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THE WORLD | SHOWDOWN WITH IRAQ

Powell Says U.S. Not After Iraqi Oil

January 23, 2003|Warren Vieth | Times Staff Writer

WASHINGTON -- Secretary of State Colin L. Powell insisted Wednesday that the United States has no plans to claim Iraq's oil fields or use its petroleum revenue to recoup the cost of a possible war.

Powell, offering the most explicit U.S. assurance to date about the future of Iraq's oil industry, said future production proceeds would be held "in trust" for ordinary Iraqis.

"The oil of Iraq belongs to the Iraqi people," Powell said. "Whatever form of custodianship there is ... it will be held for and used for the people of Iraq. It will not be exploited for the United States' own purposes."

His pledge addressed one of the most sensitive issues facing the administration as it prepares for military action in Iraq: the claim that President Bush's campaign to oust Saddam Hussein is really about oil, not weapons of mass destruction.

Although the Bush administration had previously denied that its Iraq policy is fueled by oil, it had not revealed its thinking about postwar control of Iraq's petroleum industry or use of its oil revenue for purposes other than postwar rebuilding.

Oil industry analysts and insiders said Powell appeared to be trying to quell expectations that Iraq's vast oil reserves -- second only to Saudi Arabia's -- might become the spoils of war.

"I think it was designed to have a calming effect on people who have other thoughts about what might be done with the Iraqi oil sector," said Robert Ebel, energy program director at the Center for Strategic and International Studies. "There's a message there for a lot of people, and not all of them are outside this country."

Powell said he was not certain how Iraq's oil revenue would be allocated after a war, but he indicated that U.S. officials are not seeking to use the funds for reparations.

"I don't know of anybody who's made that suggestion," he said. "It'll be held in trust for the Iraqi people, and it will benefit the people of Iraq."

He said the United States, if it assumed administrative responsibility in a postwar Iraq, would "religiously" follow international law governing the responsibilities of an occupying power.

But he indicated that the administration had not decided who would exercise day-to-day decision-making authority. Since the 1991 Persian Gulf War, the United Nations has supervised Iraq's oil production.

"How will we operate it? How best to do that? We are studying different models," Powell said.

He did not rule out the use of Iraq's oil revenue to cover a portion of postwar peacekeeping and reconstruction expenses incurred by the United States or other nations.

"Whether or not it can be used to assist the occupying power in conducting activities that support the Iraqi people -- for example, their humanitarian relief efforts ... these are all issues I just don't have the expertise to get into."

Although Iraq's fields are capable of generating at least $10 billion a year for the government, experts say the cost of rebuilding the nation's infrastructure and providing for other postwar needs could run as high as $100 billion.

"The revenue from the oil business will be spoken for two or three times over for the first couple of years," said Philip K. Verleger Jr., a senior fellow at the Council on Foreign Relations.

Energy industry officials have cited a split within the administration over the oversight of Iraq's oil industry after a regime change. One faction, identified with Powell's State Department, reportedly has favored a policy that would leave control of the industry largely in the hands of Iraqi petroleum professionals. Another camp has advocated a more aggressive policy, with the United States exerting influence over prices, production rates and exploration rights.

Powell insisted otherwise. "There is no disagreement," he told reporters.

Nevertheless, some experts interpreted his remarks as an attempt to establish the State Department position as the consensus view of administration officials.

"I think the secretary of State is making clear what in his view is the ultimate policy," said senior energy analyst Amy Myers Jaffe at Rice University's James A. Baker III Institute for Public Policy in Houston.

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