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Quick jump to below stories:
 CHALLENGES 2005-2006: Oil Market Analysts Issue Dire Warnings
 Homegrown fuel: a waste of energy?
 America's days as a superpower are over
 Iraqi Civil War? Some Experts Say It's Arrived
 Many Iraqi soldiers see a civil war on the horizon
 Kurds in Iraqi army proclaim loyalty to militia
India, China pin down $573m Syria deal

http://www.fromthewilderness.com/free/ww3/011606_world_stories.shtml#0

CHALLENGES 2005-2006:
Oil Market Analysts Issue Dire Warnings

Humberto Márquez
http://www.ipsnews.net/news.asp?idnews=31614

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

CARACAS, Dec 29 (IPS) - While this year's record high oil prices are unlikely to come down in the near future, analysts are warning the world's traditional and emerging economic powers to curb consumption, saying that at the current rate, proven reserves will only meet demand up to 2030.

 "The current model (of consumption) is suicidal," Venezuelan Energy Minister Rafael Ramírez recently told journalists. "The United States, for example, will use up its oil reserves in 10 years, and after that it will go after its rivers, lakes and forests."

 This month, Democratic Party lawmakers in the U.S. Senate narrowly blocked a Republican-led bill that would have allowed drilling for oil in Alaska's Arctic National Wildlife Refuge, which has an estimated 10 billion barrels in reserves.

 The United States devours one out of four of the 84 million barrels of oil consumed daily around the world, and one out of two litres of gasoline.

 But the emerging powers are steadily closing the consumption gap. In India, less than 200,000 new cars were sold annually two decades ago, compared to 802,000 in 2004.

 "Since oil began to be drilled in 1859, the world has consumed 900 billion barrels - nearly half of the planet's reserves (according to an oil industry expert quoted by the Wall Street Journal), which means we'll have oil for another 50 years at the most," said Francisco Mieres, a professor of postgraduate studies on the oil economy at Venezuela's Central University.

 But because consumption is increasing every year, driven by economic growth rates like those of China - which have ranged between seven and 11 percent a year - "oil will perhaps only last until 2030, even including reserves like Alaska's and the Athabasca tar sands" in Alberta, Canada, Mieres told IPS.

 That long-term outlook will also be affected by more immediate political factors, "like the difficulties faced by the United States in the Middle East, rebellious governments like those of Venezuela and (the future administration of leftist president-elect Evo Morales in) Bolivia, or the radicalisation of Iran's leadership," he added.

 On the economic front, Mieres said these developments would discourage investment by large corporations.

 He also mentioned the competition between China, India and other emerging powers to get their hands on the available oil resources, and the real or expected decline in deposits in the North Sea, the Caspian Sea, Mexico or Siberia in Russia.

 "The era of cheap oil is over," is a phrase repeated over and over by experts like Ramírez, Mieres or Colin Campbell, the founder of the Association for the Study of Peak Oil & Gas (ASPO).

 U.S. benchmark West Texas Intermediate (WTI) soared to 70.85 dollars per barrel on Aug. 30, when Hurricane Katrina devastated New Orleans and much of the U.S. Gulf Coast oil-producing region.

 The Organisation of Petroleum Exporting Countries (OPEC) basket of crudes averaged 50 dollars a barrel this year, bringing the members of the oil cartel more than 500 billion dollars in revenues. By comparison, the average price stood at 36 dollars a barrel in 2004, and 28 dollars in 2003.

 And the year is coming to an end with international oil prices ranging between 50 and 60 dollars a barrel.

 Nevertheless, the late January OPEC ministerial meeting "should decide to reduce output to keep prices from dropping," said Ramírez.

 The members of OPEC - Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela - pump a combined total of 30 million barrels a day.

 And OPEC president Sheikh Ahmad al-Fahd al-Sabah visited Moscow this week to persuade Russia, the world's second biggest oil producer after Saudi Arabia - it produces nine million barrels a day - to cooperate with the cartel, in order to avoid flooding the market.

 OPEC, according to al-Sabah, would be willing to withdraw up to two million barrels a day from the market if springtime is warm as forecast, which would lead to a drop in demand in the second quarter of 2006.

 But Ramírez asserted that "the responsibility for supplies and prices cannot only fall on the shoulders of producers."

 "Importer countries, whether industrialised or emerging economies, should rationalise consumption," he argued.

 In addition, "the burden of internal taxes is overwhelming," he said. "In Europe, for example, taxes account for 70 percent of the final price for energy paid by consumers."

 Venezuelan Foreign Minister Alí Rodríguez, a former OPEC secretary-general, said that "in this respect, France is more of an 'oil country' than those of the Persian Gulf, because the French state obtains more revenues from oil than the countries in that region."

 And in small countries like those of Central America, whose oil bill has doubled over the past three years to nearly five billion dollars a year, one out of every three dollars paid by consumers in gas stations goes to taxes.

 Ramírez also stated that "the markets cannot be stabilised if political instability is provoked in producer countries, because that gives rise to high costs and uncertainty." He pointed to the U.S. invasion of Iraq, and the George W. Bush administration's pressure on Iran and open hostility towards the Venezuelan government of Hugo Chávez.

 This year, international oil relations shifted after the Chávez administration reached cooperation agreements based on oil supplies. Mexico also took steps in that direction.

 Chávez launched Petrocaribe, an alliance under which Venezuela will provide 198,000 barrels a day of oil to 13 Caribbean nations, with financing for up to 40 percent of the bill. In addition, Caracas will accept payment in the form of products or services.

 Mexico, meanwhile, reached an agreement with its Central American neighbours to build a new refinery and gas pipeline in that region.

 Since 1980, Venezuela and Mexico, Latin America's biggest oil producers, have sold 160,000 barrels a day, divided in equal parts, to nations in Central America and the Caribbean on preferential terms, with financing for up to 20 percent of the total cost, under the San José Pact.

 But the Pact has sometimes faced difficulties in implementation because the beneficiaries must in exchange purchase products from Mexico and Venezuela.

 Caracas also promoted the creation of Petrosur, based on alliances among South American nations that began with supplies of heating oil and fuel oil to Argentina, to be paid for with agricultural and manufactured goods, as well as a contract with shipyards in Argentina to manufacture and repair vessels for Venezuela's oil fleet.

 Paraguay and Uruguay will also receive Venezuelan oil shipments under terms similar to those offered through Petrocaribe. In addition, the state-owned oil companies Petróleos de Venezuela (PDVSA) and Brazil's Petrobras signed agreements and will begin construction of a refinery in northeastern Brazil.

