Saddam Hussein is sitting on a gold mine — the second-largest oil reserve in the world — and everyone wants a piece of it.
Oil is a consideration for nations considering joining in the fight if the United States goes to war in the Persian Gulf, because the day after Saddam is removed, the Iraqi oil industry is up for grabs.
Of all of the reasons offered for removing Saddam, from terrorism to terrible weapons, oil is seldom mentioned. Yet critical to the American agenda is the fear an Iraq armed with nuclear weapons could dominated, or hold hostage a region through which flows an estimated 30 percent of the world's oil and natural gas.
Similar worries about the world's oil supply figured heavily in the 1991 Gulf War, and before that, concerns Iran might capture critical oil fields led the United States to support Iraq in the war between those two countries.
And now, oil is a consideration in the continuing drama at the United Nations. France and Russia, both with veto power in the Security Council, have extensive oil interests in Iraq.
Paying a ‘Fear Premium’
In the oil economy, talk of war is already driving prices up. A barrel of crude costs about $30, up 25 percent since August. And some analysts say the market is anticipating a crisis.
"The price is telling us right now that people think on balance that a military solution is more likely than a diplomatic solution," says oil analyst Sara Emerson.
"We see already in the oil price a sort of fear premium," adds Daniel Yergin, author of The Prize, a history of the oil industry. "Things can come together to really frighten a market."
The same happened 12 years ago, after Saddam's surprise invasion of neighboring Kuwait. When the shooting started, the oil exports stopped from the Gulf's two big producers, Iraq and Kuwait. In the three months after the invasion, oil prices went up significantly.
It was not until the air war began in January of 1991, and images of its destruction flashed around the world, that oil markets immediately calmed and prices fell by $7 to $8 a barrel.
"I think we definitely learned something last time," says Emerson. "We learned that the market gets spooked by uncertainty, and when you have a certain resolution, whether it's diplomatic or military, there is a little bit of relaxation of the uncertainty and that allows the market to come down."
Sitting on a Sea of Oil
But the lesson, experts say, is that critical to market stability is the availability of other sources of oil.
"The whole market would have its eyes and ears on what's happening to alternative supply," says Yergin. "And as long as the alternative supply was not interrupted in any serious way, probably at that point the price would start coming down again."
On that score, the oil market of today is very different from that of a decade ago. The United States and other industrialized countries have more stockpiles of oil. The Gulf states are keeping oil supplies in reserve offshore, and new producers have come online in Africa, in Central Asia, and in Russia.
But none of them can compare with Iraq. The country sits on a sea of oil — with known reserves of more than 112 billion barrels.