THE WAR FOR RESOURCESGULF WAR (JAN-FEB 1991)

THE GULF WAR

Gulf War –conflict waged by coalition force from 34 nations led by the United States against Iraq in response to Iraq's invasion and annexation (occupation) of Kuwait.

BACKGROUND

Iraq claimed that Kuwait territory historically belongs to them.

Iraq accused Kuwait of exceeding its OPEC quotas for oil production. The United Arab Emirates and Kuwait were consistently overproducing oil. Iraq was interested in keeping price about 18$/barrel. But Kuwait and UAE kept to overproducing it, so price dropped to 10$. Iraq losses estimated to be 7 billion dollars a year.

Kuwait reserves estimated to be 10% of the world's reserves. Iraq - 3-4%

IRAQ INTERVENTION

• 2nd August Iraq National Army have crossed the Kuwait border.

• Iraqi Army was the world's fourth largest army; it consisted of 955,000 standing soldiers, 650,000 paramilitary forces, 4,500 tanks, 484 combat aircraft and 232 combat helicopters.

• Kuwait army consisted of 16’000 men, 80 aircraft and 40 helicopters

• Within 12 hours all country was captured.

• Iraq SpecFors attempted to capture Kuwait’s Royale family, but were unsuccessful. They have fled to OAE.

• Same day, a new government was established, which signed the document about Kuwait joining Iraq.

WORLD’S REACTION• World public have doomed Iraq for such hostile actions.

• Coalition was created shortly consisting of 34 nations

Note: most of them are:

• Well-developed• Energy-dependant• Members of OPEC

• Resolution 678, was passed on 29 November 1990, which gave Iraq a withdrawal deadline until 15 January 1991, and authorized "all necessary means to uphold and implement Resolution 660 (free Kuwait)", and a diplomatic formulation authorizing the use of force if Iraq failed to comply

ECONOMIC EFFECTS

• Oil supplies were constantly delayed/stopped/lost.

• Oil price growth massively

• Other economical sectors were negatively affected by this conflict

• The tensity in the region made all non-Arab civilians, religious minorities and foreigners targets of religious radicals, including Americans.

• The USA investments in the oil sector were under threat of withdrawl, meaning that investors/firms were willing to quit the area.

KUWAIT

GDP – $167.9 billion

Income per capita of US$81,800

5th richest country in the world, per capita.

THE REASONS FOR INTERVENTION (OFFICIAL VERSION)

Annexation - is a severe violation of UN resolutions.

Severe abuse of human rights during military conflict.

High risk of destabilization of a region.

Heavy military crimes committed by Iraq soldiers.

The willingness of UN to bring peace in the area

THE REASONS OF INTERVENTION(NON-OFFICIAL/CONTROVERSIAL)

Destabilization of a region made oil market unstable – the oil prices started to grow rapidly

The Saudi Arabia, which was under threat of Iraq intervention, was a close partner of USA.

The war economy

THE WAR ECONOMY (EXPENSES)

Expenses of a conflict is estimated to be 40 billion of USD. Overall

HOWEVER

40 BILLION $

25% of the expenses was paid by the USA

(10 billion$)

75% of the expenses was paid by the Arab countries,

specifically by Kuwait and Saudi Arabia (30 billion $)

THE WAR ECONOMY (INCOME)

The oil price before the war was approx. 18$ per barrel...

…but with the Gulf war, it rose to 60$ per barrel, generating an EXTRA profit of about 60 billion $

Who did this profit go to?

In the Arab countries the “fifty – fifty” law is valid: 50% to the state and 50% to the multinational that controls

the oil deposit. This gives us…

Net profit from the increase in the price of oil: 60 billion $

30 billion $ to the oil companies

30 billion $ to the governments of the Arab states (Kuwait + Saudi

Arabia)

THE BEST PART OF A SCHEMEIn the Middle East, the extraction and trading of oil is in the

hands of the 7 Sister (Shell, Tamoil, Esso…), all of which are American, and 5 are state owned.

30 billion $

Approx. 21 billion $ to the American State

Approx. 9 billion$ to the American private

sector

Expenses of war

Profit from the increase in the

oil prices

Profit or loss

Arab Nations30$

billion30 $

billion0

USA GOVERNMENT

10$ billion

21 $billion

+ 11 $billion

USA Private Sector 0

9 $billion

+ 9 $billion

WAR ECONOMY (INVESTMENTS)

Where did the $ 40 billion spent for the war go?

To the war industry, all of which just happens to be almost exclusively in USA

CONCLUSION• The willingness of UN, led by US, to free

Iraq is economically based. • Most of the OPEC countries have

supported financially all of the Gulf war operations. Meaning that this little-scale conflict could affect world markets of oil.

• Today world is VERY dependant on crude oil.

QUESTIONS

• Which resource caused the conflict?

• Who were the main battlefield players?

• How much oil Kuwait have in possession?

• What price of oil was in 1990-1991?

• What price of oil was in 1989?