OPEC warns against military conflict with Iran

By James Kanter

Thursday, July 10, 2008

VIENNA: The head of the Organization of Petroleum Exporting Countries warned Thursday that oil prices would see an "unlimited" increase in the case of a military conflict involving Iran, because the group's members would be unable to make up the lost production.

"We really cannot replace Iran's production - it's not feasible to replace it," Abdalla Salem El-Badri, the OPEC secretary general, said during an interview.

Iran, the second-largest producing country in OPEC, after Saudi Arabia, produces about 4 million barrels of oil a day out of the daily worldwide production of close to 87 million barrels. The country has been locked in a lengthy dispute with Western countries over its nuclear ambitions.

In recent weeks, the price of oil has risen higher on speculation that Israel could be preparing to attack Iranian nuclear facilities. The saber-rattling intensified this week with missile tests by Iran. That has further shaken oil markets because of concerns that any conflict with Iran could disrupt oil shipments from the Gulf region.

"The prices would go unlimited," Badri said during the interview, referring to the effect of a military conflict. "I can't give you a number."

Analysts said the timing of Badri's remarks was noteworthy, given that the idea of an attack on Iran has been around for years. In addition, an attack on Iran would probably not specifically target oil facilities, said Johannes Benigni, managing director of JBC, an oil research and consulting firm in Vienna.

"Perhaps OPEC wants to say to the Americans in particular that there would be an economic price to be paid for an attack on Iran," said Daniel Gros, director of the Center for European Policy Studies in Brussels. "Gulf leaders also know that if a war broke out, the situation of some Gulf states also would become more uncomfortable and could have political difficulties for them domestically," he said, noting that some have their own Shia minorities.

Badri, a former oil executive who has headed the oil industry in Libya and also served as deputy prime minister of that country, called for a peaceful solution. He also suggested that an additional military conflict in the Middle East, besides the ongoing conflict in Iraq, would be severe and long-lasting.

"If something happened there, nobody would be able to solve it," he said.

The United States, Israel and other Western countries say Iran is seeking to develop nuclear weapons, but Iran says the program is only for civilian purposes.

Badri said that current geopolitical tensions were among the principal reasons why oil prices were so high.

He said that a shortfall in refining capacity and a weak dollar were other factors, and he reiterated OPEC's position that speculation on oil markets probably was the most important.

But he said that reserves of oil were plentiful and that worries about scarcity were misplaced.

Proven reserves of conventional oil worldwide rose slightly to about 1.205 trillion barrels in 2007 from 1.195 trillion barrels in 2006, according to one of two annual reports issued by OPEC on Thursday.

Supplies from Russia and Norway and other nations outside the 13-member OPEC are expected to keep growing, helped by technologies like turning gas and coal into liquid fuel and extracting oil from tar sands and shale.

Even so, Badri sought to assuage concerns about a supply shock, saying that OPEC members already were investing $160 billion in new production capacity up to 2012.

But he said additional investment in future production capacity could be limited, potentially sharpening a dispute with consuming nations about whether sufficient steps are being taken to meet demand over the next decade.

The International Energy Agency, an energy monitor based in Paris and financed by industrialized nations, warned in its annual medium term report this month that oil supplies would remain tight over the next few years, despite the record-high prices. The IEA noted low spare capacity from OPEC, among other factors. It said that prices were high mostly because of fast-growing demand from rapidly industrializing countries like China, rather than because of market speculation.

On Tuesday, leaders of the Group of 8 economic powers warned that surging oil prices could be a key factor undermining world growth and called on petroleum suppliers to increase production and refining and to increase investment in oil exploration and output over the medium term.

Some analysts have predicted that oil prices could reach $200 a barrel this year as oil consumption continues to rise rapidly while supplies lag.

Saudi Arabia has said it would raise output in July. But OPEC has not officially increased output since a meeting last September. The next meeting of the group is in September. Badri said it was too early to say whether OPEC would raise output then.

OPEC also reported Thursday that economic growth in emerging markets would ensure that consumption worldwide increased annually by 1.3 million barrels a day to 92.3 million barrels by 2012, 102.2 million barrels by 2020, and 113 million barrels per day by 2030. The figure for 2030 represented a downward revision of the expected oil demand, by four million barrels a day, from the previous year's outlook.

