DOHA, Qatar (AP) – The rebirth of Iraq’s once-booming oil industry could challenge the world’s big oil exporters and bring down prices – if it cranks up production to fund reconstruction projects and is unfettered by market controls.

Political wrangling over international sales and the fitful restart of meager domestic supplies highlight the obstacles. Analysts warn that oil is no magic bullet for Iraq’s economic woes and say big money is a long way off.

“The degree to which Iraq will ramp up production is largely overstated,” said Jon Rigby, an oil analyst with Commerzbank Securities in London. “It’s not just a matter of turning the taps back on again.”

The fragility of Iraq’s rebound was underlined Monday as engineers raced to repair oil leaks that stymied efforts to restart a key oil refinery in southern Iraq, where supplies of finished products such as gasoline are running short.

Amid pomp and ceremony, the oil flow to the Basra refinery was restarted last Wednesday for the first time since the war began March 20. But several line leaks, some of which caught fire, have since forced oil officials to suspend the stream.

“Multiple lines have caught on fire all over the place,” said an oil engineer familiar with the repair work in southern Iraq. “Because the urgency of getting the oil in there is real, we’re moving as fast as we can.”

Over the weekend, U.S. reconstruction officials said supplies of gasoline, fuel oil and lubricants were running short around Basra, Iraq’s second-largest city. Now, despite sitting on some of the world’s largest oil reserves, Iraq may need to import refined petroleum products from other oil-rich nations in the region if the refinery sits idle too long, officials said.

Restarting the oil industry is key to rebuilding plans. Refinery problems won’t affect exports of crude oil, which will eventually be sold to help pay for reconstruction. But refined fuels are crucial for the domestic economy.

Exports face hurdles, too, political as much as technological.

The U.S.-led interim administration in Iraq wants to resume exports as soon as possible. But they are hindered by U.N. sanctions imposed on overseas sales after Iraq’s 1990 invasion of Kuwait.

Another question is Iraq’s future role in OPEC, the oil exporting group it helped found at a Baghdad charter-meeting back in 1960.

A U.S.-influenced Iraq looking for quick cash to rebuild may be tempted to pull out of the group so it can jack up production unhindered by the group’s quota system, and rake in reconstruction revenue.

But if it floods the global market, crude prices could come down – angering its neighbors.

A former official in Iraq’s Oil Ministry argued that such a step may be necessary to pay reconstruction bills.

Fadhil Chalabi, in an article published Sunday on the Web site of the Britain-based Guardian newspaper, said Iraq should privatize its state-run oil sector and consider breaking free of the Organization of Petroleum Exporting Countries to maximize revenue.

Iraqi reconstruction costs could reach $600 billion over the next decade, but analysts warn that oil revenues could cover only a sliver of that.

For the next five years, Iraqi oil revenue won’t exceed $20 billion a year, said Leo P. Drollas, deputy executive director of the Center for Global Energy Studies in London.

It will cost $600 million alone just to bring production up to prewar levels of 2.8 million barrels a day, Drollas said. To reach the late 1970s heyday production of 3.5 million barrels a day, another $1 billion of investment would be needed.

The problem is, as production picks up, crude prices generally weaken.

Drollas said it would be unwise to pin Iraq’s economic recovery solely to oil, and he urged reconstruction officials to diversify the economy by also focusing on other sectors, such as Iraq’s once prosperous agriculture sector.

“If you base everything on oil, the economy will never recover,” Drollas said.

AP-ES-04-28-03 1534EDT