Oil price spike bodes poorly for world economiesBy Mohammed AbbasIran flexed its muscles by occupying an inactive but disputed oil well on its border with Iraq, a sign to Baghdad of what it can do if it is sidelined and to the West of how Tehran might respond to more sanctions. Eleven Iranian soldiers on Friday raised their country's flag over the oil well in a border area disputed by Iran and Iraq. They have since withdrawn slightly, giving up control of the well; Iraq has demanded a full withdrawal. The move came as Iraqi Prime Minister Nuri Al-Maliki prepared to visit Egypt, which has frosty ties with Iran, and as Iraq signed deals with Western oil majors that could catapult it into first-class oil producer status. Although the seizure was largely symbolic, what many Iraqis saw as a weak response from Maliki could spell trouble for the prime minister in a parliamentary election scheduled for March 7. A Shi'ite Muslim, he has historic ties to Shi'ite-majority Iran. Border disputes between Iran and Iraq have festered for decades, but they also were part of the impetus for a ruinous eight-year war between the two countries in the 1980s. The spat over the well spooked markets, pushing up the price of crude, and heightened the risks associated with a series of oil deals Iraq has agreed with global oil majors this year. The deals, awarded in Iraq's first energy auctions since the US-led 2003 invasion, could more than quadruple output capacity. “This is a clear message to the foreign oil companies: You cannot come and exploit Iraqi oil while at the same time your governments are putting pressure on us,” analyst Ghassan Al-Attiyyah of the Iraq Foundation for Democracy and Development said. On Tuesday, the US House of Representatives approved legislation to impose sanctions on foreign companies that help to supply fuel to Iran, a measure lawmakers hope could deter Tehran from pursuing its nuclear energy program. Europe's largest oil company Royal Dutch Shell, Malaysia's state-run Petronas, Russia's Gazprom, Korea's Kogas and Turkey's TPAO have all recently won deals to develop Iraqi oilfields near the border with Iran. For oil-consuming nations, even temporary spikes in world oil prices can bring major economic pain. “It could have been a reminder to Israel, the US and China that world economic recovery could rather be derailed ... World economic recovery depends on Iranians being happy campers,” author and Middle East expert Juan Cole said on his website.Political angle The Iranian occupation of the well, which Iraq considers part of its Fakka oilfield in southeast Maysan province, met little apparent resistance from Iraqi forces. Iran said its troops acted to dismantle a barrier erected recently by Iraqi soldiers. The well, inoperative for decades, is considered small by local standards. The bigger impact may have been in Baghdad. Many of Iraq's top politicians once sought refuge from Saddam Hussein's Sunni-led regime in Iran and since Saddam's ouster, Tehran has had warmer ties with Baghdad, to the point where many Iraqis accuse it of undue influence. Many Iraqis note disapprovingly that the Maliki government had a delayed response to the incident and its outcry was muted. On the other hand, Maliki has appeared willing to dissociate himself from politicians Iraqis identify with Iran. He has also blasted Iranian ally Syria, blaming it for harboring militants Iraq holds responsible for major bomb attacks. “His differences with Syria are in fact a message to Iran,” said Hazim Al-Nuaimi, a political science professor at Baghdad's Mustansiriya University. As Iraqis increasingly reject outside interference, politicians seen as close to Iran may fare badly in March, leaving Iran a small window to define borders on its own terms. “Iran knows it has many allies in the current government, and there is no guarantee they will have the same influence in the next one,” Iraqi oil analyst Mahmoud Al
