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IN EARLY September 1960 the Iraqi government hosted officials from Venezuela and three Gulf countries for an obscure five-day conference in Baghdad. Wearing suits rather than robes, and sitting at a plain wooden table, they founded the Organisation of Petroleum Exporting Countries (OPEC). For the next three decades Iraq helped to lead the oil cartel as both membership and output grew rapidly. But its influence declined in 1990 when it invaded another founding member, Kuwait, and fell under United Nations sanctions. Despite having the world's third-largest reserves of oil, Iraq dropped to 13th place in the international production table. Pipelines rusted, wells remained untended and engineers emigrated.


Yet Iraq will have to pull off an unprecedented feat. In the history of the modern oil industry, no country has increased output with the speed the Iraqis envisage. Over the next seven years Iraq intends to go from producing 2.5m barrels per day to 12m b/d, a target that exceeds Saudi Arabia's current output by more than 30%. To this end, Iraq has signed ten deals with most of the world's top oil companies. Some got down to work this month.





There is no guarantee that compromise will continue to trump violence. Iraq could still relapse. A bigger worry, however, is the growing opposition to Iraq's oil surge from its neighbours. At today's levels of world demand, an influx of Iraqi crude could force down prices and make other OPEC members cut production even more than they already have over the past year. Few doubt a new quota for Iraq needs to be negotiated, therefore, but where to start? Iraq's latest quota dates back to 1991 and, at just 3m b/d, was similar to Iran's. In the past, OPEC has put Iraq and Iran on a par. But Mr Shahristani earlier this year demanded a quota similar to Saudi Arabia's. He makes the plausible argument that Iraq underproduced for decades and deserves to catch up, but this has irritated the Saudis.

The pressure on Iran

Iranian unease over Iraq's oil production is even more pronounced. Countries like China have resisted piling more sanctions onto Iran over its nuclear programme partly for fear of jeopardising Iranian energy supplies. These could suddenly look less crucial. Iran's oil industry suffers from a lack of investment and technology. It needs the skills and money that the oil majors now look likely to lavish on Iraq. And Iran, more than its Gulf neighbours, relies on high crude prices to sustain a wobbly budget and buy support at home. Perhaps all this explains the warning shot Iran fired last December, when it sent soldiers across the Iraqi border and briefly occupied a well in the Fakka oilfield.

Others have spotted Iran's vulnerability. American officials say one aim of this week's visit to Arab states in the Gulf by Hillary Clinton, the secretary of state, was to ask them to reassure Asian customers that they could pick up any drop in Iranian oil output.