 Furthermore, Venezuela set aside deposits in the southestern Faja del Orinoco - considered the world's biggest reserve of extra heavy crude oil, with 230 billion barrels - for joint ventures with state-owned firms from Argentina, Brazil and Uruguay.

 South American countries also foresee the construction of a gas pipeline running from Venezuela's Caribbean coast to the Río de la Plata (River Plate, located between Argentina and Uruguay). The project will involve Bolivia, whose president-elect, Morales, is a political ally of Chávez and other left-leaning leaders in the region.

 Even Colombia, which is governed by right-wing President Alvaro Uribe, has entered into an association with Venezuela to build a binational oil pipeline connecting Venezuela's oilfields with the Pacific coast.

 Oil producers Ecuador and Peru, and Chile, an oil importer, have also expressed interest in taking part in the new energy integration schemes, which differ from the traditional commercial relations of the past.

 The need to ensure supplies of energy, which will soon become scarce, in a context of sustained high prices, has fuelled the new forms of cooperation that have been emerging in the developing South.

                
    China, which will purchase 5.4 million barrels of Venezuelan oil this month, hopes to receive a total of 300,000 barrels a day from this country starting in 2006, and has explored with OPEC the possibility of long-term cooperation mechanisms.                 
                



[Why are we not surprised? Painstakingly and for about three years now, FTW has explained, documented, researched and proven that any notion of replacing oil with biodiesel substitutes is a waste of topsoil, food, water and energy. It all comes back to the one single factor (more than any other) that investors, corporations and politicians seem to have a hard time understanding: Energy Return On Energy Invested. In the meantime, Archer Daniels Midland laughs all the way to the bank. With a price to earnings (P/E) ratio of 17:1, every dollar of net profit thrown into their coffers by politicians or investment advisors selling the snake oil of alternative fuels generates $17 in stock value which ADM will happily sell off before all markets succumb to Peak Oil. That $17 came out of your pocket whether you invested or not.

Food is not a fuel.

The weak hearted, those in denial, will plaintively whine that surely biodiesel has a place. Yes, it will have a place as a last ditch life-saving fuel substitute on a small scale when net energy doesn't matter as compared to saving a life or powering a generator to keep people from freezing. It will have a place on local farms where there is a real surplus of waste that is not needed to be returned to the topsoil for mulching and regeneration; but then, only as long as government subsidies for crops make it profitable for farmers to burn crops as the world goes hungry. It will have a place only so long as the plant matter doesn't have to be transported (by truck and/or rail) using the real stuff.

In short, biodiesel, from an economic or energy efficiency standpoint, will never be anything more than a last-ditch, stopgap, emergency measure to help small local communities. It is not sustainable. The sooner we burn out the lame excuses that justify societal and cultural denial and inaction, the sooner we come to grips with the imminent peril of Peak Oil and start to do the only things that can be really be done: reducing consumption, halting growth, and powering down. – MCR]

Homegrown fuel: a waste of energy?

By Warren Cornwall
Seattle Times staff reporter
http://archives.seattletimes.nwsource.com/cgi-bin/texis.cgi/web/vortex/display?slug=biodiesel28m&date=20051228

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

REARDAN, Lincoln County — On a blazing day last July at his farm west of Spokane, Fred Fleming placed a machine that looks like a meat grinder the size of a truck engine on a concrete slab and started dumping tiny canola seeds into the top.

The machine kept clogging as it squashed the seeds into oil, and Fleming was reduced to slowly pouring in the seeds.

After three straight days under the searing Eastern Washington sun, he shut down the crusher. After all that, he had managed to produce about 400 gallons of vegetable oil, which eventually was sold to become some of the first homegrown biodiesel ever made in Washington. The biodiesel was a paltry trickle.

"That was one of the dumber things I did," Fleming said, recalling the heat and "wondering if I should really be committed and be in counseling."

Such is the state of Washington's biodiesel industry — more farmyard experiment than full-sized factory.

The fuel — a mix of vegetable oil and methanol used in place of diesel to fuel engines — has been pushed as a way to help both struggling farmers and the environment, with talk of Washington farm fields producing 100 million gallons of clean-burning fuel a year and pumping millions of dollars into the state's faltering farm economy.

Biodiesel basics

What is it?

Biodiesel is clean-burning fuel that is a mix of vegetable oil and methanol used in engines in place of diesel.

How is it used?

Biodiesel can be mixed with regular petroleum diesel and can be burned in most diesel engines. Sometimes it can be used without blending with regular diesel. Biodiesel is also blended with home heating oil.

Are people using it?

According to the National Biodiesel Board, about 25 million gallons of biodiesel were sold in the U.S. in 2004. But Washington state alone burns about 1 billion gallons of regular diesel fuel a year.

How much does it cost?

Tuesday, Laurelhurst Oil in Seattle sold biodiesel for $3.18 a gallon, compared with $2.60 for regular diesel. The price varies, and biodiesel sold for less than regular diesel for a brief time after Hurricane Katrina, according to Laurelhurst Oil.

Where can I buy it?

There are dozens of biodiesel retailers in Washington. For a list, look online at www.biodiesel.org.

Gov. Christine Gregoire recently proposed low-interest loans for biodiesel factories, and a requirement that diesel sold in the state contain at least some biodiesel. State lawmakers from both parties are vowing to promote similar plans when the Legislature convenes next month. And Congress last summer included a tax credit for biodiesel in its energy bill.

At least four companies plan to build biodiesel plants, and a refinery is already operating in South Seattle. But even the enthusiasts say there are daunting obstacles to actually making money. Skeptics point out that recent history has seen plenty of hype around crops like sugar beets that were supposed to be the salvation of Washington farmers but flopped.

"It's like an old carcass out there and everyone's circling to see if it's going to make us sick when we eat it," said Fleming, a fourth-generation farmer.

Making it worth planting

Though getting fuel from plants isn't new, the industry has been mostly confined to the Midwest, where corn is turned into ethanol and soybean oil is made into biodiesel. Biodiesel can be mixed with regular diesel or, in some engines, used alone.

But recent high gas prices and global warming, joined with farmers' hunger for a new lucrative crop, have people in Washington talking seriously about homegrown fuel.

While most of the biodiesel today comes from soybeans, the oil can also come from canola and mustard seeds that grow well in Washington.

