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Last Updated: Wednesday, 16 June, 2004, 14:42 GMT 15:42 UK
Oil attacks target Iraq recovery
By Matthew Davis
BBC News Online

Sabotage attacks on Iraq's vulnerable oil industry are proving one of the most immediate ways in which insurgents can strike a blow at the heart of the country's recovery.

An oil pipeline burns in Tikrit after an attack by saboteurs
Attacks on the oil industry strike at the heart of Iraq's recovery

Iraq has the world's second largest oil reserves and relies on oil for 90% of government revenues.

It now stands to lose hundreds of millions of dollars over the coming days after a series of strikes forced it to turn off major export pipelines in the north and south.

Repairs to the pipe on the Faw peninsula - the main conduit for oil exports in southern Iraq - are expected to take more than a week, leaving oil output at a virtual standstill.

In that time, money that could have been spent on building schools and hospitals or improving sanitation is leaking away.

Despite huge efforts to secure oil terminals and the "economic lifelines" that carry oil through Iraq's deserts, they are proving almost impossible to protect.

Coalition forces, Iraqi police and soldiers backed by rapid response vehicles and air patrols are guarding hundreds of terminals, refineries and pumping stations.

But night after night, out in the open countryside, the saboteurs manage to damage the pipelines.

'Big impact'

There is little prospect of attacks ebbing away, according to Neil Patrick, of the Economist Intelligence Unit.

Chart showing Iraqi oil production in 2003 and 2004

"This is clearly going to be an ongoing risk and despite the setting up of a [oil security] taskforce, one can assume that this will be a constant factor that will affect oil revenues for some time," he told BBC News Online.

The latest strikes will have a "big impact" in terms of Iraq's oil revenues, but perhaps not the $1bn cost of the most pessimistic forecasts, he said.

While the flow of funds is essential to pay for the country's rebuilding, many of the major reconstruction projects are reliant on aid from the US and other donor countries, rather than oil money.

But there are a number of "high-spend items" earmarked for Iraq's own revenues, like hospitals and schools, which could be affected, he said.

"What we are seeing are interruptions to the flow of oil or to exports, rather than attackers affecting the ability of Iraq to supply oil over the long term."

Catalogue of sabotage

The vast majority of attacks on the oil industry are being blamed on insurgents bent on destabilising Iraq as it prepares for the 30 June handover of power by the coalition.

The Institute for the Analysis of Global Security think-tank details at least 61 significant attacks on Iraqi oil infrastructure targets since exports resumed in early June 2003.

Analysts say that if the saboteurs hit the pipes around the refineries, they can cause petrol shortages, cut off gas supplies to the power stations and bring more power cuts.

When they target export routes - as they have in the latest attacks - they can cripple the industry. With little storage capacity in the system, when the oil stops flowing, everything must come to a halt.

Recently crude exports have been running at about 1.7m barrels of oil a day, with 1.6m of that coming from the southern terminals. Exports have now been cut by as much as two-thirds.

Iraqi Prime Minister Iyad Allawi says sabotage has cost the country more than $200m in lost revenues over the past seven months.

Oil pollution

There are fears that if there are more attacks on the country's pipelines, the authorities will not be able to make repairs fast enough. If that happens, analysts fear that oil prices could soar.

Coalition Provisional Authority spokesman Pepper Bryar told BBC News Online that attacks on oil targets were a "direct blow against the rebuilding of Iraq".

"They affect money used for schools, clinics, oil facilities, water and other infrastructure, not to mention the environmental impact."

In the south where the water table is just a few feet below ground, oil from damaged pipeline seeps into water supplies used for agriculture and drinking.

"The criss-crossing irrigation canals that channel water to farmland from the Tigris and Euphrates, become conduits for oil pollution," said Mr Bryar.






BBC NEWS:VIDEO AND AUDIO
The BBC's Juliet Dunlop
"The pipeline here flows directly to...one of the country's few working outlets"



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