IRAQ PD: DVC WITH JAMES PLACKE, OIL ANALYST

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