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. Last Updated: 07/27/2016

Choosing Oil, Not Iraq




Once again Baghdad seems to be doing everything possible to aggravate the situation in the Middle East. When Iraq's Deputy Prime Minister Tariq Aziz met United Nations Secretary-General Kofi Annan on Sept. 29, he announced that sanctions would not force his country to moderate its behavior.


We should recall that on the eve of this meeting, Iraq's parliament unanimously advised Saddam Hussein to suspend all activities of the team of UN inspectors examining installations in Iraq. The Iraqi leadership had in fact already done this at the end of July and without any approval from parliament. In response on Aug. 5, the UN Security Council suspended the bi-monthly reappraisals of sanctions against Iraq, causing any hope of relief from the sanctions to recede indefinitely.


Driven into a corner, Hussein is now threatening the UN with further upheavals, indicating as always that his immediate neighbors, starting with Kuwait, will be the first to suffer the brunt of his anger.


If this had happened a few months ago, the United States would have been immediately roused to action, closely followed by Europe. Stern warnings would have been issued from the tribunes of the UN. Hussein would not have backed down, and then, as in February, U.S. aircraft carriers would have entered the Persian Gulf, and Russia's special presidential envoy Viktor Posuvalyuk would have been dispatched to Baghdad from Moscow.


This time, however, the customary tough reaction of the United States was delayed, much to the surprise of many Americans. Many asked themselves whether their president had been paralyzed by the infamous "Monicagate" affair. The president's paralysis didn't last long, though: The next week Washington announced its readiness to increase its military presence in the Persian Gulf area and use force against Iraq.


But if this renewed confrontation between the United States and Iraq seriously escalates, this time Hussein cannot count on receiving moral and political support from the six oil-producing Arab states or from Russia. After they all suffered huge losses from unprecedentedly low oil prices, the slump in the world's oil market now seems to be the main factor determining their foreign policies.


When oil prices started to fall at the beginning of the year, the demands of the six oil-producing Arab nations that the UN lift sanctions on Iraq became noticeably less vocal. Instead, they limited themselves to appealing to the world community to more actively provide humanitarian aid to Iraq's population.


The United Arab Emirates is now sending caravans of supplies to Iraq, and Saudia Arabia recently signed for the first time contracts with Iraqi companies for the supply of medicines. But providing humanitarian aid and allowing Iraq onto the oil market as a full player are two different things entirely. In short,the prospect of Iraqi oil gushing onto the world market has put the wind up the big-league exporters of "black gold."


In precipitating a deterioration of relations with the UN, Hussein appears to be counting on Moscow to back him up more energetically than usual, and hoping to profit from Russia's unfolding internal political situation and most of all from the appointment of Yevgeny Primakov as prime minister. When Primakov headed the Foreign Ministry he invariably followed a conciliatory line with Baghdad. This and the recent condemnation of the U.S. stance toward Iraq by the left-wing axis in the State Duma, the People's Patriotic Union, and its appeal to the UN to lift sanctions, could not fail to inspire the Iraqi president.


Baghdad also seems to hope to profit from Moscow's troubled relations with the West following Russia's recent default on debts, and from the uncertain nature of the Russian government's future policy.


But regardless of the Russian leadership's overall shift to the left, Hussein's expectations are unlikely to pan out. In view of the current financial crisis Moscow will not try to toughen its position toward the United States and Britain, which play a leading role in the main international financial organizations.


Primakov's line that Russia must conduct a strong foreign policy regardless of the state of its economy is scarcely applicable in the current circumstances, since a deterioration of relations with the Western powers would have dire economic consequences. Primakov has in fact toned down his former geopolitical ambitions, and is now more inclined to view the world through the prism of economic factors, and oil in particular.


For the near future, oil sales are likely to be the most important means for replenishing Russia's hard-currency reserves. In this context, analysts assume that Primakov's government has learned from the experience of last spring, when Russia committed itself in word to a reduction of oil exports announced by OPEC, but in fact increased its volume of sales from January to July by 8.5 percent. This was one cause of the international slump in oil prices, and the move lashed back hard at Russia: Real earnings for that period fell by 25.2 percent compared to the previous year.


Despite the unified efforts of OPEC, a quick recovery of the oil market is unlikely, and the market might well collapse entirely if sanctions were to be lifted from Iraq, regardless of the seasonal winter increase in demand.


Consequently, it has become far more important for Primakov's government to re-establish working relations with Western creditors and to at least prevent a further slide in oil prices on the world market than to maintain the Soviet-era litany of Moscow's "eternal friendship" with Baghdad.


Alexander Shumilin is an international observer for the Kommersant publishing house. He contributed this comment to The Moscow Times.