KUWAIT: Kuwait will turn off the taps of its multi-billion dollar oil industry in the event of a full-blown war against Iraq, threatening to send oil prices spiralling.
Kuwaiti oil officials have also discussed measures for evacuating the country's oil fields, many of which are situated along the border with Iraq where 110,000 US troops are gathering for military action.
An official at the state-owned oil company, speaking on condition of anonymity, said: "Iraq still has its short-range missile capacity intact and may use them against Kuwait.
"We cannot put our employees' lives in danger and will have to leave the oil fields if a war between America and Iraq escalates."
A missile strike on Kuwait's oil fields, which is one of the largest producers with 3 per cent of the world marker, could have significant effects on oil prices.
During the first Gulf War, oil prices more than doubled to $40 per barrel, and estimates suggest that should Iraq target the oil industry this time, prices could leap as high as $80 per barrel.
Insurance companies are also threatening to declare the Gulf area a "no-go area" in the event of war, meaning that many tankers will not travel to the region for fear of being attacked, further affecting the price of oil.
Saudi Arabia has promised to make good any shortfalls if Iraqi oil production ceases, but should Kuwait stop producing, and with Venezuela's oil industry effectively closed because of strike action, it may struggle to make up the shortfall.
Kuwaiti fears of an attack by Iraq appeared to be confirmed yesterday when the Iraqi Deputy Prime Minister, Mr Tariq Aziz, said that attacking its neighbour in response to an American invasion was a possibility as Kuwait would be part of any battlefield.
Iraq has already devastated Kuwait's oil industry once before, when fleeing Iraqi soldiers during the first Gulf War destroyed most of Kuwait's oil wells.
During the Iran-Iraq war in the 1980s, both sides regularly targeted oil tankers in an effort to cripple the other's war efforts.
However should the region be devastated by war, there will be no "lasting impact" to oil producers, according to one oil executive.
Teams of experts from the leading oil companies are already preparing to enter Iraq to begin reconstruction work, and the Kuwait's state oil company is preparing a similar "rapid reaction team".
"We don't expect the oil industry in Iraq to be targeted by American air strikes and so we will soon have oil flowing again to help rebuild the country and the region," said the executive.
"After all, Kuwait's oil industry last time round was completely destroyed and we rebuilt that in under two years."
Aziz threat boosts oil: page 19