Iraq is once again presenting itself as the patriotic bastion of the Arab world by sending a draft resolution to the Arab League asking oil producers to cut off supplies to America inresponse to the military campaign being orchestrated by George Bush to topple Saddam Hussein.
Saudi Arabia and the Gulf states are unlikely to join any embargo, but the sense that the Middle East crisis is spiralling out of control is keeping oil prices at a six-month high despite weak consumption and high oil stocks.
Adam Sieminski, of Deutsche Bank Securities, said: "First Iraq and nowIsrael/Palestine have added a $6 [£4] a barrel to oil pricesbeyond what we think supply, demand and inventories warrant." North Sea Brent hit a six-month high of $27.68 a barrel on Tuesday, having risen from $20 at the beginning of March.
Paul Horsnell, of the investment bank JP Morgan, said: "The combination of fundamental, macroeconomic, political and military factors is rapidly creating an oil market version of the perfect storm. Strap in tightly, this could get rough."
Ali Rodriguez, the secretary general of Opec, the association of oil-producing states, said yesterday it had no plans for now to increase crude output. He echoed fears that the recent price rises were the result of speculation and "political uncertainties" rather than any change in supply or demand.
Earlier an Iraqi minister said Baghdad was ready to cut its oil supplies to America if Iran would join it – unlikely given the traditional hostility between the two countries. Iraq has already made important gains from the crisis in Gaza and the West Bank, which is hampering Washington's efforts to garner support, internationally and in the Middle East, for the overthrow of Saddam Hussein.
Repeated crises because of the actions of Iraq and theIsraeli-Palestinian question have affected the price of oil over the past 30 years, but the degree of instability in the region now appears greater than before because of the military focus of American foreign policy since 11 September.
And in the present jumpy atmosphere militant Iraqi rhetoric has greater impact than a few months ago. Crude futures – financial instruments based on the future price of crude oil – rose spectacularly on Tuesday when Naji Sabri, the Iraqi Foreign Minister, said in Kuala Lumpur that the oil producing countries had the right to co-ordinate their policies to put pressure on Israel.
Iran, which has not exported oil to America since 1995, appeared cautious about the Iraqi proposal. Kamal Kharrazi, the Iranian Foreign Minister, said: "This is not a decision that one country alone can make for itself. It has to be a collective decision for it to be effective."
Loyola de Palacio, the European Union energy commissioner, said Opec officials had assured her they would not seek to use the threat of an oil boycott to pressure Israel and its allies. "They do not wantoil to be used as a weapon inIsraeli-Palestinian conflict."Reuse content