"This war, should it come, is intended to mark the official emergence of the United States as a full-fledged global empire, seizing the sole responsibility and authority as a planetary policeman. It would be the culmination of a plan 10 years or more in the making, carried out by those who believe the United States must seize the opportunity for global domination, even if it means becoming the 'American imperialists' that our enemies have always claimed we were.

Once that is understood, other mysteries solve themselves. For example, why does the administration seem unconcerned about an exit strategy once Saddam is toppled?

Because we won't be leaving..."

-- Jay Bookman
The Atlanta Journal Constitution
Sept. 29, 2002

April 16, 2003 1400 PDT, (FTW) - None of it looks good. As surreal media coverage trumpets victory and sounds a clarion call to arms for the next target - Syria, the real data on both Iraqi oil production and the economy may leave the Bush administration no option but to perpetuate and enlarge a massive global conflict. Its dreams of a 2004 re-election are now evaporating like water in the blazing Iraqi desert. Notwithstanding irrational reductions in the price of oil futures contracts and rises in the equity markets based upon hype and Centcom media manipulation, the hard numbers are ominous indeed.

OIL

Colin Campbell, previously a senior geologist for Texaco, Amoco and BP, and an executive and chairman at major oil companies before becoming a governmental and industry consultant, made some chilling observations to FTW. Two weeks after the start of the Iraqi war he observed, "Short term movements of oil price since the war began are completely irrational. They just reflect the patterns in the market by the hour. It may be that buyers have held off buying in anticipation of a fall in price in the mistaken belief that when Bush takes the place all he has to do is open a tap. I think, in fact, that you can expect quite a severe increase in price about 45 days from March 20th.

"Tankers have stayed away from Iraq because of war risk insurance costs and other risks. It takes 45 days for this interruption to flow through the system. It is impossible to look further ahead. It seems evident that these famous weapons, which the inspectors couldn't find, were not real or the Iraqis would have used them. Bush may yet fabricate them, along with much of the other evidence he has used so far. But it gets harder to con the people. So I suppose when that becomes ever more evident, people throughout the world will become even more upset, which I imagine would lead to increased acts of sabotage against oil installations in the Middle East."

Recent stories from major press organizations are confirming earlier FTW reports that the Iraqi infrastructure was too run down before the war even started to accommodate any rapid increase in production after victory. This belief, which the administration has quietly promoted as a "sure thing" after Saddam's defeat, has been fueling market speculation in both oil prices and stocks. When combined with the effects of widespread Iraqi looting and sabotage, along with rising anti-American sentiment in a populace that is correctly viewing itself as irrelevant to American interests, Campbell describes a reality which is becoming ever more apparent. "I think it will be years before Iraqi production gets back to pre-invasion levels, never mind an increase."

Like a bucket of cold water in the face of irrational financial markets, Agence France Presse reported from Nicosia, Cypress on April 12 that the Middle East Economic Survey (MEES) had concluded that there won't be a drop of Iraqi oil on the markets until at least June. And those drops are a long way from 3.5 million barrels per day (Mbpd).

On April 11, the AP confirmed Campbell's dire assessment. "Political disputes, legal issues and the need for billions of dollars in investment are among the hurdles Iraq must pass before it can restore crude output even to 1990 levels - much less increase it beyond that...

"... its pipelines, pumping stations and oil reservoirs have suffered for years from a dearth of funds and lack of maintenance."

Quoting an analyst at the Washington-based Petroleum Finance Co, the AP reported that an investment of $3-6 billion and two years would be required to permit Iraqi production to reach 3 Mbpd. That issue is further compounded by the fact that title to Iraqi oil is presently uncertain and the only way to resolve the issue might be through the recently roughed-up UN.

Just a day later, CBS News' Market Watch labeled post-war Iraqi oil as a "wild card", reaffirming evaluations of current Iraqi infrastructure and quoting oil industry expert Kevin Kerr as stating that it would take three years and $7 billion in new investment to bring Iraqi oil production to the 1980 peak of 3.5 Mbpd, $20 billion to reach 5.5 Mbpd, and more than 10 years to double production from current levels if "everything goes smoothly".

