WASHINGTON, Sept. 3 (UPI) -- The game could hardly be for higher stakes. War seems likely; revolution in one Middle Eastern country or another is possible if an attack on Iraq stirs up Islamic fundamentalism.
U.S. President George W. Bush seems willing to run these risks. But there is another risk, which would worry him: that of recession, in the United States and elsewhere, a recession that would put Bush's own job on the line. The oil price could be the catalyst for that. It is an end in itself and also a counter, the measure of the state of this deadly game.
Tuesday a move in the game by Iraq helped to push the counter down: U.S. crude oil prices in New York fell below $28 for the first time in two weeks.
Iraqi Deputy Prime Minister Tariq Aziz said to United Nations Secretary General Kofi Annan in Johannesburg that "If the question of so-called weapons of mass destruction is a genuine concern by the U.S., this matter could be dealt with reasonably and equitably." But Aziz went on to say that the supposed U.S. concern about weapons was really "a pretext ... to attack Iraq."
It was the suggestion that Iraq might negotiate the admission of UN weapons inspectors that brought oil prices down. If a U.S. attack on Iraq becomes less likely, the oil price falls. But, as Aziz implied, admitting weapons inspectors may not be enough to placate the United States if Bush wants Saddam out. British prime minister Tony Blair tended to confirm this Tuesday when, echoing the Bush administration's line, he said Tuesday that Saddam is "a threat for the entire world" and that "Either the regime starts to function in a completely different way...or the regime has to change."
While "regime change" remains on the cards, the game will remain potentially explosive for the oil price. That presents the Organization of Petroleum Exporting Countries, which meets in Tokyo on Sept. 19, with a huge problem.
It might be thought that a high oil price suits OPEC very well but that is not the whole story. Saudi Arabia is concerned about the high price, which is encouraging increased oil production by higher cost rivals, such as Russia, as well as cheating on quotas by OPEC members, at a time when weak world growth means that demand for oil is barely increasing.
The danger Saudi Arabia fears is that over-supply of oil will eventually lead to a collapse in the oil price which, until the price recovers, would slash oil exporters' revenues. Saudi's dilemma is how to prevent that happening when a huge uncertainty is lifting the oil price and clouding its vision: whether or not the United States will attack Iraq.
If it were strong demand rather than the threat of war, which was pushing the oil price up, Saudi Arabia would probably press its fellow OPEC members to raise quotas when they meet in Tokyo. But if supply is increased and the threat of war recedes the oil price might swiftly collapse.
On the other hand, if supply is kept at current levels and the threat of war increases or an attack is made, the oil price is likely to shoot to $40 per barrel. The question, then, is how long it stays there. If a U.S. attack on Iraq provokes instability in other countries, above all in Saudi Arabia itself, then the world oil price could go still higher than this -- thereby forcing up the costs of consumers and industries worldwide and propelling the U.S. and the global economy into deep recession in 2003.
The oil picture is shifting now from day to day. Blair is an isolated foreign supporter of a U.S. attack on Iraq. Most European leaders oppose it strongly. Nelson Mandela, the former South African president said Tuesday "We are really appalled by any country, whether a superpower or a small country, that goes outside the U.N. and attacks independent countries."
Despite the strength of the international opposition, the rhetoric of the Bush administration, with the notable exception of Secretary of State Colin Powell, appears to suggest that an attack is on the cards. "Regime change" has become so much Bush's mantra that he may already have committed himself.
That would seem to make Tuesday's drop in the oil price a temporary one. The oil price seems likely to head up, damaging Western economic prospects and the recovery Bush has been trying so hard to foster. If an attack goes ahead, it is its success and consequences that will determine where the oil price goes. The great danger for Bush is that instability in other Middle Eastern oil-producing countries, and above all in the world's largest exporter, Saudi Arabia, could push the oil price exceedingly high. Then a recession would begin which could mean regime change in the United States when and if Bush runs for re-election in 2004.
Iraqi dictator Saddam Hussein said Monday that the whole of this game was about the United States' desire to control the oil market: "America thinks if it controls the oil of the Middle East then it will control the world."
That was untrue. Bush's desire to remove Saddam is about terrorism not oil. But oil makes the game all the more deadly for Bush and for the world economy.
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