Vol. 3, No. 26 June 24, 2004
Developments in Saudi Arabia and Iraq should cause oil prices to decline further and to reach $30-35 a barrel.
Iraq’s southern oil terminal exports are back to 1.0 million b/d after the bombing of three pipelines by al-Qaeda terrorists led to the temporary stoppage of all Iraqi oil exports.
The Shi’ite territories in southern Iraq are hostile to al-Qaeda’s Sunni Wahhabi militants. Therefore, repeating the successful operation against Iraq’s southern oil terminals should be far more difficult in the future.
The many Saudi and other Muslim casualties caused after the May 2003 bombings alienated the majority of the conservative (not to mention the better educated and liberal) Saudi population and helped the regime to largely isolate the al-Qaeda mujahidin.
Aramco’s two new Saudi fields (al-Qatif and Abu Safah) are about to come on line and initially produce about 500,000 b/d.
The strategy of al-Qaeda to undermine the Western economy by hitting Persian Gulf oil production is unlikely to succeed as long as Iraq’s Shi’ite majority cooperates with U.S. authorities and the new regime in Baghdad.
The bombing of three pipelines leading to Iraq’s southern export terminals (the two Basra and Khor al-Amaya terminals) led to the temporary stoppage of all Iraqi oil exports. This was a major success in al-Qaeda’s strategy of undermining the Western economy by hitting the oil supply from the Persian Gulf. That, and the assassinations in Saudi Arabia of Western expatriates related to the oil industry, caused NYMEX oil prices to sharply spike to $42.23 a barrel. Since then, oil prices have declined to below $40 a barrel due to increasing oil supply (and more to come at the beginning of July) that has helped raise OECD inventories (especially U.S.) to above last year’s average. Moreover, developments in Saudi Arabia and Iraq should cause oil prices to decline further and to reach $30-35 a barrel.
Al-Qaeda Targets Iraq
Iraq’s oil authorities have now announced that the country’s southern oil terminals’ exports are back to 1.0 million b/d as the pipelines leading to one of the Basra terminals and Khor al-Amaya have been repaired. The third pipeline carrying oil to the other Basra terminal will be repaired within a few weeks. Subsequently, Iraq should soon be able to export the 1.8-2.0 million b/d it had previously delivered to the world market. This does not include the shipment of about 250,000 b/d from Iraq’s northern fields by the Kirkuk-Ceyhan pipeline, which is being hurriedly repaired. Furthermore, according to Baghdad’s new/old petroleum minister, Thamir Ghadhban, Iraq’s output and exports should rise further in the third quarter of 2004.
It is believed that the well-planned bombings of the oil pipelines in Shi’ite southern Iraq were perpetrated by al-Qaeda terrorists. It has been claimed that Iraq’s al-Qaeda is led by Abu Mus’ad al-Zarqawi, the seasoned Jordanian veteran of the “Afghani” mujahidin. In addition to Saddam’s Ba’athist diehards, al-Zarqawi masterminded numerous attacks on U.S. forces and major infrastructure installations in Baghdad, the Sunni triangle north and west of the capital, and the Kurkuk-Mosul region. However, the Shi’ite territories are hostile to al-Qaeda’s Sunni Wahhabi militants. Therefore, repeating the successful operation against Iraq’s southern oil terminals should be far more difficult to carry out in the future.
The Threat to Saudi Stability
The killing of Abdul-Aziz al-Muqrin, the self-proclaimed head of al-Qaeda in the Arabian Peninsula, is an important achievement for the Saudi anti-terrorist forces and U.S. intelligence, which cooperates with them. The three additional al-Qaeda members who were killed with al-Muqrin in the firefight in Riyadh and the incarceration of 12 other (alleged) members of his cell revealed interesting facts about Saudi al-Qaeda members and how they function. It is clear that al-Muqrin’s network operated independently of al-Qaeda’s central command. Although the Saudi al-Qaeda has lost many of its former “Afghani” mujahidin since last May, it has managed to attract scores of lower class, unemployed, and uneducated young Saudis who have participated in attacks led by veteran al-Qaeda members.
