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PEACE MISSIONS by Cuban Foreign Minister Isidoro Malmierca and former Swedish Premier Olof Palme (acting for the United States) are doomed to failure: the Iraqi-Iranian conflict looks set to rumble on through the winter. Civilian workers following the Iraqi army into Iran have been building new roads in preparation for a harsh winter campaign Both sides appear to be trying to improve their military positions at strategic mountain points in the northern and central sectors overlooking the routes connecting Khuzestan with Iraq.

Iraq at least is trying to put a brave face on the disruption caused by the war with Iran. But while the fighting continues it is becoming increasingly difficult for companies on either side to go on working because of shortages. Which means that as soon as the fighting dies down, both countries will make a major effort to resume oil supplies to pay for reconstruction.

Oil producers and consumers are exercising an extraordinary degree of self-restraint to avoid the price rise chaos of 1979 and early this year. But as MEN outlines in its last issue, the line between market order and catastrophic disruption is a thin one, and it will not take much to cross it. Already there are one or two warning signs in the air as spot prices creep upwards

The Gulf war no longer bears the remotest resemblance to the military walkover Iraqi President Saddam Hussein seems to have expected a month ago. It has long since degenerated into a slow, bloody slogging match, conducted primarily by artillery fire and air raids with Iraqi ground troops only taking up new positions when the enemy has been literally pulverized. By last week, the Iraqis were, however, effectively in control (if not altogether occupying) Khorramshahr and Abadan and most of the east bank of the Shatt al-Arab.

Iraqi President Saddam Hussein thought Iran would be an easy military target. He has so far been proved wrong, although his forces have evidently had the upper hand in the conflict. But Iran shows no sign of admitting defeat, and unless Hussein can emerge as a clear victor his own position at home must be in serious danger. Meanwhile, no resolution of the conflict is in sight.

OPEC's Vienna meeting broke up in almost complete failure with only Saudi Arabia's unilateral price rise keeping hope of a compromise alive. The hawks will not be won over to Saudi Arabia's indexing formula which they feel will tie down future price prospects too firmly. Paradoxically, even if they agreed the majority formula world probably prove quite unworkable.

The 1980 oil glut is turning out even deeper than the Saudis (and the West) expected, but given Saudi Arabia's anger with the United States over its inability to prevent Israel annexing East Jerusalem (MEN 25 August 1980) this could prompt the princes in Riyadh to cut back oil production very sharply indeed. For short periods, oil output might even drop well below the official 8.5 million bid ceiling.

The Saudis plan to build a naval base on the barren peninsula of Ra Khumais, just below Qatar on the Gulf, but were hoping not to let their intentions be known. The sensitiveness of the project is two-fold. Building at Ras Khurnays effectively confirms Saudi annexation of the area from the UAE according to an agreement concluded in 1974, promulgated in 1976, but up till now never of any actual relevance. And any indication that the Saudi authorities are constructing naval facilities will give rise to speculation that they are not building them for their own navy, but for the United States.

Economists in major international oil companies and banks are increasing their intention on revenue requirements of OPEC nations as the best guide to likely production patterns, now that more and more countries are either legally or optionally bound to keep production within justified limits. And the First National Bank of Chicago has become the leading estimator of investment income.

The West's much vaunted sanctions against Iran are treated with hilarity in Tehran, even by Western diplomats. At the same time, the Eastern bloc is not taking its place, and the shortage of oil income leaves the government with precious little room to manoeuvre. In fact, the budget which has only just been announced is now acknowledged as redundant.