The Middle East: Mousetrapped in Iraq

At a midnight press conference in Baghdad’s Defense Ministry, Iraq’s “sole leader,” Major General Abdul Karim Kassem.

last week threw down the boldest chal lenge to Western oilmen since Iran’s Mohammed Mossadegh expropriated the Anglo-Iranian Oil Co. in 1951. Kassem’s move : the establishment of a government-owned company to produce and market Iraqi oil.

Ever since he seized power in 1958. Kassem has been playing a cat-and-mouse game with the Iraq Petroleum Co., the international consortium that since 1942 has held exclusive oil exploration rights for virtually all of Iraq and has already found there proven reserves of 26.5 billion bbl. of oil. In the last four years alone, I.P.C. has invested nearly $300 million in Iraq, and Kassem’s government is largely financed by its 50% cut ($266 million last year) of I.P.C.’s profits. But this was not enough for Kassem, who demanded that I.P.C. surrender 20% of its stock to the Iraqi government and relinquish some of its exploratory concessions as well.

In 30 nerve-racking negotiating sessions, the I.P.C. steadily gave ground un til at last it offered to surrender 75% of its concession area immediately and give up another 15% within seven years. But the more the I.P.C. offered, the more Kassem asked. Last October, crying ”we shall rid ourselves of wickedness,” Kassem finally broke off the talks, revoked all I.P.C. concessions save those covering 740 sq. mi. in which the company was currently producing oil. Then he began laying the groundwork for last week’s establishment of a national oil company.

Because of the worldwide oil glut and Iraq’s shortage of skilled technicians, some Western oilmen insist that Kassem’s venture is foredoomed to failure. But unlike Iran’s Mossadegh. Kassem has prudently allowed the foreign oil company to continue production, thus assuring himself of a continuing income while he dickers for help in getting his own company on its feet. And help may not be hard to find. The Soviet Union might aid Kassem simply for political advantage. And in Rome sits hawk-faced Enrico Mattei, boss of Italy’s state petroleum monopoly, who delights in defying the big Western oil companies. Though Mattei is getting oil more cheaply from Russia than he probably could from Iraq, he is under mounting pressure from other Common Market members to cut back his imports of Soviet oil. A deal with Kassem could offer Mattei the one strength he now lacks: a reliable major oil supply of his own.

-Jointly owned by British Petroleum (formerly Anglo Iranian Oil), Royal Dutch/Shell, Compagnie Francaise des Petroles. Jersey Standard, Socony Mobil, and the estate of the late Calouste (“Mr. Five Percent”) Gulbenkian.