TIME: Almanac 1993/TIME Almanac 1993.iso/time/120390/1203510.000

Text File | 1992-08-28 | 9.8 KB | 255 lines

                                                                                INTERVIEW, Page 22

Prospects of War, Psychology of Oil


Former Saudi Oil Minister AHMED ZAKI YAMANI says Saddam Hussein
and the Gulf crisis will forever change the world petroleum game

By ADAM ZAGORIN LONDON and 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.