Bush: Iraq oil hurt by Saddam, losing war

DAYTON, Ohio, March 27 (UPI) -- President Bush said Iraq's nationalized oil sector is a Saddam Hussein "legacy" that is harming Iraq's economy, and losing the war would "endanger" Iraq's oil.

"Iraq has great economic potential -- they've got a young, energetic population, it's got a lot of natural resources," Bush said Thursday in a war on terrorism speech in Dayton, Ohio.

"The reality is that retreating from Iraq would carry enormous strategic costs for the United States. It would incite chaos and killing, destroy the political gains the Iraqis have made, and abandon our friends to terrorists and death squads," he said. "It would endanger Iraq's oil resources and could serve as a severe disruption to the world's economy."

The price of oil increased to $105 per barrel Thursday as a strategic pipeline was bombed during the Iraqi military campaign in the oil hub of Basra that started Tuesday.

Bush said the insurgents weren't the only threat to Iraq's oil. "In many ways, the legacy of the tyrant continues to haunt the Iraqi economy. The government is forced to rely on the centralized food and fuel rationing system that Saddam used to control his population and to punish his enemies.

"The infrastructure for Iraq's oil sector is still owned and managed by the central government, and suffers from decades of under-investment."

Iraq's oil production is at record post-2003 levels of about 2.4 million barrels per day, according to unofficial February data. But the "under-investment," coupled with Hussein's mismanagement, U.N. sanctions and decades of war have created a need for tens of billions of dollars. Iraq has been criticized at home and abroad for not investing enough of its own funds. Meanwhile, it waits to sign deals with international companies for both oil and electricity projects.

Much of that hinges on security and the controversial draft oil law that is pushed heavily by the Bush administration. It's stuck in Parliament in multiple feuds, namely the extent control over the oil should be in the hands of the national or local governments and the extent international oil companies should be allowed into the long-nationalized oil sector.

Iraqis largely favor nationalized oil, though they agree to some extent international firms should be allowed in to fix the decades of problems.