Saddam May Soon Unleash His Best Weapon: Oil Blackmail

Gas-guzzling Americans have done their bit. So has oil demand in Asia, swiftly rising on the back of a stronger-than-expected economic rebound. But a hidden culprit behind the highest oil prices in over a decade is Iraqi dictator Saddam Hussein.

Since early August, Saddam has been ratcheting up the tension in the Persian Gulf. In the same period, oil prices have shot up, hitting post-gulf war highs on Sept. 20 of $37.50 a barrel. First he made a saber-rattling speech on Aug. 2 to mark the 10th anniversary of Iraq's invasion of Kuwait. Then, on Sept. 4, an Iraqi aircraft strayed over Saudi airspace for the first time since the war. Most ominously, Iraq accused Kuwait on Sept. 16 of illegally tapping into Iraqi oil fields through the use of "directional" drilling, which can burrow across borders. Similar accusations served as a pretext for the invasion of Kuwait. "We're taking this stuff very seriously," says a senior U.S. Administration official in Washington.