Special Report: Iraq rebuilding a big opportunity for Gulf states

The effort to rebuild Iraq involves a lot of politics and is expected to put Iraq's relationship with GCC members to the test. GCC members and the Organisation of Petroleum Exporting Countries (Opec) do not have much say in U.S.-ruled Iraq.

However, a well coordinated effort by Opec and the GCC may yield a substantial portion of the Iraqi rebuilding business for the Gulf countries. Whether Iraq will remain within the Opec fold or chart its own path is being debated at almost all major forums in the GCC.

Administration

While on the one hand there is the U.S., which currently holds charge of the administration of the country and is making efforts to put its oil economy back on track, on the other there is Opec which is keen to see that Iraq remains within its fold. The GCC countries are also keen to see that they get the lion's share of the ongoing rebuilding activities in Iraq.

However, Opec, which itself is mired in its own internal problems, needs to get its act together and take advantage of the influence of its GCC member countries over Iraq.

But first Opec will have to put its own house in order. Some of the Opec member countries like Nigeria and Algeria have insisted on a raise in their share of total Opec production in recent times. This being an extremely contentious issue, Opec members normally try to have an open discussion on it.

Saudi Arabia, the biggest member of the group, has voiced its concern over the issue and advised the member countries to maintain the output level to stabilise the prices.

Saudi Arabia, which has the highest output of over 6 million barrels per day among the group members, has already made it clear to its members that it will not allow the oil prices to dip below the rock bottom price of $22 per barrel.

Saudi Arabian oil minister Ali Al Naimi, who is known for his strong views on the oil prices, has informed the members that the Opec will go to any extent to ensure that the oil prices remain within the price band of $22 to $28 per barrel for the next ten years.

Opec is yet to take a formal stand on the issue of redistribution of the output quota among the members and it is also confronted by the return of Iraq exports.

Who will make the sacrifice for Iraq?

The return of Iraqi oil in the global market has given a clear message to the Opec members that a decision has to be taken soon on how to accommodate its pre-Kuwait war quota of 2 million barrels per day.

It is now a well known fact that to accommodate Iraq, Saudi Arabia and maybe a few others among the present members will have to make some sacrifices in order to stabilise the oil prices.

Saudi Arabia may be forced to sacrifice the most, said industry analysts. The UAE, Iran and Kuwait may be compelled to follow Saudi Arabia and accommodate Iraq by reducing their respective quotas.

The UAE and other member countries of Opec have already pledged their support to Iraq's rebuilding efforts. However, sceptics among industry analysts believe that when it comes to the oil business, few among the GCC member countries may agree to sacrifice their Opec quota to accommodate Iraq.

The Opec, which has lost a substantial amount of its oil trade share to non-Opec member countries like Russia, Norway and Mexico in recent times, has openly acknowledged the importance of Iraq being within its fold. However, so far no concrete step has been taken by the group, pointed out an industry source.

The world's second largest proven oil reserves, which areestimated at over 125 billion barrels of oil, has brought Iraq to the centre stage of the power struggle between the Opec, non-Opec oil producers and the U.S.

The U.S. is currently more focused on the reconstruction of the country. But industry experts believe that soon the U.S. will get down to the "real business".

The Iraqi oil industry is currently being managed by U.S.-appointed administrators. Many watching the Iraq developments with keen interest believe that the biggest business opportunities are probably in rebuilding the Iraqi oil industry.

Here again, like the oil trade, GCC member countries will have to ensure that their age-old relationship with Iraq brings them some benefits. The U.S. led-administration in Iraq has started awarding contracts. One of the biggest contracts has gone to Bechtel and more are likely to follow.

To ensure its own members get the best business opportunities in ongoing rebuilding efforts in Iraq, the GCC will have to take the initiative and enhance awareness among the member nations.

Whether Iraq stays within or outside Opec, the rebuilding of the country devastated by the war is a major business opportunity and a timely step by its neighbouring GGC countries may prove helpful in the long run.