Seattle Biodiesel, the state's largest refiner, made about 1 million gallons this year, and has the capacity to produce 5 million gallons as the market grows. But that's a fraction of the 1 billion gallons of diesel fuel sold in the state. And for now, the company imports its soybean oil from the Midwest.

So would-be biodiesel companies are trying to figure out how to pay Washington farmers enough for their crops to make them worth planting, and where to get the millions of dollars to build a factory to turn the crop into biodiesel.

"Everybody will tell you they can sell all the biodiesel they can produce. Nobody wants to take on the risk that's involved in the crushing or the production," said Chad Kruger of Washington State University's Climate Friendly Farming Project.

Projects "don't pan out"

Mike Roecks would like to grow canola again, if he could just make money at it.

The past few years, he has grown tall, leafy canola plants on his farm just south of Spokane. But he stopped this year, when the price of the seeds plummeted.

At most recent count, in 2002, about 20,000 acres of canola and mustard were grown in Washington. But that's only enough to make 1 million or 2 million gallons of biodiesel.

On a recent November day, Roecks, 51, stood in his brightly lit machine shop and listened impassively as David Ostheller, a farmer who serves on the board of Cooperative Agricultural Producers, talked about the co-op's plans to build a biodiesel plant to be fed with local crops.

"There's been projects for a long time that don't pan out," Roecks replied. "So I'll believe 'em when I see 'em."

Even if farmers planted the crops, so far no one has risked the $8 million to $12 million it could cost to build a plant capable of crushing the seeds into oil. The closest large-scale crushers are in central Montana and in southern Alberta, Canada.

"We need the capital for a crusher and a refinery, that's what it boils down to," said Mike Conklin, president of Palouse Biodiesel, an alliance of four Eastern Washington farm cooperatives, including Cooperative Agricultural Producers.

Companies optimistic

Palouse Biodiesel is one of at least four companies in Washington claiming to have plans that will actually make money.

Fleming has already successfully tapped into the eco-friendly agricultural market with a company that makes sustainably grown wheat flour. Now he has formed an alliance with Seattle Biodiesel and another farm cooperative to build a high-capacity crusher. Two groups of Eastern Washington investors are also pursuing plants, one in Columbia County near the Oregon border and another near Othello, Adams County.

All of them are trying to win financial help from the state, and talk of breaking ground next year.

The Palouse Biodiesel venture, which represents about 1,200 farmers, wants to start a complete biodiesel operation, from field to fuel tank, so that the farmers will profit from the finished product, not just the seed. But Conklin said the company doesn't have the capital to build a plant.

"I can guarantee you it's going to get done. Whether it's my company or another company, the momentum in Eastern Washington for this is huge," Conklin said.

Several of the other companies say they can make money, partly by selling the crushed seed pulp as livestock feed.

Building a market

Politicians, farm groups and environmentalists are trying to help make the companies profitable.

Gregoire recently endorsed legislation that would mandate that every gallon of diesel sold in the state contain 2 percent biodiesel.

Gregoire and others say that could translate to 20 million gallons of biodiesel a year — based on the 1 billion gallons of diesel fuel consumed a year in the state — and create an instant demand.

"It allows the farming community and us, as producers, the safety to know there will be a market for the fuel," said John Plaza, president and founder of Seattle Biodiesel.

Others, however, warn a mandate might only benefit huge Midwest biofuel producers, such as Archer Daniels Midland (ADM).

"If we go with a mandate and a big-time program and we don't think of the producer at the farm level or the refinery level, we've done ADM a great favor but we really haven't helped the state's economy," said state Sen. Mark Schoesler, a Republican whose district includes much of the farm country south of Spokane.

To address that, Gregoire has proposed $17.5 million in low-interest loans to help build crushing plants.

But with so many companies rushing to get into the market, some may not survive. To keep all those new crushers fed with local seeds, hundreds of thousands more acres of land would have to be planted with canola.

"We've got massive facilities under consideration for what we don't grow," cautions Kruger, of WSU's Climate Friendly Farming Project.

Snake oil?

Hanging over all this is another specter: the legacies of strawboard and sugar beets.

In the 1990s, boards made from straw were hyped as an environmentally friendly substitute for wooden particle board, and also touted as a boon for Washington farmers. By the end of the decade, factories started churning out the boards.

But quality was uneven. Horses sometimes ate the grassy panels. And the boards often cost more than the wooden ones. The main plant went out of business.

Around the same time, a group of farmers in Moses Lake built a $100 million sugarbeet refinery. But equipment failures left beets rotting on the ground. Farmers lost big. Banks quit loaning on the crop. Four years after opening, the refinery shut down.

"You have seen a lot of snake-oil salesmen come through with the next best thing," acknowledged Conklin, the Palouse Biodiesel president.

Unpleasant reminder

On the outskirts of Creston, a farming town west of Spokane, a metal-sided building at the end of a dirt road stands as a monument to the pitfalls of biodiesel investment.

The Northwest Lincoln County Regional Public Development Authority built it in 2003 with money from the state to house American Premix Technologies, a company that was supposed to hire locals to make animal feed.

The development authority was also going to borrow $980,000 to erect a building next door for Columbia Oilseeds, a related company that was going to crush canola oil for biodiesel.

Instead, the development authority has been fighting with John Graff, a founder of the companies, alleging unpaid bills and broken promises.

Lately, development authority officials have been trying to evict American Premix from their building.

Graff, whose meeting room in the Creston building is furnished with a folding table, a chair, a dry-erase board and a jar of golden biodiesel, says it's the development authority that broke a promise by failing to build a railroad spur to the building.

The issue has gone to court.

Now Graff is the chief operating officer for Technical Holdings, a company of investors who want to build a biodiesel plant near Othello.

Gary Trautman, who runs a Moses Lake-based insurance company, has invested a lot of his own money in the project. He said he knows about Graff's disagreement with the folks in Lincoln County. But this new business shouldn't be judged by the history of one member, he said.

"We really think that some of our competitors have taken this thing, John's problems with the [public development authority], and tried to use it to their competitive advantage," he said.

Another try

And back at his farm outside Spokane, Fleming said his first summertime frustrations with biodiesel haven't extinguished his enthusiasm. He sees huge promise in biodiesel if private enterprise and government work together.

He likes to think of it as something akin to President Franklin Roosevelt's New Deal, when the federal government helped build industries and create jobs during the Great Depression.

So Fleming planted canola again last fall.

But he planted only five acres.

"This is sort of an experiment," he said. "Just to see what we could do."