Everything is not going smoothly. Little noticed by the American press is the fact that saboteurs are ravaging northern Iraqi oil fields. An April 14 AP story quoted Shad, an electrical engineer who would not give his last name, as saying, It's the worst destruction I have seen in my life. It will set Iraq back many years." Shad should know. He works for the Northern Oil Company, which administers all of the oil fields in northern Iraq.

There is no immediate promise or even a remote possibility that Iraqi production will increase rapidly. U.S. military, economic planners and experts in the financial markets know this. In his FTW interview Campbell stressed that even the loss of seismic charts or the hands-on expertise of people who know how to work each unique oil field could set reconstruction back years.

As Iraqi outrage over uncontrolled looting - in some cases reportedly encouraged by U.S. troops - continues to mount, it is apparent that something else is driving U.S. actions. The cavalier and glib assertions of Centcom that they did not expect looting, and their failure to recognize the value to all humanity of the antiquities stored in Iraq's museums, is the basest kind of cultural and ethnic insult. The failure to protect antiquities dating back to the time of Abraham, or even plan for it, does more to reaffirm global perceptions of Ugly Americans with a Big-Mac culture than any U.S. action thus far.

The Bush administration has obviously concluded either that it does not need a quick increase in Iraqi production or has misplayed its hand entirely. If the former is true then where and how can the U.S. economy obtain other supplies of inexpensive oil, especially if OPEC proceeds with announced plans to cut production?

PEAK OIL CONFIRMED AGAIN

On April 7, the Associated Press reported that OPEC was planning an emergency meeting to discuss the pricing impacts of a possible oil glut. Saudi Arabia and all the OPEC nations know that Iraqi production is not a price threat for several years and they are very aware of the fact that planetary supplies are both running out and becoming more expensive to obtain. Yet a flurry of press stories following the apparent U.S. victory have indicated that OPEC is moving to cut production to avoid a sudden fall in prices as imaginary Iraqi oil hits the markets. Why?

Both OPEC and Saudi Arabia know that the United States has two objectives. The first, made ever more apparent by the actual conduct of the war, is simply to gain control of Iraq's 112 billion barrels (Gb) of oil; the second largest reserves on the planet. That Centcom purposely allowed the looting, the removal or destruction of vital records, and indirectly encouraged actions that have distracted attention from the oil fields conveys a powerful message. If the U.S. priority had been to do what was necessary to restore Iraqi production as quickly as possible, the human resources, seismic data, administrative infrastructure and other key assets would have been foremost on Centcom's military agenda, the same way that Nazi rocket scientists were on the U.S. agenda at the end of World War II.

Iraqi oil cannot be pumped, exported or sold without a governmental infrastructure to handle the paperwork, collect taxes, authorize shipments, control port entry by tankers and a thousand other details. Press reports tell us that Iraqi governmental buildings have been burned and that even if there were employees able to work, they would have no computers to work on, no telephones to talk on, and no chairs to sit at. Oil experts have decried the prospect that the U.S. might privatize Iraqi oil assets. That would be a replay of the nightmare scenario inflicted on Russia by Goldman Sachs, The Harvard Endowment and the U.S. Treasury in the 1990s. That media-hyped effort to show the Russian people how to be capitalists resulted in the looting of Russian wealth and a financial debacle which the Congressional Cox Committee characterized as "three times worse than the great depression" in terms of what it did to the Russian people.

What OPEC is afraid of is not an oil glut tomorrow, but in five to ten years as the rest of the world suffers the serious repercussions of Peak Oil. That glut from unused Iraqi fields would have a double impact, as the OPEC nations pass their production peaks at the start of the next decade and go into decline. Any immediate moves OPEC makes to cut production are intended to tighten an economic noose around the United States now, rather than later, while the U.S. economy is fragile and before it can benefit from Iraqi reserves. An April 15 AP story headlined "OPEC to discuss ways to stabilize oil prices" supported this theory. "OPEC members will discuss 'all scenarios' to keep oil prices stable, the president of the group said Tuesday, keeping the idea of production cuts alive despite warnings that such a move could be premature." AP reported that OPEC fears of a price crash had prompted an "emergency" OPEC meeting in Vienna next week.

