As Iraq turns off the spigots, oil prices surge 6%. The west is not alarmed, claiming that the poorer countries will be hit first and that the embargo will have to go on long after its 30-day initial period to have any real effect.
As protesters in the Sudan and Jordan called vociferously in the streets for Osama Bin Laden to strike Israel, Iraqi President Saddam Hussein decided to play his part in helping the Palestinian cause. He ordered the spigots to be turned off on Monday night, initially for a period of thirty days, or until Israel withdraws from Palestinian territories, the Iraqi president declared in a televised address to the nation.
However, since OPEC countries have not unanimously agreed to support Iraq’s decision and because there are other non-OPEC suppliers who could increase their production, the move is not expected to produce serious effects in the economic scenario.
For its part, the Russian Federation does not intend to increase its quota at least until the situation is revised in mid-May.
Iran and Libya have supported the move, but do not intend to take action of their own. Saddam Hussein, hailed as “President. Leader and holy warrior” in his address to the nation, has called himself the champion of the Palestinian cause, which has won him great popular support in the region, as Arabs call for their leaders to take more radical action against Israel and the USA. This popular acclaim is translated in the scant support for the notion of an American attack on Iraq in the area, especially at a time of Palestinian-Israeli conflict.
Hammas, the radical Palestinian group based in Damascus, called the decision of the Iraqi regime “practical and real steps…to show solidarity to our people”.
The reaction from Washington is that these measures will hit the poorer countries first, since the measure concerns 2 million barrels per day, or 4% of international oil trade. Despite these claims, the combined result of the Iraqi decision and the slow-down in Venezuelan oil production due to industrial disputes saw the price of Brent rise sharply in London, up some 6% from 25.99 USD/Barrel to 27.35 USD.
Since the oil crashes in the 1970s, modern economies have learned to build up huge reserves of stocks, so as not to be affected by sudden surges or halts in production. More dependent are the emerging Asian economies, coming through their recession but more vulnerable to sudden glitches in oil prices. Most at risk in the region would be Thailand and South Korea, while in South America, Brazil’s energy crisis has seen its oil reserve decrease to alarmingly low levels, putting it in a precarious position.
John ASHTEAD PRAVDA.Ru LONDON UNITED KINGDOM
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