Oil in the Cradle of Man

IN the land between the Tigris and Euphrates Rivers, cradle of world civilization, oil has long been a treasure pursued by Arabs and Westerners alike. Surface oil seepages were tapped in Mesopotamia as far back as 3000 B.C. This crude bitumen was used as a mortar, a water-proofing agent, and a medicine.

In more recent times, oil was a force behind the British creation of modern Iraq. Unrest over foreign control of oil resources helped drive the coups which culminated in the rise of the Iraqi Ba'th Party, ruled today by Saddam Hussein.

Ironically, one early grievance Iraqi nationalists held against the West was that their oil wasn't being pumped fast enough. "Large-scale development of Iraq's oil resources came late, particularly in comparison to its neighbors," writes National Defense University scholar Phebe Marr in her book "The Modern History of Iraq."

American involvement with the early years of Iraq's petroleum development was subsidiary to the role of Britain. During World War I, the British had encouraged an Arab revolt against Turkish rule in the Middle East. After the war, British diplomats carved the old Turkish empire into today's Arab states. The new nation of Iraq was handed over to Faisal, son of Hussein, the Sharif of Mecca, Britain's main Arab ally.

Western geologists had long thought Iraq promising oil territory. In 1927, a drilling team struck the country's first gusher, at Baba Gurgur. A year later, the Iraq Petroleum Company (IPC) signed a deal to exploit the discovery. Operating under a concession let by King Faisal, the IPC was a consortium of Dutch, British, French, and American oil companies.

Relatively low production levels in IPC's early years led to small royalties for Iraq. In the 1950s, with development beginning in earnest, Iraq negotiated larger and larger shares of oil profits. But the coming of populist Prime Minister Mossadegh in neighboring Iran, plus Iran's nationalization of its oil in 1951, led to increasing demands among Iraqi nationalists for a takeover of their own oil.

Kuwait, Saudi Arabia, and Iran started building oil industries after Iraq, but in the late 1950s were already pumping more oil than their neighbor. "With some justification, Iraqis have blamed this delay on the foreign ownership of IPC and its lack of concern for Iraq's interests," writes Ms. Marr.

In 1958, amid the Arab nationalist ferver inspired by Egypt's Gamal Abdel Nasser, Iraqi army officers in Baghdad overthrew King Faisal in a quick, bloody coup. The US was shocked. President Eisenhower had thought Iraq a bulwark of the anticommunist coalition he had cobbled together for the region, the Baghdad Pact.

In 1960, the new Iraqi regime revoked IPC's oil rights to most of the country. Powered by foreign money, the oil industries of Saudi Arabia and Iran surged ahead, while output of the largely nationalized Iraqi industry rose slowly.

Until the Iraqi revolution, the US and other Western partners had believed that only conservative regimes in producing countries could preserve the developed world's access to crucial petroleum supplies. But Iraq's oil exports continued unimpeded. IPC was allowed to retain rights to wells it was already pumping, and even radical regimes were eager to sell oil abroad. They needed the revenues for economic development just as conservative monarchies did.

In the 1970s, Iraq joined fellow Arab oil producers in attempts to use the oil-embargo weapon to change developed-world policies. Most Arab producers tried to rebuild their links to Western customers in the '80s. Iraq was an exception. Saddam warned the oil weapon might be used again.

"But in an ironic new twist to an old story, the weapon was turned against him when oil exports from Iraq and occupied Kuwait were embargoed by the United Nations," notes author Daniel Yergin in "The Prize."