The International Energy Agency has been cautioning that no glut is likely and affirming, as previously reported in FTW, that current production capacity is near its limit. Therefore, OPEC's move toward production cuts must have other motives. Those motives are a response to what OPEC and Russia both fear most, a fall in prices below the $22-28 per barrel range favored by OPEC. The U.S. cannot do that today, but with Iraq firmly in its control, it can do it five to ten years from now when the pains of Peak Oil are more acute. If that happened, the fall in oil revenues in the Middle East would evaporate domestic stability in OPEC nations and make Russian oil uncompetitive on world markets because of its higher (and rising) production costs.

THE FRAGILE ECONOMY

On April 8, ABC News reported that the U.S. economy was "On The Edge". Quoting David Rosenberg, chief North American economist for Merrill Lynch, the ABC story said, "'Investors could be in for a rude awakening' once the war comes to an end, 'the economy is back on the precipice of recession.'" The ABC story cited confirming opinions from experts at Goldman Sachs and J.P. Morgan, which were based on a wide range of economic data. Aside from grim data on unemployment, consumer confidence, debt, manufacturing and retail sales, the picture got far worse as the Congressional Budget office revealed this week that the deficit has now exceeded $3 trillion, making it the largest in history.

The New York Post added another wrinkle on April 13 when it observed that Iraqi instability, damage to infrastructure, new technologies and rising production by non-OPEC countries might actually curtail infrastructure investment in the short term. That might be what is intended, as the U.S. "banks" Iraqi reserves for use at a more appropriate moment. That is  also the scenario that OPEC and Russia cannot afford to see play out and they may be trying to proactively forestall

A number of stories have recently confirmed FTW's prediction that a new "anti-American" alliance was forming between Russia, France, Germany and China. In our last major story - "The Perfect Storm" - we predicted that these nations, unable to oppose the U.S. militarily, would do whatever they could to give themselves an economic edge including quiet support for rebel movements around the world that would stress global production capacity.

Events confirming that possibility have recently taken place in Nigeria, the world's sixth largest oil producer. BBC, AFP and other major news organizations reported in late March that rebel insurgencies had caused oil giants ChevronTexaco and Shell to abandon facilities there, cutting production by some 800,000 barrels per day. Over the next two weeks, other stories reported that the U.S. government had rushed delivery on the first of seven new warships to the Nigerian government, and that the oil companies were returning to work. However, just days after the oil companies were announcing that things had settled down, both AP and AFP reported the April 6 bombing of Nigeria's main pipeline which had been seriously damaged and burning out of control.

SQUEEZING BUSH

Continuing evidence of the failure of the Bush Neocons to manage events in a manner pleasing to the world's financial elites surfaced in a rare and very stinging public rebuke form Henry Kissinger business partner and former Bush I Secretary of State, Lawrence Eagleburger. In a story published on April 14 by Britain's Independent-UK it was reported that Eagleburger told the BBC, "If George Bush [Jr.] decided he was going to turn the troops loose on Syria, and Iran after that, he would last in office for about 15 minutes. In fact, if President Bush were to try that now even I would think that he ought to be impeached. You can't get away with that sort of thing in this democracy."

Although not intended to reach the ears of the general American public the warning was meant to have an impact inside the administration. It did. In his Pentagon press briefing the next day, Secretary of Defense Donald Rumsfeld bluntly stated that the U.S. had no intentions of engaging in military conflicts in Syria or anywhere else in the region.

The rapidly coalescing New European Alliance, which Britain will ultimately be compelled to join due to energy demands, appears to be leaving the Bush administration few alternate approaches. The days of the Neocons may be numbered. Frankenstein's monster may be removed but the financial interests who created it remain busy in their laboratories.