Iraq's Oil Makes It A Grand Prize

The oil fields of Iraq may look run down and rusted, but underground there are enough crude reserves to reshape the balance of power in the politics of oil.

"The reserves are a grand prize," says oil analyst John Kingston.

There are more than 300 billion barrels in reserves, ranking Iraq second only to Saudi Arabia. U.N. sanctions have prevented Iraq from drilling for that oil. But even if Saddam is deposed, Kingston says, Iraq will need help.

"You're talking about developing billions of barrels of reserves in a country that has no money - that's certainly not going to have any money after a war," says Kingston. "Where's that money going to come from?"

It's going to come from the western oil giants, of course. But while its equipment may be antiquated, Iraq's national oil company is considered highly professional.

"So the idea that we're just going to roll into Iraq and create our own deal and put the international oil companies in there to run things - that's simply not going to happen," says Thane Gustafson, of Cambridge Energy Research Associates.

And once it taps into those reserves, Iraq, a founding member of OPEC, would be a new power in the world's oil markets - strong enough to challenge even the Saudis.

With upgraded technology, the Iraqis who pump about 2.5 million barrels a day now, could pump as much as 6 million within a decade.

"So the balance of power within OPEC will be very interesting, because sort of they'll have a policeman again," says Karen Matusic, of Energy Intelligence. "Right now Saudi Arabia calls the shots in OPEC.

"There'd be a counterbalance in the market."

But Saddam could slow that process down if, in retreat, he torches the oil fields, as he did in Kuwait.

"The Kuwaitis had a lot of money to pay for the extinguishing of their fires, and the Iraqis don't have that money," says Kingston. "And certainly their only crop, so to speak of, is oil, and they won't be able to export it because it'll all be burning."

The cleanup could take two years. But an Iraq without Saddam, without U.N. sanctions is still destined to be an oil superpower.