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Last Updated: Thursday, 17 April, 2003, 12:48 GMT 13:48 UK
Q&A: Who will control Iraq's oil?

Attention is turning to the reconstruction of Iraq, in particular its sanction-hit oil industry which could be used to pay for rebuilding programmes. But political, legal and economic issues mean ending the restrictions on oil production will not be a simple step.

What will happen to Iraq's oil supplies?

This is being seen as the key question of the post-war reconstruction of Iraq. Baghdad's massive oil reserves - second only to those of Saudi Arabia - hold the potential to make Iraq one of world's richest countries so control of the industry is crucial.

US officials including Vice-President Dick Cheney and Secretary of State Colin Powell insist the oil assets will be used to benefit Iraqis but that could mean oil being sold to pay for rebuilding contracts handed out to US companies.

Unlike Afghanistan, Iraq has the means through oil to pay for its "liberation". There could also be demands for compensation for war costs. The Pentagon says it spent $20bn in the first four weeks since invasion.

How soon can oil production be resumed?

Despite the huge reserves, Iraqi exports now represent only 3% of total global production.

Daily production fell from a peak of 3.5 million barrels in 1980 to about 2.8 million barrels as the war began. Analysts say the industry's infrastructure is in poor shape and it could take years and millions of dollars to return to the 1980 level of output.

But Iran's Oil Minister Bijan Zanganeh said production could be increased far more rapidly and might lead to a need to restrict sales to protect oil prices. He said Iraq's production could reach 3.5 million barrels per day within a year.

While coalition commanders said many oil facilities were wired for destruction, most were seized intact as the US-led forces moved through Iraq.

They might be able to be restarted quickly but a mass injection of capital would be needed to develop new areas to tap the reserves.

Why does the US want sanctions lifted?

All parties agree that ending sanctions is vital to Iraq's future. But the speed with which Washington is acting has surprised some observers.

There are fears that the US might use its current control of Iraq to agree deals as part of a "victory dividend" for its role at the head of the military coalition.

With no government ready to take over from the toppled regime of Saddam Hussein, it is unclear who else would take charge.

The question of ownership is more than an academic point. A company buying Iraqi oil could face legal action from someone who argues that the new Baghdad administration does not own the oil or have the right to sell it.

What do other countries think?

Correspondents say a key fear is that if the UN lifts sanctions it will effectively lose control of what is going on in Iraq. The sanctions remain the main leverage for Security Council members, including war opponents such as France, Russia and Germany, to persuade the US to give the UN a political role in Iraq's reconstruction.

There is an economic as well as political aspect to the views of countries including France and Russia. Russian firm Lukoil says it expects its contract to develop Iraqi oilfields to be honoured while France's state-controlled oil company TotalFinaElf also reached similar potentially lucrative understandings. France was also the leading supplier of goods to Iraq under the UN's oil-for-food programme.

What was the situation before the war?

Proceeds from permitted Iraqi oil sales were deposited in a UN account and used to buy food, medicine and other civilian goods. About 60% of Iraqis were dependent on the oil-for-food programme which was suspended as the war began. The Security Council voted to resume the aid, giving Secretary General Kofi Annan power to control the programme in the absence of an official Iraqi administration.

What are the terms for the sanctions to be lifted?

UN resolutions demand that Iraq be declared free of weapons of mass destruction before the sanctions can be lifted. But the UN arms inspectors who left Iraq before the war have not yet returned. And it could take months before they can give assurances that there are no banned weapons in the country.

Why were the sanctions imposed?

The sanctions were imposed on Saddam Hussein's regime in August 1990 when Iraq invaded Kuwait. They included a ban on trade links and an embargo on sales of arms and oil.

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