Warren Cornwall: 206-464-2311 or wcornwall@seattletimes.com

"I can guarantee you it's going to get done ... the momentum in Eastern Washington for this is huge." Mike Conklin, president, Palouse Biodiesel



America's days as a superpower are over

PAUL CRAIG ROBERTS
Creators Syndicate
Jan 12, 2006
http://www.ocala.com/apps/pbcs.dll/article?AID=/20060112/NEWS/201120351
/1030/news08&template=printpicart

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

President George W. Bush has destroyed America's economy, along with America's reputation as a truthful, compassionate, peace-loving nation that values civil liberties and human rights.

Nobel Prize-winning economist Joseph Stiglitz and Harvard University budget expert Linda Bilmes have calculated the cost to Americans of Bush's Iraq war to be between $1 trillion and $2 trillion. This figure is five to 10 times higher than the $200 billion Bush's economic adviser Larry Lindsey estimated.

Lindsey was fired by Bush because his estimate was three times higher than the $70 billion figure that the Bush administration used to mislead Congress and the American voters about the burden of the war. You can't work in the Bush administration unless you are willing to lie for Dub-ya.

Americans need to ask themselves if the White House is in competent hands when a $70 billion war becomes a $2 trillion war. Bush sold his war by understating its cost by a factor of 28.57. Any financial officer anywhere in the world whose project was 2,857 percent over budget would instantly be fired for utter incompetence.

Bush's war cost almost 30 times more than he said it would because the moronic neoconservatives that he stupidly appointed to policy positions told him the invasion would be a cakewalk. Neocons promised minimal U.S. casualties. Iraq already has cost 2,200 dead Americans and 16,000 seriously wounded - and Bush's war is not over yet. The cost of lifetime care and disability payments for the thousands of U.S. troops who have suffered brain and spinal damage was not part of the unrealistic rosy picture that Bush painted.

Stiglitz's $2 trillion estimate is OK as far as it goes. But it doesn't go far enough. My own estimate is a multiple of Stiglitz's.

Stiglitz correctly includes the cost of lifetime care of the wounded, the economic value of destroyed and lost lives, and the opportunity cost of the resources diverted to war destruction. What he leaves out is the war's diversion of the nation's attention away from the ongoing erosion of the U.S. economy. War and the accompanying domestic police state have filled the attention span of Americans and their government. Meanwhile, the U.S. economy has been rapidly deteriorating.

In 2005, for the first time on record, consumer, business and government spending exceeded the total income of the country.

America can consume more than it produces only if foreigners supply the difference. China recently announced that it intends to diversify its foreign exchange holdings away from the U.S. dollar. If this is not merely a threat in order to extort even more concessions from Bush, Americans' ability to consume will be brought up short by a fall in the dollar's value, as China ceases to be a sponge that is absorbing an excessive outpouring of dollars. Oil-producing countries might follow China's lead.

Now that Americans are dependent on imports for their clothing, manufactured goods, and even high technology products, a decline in the dollar's value will make all these products much more expensive. American living standards, which have been treading water, will sink.

A decline in living standards is an enormous cost and will make existing debt burdens unbearable. Stiglitz did not include this cost in his estimate.

Even more serious is the war's diversion of attention from the disappearance of middle-class jobs for university graduates. The ladders of upward mobility are being rapidly dismantled by offshore production for U.S. markets, job outsourcing and importation of foreign professionals on work visas. In almost every U.S. corporation, U.S. employees are being dismissed and replaced by foreigners who work for lower pay. Even American public school teachers and hospital nurses are being replaced by foreigners imported on work visas.

The American Dream has become a nightmare for college graduates who cannot find meaningful work.

This fact is made abundantly clear from the payroll jobs data over the past five years. December's numbers, released on Jan. 6, show the same pattern that I have reported each month for years. Under pressure from offshore outsourcing, the U.S. economy only creates low-productivity jobs in low-pay domestic services.

Only a paltry number of private sector jobs were created - 94,000. Of these 94,000 jobs, 35,800 - or 38 percent - are for waitresses and bartenders. Health care and social assistance account for 28 percent of the new jobs, and temporary workers account for 10 percent. These three categories of low-tech, nontradable domestic services account for 76 percent of the new jobs. This is the jobs pattern of a poor Third World economy that consumes more than it produces.

America's so-called First World superpower economy was only able to create in December a measly 12,000 jobs in goods-producing industries, of which 77 percent are accounted for by wood products and fabricated metal products - the furniture and roofing metal of the housing boom that has now come to an end. U.S. employment declined in machinery, electronic instruments, and motor vehicles and parts.

Two thousand six hundred jobs were created in computer systems design and related services, depressing news for the several hundred thousand unemployed American computer and software engineers.

When manufacturing leaves a country, engineering, R&D and innovation rapidly follow. Now that outsourcing has killed employment opportunities for U.S. citizens and even General Motors and Ford are failing, U.S. economic growth depends on how much longer the rest of the world will absorb our debt and finance our consumption.

How much longer will it be before "the world's only remaining superpower" is universally acknowledged as a debt-ridden, hollowed-out economy desperately in need of IMF bailout?

Paul Craig Roberts, senior research fellow at the Hoover Institution at Stanford University, writes for Creators Syndicate.




Iraqi Civil War? Some Experts Say It's Arrived

1 January 2006
By John Daniszewski, 
LA Times Staff Writer
http://www.latimes.com/news/nationworld/iraq/complete/la-fg-civilwar1jan01,1,5912387,full.story?coll=la-iraq-complete&ctrack=1&cset=true

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

The full extent of the conflict is veiled by the presence of U.S. troops, says one, but Americans' premature exit could lead to far worse strife.

BAGHDAD — Fourteen members of a Shiite Muslim family are slaughtered in their home. Days later, masked gunmen invade a Sunni Arab household, killing five people. Organized political killing proceeds, as if there had not been elections two weeks ago.

 In a speech delivered as Iraqis prepared to go to the polls, President Bush said he didn't believe a civil war would break out in the country. But some observers believe it has already begun — a quiet and deadly struggle whose battle lines were thrown into sharp relief by the highly polarized vote results.

On any given day, a group of Shiite police might be hit in a Sunni suicide attack or ambush. A militiaman in the Shiite-dominated Iraqi security services might arrest, torture and kill a suspected Sunni insurgent. Or a Kurdish official in the new government might be gunned down between home and office.

