A U.S. soldier walks past an overturned sign outside  the Iraqi oil ministry building in Baghdad. A lack of a  governmental authority to approve exports is one many obstacles to restarting oil production.

Though Iraq’s oil infrastructure remains largely intact, and storage tanks are overflowing, oil dealers can’t buy it. With no banking system or oil ministry, transactions can’t happen. What will it take to restore this critical source of hard currency to feed the Iraqi people and fund reconstruction of their country? WORRIES THAT A prolonged war could leave Iraq’s oil infrastructure in ruins were not borne out. While oilfields and pipelines in the south sustained some damage, operations in the north were largely unscathed. Though oil sales ground to a halt on March 20, oil continued to flow into storage tanks in the Turkish port of Ceyhan until they filled to capacity. See Pipelines: Iraq Map or Saudi Map

But the estimated 8 million barrels of oil stored there — and the rest of Iraq’s oil output — remains stranded by the collapse of the mechanism for selling Iraqi oil. Untangling the legal and political morass is proving more difficult than restarting Iraq’s production and transport infrastructure. 

	see map left

For starters, the financial infrastructure needed to support oil sales was shattered by the war.
       “Nobody walks in with cash and takes away [a] barrel of oil,” said Bill O’Grady an oil futures analyst at A.G. Edwards. “You contract to buy the oil, you take out some sort of letter of credit and some bank gets your documents. What banking system exists in Iraq?”
       Rebuilding Iraq’s banking system is just getting underway. On Thursday, the Bush administration named Michigan State University President Peter McPherson to take charge of financial matters related to the rebuilding of Iraq. McPherson served as the second-highest Treasury Department official in the Reagan administration.

Then there’s the question of just who will operate Iraq’s oil infrastructure. Under Saddam Hussein’s regime, oil was produced by two national oil companies (one covering northern oilfields and the other those in the south) and sold by the State Oil Marketing Organization, or SOMO, under U.N. supervision. While many of the Iraqis who ran those operations are available to go back to work, and U.S. forces moved quickly to secure the main oil ministry offices in Baghdad, other offices outside the city have been looted.
       There’s also the issue of reparations. About a quarter of the proceeds from the oil-for-food went to pay reparations for damages inflicted during the Gulf War. Before Iraqi oil sales resume, those claims must be resolved.
       It’s also not clear exactly who owns the oil. Until a new government is in place, there’s no one who can sign off on any transfer.
       “You can export oil until a buyer can be assured legal title,” said Robert Ebel at the Center for Strategic and International Studies in Washington.

That’s touched off a fierce, behind-the-scenes battle over who will control the sale of Iraqi oil. While all agree the proceeds should be used to feed the Iraqi people and help rebuild their country, the central issues that split the U.N. over the decision to go to war have touched off a renewed debate over reconstruction. U.N. Security Council members France and Russia, who opposed the war, now want assurances that billions in loans they made to the former Iraqi regime will be repaid. They also want to see agreements upheld that were made by Saddam to develop Iraq’s oil resources. That’s why they’re pushing for the U.N. to continue to supervise the sale of Iraq’s oil. 
       “Controlling Iraqi oil is their leverage,” said David Phillips at the Council on Foreign Relations. “If they relinquish their ability to manipulate the sale of oil, then they’ve given away their ability to leverage the U.S. and other Security Council members to succumb to the demands.”

European leaders meeting in Athens Thursday called for a new Security Council resolution guaranteeing the United Nations a “central role” in the country’s administration. But there’s little support for the idea in Washington. Last week, Senator John Warner, Chairman of the Senate Armed Services Committee, summed up the prevailing view by saying that the U.N. should be a partner in the rebuilding, but “not a managing partner, for that role of the management most properly falls to the coalition of the willing that conducted these operations.”
       U.N. sanctions on Iraqi oil exports remain in place. After Bush this week called for those sanctions to be lifted, the same countries that opposed the U.S. invasion have said that can’t happen until U.N. weapons inspectors have be allowed to finish their work.
       “For the Security Council to take this decision, we need to be certain whether Iraq has weapons of mass destruction or not,” said Russian Foreign Minister Igor Ivanov. 
       Washington has made clear it prefers to do the job itself and a Pentagon official said it had enlisted about 10 former U.N. weapons inspectors to help the search. 
       The Security Council will hold closed-door meetings Tuesday to try to come up with a resolution. 
       Even if the U.N. ends up playing a limited role in Iraqi oil sales, it remains to be seen whether the Iraqi people will support an interim government supervised by coalition forces. In the past week, Shiite clerics in southern Iraq have moved to fill the power vacuum by appointing governors, imposing curfews and offering jobs, health care and financial assistance to the poor.

But if that process of building a new government drags on too long, the U.S. coalition allies may decide, once again, to proceed on their own without unanimous Security Council approval.
       “At what point does the U.S. break the sanctions and say, ‘What are you doing to do about it?,’” said O’Grady. “There are diplomatic niceties here, but our boots are on the ground.”
       The White House has already signaled it’s not waiting to resolve the U.N. role in reconstruction. On Thursday, the Bush administration awarded the first major contract for rebuilding Iraq, worth as much as $680 million, to Bechtel Group of San Francisco.