A war of words has erupted between Iraqi oil officials in Baghdad and in the country's southern oil fields. STRATFOR is concerned because both sides are right — and wrong. The two entities in question are the Baghdad-based State Oil Marketing Organization (SOMO) and South Oil Co. (SOC), the state firm that manages Iraq's 10 billion barrel Rumaila superfield. SOC interim director Abdul-Jabar Al-Luaybi on July 8 said, "We could raise capacity to 850,000 b/d but SOMO still hasn't sorted out the exports and the loading programs and that's keeping production down." Upon hearing this, a SOMO official told Dow Jones, "If it was up to us, we would sign those contracts today.... But we have to be sure we have regular, continuous production before we can do that, and we can't say when that will be." First, both sides are correct. When SOMO began operations in late May, it quite literally didn't have a chair to sit on. SOMO offices in Baghdad had been picked clean of anything even tangentially valuable, including the phone lines. Oil trades reported mass confusion in reaching Iraqi sales representatives, and the final auction for the 10 million barrels of crude that Iraq possessed from prewar production took the better part of a month. While SOMO is clearly in better shape now, STRATFOR has no reason to believe that the organization is nearly as ready to go as it would like everyone to believe. If nothing else, it lacks basic information about what Iraq's infrastructure is capable of producing, just as SOC's Al-Luaybi pointed out. The SOMO official wasn't kidding when he said, "If it was up to us, we would sign those contracts today." But it's not Iraq that's balking. International traders won't sign multimillion-dollar contracts when it is not clear the supplier can deliver, just as the SOMO official stated. More jarring is what SOC and SOMO are wrong about, or at least what they are pointedly ignoring. The key issue is not the oil fields or the export terminals, but the pipeline connecting them to each other. There are numerous reports from Iraq that looting of equipment, while still occurring, has given way to theft of crude. Unlike many other third-world countries where thieves puncture transport lines and haul away crude by the bucket, Iraqi crude thieves are thinking bigger and hauling it away by the tanker truck. The crude is then taken to ships on the Shaat-al-Arab and smuggled out to the Persian Gulf in the same manner that crude was smuggled past the U.N. blockade during the reign of former Iraqi President Saddam Hussein. STRATFOR doesn't doubt that Rumaila is ready to go from the 450,000 bpd it currently is pumping to the 850,000 bpd that SOC believes it is capable of in rather short order. STRATFOR does doubt, however, that all crude will make it to market under Baghdad's brand unless the Coalition Provisional Authority can spare the troops to guard the line.