 Unless the assassination target is prominent, or the number of victims rises to at least the high single digits, such events barely rate a mention in Western news reports. Yet the most reliable estimates are that about 1,000 Iraqis have been dying each month, most of them killed by fellow Iraqis.

 The term "civil war" conjures images of armies massed against each other, and ultimately the breakup of a state — a far cry from the democratic paradigm the U.S. government meant to achieve in Iraq after the overthrow of Saddam Hussein 2 1/2 years ago.

 Iraqi politicians and leaders routinely extol the country's unity and its aversion to civil war. Last week, Abbas Bayati, an official of the Shiite-based Supreme Council for Islamic Revolution in Iraq, said it would never happen, because the country's religious leaders would not permit it.

 Other experts inside and outside Iraq are less sure.

 James Fearon, a Stanford University political scientist and an authority on modern conflicts, believes that Iraq's civil war began almost as soon as Hussein was ousted, and that it is now obscured and partly held back by the presence of foreign forces.

 "I think there is definitely a civil war that has been going on since we finished the major combat operations," Fearon said. He rejects the position of many observers that a civil war is still only a possibility for Iraq.

 "When people talk about 'Will there be a civil war?' they are really talking about a different type of civil war," he said.

 The kind of war emerging in Iraq, characterized by guerrilla attacks, kidnappings, assassinations and "ethnic cleansing," is typical of modern civil conflicts, Fearon said.

 "Since 1945, almost all civil wars, a big plurality, have been guerrilla wars where it is kind of insurgency versus counterinsurgency," he said. "Most civil wars look more like what we are seeing in Iraq now."

 The presence of U.S. troops in the conflict would not be unusual, he said. "A great number [of civil wars] have involved foreign intervention. But I would still call it a civil war on grounds that the insurgents are attacking and killing far more Iraqis than U.S. troops."

 Although he sees the recent elections as a possible step forward, he thinks that if delicate government talks now getting started fail to end in compromise, the war among Iraqis could widen and intensify into open fighting on a larger scale, particularly if U.S. troops withdraw from the country too quickly.

 Broadly speaking, the struggle pits armed Sunni factions desperate to regain power in Iraq against Shiite militiamen. The latter are intent on protecting the new government, which Shiites dominate, and to avenge past and current harms at the hands of the Sunnis. Kurds, meanwhile, also are targeted by the Sunnis. Their goal of independence or strong autonomy, and their wish to add the oil-rich city of Kirkuk to their region, has put them on a possible collision course with the rest of the country.

 One former mid-ranking Iraqi government official, who asked not to be named, said he had been forced to abandon his Baghdad neighborhood because of his Shiite name and now conceals his identity when he travels between the capital and his home village near Babylon.

 "You cannot drive in the south bearing a Sunni name. You cannot go to [Al] Anbar [province] with a Shiite name,'' he said. "There is not a civil war across the whole country, but there are civil wars in at least 20 towns — low-intensity civil war."

Sectarian Violence

Since the summer of 2003, mosques have been bombed and hit with rockets, people have been kidnapped, and hitherto mixed Baghdad districts such as Ghazaliya and Doura have slowly and inexorably been "cleansed" of Shiites through intimidation and violence. Similar pressures have been put on Sunnis in villages in the Shiite-dominated south and on Arabs and Turkmens in Kirkuk.

 In a grisly example of the strife, 14 members of a Shiite family who had been warned to leave their mostly Sunni neighborhood were slain last week in their home in a mixed area just south of Baghdad that has become known as the "triangle of death."

 Attackers slit the victims' throats as relatives were made to watch. Only the women of the family and a 7-year-old boy were spared, in an incident that evoked the internecine carnage that occurred in Algeria during much of the 1990s.

 Alluding to the recent parliamentary elections, in which almost all Iraqis voted along sectarian or ethnic lines rather than for broader-based parties, James Dobbins, an analyst at the Rand Corp. think tank in Washington, has argued that the strong divisions have the potential to tear apart the country.

 Already the fighting in Iraq amounts to an unconventional civil war, he said, one in which only one side — the Iraqi government aided by its U.S. and British allies — possesses heavy weapons, while the other side relies on guerrilla tactics. He, too, sees a danger of escalation.

 "You could have a civil war of the sort that they had in Yugoslavia in the '90s, in which both sides had heavy weaponry and the casualties were much, much higher."

 In fact, "the main argument for America continuing to stay in Iraq and exercise influence is to prevent the situation from degenerating that way. But it is going to be difficult, costly and time-consuming," Dobbins said.

 The median length of a civil war, according to a 2002 study by Fearon and his colleague, historian David D. Laitin, is about six years, and on the whole, civil wars since 1945 have been more deadly than wars between countries, claiming more than 16 million lives and devastating the economies of the countries engulfed.

 In September 2004, the highly regarded Royal Institute for International Affairs in London forecast that it would be difficult for Iraq to avoid a civil war, and that its ability to do so depended largely on whether the transitional government then being formed could give Iraqis a sense of ownership and belonging to the state.

 Looking back 15 months later, Rosemary Hollis, one of the authors, said of the optimistic scenario, "I think you can rule that out." Still, she is not sure the country is on the road to a breakup.

 "The other scenario, still in play, is that it doesn't fall apart but the tremendous amount of internal tensions kind of cancel each other out," she said. Rivalries within the Shiite community, for instance, could keep its members' struggles localized and prevent them for acting directly against other communities, she said.

Elections Disputed

Although still not final, the preliminary election results from the December voting for a National Assembly seem to point to the emergence of a parliament heavy on religion-based parties from both the Shiite and Sunni factions. Faring poorly were parties with a secular bent and those seeking to transcend sectarian or ethnic divides.

 Disappointed secular and Sunni groups immediately charged vote rigging and intimidation; several leading Sunni politicians felt aggrieved enough to question the legitimacy of the vote, asking that it be held again. But the winning Shiite alliance has refused, and Kurdish and Shiite political leaders are starting consultations to see whether a national unity government can be formed that would satisfy, or at least mollify, the losers.

 Most Iraqis shudder at any suggestion that the country could be plunged into full-scale civil war, but the danger is seldom far from their minds.

 "The Shiites insist on their demands, and the Sunni and the Arab nationalists remain feeling marginalized and isolated or ignored and this and that, so I think there will be big problems and violence will continue" for the next two or three years, said Yunadim Kana, a Christian politician.

 "Will there be a civil war? I don't think it will reach that point," he said, adding that no one can be sure. "Every time in Iraq there is A plus B that should equal C, but then something else happens."