It is alleged that al-Muqrin’s group even managed to win the support of some members of the security forces (attributable to tribal affiliation or religious fanaticism) and that it has sympathizers among the more fundamentalist, anti-regime elements of the Saudi population. However, the increasing persecution by the regime’s security forces after the May 2003 bombings of housing compounds in Riyadh reduced the ranks of al-Qaeda’s veteran fighters, who were either killed or incarcerated. The many Saudi and other Muslim casualties caused by the militants’ operation in Riyadh and other urban centers in the kingdom alienated the majority of the conservative (not to mention the better educated and liberal) Saudi population and helped the regime to largely isolate the al-Qaeda mujahidin and their younger offshoot. Indeed, six leading ultra-radical clerics, who have spent long periods in Saudi jails, together called upon the Saudi population to help the regime in its anti-terrorist endeavors.
The elimination of al-Muqrin’s group does not mean that the Saudi authorities managed to wipe out the militants’ threat to the kingdom. Other cells, made up of former Saudi “Afghanis” and younger volunteers, are likely to continue to operate, although with increasing difficulty, in Riyadh and regions of the kingdom where they still manage to enjoy shelter with ultra-fundamentalist and anti-Saudi elements (for instance, the al-Bureida region in the Najd and Assir on the Saudi border with Yemen). Under such circumstances, the remaining militants will find it more difficult to operate in the future, although their willingness to die for their cause may still enable al-Qaeda to mount limited “showy” operations. For example, it would be difficult to protect the tens of thousands of Western experts employed in the kingdom who are essential for the operation of the Saudi oil and related industries. Indeed, just a handful of murderous terrorists were necessary to carry out operations that led to the assassinations of Western and other expatriates in Yanbo, al-Khobar, and Riyadh.
The State Department has again strongly advised Americans to leave the Saudi kingdom (as did the British government) “due to recent information that the extremists may be planning to carry out attacks against Westerners and oil workers in the Persian Gulf region beyond Saudi Arabia.” Ironically, on June 18, Secretary of State Colin Powell called upon foreigners to stay in Saudi Arabia “because their departure would be a victory for the kind of people who beheaded kidnapped American Paul Johnson.” Indeed, Powell was particularly concerned that Western experts, who are essential for the operations of the Saudi oil industry (about 35,000 Americans and other Westerners are employed by Saudi Aramco and other bodies in the Saudi kingdom), would join the exodus of expatriates from Saudi Arabia.
The Future of Saudi Oil
It seems that the initial panic of Westerners employed in the Saudi kingdom has somewhat subsided, although fear for personal safety has caused a good number to leave the kingdom and others are about to follow them. Nevertheless, the Saudi oil industry seems to continue to function normally, protected in the Eastern (oil) Province by about 30,000 Saudi security personnel and the Saudi and U.S. navies. Riyadh is keeping up with its undertaking to supply the market with all the oil required. Aramco’s two new fields (al-Qatif and Abu Safah) are about to come on line and initially produce about 500,000 b/d. This will help the Saudis to eventually produce (if necessary) up to 9.5 million b/d in the second half of 2004. With current production quickly approaching 9.1 million b/d, Riyadh is most likely (with other OPEC producers) to provide the market with all the oil required.
The strategy of al-Qaeda and related Sunni militant organizations to undermine the Western economy by hitting the Persian Gulf’s oil production is unlikely to succeed in the foreseeable future, as long as Iraq’s Shi’ite majority (and other Shi’ite communities in Kuwait and Saudi Arabia) cooperates with U.S. authorities and the new U.S./UN-appointed regime in Baghdad.
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Mordechai Abir is a Fellow of the Jerusalem Center for Public Affairs and Professor (Emeritus) of Islamic and Middle Eastern Studies at the Hebrew University of Jerusalem. His books include Saudi Arabia: Society, Government and the Gulf Crises (1993) and Saudi Arabia in the Oil Era: Regime and Elites: Conflict and Collaboration (1988).