US embassy cable - 03AMMAN940

UNCLAS AMMAN 000940 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL, KPAO, OIIP, IZ, JO 
SUBJECT: IRAQ PD: DVC WITH JAMES PLACKE, OIL ANALYST 
 
1.  IN A FEBRUARY 4 DVC HOSTED BY PAS AMMAN, OIL ANALYST 
(AND FORMER STATE DEPARTMENT DAS) JAMES PLACKE REFUTED 
EFFECTIVELY ALLEGATIONS THAT "CONTROL" OF OIL RESERVES -- 
AND NOT DISARMAMENT -- IS AT THE CENTER OF U.S. POLICY 
TOWARD IRAQ.  ROUGHLY 20 JORDANIAN JOURNALISTS FILLED THE 
ONE HOUR PROGRAM WITH QUESTIONS THAT FOCUSED MAINLY ON TWO 
AREAS:  CONCERNS THAT THE U.S. INTENDS TO SEIZE IRAQ'S OIL 
FIELDS TO FINANCE A MILITARY OCCUPATION, CONTROL WORLD OIL 
PRICES AND EVISCERATE OPEC; AND JORDAN-SPECIFIC CONCERNS 
REGARDING A POSSIBLE LOSS OF HEAVILY-SUBSIDIZED OIL SUPPLIES 
FROM IRAQ IN THE EVENT OF WAR.  PLACKE HANDLED QUESTIONS 
WITH GRACE AND AUTHORITY, PROVIDING FACTUAL ANALYSIS NOTABLY 
ABSENT FROM MOST DISCUSSION OF THESE TOPICS IN JORDAN.  HE 
EMPHASIZED THAT, IN THE CASE OF WAR AND EXPECTED U.S. 
MILITARY PRESENCE IN IRAQ, IRAQI OIL PRODUCTION WOULD LIKELY 
FALL UNDER A TEMPORARY U.S. ADMINISTRATION, AND NOT BE 
"TAKEN OVER" BY U.S. OIL COMPANIES.  REVENUES FROM THE SALE 
OF IRAQI OIL WOULD ACCRUE TO THE BENEFIT OF THE IRAQI 
PEOPLE, AND NOT A REGIME ELITE.  ALL OF THESE MAJOR POINTS 
APPEARED IN SUBSEQUENT DAYS' PRINT MEDIA COVERAGE OF THE 
EVENT.  WE JUDGE THE PROGRAM SUCCESSFUL AND WOULD COMMEND 
MR. PLACKE TO OTHER POSTS IN THE REGION CONTEMPLATING 
SIMILAR PROGRAMS. 
 
2.  THE PROGRAM BEGAN WITH PLACKE NOTING SECRETARY POWELL'S 
STATEMENT THAT IN THE EVENT OF WAR IN IRAQ, THE U.S. WOULD 
BE GUIDED BY INTERNATIONAL LAW IN ADMINISTERING IRAQ'S OIL 
FIELDS AND THAT REVENUES FROM THE SALE OF IRAQI OIL WOULD 
BENEFIT THE PEOPLE OF IRAQ, NOT ITS REGIME.  PLACKE ALSO 
MADE THE POINT THAT IF OIL TRULY WAS AT THE HEART OF THE 
CURRENT CRISIS, IT WOULD BE AN EASY CONFLICT TO RESOLVE FOR 
ALL SIDES INVOLVED.  IN RESPONSE TO A STATEMENT THAT THE 
U.S. WOULD BE IN A POSITION TO CONTROL WORLD OIL PRICES IF 
IT INVADED IRAQ, PLACKE POINTED OUT THAT, AS A PERCENTAGE OF 
TOTAL WORLD PRODUCTION, IRAQ'S OUTPUT (AND THEREFORE ITS 
IMPACT ON GLOBAL PRICES) WAS EXTREMELY MODEST.  IN ANY CASE, 
HE CONTINUED, OPEC HAD LONG SOUGHT SUCH A ROLE AND HAD 
DEMONSTRATED A VERY LIMITED ABILITY, HISTORICALLY, TO 
"CONTROL" THE PRICE AND SUPPLY OF OIL AROUND THE WORLD.  IN 
DISCUSSING THE IMPORTANCE OF MIDDLE EAST OIL TO U.S. OIL 
NEEDS, PLACKE NOTED THAT SAUDI ARABIA IS THE ONLY MIDDLE 
EASTERN COUNTRY WITHIN THE TOP FIVE SUPPLIERS OF OIL TO THE 
U.S. AT PRESENT. 
 
3. OF GREATEST INTEREST TO THE JOURNALISTS PRESENT WAS THE 
FUTURE OF THE PRESENT JORDAN-IRAQ OIL SUPPLY ARRANGEMENT, 
WHEREBY IRAQ PROVIDES HALF OF JORDAN'S OIL NEEDS FREE WITH A 
REDUCED-PRICE/BARTER ARRANGEMENT GOVERNING THE SUPPLY OF THE 
REMAINING HALF.  JORDANIANS ARE UNDERSTANDABLY CONCERNED 
ABOUT THE FATE OF THIS FAVORABLE ARRANGEMENT.  ATTENDEES 
ASKED HOW JORDAN COULD POSSIBLY SURVIVE AN ECONOMIC SHOCK 
CAUSED BY A DISRUPTION OF OIL SUPPLIES FROM IRAQ AND WHETHER 
THE U.S. WOULD HELP JORDAN TO COMPENSATE FOR ANY SUCH LOSS. 
WHILE PLACKE EMPHASIZED HE WAS NOT IN A POSITION TO ADDRESS 
THOSE CONCERNS, HE NOTED THE EXCELLENT RELATIONS BETWEEN THE 
U.S. AND JORDAN AND THE HIGH REGARD IN WHICH KING ABDULLAH 
IS HELD IN THE UNITED STATES, INDICATING TO HIM THAT THE 
U.S. WOULD BE PREPARED TO ASSIST JORDAN IN WEATHERING ANY 
SHORT-TERM DISRUPTIONS. 
 
3.  REPORTING ON THE PROGRAM WAS FEATURED IN JORDAN'S MAJOR 
DAILY ARABIC NEWSPAPERS.  REPORTS HIGHLIGHTED PLACKE'S 
COMMENTS THAT:  THE PRINCIPAL REASON FOR WAR WOULD BE WMD, 
AND NOT OIL; THE IRAQI OIL INDUSTRY WOULD BE FALL UNDER 
TEMPORARY U.S. ADMINISTRATION, LEAVING IN PLACE TECHNOCRATS 
AND WORKERS BELOW THE SENIOR LEADERSHIP; JORDAN WOULD 
DOUBTLESS BE HIT HARD BY A DISRUPTION IN ITS OIL SUPPLIES 
FROM IRAQ, BUT IT SHOULD BE EXPECTED THAT A NEW OIL SUPPLY 
RELATIONSHIP WILL BE FORMED OVER TIME AND THAT, IN THE 
MEANTIME, JORDAN'S FRIENDS LIKE THE U.S. WOULD LIKELY HELP 
IT THROUGH SHORT TERM DISRUPTIONS. 
 
4.  POST THANKS IIP/T, JAY RICHTER, AND IIP/G/NEA, TERENCE 
SCOTT FOR THEIR HELP IN PUTTING THIS PROGRAM TOGETHER. 
 
BERRY