|March 27, 2003||No.129|
Egyptian Economist: Economic Interests Guide the French, Germans, and Russians Toward Baghdad
Egyptian economist Khalil Al-'Anani discussed the economic underpinnings of France, Germany, and Russia in their opposition to the war in Iraq, analyzing the positions of each of the countries. The following is a summary of Al-'Anani's report which appeared on Al Jazeera's website (1):
The French Economy
France's opposition to the war in Iraq, rather than being based on political considerations, its historical ties with the Arab world, or an attempt to challenge America's role as superpower, is motivated by pure economic interests. Despite France's attempts to portray its stance against the war as a political one, it is difficult not to imagine the economic benefits to France if the war had not occurred. The consequences of war on the weak French economy will be palpable primarily in the oil and commercial sectors.
Ten years ago, the French oil company Total/Fina/Elf signed an agreement with Iraq to share oil production in the "Majnoon" and "bin Omar" oil fields upon the termination of the sanctions on Iraq. The Majnoon oil field is located near the Iranian border and is estimated to contain 30 billion barrels of oil. This field alone could meet French consumption needs for 30 years.
French exports to Iraq have increased sharply in recent years. They were valued at $330 million in 2000, doubled in 2001, and went over $1 billion in 2002. In the most recent international fair held in Baghdad in late 2002, 150 French companies took part. War in Iraq could mean:
* A spike in oil prices at a time of economic slow-down in the world economy.
France is also concerned that, after a war in Iraq, it will fare no better than after the Gulf War in 1991, which brought only a few contracts to France.
The German Economy
The Russian Economy
Not unlike the case of France, it is difficult to overlook the extent and depth of the economic relations between Russia and Iraq which extend over 40 years. Here, again, economic considerations drive the Russian position vis-à-vis the war on Iraq.
Russia produces 7.3 million b/d, which is 9.7% of world production, but it exports only a half of its production. Its reserves are estimated at 48.6 billion b/d, or 4.6% of world reserves (oil reserve figures are considered a state secret in Russia and have never been confirmed). The cost of production is $12 per barrel compared with less than $2 for the Iraqi oil. It is not surprising that Russia covets Iraqi oil only. In addition, there are currently 300 Russian companies which manage the export of Iraqi oil under the "Oil for Food" program. Russia has signed as many as 900 oil contracts with Iraq since 1996.
The war in Iraq will have considerable effects on the Russian commercial interests:
* The loss of business with one of Russia's leading trading partners in the Middle East, particularly in the fields of oil and petrochemical industries.
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