Is it all about oil?

It has become a commonplace of the anti-war movement that the conflict with Iraq is 'all about oil.'

The country certainly has massive reserves - the second biggest in the world. Politicians in Washington and London deny any motivation so cynical.

But any war is bound to have an enormous impact on oil supplies, and hence on the world economy.

There will be people who make money. Our Business Correspondent, Paul Mason examined who they're likely to be.

PAUL MASON:
The 16th Air Assault Brigade on exercise over Salisbury Plain last week. If Tony Blair gives the green light for war, the next time they jump could be into an Iraqi oilfield. The Pentagon has said that in any war, the oil installations would be seized to stop Saddam destroying them. In the oil industry, experts have a very clear idea of what happens in the worst-case scenario.

PHILLIP ELLIS:
(Boston Consulting Group)
If, in the unlikely circumstance physical damage is done to a lot of oil facilities in the Middle East, then history tells us that oil prices will double. If they stay double what they are today for a long period of time, six months to a year, then the world economy, which is already only growing 1% or 2%, optimistically, all growth will go away for some time period.

PAUL MASON:
"No blood for oil" has become the slogan of the anti-war movement. But it's not only US companies that have their eyes on Iraq. Over the past five years, Iraq's oil industry has become a proxy battleground for the interests of other major powers.

Iraq has the second biggest oil reserves in the world, after Saudi Arabia. The big northern oilfields are in slow decline, but it has booming oilfields in the south, and the unexplored Western Desert is thought to contain massive reserves.

Since 1991, UN sanctions have restricted western oil companies' involvement with Iraq. US oil firms are banned outright by the Saddam regime, but some companies have been allowed to sign provisional agreements. In the lead are Total Fina Elf, Lukoil and the China National Petroleum Corporation, companies strongly allied with the governments of France, Russia and China respectively. These three governments have resisted regime change as an overt goal of intervention in the UN Security Council.

The proxy war over oil contracts came to a head before Christmas when Iraq sacked Lukoil, Russia's biggest oil company, from a project to develop the West Qurna field.

NELLI SHARUSHKINA:
(Energy Intelligence Group, Moscow)
The formal reason this was indicated in the letter to Lukoil was the failure of Lukoil to start the work centre production agreement in West Qurna. But the Iraqi side admitted several times that the real reason was Lukoil's attempts to find assurances somewhere outside Iraq that Lukoil would hold on to this project in the case of regime change.

PAUL MASON:
But now there's been a thaw. As American troops poured into Kuwait, Russian oil bosses poured into Baghdad. On January 17th, they signed four big deals with Saddam. With regime change looming, why did they bother?

NELLI SHARUSHKINA:
The government that exists in Iraq is a legitimate government, whether you like it or not, and Russian companies signed contracts with a legitimate government. And whatever happens afterwards, whatever government is installed in Iraq, Russian companies will have something to claim their rights for, because they have contracts signed by a legitimate government.

PAUL MASON:
The French commitment to Iraqi oil has been well documented. Less well known is how vital contracts with Baghdad could be to China's economic future.

PHILLIP ELLIS:
In terms of China, it is going everywhere that it can to secure its energy future, starting with Indonesia, and very much now into the Middle East, because oil is the lifeblood of the economy. It really is, and they know that. They have got to find a way to get secure access, long-term, to drive economic growth.

PAUL MASON:
In Washington, there's an argument about what to do with Iraq's oil industry. Some in the Pentagon want it privatised and split, the revenues used to pay for reparations. But Colin Powell has promised that the oilfields will be "held in trust" for the Iraqi people.

RACHEL BRONSON:
(Council on Foreign Relations)
It's convenient to say this about oil, but when you look at the facts you cannot explain American foreign policy based on oil. It really is about disarmament, it clearly it has implications for oil, but it's certainly not driven by the desire to take over fields. That's why Colin Powell's statements were so important. It disturbs me significantly when I hear some in Washington, usually not in the administration, talking about taking over Iraqi oilfields. I think that's a sure-fire way to make sure that Iraqi guns are turned against Americans rather than the regime.

PAUL MASON:
For the USA, there are arguably far more substantial spoils of war than a few oil contracts. With a pro-US regime in Iraq, it's not the future of competing oil companies that's at stake, but the future of OPEC. The oil cartel controls the price of oil by controlling its supply. Ever since 1973, when OPEC massively hiked the price of oil, policymakers have fantasised about its demise. Some believe a US-installed Government in Baghdad with a seat on OPEC, and under pressure to turn on the taps to rebuild the economy, could bring the end in sight.

DR LEO DROLLAS:
(Centre for Global Energy Studies)
I personally don't think that OPEC's chances of survival are very great, but it will take time. They will obviously try to defend the organisation, and it will carry on limping along. But I don't think, in the next five to ten years, under the best scenario for Iraqi oil, a lot of Iraqi oil coming out, I don't think OPEC will be able to survive in its present form.

PAUL MASON:
Sheikh Yamani was Saudi Arabia's Oil Minister during the great price hikes that made OPEC a strategic player in the global economy. Retired from office, he retains links with the Saudi elite, though he's less constrained by diplomatic language when I ask him to define America's motive in the current crisis.

SHEIKH YAMANI:
(Former Saudi Oil Minister)
Oil. I have no illusion about that.

PAUL MASON:
What do you think is the oil motive of the West.

SHEIKH YAMANI:
The Americans want to completely eliminate any dependence on Saudi oil and Gulf oil, and this is a policy known now, it is no more a secret. They worked for it, and even prior to the September 11th incident America had a committee presided over by Vice President Cheney to work for that, but it can't really succeed until around the end of this decade. So the best thing to do is to occupy Iraq, and Iraq is a very important oil producer.

PAUL MASON:
If war does come, how will Saudi Arabia react?

SHEIKH YAMANI:
Increase the price of oil and make money.

PAUL MASON:
Shamelessly?

SHEIKH YAMANI:
Why? Realistically, if they make some money, we have a huge deficit and a huge debt. Let us pay back some of our debts.

PAUL MASON:
There are voices within the US administration who see this whole crisis as a golden opportunity to reshape the geopolitics of the region. Do you think that is a realistic prospect?

SHEIKH YAMANI:
Some people, with the arrogance of power, they cannot see things properly, and I think that's the problem they have. You cannot handle things in the Middle East as what happened after World War I, when you have a new geography and borders in the area. Both France and Britain did it, now it is very difficult. What they are going to do if they embark on this, they will produce real terrorists. I think some time in the future, Osama Bin Laden will look like an angel compared to future terrorists. Some people in my area started hating America. They are foolish. America is so valuable, and they might disagree with the American Government for what they're doing, I disagree myself, but America is so valuable. The American economy, the technology, everything in that country, if it's ruined, the whole world will suffer.

PAUL MASON:
And do you seriously think it could be ruined?

SHEIKH YAMANI:
Yes, with the price of oil going to $80 or $100, and everyone will really suffer in America. They won't have money to finance their research, their technology will come down, there'll be chaos of course.

PAUL MASON:
That's a worst-case scenario. The fire last time, when Saddam destroyed Kuwaiti oil wells, was not so devastating. If war does come, Iraq's oil installations will be an early operational target for both sides. Where they fit in terms of strategy depends on whether you think a weakened OPEC, and a more secure oil supply, are happy coincidences for America, or central to its plans.

This transcript was produced from the teletext subtitles that are generated live for Newsnight. It has been checked against the programme as broadcast, however Newsnight can accept no responsibility for any factual inaccuracies. We will be happy to correct serious errors.