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Thursday, August 13, 2015

Burning Kuwaiti oil wells still drains Iraqi budget

As Iraqi troops retreated to Baghdad after conceding defeat to U.S.-led coalition forces in Kuwait, they unleashed one final act of aggression when they set fire to nearly 789 Kuwaiti oil wells near the border. This left Kuwait in days of darkness as black smoke engulfed the skies. This act would not only leave Iraq accountable for ecological damage in Kuwait, but more importantly responsible for repaying financial losses. Kuwait’s economy suffered a heavy drop in export revenues immediately after the Gulf War due to the damaged oil wells. Years later, Kuwait would win reprieve when major powers on the ruling body of the U.N. Compensation Commission (UNCC) granted it nearly $52.4 billion in war reparations from Iraq. Analysts tell Al Arabiya News that only now, nearly 25 years on, are Iraq and Kuwait recovering from the incident. “The exit of Iraqi oil from the markets in 1990 created a new regional dynamic as other producers, mainly Saudi Arabia, stepped in to fill the gap,” said Ruba Husari, managing director of Iraq Insight Advisory. “Today Iraq is producing the same volumes it did before invading Kuwait, but it has to fight for the lost market share.” Richard Mallinson, a geopolitical analyst at Energy Aspects, says it has not always been easy for Iraq to catch up on payments. “Oil exports provide almost all revenue for the Iraqi government. These revenues were falling behind government spending even before global oil prices collapsed and fighters from the Islamic State of Iraq and Syria [ISIS] captured Mosul last summer,” he said. Payment deferral Under a cash-strapped budget, Iraq today has to allocate its funds to a number of other obligations, including the fight against ISIS, contractual payments to oil companies, public salaries and transfers to the Kurdistan Regional Government (KRG). Under pressure to make its payments last year, Iraq requested a deferral of its final payment of $4.6 billion in reparations for destroying Kuwait’s oil facilities. Analysts say while Kuwait was reluctant over the deferral, it had no choice but to accept. “Kuwaiti insistence on being paid war reparations is misguided” in the short run, said Jean-Francois Seznec, a political scientist at the Middle East Institute. “Iraq is desperate for cash to invest in modernizing its fields, develop its infrastructure and redevelop the country. It’s the only way the tensions between Iraqis will improve.” The burning of the oil wells caused a Saudi military plane to crash amid heavy smoke on approach to Ras Mishab airport, Saudi Arabia. At least 92 Senegalese soldiers and six Saudi crew members were killed, the deadliest accident at that point among coalition forces. Environmental damage It would take until Nov. 6, 1991 - nearly eight months after Iraqi troops left Kuwait - before the last burning oil well was capped and extinguished. This resulted in hundreds of oil lakes being formed. “These were initially called oil lakes, referring to the spills caused from extinguishing the fires at the oil wells. Now after all these years most of these lakes have turned into contaminated soil,” Redha al-Hasan, program manager for Kuwait Environmental Rehabilitation, told Reuters in 2011. “The total amount for environmental rehabilitation projects that will be executed by [the Kuwait Oil Company] from the environmental reparation money exceeds $2 billion.” Paying for past mistakes Asked whether present-day Iraqis should be held responsible for Saddam-era mistakes, analysts held mixed views. “From an ethical standpoint, Kuwait as a war victim is entitled to compensation. That’s why the delay of reparation payments is an important development,” said Ibrahim al-Marashi, assistant professor at California State University and researcher on modern Iraqi history. “In this manner, Kuwait says while it’s entitled to reparations for the actions of Saddam, it’s willing to forgo payments for the sake of Iraq’s security,” he added. Seznec said: “If Kuwait continues to force payments, Iraq may become so dependent on Iran, and daily tensions become so intense, that Kuwait could get hurt in the long run.” Mallinson said: “Kuwait will want the repayments to resume and for the missed payments to be made up. Given the state of Iraq’s finances, even if oil prices recover next year Baghdad may struggle to find the money to do so.”

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