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Allies putting people ahead of oil in Iraq

http://www.jewishworldreview.com | (UPI) -- Coalition troops tightened their hold on the oilfields of northern Iraq Friday although providing humanitarian supplies to the population will be getting a higher priority than resuming the flow of crude.

The northern oil city of Kirkuk fell to allied troops and Kurdish fighters this week, giving the invasion forces control of the major oil fields in both the north and south of the country as well as key infrastructure.

"At this point, four of the very important gas-oil separation plants (in Kirkuk) and several wells have been secured, and none of them have been damaged at this point," said Brig. Gen. Vincent Brooks during Friday's media briefing at Central Command headquarters in Qatar. "At this time, we can begin doing assessments to find out exactly what there is to know about each one of the wells and each one of the key portions of that field."

The news has heartened the bears in the oil markets; however, May crude futures still settled 68 cents higher at $28.14 per barrel on the New York Mercantile Exchange Friday as traders anticipated production quotas being lowered by OPEC later this month.

OPEC calculates that the world oil market is oversupplied by around 2 million barrels per day, which is roughly what Iraq was capable of producing prior to the start of the war. Even with the Iraqi oilfields largely intact, the coalition says its first priority is opening the floodgates and allowing food and other humanitarian supplies into the country.

"Right now, the immediate focus is on humanitarian assistance," State Department spokesman Richard Boucher told reporters Friday. "At the appropriate time, the needs of the oil sector will be addressed."

A daunting list of legal, financial and administrative tasks will have to be tackled as Iraq tiptoes back into the world oil market. At the same time, the physical side of the oil sector is considered to be in need of extensive maintenance after some 20 years of war and economic sanctions.

"There is a lot to do to get this sector back up to international standards," said Boucher. "We've been in touch with other coalition partners about the whole gamut of assistance reconstruction issues, and I'm sure this will be one of the subjects that the Iraqis want to take up as they talk about their vision of their own country."

Major oil companies are expected to play a sizable role in the rehabilitation and expansion of Iraq's energy sector, although analysts caution that there may not be an immediate rush of investment into the war-torn land.

A report issued last week by Britain's Royal Institute for International Affairs estimated that it could take some five years for a new, independent Iraqi regime to take over in Baghdad and strike the necessary deals with foreign companies.

"It would be politically very risky for the U.S. administration or Iraqi political representatives to propose terms that 'give away' future oil," the report predicted. "In any case, many foreign companies will not engage in long-term investments in an Iraq ruled by the U.S., because of the risk that their investments would not survive the U.S. occupation."

The study also predicted that potentially dangerous and shortsighted political pressure could surface in London and Washington demanding that some of Iraq's limited oil revenues be used to pay the coalition's costs of deposing Saddam Hussein and running the interim government.

"The domestic political benefits of minimizing American expenses in the Iraq venture must be set against the risks of popular resentment of U.S. neo-colonialism leading to violence in the region," it predicted. "The dominant view in the region ... is that oil is a national resource that belongs to the Arab people."

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