Saddam May Find Resistance in Oil Embargo Plan

Iraqi President Saddam Hussein says he's ready to go to war using one of his most effective weapons: oil.

Saddam has indicated that he's ready to turn off the taps to use crude as a weapon to punish countries supporting Israel, and has told other Arab nations to follow his lead in an escalating war of words.

"It's a disgrace on all Arabs and believers everywhere in the world if they don't help their Palestinian brothers in their battle," Saddam told his ruling Ba'ath Party in a speech Sunday night before the directive to Arab nations. "If Arabs want to put an end to Zionism, they are able to do so in 24 hours."

Iraq pumps out 200,000 barrels of oil a day and is the fifth-largest producer of oil for the United States despite sanctions that allow Iraq to sell only enough oil to pay for humanitarian and medical relief for its citizens.

"Saddam Hussein has made similar threats in the past and has not followed through. It's a little bit like the little boy who cried wolf," said Erik Gustafson, an Iraqi policy expert.

"This is a desperate attempt on his part to stay in power. Ultimately, it's not going to work and within 12 months, Saddam Hussein is going to be out, and I think he's going to be in his equivalent of paradise, he['s] not going to be on this Earth," forecast Forbes magazine publisher Steve Forbes.

If Saddam were to succeed in such a push, the impact could devastate the U.S. economy. Oil prices would skyrocket, gas lines would return and President Bush could imagine a future like that of Jimmy Carter, whose presidency sank in the midst of a 1979 oil crisis.

World markets are already vulnerable to changes in supply because OPEC recently cut production by 1.5 million barrels a day. The price of crude jumped above $27 a barrel. That's a 50 percent hike since the beginning of the year.

Markets, however, do fear a repeat of the economically devastating 1970's gas lines when OPEC imposed an oil embargo on the United States because of U.S. support for Israel during the Middle East conflicts in 1973.

But this time around, oil industry experts say Saddam's going to have a harder time rallying the oil-producing troops.

"Most oil-producing nations within OPEC will not use oil as a weapon. It will be a weapon of last resort as far as they're concerned," said Phil Flynn of Alaron Trading.

"The real question is: Does an embargo go along with an output reduction by OPEC? But let's remember something about Saudi Arabia. They export around 1.7 million-1.8 million barrels of oil a day to the U.S. About a third of that goes to a half-owned refining system. They're half owner so are they going to embargo their own refining system?" asked John Kingston, Platts' global director of oil.

Just the threat of further unrest in the area destabilizes crude markets. Saddam's words could have an impact on prices just by talking loudly and holding a big oil reserve.

"The significant part of all this, however, is that it has really come to the point that Saddam can make a statement like this and that it doesn't fall on deaf ears," said Samer Shehata, a professor of Middle Eastern Studies at Georgetown University.