OPEC officials said that improving recovery and production processes would continue to enable efficient recovery of hydrocarbons. But because of the diverse sources of liquid fuels coming from sources like natural gas and coal, total demand for crude oil pumped from wells would not exceed 82 million barrels a day by 2030.

Total withdrawing from Iran

Total, the French oil giant, has decided to back away from planned investments in Iran because of political uncertainty, a company official said Thursday, David Jolly reported from Paris.

Total's withdrawal from Iran, including a planned huge gas project in the South Pars field, makes it the last major Western oil company to give up on Iran amid pressure from Washington.

"We think that under current conditions it is not possible in Iran just now," Patricia Marie, a spokeswoman for Total, said.

Plan Offered to Revamp War Powers Act

Wednesday 09 July 2008

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by: John M. Broder, The New York Times

Former Secretaries of State Warren Christopher and James A. Baker III oversaw a year-long study into the tension over war powers between the executive and legislative branches.
(Photo: Getty Images)

Washington - Two former secretaries of state have declared the War Powers Resolution of 1973 obsolete and proposed a new system of closer consultation between the White House and Congress before American forces go into battle.

Their proposal would require the president to consult lawmakers before initiating combat lasting longer than a week except in rare cases requiring emergency action. Congress, for its part, would have 30 days to approve or disapprove of the military action.

The plan would create a new committee of Congressional leaders and relevant committee chairmen, with a full-time staff with access to military and intelligence material. The president would be required to consult with the group in advance of any extended strike.

Secretaries of State Warren Christopher and James A. Baker III oversaw a year-long study of the longstanding tension over war powers between the executive and legislative branches. In a report to be released on Tuesday, they concluded that the 1973 law, which was passed in the waning days of the Vietnam War and which aimed to limit the president's ability to commit American forces to war unilaterally, never served its intended function and must be replaced.

In an Op-Ed article in The New York Times on Tuesday,, Mr. Christopher, who served under former President Bill Clinton, and Mr. Baker, who served under the first President Bush, wrote that the 1973 act is "ineffective at best and unconstitutional at worst. No president has recognized its constitutionality, and Congress has never pressed the issue. Nor has the Supreme Court ever ruled on its constitutionality."

"As a consequence," they wrote, "the 1973 statute has been regularly ignored - a situation that undermines the rule of law, the centerpiece of American democracy."

Presidents since Jefferson have asserted the right to commit troops to battle when they deem it in the national interest. Congress has the power under the constitution to declare war and control spending on military actions, but it has seldom exercised it. The new legislation is designed to clarify when and for how long presidents can act unilaterally.

The question has arisen repeatedly in the context of the Iraq war. In 2002, President Bush sought and received Congressional authorization for military action to enforce United Nations weapons sanction. Since then, however, many members of Congress have claimed that he has exceeded that authority and have tried repeatedly to limit the scope of the war and impose a timetable for withdrawal of troops. All of those efforts have failed.

In 2007, several senators, including Robert C. Byrd of West Virginia, Hillary Rodham Clinton of New York and Barack Obama of Illinois, the likely Democratic presidential nominee, tried to repeal the 2002 war authorization. They also fell short.

In a Republican presidential debate last October, Senator John McCain, the likely Republican presidential candidate, said he would take military action without going to Congress first, "if the situation is that it requires immediate action to ensure the security of the United States of America."

"That's what you take your oath to do when you're inaugurated as president," Mr. McCain said. But he also said that he would seek the approval of Congress if there were time to assess the threat and debate possible courses of action.

Mr. Baker and Mr. Christopher led a commission of former policymakers and constitutional experts to study the war powers question. The group included former Democratic Representative Lee Hamilton, who was a co-chairman with Mr. Baker of the Iraq Study Group in 2006, whose recommendations for a gradual withdrawal from Iraq were largely ignored by President Bush. Other members of the panel were former Republican Senator Slade Gorton of Washington, former Secretary of the Army John O. Marsh Jr., former Attorney General Edwin Meese III and former Deputy Secretary of State Strobe Talbott.