Prospects Of War, Psychology of Oil
By ADAM ZAGORIN LONDON Ahmed Zaki Yamani
Q. Does Saddam Hussein have a plan?
A. He knows that Iraq has a terrible financial problem, and he has to solve it. That is the root of his motivation, in my judgment. He thinks the best way to deal with this difficulty is to take over Kuwait, get hold of its oil and financial assets. Beyond that he has other great ambitions, which must also be financed.
Q. What is Iraq's oil strategy? And how great a threat does Saddam's control of the Kuwaiti oil fields represent?
A. I wonder if Iraq has a strategy. Saddam may only have temporary oil ! policies, depending on his large financial requirements. He has always tried to produce a lot of oil to make more money. But that is not a strategy.
Q. How disruptive can Iraq be?
A. Very disruptive. But if Iraq succeeds, initially prices would actually come down. How much would depend on Iraq's financial situation. Saddam's main objective is not the stability of the price of oil. It is to serve the financial requirements of Iraq.
Q. In other words, if the international community had not responded to the invasion, Iraq would at first have sold a great deal of Kuwaiti oil, driving the price down?
A. Yes, and to avoid a price collapse, Iraq would also pressure the Saudis, the United Arab Emirates and other gulf producers to reduce their output.
Q. How do you evaluate Saddam's threat to the Saudi oil fields?
A. Well, let us remember what happened during the Iran-Iraq war. Iraq had superiority in air power and was still not able to destroy any of Iran's oil fields -- even though they were nearby and within reach. Iraq was able to destroy only part of the huge oil terminal in the gulf at Kharg Island.
Today Iraq does not have superiority in the air. In the absence of that, their ability to inflict damage on the Saudi oil fields is zero.
Q. What would happen to the price of oil if war were to break out tomorrow?
A. Everything that is happening today in the market is psychological. A rumor might come in that an airplane is shot down or an official is assassinated -- and prices will jump by $3 to $4 a barrel. Another rumor says that peace talks are under way, and prices will drop. Now, if war erupts, psychology will be at work again. You have so many scenarios: the price could go up to $50, it can go to $60. If Iraq succeeds in halting the flow of oil from Saudi Arabia -- and I said this was a very big if -- then prices will jump to $100 a barrel, but only temporarily. Then prices will start coming down.
Q. Right now there is roughly 100 days' global supply of oil or 3.2 billion barrels, more than twice the level during the 1979 oil crisis. Why are today's prices so high?
A. Again, high prices come from market psychology, as they have in the past. The difference now is that we have a much larger volume of oil stocks than we did in the 1979 crisis. The world is currently producing at full capacity. Nevertheless, the market players keep pushing the price up and up. In 1979 they doubled the price of oil in eight months. This time they doubled it in only two months.
Q. President Bush spent many years in the oil business before going into politics. Would you comment on U.S. energy policy?
A. Oh, is there a U.S. energy policy? I understand that your policy is no policy. And this in itself is supposed to be a policy, according to some people in the Administration.
Q. What should the U.S. do?
A. Well, I think the U.S. has to encourage exploration. You have to establish good relations with the producers and have a stable supply of oil for yourself and the Western alliance. You have to be more cautious about how to consume energy.
Q. In December 1975 you and your fellow OPEC ministers were taken hostage in Vienna by Carlos, the international terrorist. Two people were killed before you were set free. As a victim of terrorism, how do you evaluate the phenomenon and its possible role in the gulf crisis?
A. I think terrorism will stay with us. It might flourish at times and become very much less of a threat at other times. But if we solve the Arab-Israeli problem, solve the Palestinian problem, we will drastically reduce its impact in the Middle East.
On the other hand, terrorists require shelter, a place where they can be trained, a country, a state that will help in smuggling their weapons and giving them passports. Eastern Europe is no longer a shelter. If we manage to stop certain states from performing this role, terrorism will decline.
Q. How is the Palestinian problem related to the gulf crisis?
A. Most of the Palestinians were against the Iraqi invasion in the first two, three days. But as soon as the Americans stepped in, they saw a contradiction. In the case of Israel, which occupies Palestinian territory, the U.S. offers one policy. Israel destroys houses, kills their boys, and in the Security Council when there is a resolution to blame Israel, usually America will not agree to it. In the case of the gulf, the U.S. comes running against Saddam Hussein. That is how the Palestinians see it.
Q. Your country, the kingdom of Saudi Arabia, has supported the Palestinians in many ways over the years. Now their principal representative, the P.L.O., is supporting Saddam Hussein. Is there any sense in which you feel this represents a betrayal or a lack of gratitude?
A. Well, of course, we feel really disappointed.
Q. Disappointed is not a very strong word.
A. Well, disappointment is strong. When you have a situation where you give and someone turns against you, you get disappointed. We feel disappointed, but our feelings toward the Palestinian problem will not change. Look at the reaction in Saudi Arabia and other Arab countries after the recent massacre ((of 21 Palestinians)) in Jerusalem. We were all disturbed, and we reacted strongly against it. So we distinguish between our feeling toward the leaders of the P.L.O. and our feeling about the Palestinian question.
Q. One other point on that. Once the current crisis is over, will the gulf states be as generous with regard to the Palestinians and the P.L.O. as they have been in the past?
A. I don't think what is happening today will come to an end without any consequences. I don't think we will do exactly what we were doing in the past. There will be a change in our policy.
Q. In what direction?
A. Well, how we deal with the P.L.O. It could be distancing, it could be dealing with other groups. I don't know.
Q. For more than 20 years you were OPEC's chief strategist. You introduced the world to an oil embargo, to gas lines and stagflation. How do you view OPEC today, and what are the organization's prospects?
A. The gas lines were not done by me. It was again a panic for no reason because there was enough oil, a huge stock. But the consumers panicked, and this is why we had gas lines.
Q. You mean Iraq will no longer be a threat if Saddam is eliminated?
A. Well, I mean that the oil policy will be conducted on the basis of the supply-demand situation, on a purely economic basis, rather than depending on artificial political objectives.
Q. You have called for a new global order to govern the oil business. How would that work?
A. It will definitely work if the three parties concerned with the oil industry -- producers, consumers and oil companies -- can cooperate to stabilize the price of oil to avoid a crisis in the future. Before that happens, we also need some sort of an arrangement between the major producers and the major consumers to avoid any shutdown of the oil fields or other disruptions.
Q. This kind of global understanding has never been reached in the past. What makes you believe it could be achieved in the future?
A. The lessons of the past. At least we could recognize the damage we cause to the world economy every time we have an oil crisis.
Q. You have also spoken of immediate steps to reduce the price of oil from its current level of about $33 a barrel to about $20 a barrel.
A. This is entirely in the hands of the consumers and the oil companies. But there is a huge global stock on hand, nearly 100 days' worth. So if we draw from these inventories we will still have enough oil to take us into 1991, and I don't think this crisis will last that long. If we do that, prices will quickly come down to about $20 a barrel. But if we don't, the price will gradually go up to $60 a barrel. Even if nothing else happens. Of course, if we have a severe winter, unfortunately, it could go even higher.
Q. Over the years you have been fascinated by astrology. You have a considerable collection of books on the subject. How many?
A. Well, I have quite a lot. I don't know the number. But the astrology that I am interested in is completely different from the astrology known to ordinary people: the prediction of what will happen to you because of the stars -- do this and don't do that. Now I completely look down on that part of astrology. The astrology I'm concerned with is the effect of the stars on marine life, on the human body, on agriculture, and this section of astrology is like a science. There are those who write books about this and the effect of astrology on the human mind, human behavior, the woman's cycle and so on. This is what fascinates me.