 Wamid Nadhmi, an Iraqi political analyst, said he was pleased that the nightmare scenario had not dawned.

 "Now there are indications that the country is being gradually pulled into some sort of a sectarian conflict, because there are reports that some Shia personnel on the one hand and some Sunni personnel on the other are getting killed. But up to now it seems to me that this is the action of small groups," he said.

 "It is more of an organized mafia rather than mass spontaneous activities."

 Grand Ayatollah Ali Sistani, the country's leading Shiite cleric, has been a consistent voice to moderate the tensions between Sunnis and Shiites since the U.S.-led invasion. Last month, he endorsed a unity government that would include Sunnis.

 Bayati, of the Supreme Council for Islamic Revolution in Iraq, says such enlightened thinking will keep the lid on. "Political tension by itself cannot lead to civil war," he said. "Sectarianism is the one possible cause…. But the position of the leadership has pulled the rug out from under this proposition."

The Foreign Factor

Juan Cole, a University of Michigan professor and specialist on Iraq, warns against concluding that if the country is already in the midst of a civil war, it does not matter whether U.S. troops stay or leave.

 Recalling the bloodshed in Lebanon from 1975 to 1990, a civil war he witnessed in part firsthand, he says he can imagine the situation in Iraq becoming far, far worse if U.S. forces leave prematurely or are drawn down significantly.

 With a weaker U.S. presence, brought about by eroding American support for the war, the neighborhood militias that have formed and are now operating "on the Q.T." would be emboldened to come into the open, perhaps staging organized attacks against neighboring towns or the central government in Baghdad, Cole said.

 Another tinderbox would be Kirkuk. In all probability, Kurds would seek a referendum to attach the disputed city to their regional federation, he said. "Are the Turkmens going to lie down and take it? Or the Arabs there as well? My guess is no," Cole said.

 Sunnis, long accustomed to running Iraq and now threatened by the prospect of being cut off from the country's petroleum revenue, also would have reason to rebel.

 "They can see the writing on the wall," Cole said.

 In any widespread civil war, he warned, Iraq's neighbors would probably be drawn in, shifting the "tectonic plates" of regional stability. Turkey could seek to prevent the Turkmen minority from being overwhelmed in Kirkuk. The Persian Gulf states would want to help the Sunnis, and Iran would intervene on the side of the Shiites.

 Fearon, like Cole, believes that a too-rapid departure by U.S. forces would be the catalyst to wider civil war. But on the other hand, he said, staying indefinitely gives Iraqis scant incentive to "get their political and military act together."

 "I think the U.S. presence makes it possible that you could have talks that result in a government that could function at some level, but the kind of depressing thing is that I don't see talks leading to a government that could clearly survive without a pretty strong U.S. presence," Fearon said.

 As things stand now, "there is no real nice exit for the U.S."

Asmaa Waguih of The Times' Baghdad Bureau and Times staff writers Raheem Salman in Baghdad and Janet Stobart in London contributed to this report.




Many Iraqi soldiers see a civil war on the horizon

By Tom Lasseter
Knight Ridder Newspapers
Dec. 27, 2005
http://www.realcities.com/mld/krwashington/13495281.htm

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

KIRKUK, Iraq - Passions run deep for the Arab and Kurdish soldiers who wear the Iraqi army uniform.

Kirkuk lies just a few miles from one of the nation's largest oil fields, worth billions of dollars. Arabs figure that the city's oil wealth should belong to Iraq, while ethnic Kurds see it as part of a future nation of Kurdistan.

"If the Kurds want to separate from Iraq it's OK, as long as they keep their present boundaries," said Sgt. Hazim Aziz, an Arab soldier who was stubbing out a cigarette in a barracks room. "But there can be no conversation about them taking Kirkuk. ... If it becomes a matter of fighting, then we will join any force that fights to keep Kirkuk. We will die to keep it."

Kurdish soldiers in the room seethed at the words.

"These soldiers do not know anything about Kirkuk," Capt. Ismail Mahmoud, a former member of the Kurdish Peshmerga militia, said as he got up angrily and walked out of the room. "There is no other choice. If Kirkuk does not become part of Kurdistan peacefully we will fight for 100 years to take it."

Five days spent interviewing Iraqi army soldiers in northern Iraq - who are overwhelmingly Kurdish - made clear that many soldiers think that a civil war is coming.

"I see Iraq gradually becoming three regions that will one day become independent," said Jafar Mustafir, a close adviser to Iraq's Kurdish interim president, Jalal Talabani, and the deputy head of Peshmerga for the Patriotic Union of Kurdistan, one of two major Kurdish parties. "I see us moving toward the end of Iraq."

Achieving independence is a matter of life and death for Mahmoud, as with most other Kurdish soldiers interviewed.

His father, a Peshmerga, was killed by Sunni Arab dictator Saddam Hussein's troops in 1991 during fighting in Kirkuk. His entire neighborhood in Kirkuk, which housed some 2,000 families, was razed that year as Saddam massacred Kurds and replaced them with Arabs.

"We all left in bare feet," he said while walking through the cold mud outside the barracks. "My father was martyred for this struggle. It's my turn now, and if I don't succeed my son will continue the struggle. ... I try to explain these things to my Arab soldiers, and I hope that I do not end up fighting them."

Almost all the Kurdish soldiers interviewed expressed that sentiment.

Col. Sabar Saleem, the head of intelligence for the 4th Brigade of the Iraqi 2nd Division in the city of Mosul, said there would be no compromise over Kirkuk.

"War is just another kind of political solution," said Saleem, a former Peshmerga.

He said that while he wore an Iraqi army uniform he had a much larger mission in mind.

"I tell you that I am a part of the Iraqi army, but when it comes to the Kurdish cause I am willing to offer my life, my head, for one inch of Kurdish land," Saleem said. "Especially for Kirkuk."



Kurds in Iraqi army proclaim loyalty to militia

By Tom Lasseter
Knight Ridder Newspapers
Dec. 27, 2005
http://www.duluthsuperior.com/mld/duluthsuperior/news/world/13495317.htm

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

KIRKUK, Iraq - Kurdish leaders have inserted more than 10,000 of their militia members into Iraqi army divisions in northern Iraq to lay the groundwork to swarm south, seize the oil-rich city of Kirkuk and possibly half of Mosul, Iraq's third-largest city, and secure the borders of an independent Kurdistan.

