The execution of Saddam Hussein brings to a close one of the stranger chapters in oil history. Saddam was a ruthless and cunning boss, but his real power, like that of his rivals in Saudi Arabia, Iran and Kuwait, flowed mainly from the oceans of crude beneath his country. Oil not only financed Saddam's army and regime, bringing in billions of dollars to an otherwise pre-industrial backwater; oil gave Iraq geopolitical weight, allowing Saddam to bargain with Washington, Moscow, London, and Beijing, and play these superpowers off one another for Iraqi advantage.
But in Saddam's hands, oil power was always a doubled-edge sword. Iraq's eight-year war with Iran was driven in part by Iraqi lust for the oil-rich border province of Khuzestan. Oil also lay behind the 1990 invasion of Kuwait. Impoverished by his war with Iran, Saddam sought to refill his treasury by increasing Iraqi oil exports. But neighboring regimes, especially tiny Kuwait, saw little advantage in allowing Iraq to regain its strength, and quietly raised their own oil production so as to glut world oil markets, drive down oil prices, and starve Saddam of revenues. (Some reports also suggest that Kuwait was stealing oil from the Iraqi side of a massive oil field that straddled a shared border.) After an enraged Saddam threatened to retaliate, neighboring governments saw the danger. They cut their own production in the hopes of raising oil prices and mollifying Saddam--but it was too late. The Republican Guard was already massing on the Kuwaiti border.
Oil also defined the post-Gulf War period. Saddam defied UN sanctions and used oil revenues to rebuild his army and to finance his own, increasingly dysfunctional regime. He skillfully levered the promise of oil contracts to win political protection from Russia, China, and even France--alliances that effectively allowed Saddam to delay Washington's efforts, in the aftermath of 9/11, to build support for a second Gulf war.
In the end, of course, oil wasn't enough--either for Saddam, or Iraq. The dictator was toppled, and, in what may be the most hostile take-over in oil industry history, his precious oil operations were acquired by Allied forces. But hopes of using that oil to rebuild Iraq (or to break OPEC's stranglehold on oil prices, which many US strategists had hoped for) have failed. Despite hundreds of millions of dollars in investment, the new Iraqi government has been unable to raise oil production even to pre-war levels.
Even as one chapter in the story of Iraqi oil power closes, another begins. Oil now fuels much of the sectarian strife that threatens to topple Iraq. Oil also threatens the fragile balance of power in Middle East--most notably in Iran's relentless campaign to extend control over Iraq. With Iranian oil reserves reportedly in sharp decline, Tehran may regard the Iraqi reserves as key to its own political survival in one of the most ruthlessly competitive regions in the world.