies may be prepared to help the Iraqis out while Saddam remains in power.