Five days of interviews with Kurdish leaders and troops in the region suggest that U.S. plans to bring unity to Iraq before withdrawing American troops by training and equipping a national army aren't gaining traction. Instead, some troops that are formally under U.S. and Iraqi national command are preparing to protect territory and ethnic and religious interests in the event of Iraq's fragmentation, which many of them think is inevitable.

The soldiers said that while they wore Iraqi army uniforms they still considered themselves members of the Peshmerga - the Kurdish militia - and were awaiting orders from Kurdish leaders to break ranks. Many said they wouldn't hesitate to kill their Iraqi army comrades, especially Arabs, if a fight for an independent Kurdistan erupted.

"It doesn't matter if we have to fight the Arabs in our own battalion," said Gabriel Mohammed, a Kurdish soldier in the Iraqi army who was escorting a Knight Ridder reporter through Kirkuk. "Kirkuk will be ours."

The Kurds have readied their troops not only because they've long yearned to establish an independent state but also because their leaders expect Iraq to disintegrate, senior leaders in the Peshmerga - literally, "those who face death" - told Knight Ridder. The Kurds are mostly secular Sunni Muslims, and are ethnically distinct from Arabs.

Their strategy mirrors that of Shiite Muslim parties in southern Iraq, which have stocked Iraqi army and police units with members of their own militias and have maintained a separate militia presence throughout Iraq's central and southern provinces. The militias now are illegal under Iraqi law but operate openly in many areas. Peshmerga leaders said in interviews that they expected the Shiites to create a semi-autonomous and then independent state in the south as they would do in the north.

The Bush administration - and Iraq's neighbors - oppose the nation's fragmentation, fearing that it could lead to regional collapse. To keep Iraq together, U.S. plans to withdraw significant numbers of American troops in 2006 will depend on turning U.S.-trained Kurdish and Shiite militiamen into a national army.

The interviews with Kurdish troops, however, suggested that as the American military transfers more bases and areas of control to Iraqi units, it may be handing the nation to militias that are bent more on advancing ethnic and religious interests than on defeating the insurgency and preserving national unity.

A U.S. military officer in Baghdad with knowledge of Iraqi army operations said he was frustrated to hear of the Iraqi soldiers' comments but that he had seen no reports suggesting that they would acted improperly in the field.

"There's talk and there's acts, and their actions are that they follow the orders of the Iraqi chain of command and they secure their sectors well," said the officer, who refused to be identified because he's not authorized to speak on the subject

American military officials have said they're trying to get a broader mix of sects in the Iraqi units.

However, Col. Talib Naji, a Kurd serving in the Iraqi army on the edge of Kirkuk, said he would resist any attempts to dilute the Kurdish presence in his brigade.

"The Ministry of Defense recently sent me 150 Arab soldiers from the south," Naji said. "After two weeks of service, we sent them away. We did not accept them. We will not let them carry through with their plans to bring more Arab soldiers here."

One key to the Kurds' plan for independence is securing control of Kirkuk, the seat of a province that holds some of Iraq's largest oil fields. Should the Kurds push for independence, Kirkuk and its oil would be a key economic engine.

The city's Kurdish population was driven out by former Sunni Arab dictator Saddam Hussein, whose "Arabization" program paid thousands of Arab families to move there and replace recently deported or murdered Kurds.

"Kirkuk is Kurdistan; it does not belong to the Arabs," Hamid Afandi, the minister of Peshmerga for the Kurdistan Democratic Party, one of the two major Kurdish groups, said in an interview at his office in the Kurdish city of Irbil. "If we can resolve this by talking, fine, but if not, then we will resolve it by fighting."

In addition to putting former Peshmerga in the Iraqi army, the Kurds have deployed small Peshmerga units in buildings and compounds throughout northern Iraq, according to militia leaders. While it's hard to calculate the number of these active Peshmerga fighters, interviews with militia members suggest that it's well in excess of 10,000.

Afandi said his group had sent at least 10,000 Peshmerga to the Iraqi army in northern Iraq, a figure substantiated in interviews with officers in two Iraqi army divisions in the region.

"All of them belong to the central government, but inside they are Kurds ... all Peshmerga are under the orders of our leadership," Afandi said.

Jafar Mustafir, a close adviser to Iraq's Kurdish interim president, Jalal Talabani, and the deputy head of Peshmerga for the Patriotic Union of Kurdistan, a longtime rival of the Kurdistan Democratic Party, echoed that.

"We will do our best diplomatically, and if that fails we will use force" to secure borders for an independent Kurdistan, Mustafir said. "The government in Baghdad will be too weak to use force against the will of the Kurdish people."

Mustafir said his party had sent at least 4,000 Peshmerga of its own into the Iraqi army in the area.

The Kurds have positioned their men in Iraqi army units on the western flank of Kirkuk, in the area that includes Irbil and the volatile city of Mosul, and on the eastern flank in the area that includes the Kurdish city of Sulaimaniyah.

The Iraqi army's 2nd Division, which oversees the Irbil-Mosul area, has some 12,000 soldiers, and at least 90 percent of them are Kurds, according to the division's executive officer.

Of the 3,000 Iraqi soldiers in Irbil, some 2,500 were together in a Peshmerga unit previously based in the city. An entire brigade in Mosul, about 3,000 soldiers, is composed of three battalions that were transferred almost intact from former Peshmerga units, with many of the same soldiers and officers in the same positions. Mosul's population is split between Kurds and Arabs, and any move by Peshmerga units to take it almost certainly would lead to an eruption of Arab violence.

"The Parliament must solve the issue of Kurdistan. If not, we know how to deal with this: We will send Kurdish forces to enforce Kurdistan's boundaries, and that will have to include the newly liberated areas such as the Kurdish sections of Mosul," 1st Lt. Herish Namiq said. "Every single one of us is Peshmerga. Our entire battalion is Peshmerga."

Namiq was riding in an unarmored pickup in an Arab neighborhood in eastern Mosul where Sunni Arab insurgents frequently shoot at his men. As he leaned out the window with his AK-47, scanning the streets, he said, "We will do our duty as Peshmerga."

Firas Ahmed, the assistant to the head of the Kurdistan Democratic Party office in Mosul, invited a Knight Ridder reporter to inspect the local Peshmerga brigade, motioning to a compound across the street.

It housed the headquarters of the 4th Brigade of the Iraqi army's 2nd Division.

"We cannot openly say they are Peshmerga," Ahmed said. "We will take you to see the Peshmerga, but they will be wearing Iraqi army uniforms."

Ahmed's boss, Khasrow Kuran, grinned and chimed in: "We cannot say `Peshmerga' here."

