Washington Report, June 27, 1983, Page 4

Trade and Finance

Iraq: Oil Exports Hurting

More than two and a half years since the day it started, the continuing war between Iran and Iraq still appears to be a stalemate. But a look at what has happened to the oil industry in each of the two countries indicates that in this sector, at least, it is the Iraqis who have been hurt the most.

Iraq's capacity to export oil has been severely handicapped since the very first days of the war, when Syria, an ally of Iran, closed down Iraq's main pipeline to the Mediterranean. In addition, tankers have been hindered by an Iranian naval blockade from reaching Iraq's oil terminals on the Gulf. As a result, the Iraqis have been limping along on exports of only about 700,000 barrels a day—less than one quarter as much as before the war—which go through a pipeline to Turkey that is still functioning. These exports bring in over $7 billion a year—a rather modest sum in view of the $1 billion per month that Iraq is spending for the war alone. Its reserves have dropped from $35 billion to something around $5 billion, and it has been depending for financial survival on handouts from Kuwait and Saudi Arabia. But these handouts have been getting smaller and more infrequent in recent months.

In the meantime, Iran's exports have increased from one million barrels per day at the beginning of the war to about 1.7 million barrels a day—which is in any case still less than half as much as Iran exported during the best days under the Shah. Occasional Iraqi bombings of Iranian oil installations and export facilities have failed to halt the flow. The Iranians still export through the island of Kharg with relative impunity.

The Iranians may have trouble producing any more, however, for the foreseeable future. Its present production is coming from wells having natural flow, but any substantial increase would require water injection or other recovery methods for which, since the purges of the revolution, there is a shortage of skills.

Oil problems for both sides could be a lot worse, if either side had pursued the bombing of the other's oil facilities with as much thoroughness and determination as it was capable of showing.

Bombings and Swipes

The Iraqis have several times hit oil platforms at Nowruz, in the Gulf, causing fires and leaks of oil. They have bombed an Iranian oil tank farm near Abadan and taken several swipes at ships approaching Kharg Island. But they never seriously tried to damage this vital oil shipping center. It is very well-defended with a U.S.-installed air defense system, although by no means invulnerable.

The Iranian airforce, on the other hand—dependent on American spare parts—ran out of steam early in the war. In the southern part of Iraq, Iranian planes did bomb the sheds of a construction company and a refinery on the outskirts of Basrah in the early weeks and also attacked some offshore oil loading installations in the region of Rumeila, near the port of Basrah. But even with the airforce's limitations, the attacks appeared to be perfunctory.

Many observers believe that neither side wanted to go all out, for fear that the other side could give as good as it got—and that the net result would be the destruction of the oil industries of both countries.