OPEC’s Future Dilemma: Iraqi and Iranian Potential and a Saudi Fear………..
“Iraqi Minister of petroleum Hussein al-Shahrestani said that his country will become the biggest exporter of crude oil in about seven years. He added that OPEC should take into consideration Iraq’s needs for reconstruction..….. al-Sharestani added that in recent years Iraq has been deprived of attaining a just level of exports and that other countries took advantage of that fact to enhance their own exports……… “
There have been recent reports that Iraqi petroleum reserves may exceed those of Saudi Arabia. Iraq and Iran are both major exporters, but there has been little serious investment in their exploration and production for almost thirty years because of wars and Western boycotts. Iran already has the world’s second largest reserves of natural gas (after Russia). Both these countries could pose problems to other OPEC producers who have benefited from their problems to expand their own markets.
The potential increased production of these two countries is so high, that other producers like Saudi Arabia may have to adjust their own production. This will have economic and political implications for the kingdom and its stability. This fear of Iraq and Iran increasing production is probably one important variable in the Saudi foreign policy equation, or it should be. Strategizing to keep both countries from meeting their production potential is surely part of Saudi foreign policy. Iran cam be kept under tough economic sanctions that will keep her petroleum sector from catching up for a while longer; Iraq is a different problem that merits a different strategy.
That potential output explosion may be a few years down the road, but OPEC will certainly have to adjust quota shares, or turn a blind eye to over-production as it has done in the past, or go kaput.
Cheers
mhg
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