The 4th Brigade soldiers who met Ahmed at the front gate saluted him and said, openly, that they reported to Afandi, the Kurdistan Democratic Party's Peshmerga commander.

Col. Sabar Saleem, a former Peshmerga who's the head intelligence officer for the 4th Brigade, said he answered to the Peshmerga leadership. He also said he had little use for most Sunni Arabs.

"All of the Sunnis are facilitating the terrorists. They have little influence compared with the Kurds and Shiites, so they allow the terrorists to operate to create pressure and get political concessions," Saleem said. "So they should be killed, too ... the Sunni political leaders in Baghdad are supporting the insurgency, too, and there will be a day when they are tried for it."

To the east, in the Iraqi army's 4th Division, is a brigade of about 3,000 troops in Sulaimaniyah that's also a near-replica of a former Peshmerga brigade.

Because of a U.S. military mandate, the 4th Division battalion serving in Kirkuk is about 50 percent Kurdish, 40 percent Arab and 10 percent Turkmen. The battalion on the outskirts of Kirkuk is about 60 percent Kurdish.

Capt. Fakhir Mohammed, a former Peshmerga and the operations officer for the battalion on Kirkuk's edge, said he wasn't concerned that the Kurds had only a simple majority in the two Kirkuk battalions: "It's not a problem, because we have an entire brigade in Sulaimaniyah that is all Kurd. They would come down here and take the Kurdish side."

Sgt. Ahmed Abdullah agreed.

"There are thousands of us Peshmerga, and it is our duty to protect the borders of Kurdistan ... we will fight to hold Kirkuk at any price," Abdullah said. "We will fight that battalion (in Kirkuk) if they stand in our way."



India, China pin down $573m Syria deal

By Indrajit Basu
Asia Times
Dec 22, 2005
http://atimes.com/atimes/China_Business/GL22Cb06.html

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

KOLKATA - India and China, the most aggressive shoppers for oil and gas assets in the world, and normally archrivals in the race for overseas oilfields, have finally come together to pursue their energy security in the global arena.

China National Petroleum Corporation (CNPC) and India's Oil and Natural Gas Corporation (ONGC), the two largest oil companies in the respective countries, announced on December 20 that they had jointly won a bid to acquire 37% of Petro-Canada's stake in Syrian oilfields for US$573 million. ONGC and CNPC, both state-owned, will have equal stakes in the al-Furat oil and gas fields.

"We are very excited about this breakthrough of joint acquisitions with CNPC," said Subir Raha, the chairman of ONGC, who maintains a very high profile in not only the country's oil and gas industry but the globally as well.

"CNPC and ONGC have been working together as joint operators in Sudan for the last three years. While we have worked together as joint operators and have gained confidence in each other's technical capabilities, we had never joined hands to own a foreign property jointly. This [will] be the first time, then, that an Indian company [will] acquire an oil property along with a Chinese company."

Indeed, as experts have said, although in monetary terms a $573-million deal may not be very significant, this one is significant because ONGC's overseas arm ONGC Videsh Ltd (OVL) had competed with Chinese firms for oil properties in Central Asia, West Africa and Latin America in the recent past.

In addition, in the past 12 months, Chinese oil companies have been consistently outmaneuvering India in just about every oil property the two countries chased. In their bid for oil security, the two countries, allege oil industry analysts, have also contributed immensely to the record high oil prices this year.

Take the following instances. In early August, CNPC and an ONGC consortium competed directly in an attempted buyout of the Canadian firm PetroKazakhstan, which had most of its operations in Kazakhstan, but CNPC grabbed the deal at the last moment by topping the Indian consortium's bid.

And last October, despite an agreement between Shell and OVL that entailed offloading Shell's 50% stake in Angola Block 18 to OVL, India was stymied because Sonangol, Angola's national oil company, which is the sole concessionaire for exploration and production of oil in Angola, wanted the property to go to Chinese oil companies.

Currently, too, the two are also pitched against each other for Encana's Ecuador assets, which in mid-September almost went to Andes Petroleum Corporation, a joint venture of Chinese petroleum companies, because India withdrew from the bid. However, subsequently it was reported that ONGC may be considering bidding for it again.

But besides the mere fact that the two countries have joined hands for feeding their oil-hungry economies, the current deal is important for a few other reasons.

For one, said experts, the al-Surat fields are already producing, so the partners will gain instant access to 60,000 barrels of oil per day without having to invest in exploration immediately. And secondly, "it is an important milestone because we have been working on this for quite some time, and instead of competing wherever possible, this win opens up the possibility of the two countries working together whenever feasible," said S C Tripathi, the Indian petroleum secretary.

The two countries' pursuit of what India's Petroleum Minister Mani Shankar Iyer calls "coopetition instead of competition" in securing their energy needs started in April this year, when during his visit to India Chinese premier Wen Jiabao said that energy cooperation should be an integral part of the bilateral dialogue between the two countries.

Picking up on that cue, an Indian delegation from oil companies visited China subsequently to discuss energy ventures. The two countries also set the global oil industry's tongues wagging when Indian and Chinese oil companies met up at the World Petroleum Congress in Johannesburg in South Africa in October. And last month, representatives from the oil industries of the two countries met in New Delhi for further roundtable ministerial talks.

Meanwhile, it appears that the stage is set for the two countries to make more joint oil bids. According to a report in the Economic Times, Indian oil companies, including downstream marketing companies like the Indian Oil Corporation, BPCL, OVL and Prize Petroleum, are set to ink agreements with China's Sinopec, CNOOC and CNPC, for collaboration in the exploration, petroleum and gas sectors.

India and China are also expected to sign a bilateral hydrocarbon cooperation deal in January 2006, when Iyer is slated to visit China. It will work as an umbrella agreement enabling joint ventures between companies in different sectors. It has also been reported that three Chinese oil companies have shown interest in tying up with Indian oil companies in their global quest for energy.

But this cooperation could be bad news for Western oil companies. Analysts said that if the two countries teamed up on a regular basis, it should worry Western oil majors. "The Indian and Chinese companies are willing to pay a higher premium for assets. The pressure is certainly on the majors," said Praveen Martis, an analyst at consultancy Wood Mackenzie, in a Reuters report.

Indrajit Basu is a Kolkata-based equity-analyst-turned-journalist with more than 12 years of experience in business/finance and technology journalism. Besides writing for Asia Times Online, he also writes for US-based publications, as well as IT companies.

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