Oil Sabotage Threatens Iraq Economy, Rebuilding

The sharp rise in attacks on Iraq’s oil pipelines in recent weeks has substantially impaired the country’s production, dealing a blow to the economy and threatening the struggling reconstruction effort, U.S. and Iraqi officials say.

Insurgents are bombing pipelines and other parts of Iraq’s oil infrastructure almost daily, another sign that the country’s security situation is deteriorating beyond the control of U.S. military and Iraqi security forces.

U.S. and Iraqi officials said the strikes had reduced average daily oil production by nearly 100,000 barrels, resulting in losses of as much as $1 billion this year.

“The attacks are continuing, and they impose a big penalty” on oil production, said a U.S. official who is involved in the reconstruction effort. “The country has got to get rid of this security problem. It’s pervasive, and they have to get over it.”

There are no official numbers, but sabotage against Iraq’s pipelines and related infrastructure has soared from an average of six attacks a month before the U.S. returned sovereignty to the Iraqis in late June to 19 a month in July and August, according to research by the Institute for the Analysis of Global Security, a Washington think tank.

Iraq’s oil production had been the bright spot in faltering efforts to rebuild Iraq’s shattered infrastructure. Although U.S. officials have had trouble delivering electricity and clean water to Iraq’s population, oil production rose after the March 2003 invasion.

U.S. officials had hoped that by the end of this year, Iraq would be producing as much as 3 million barrels of oil a day, satisfying internal demand and bringing in billions of dollars to fund the government’s operating costs and reconstruction efforts.

However, repeated assaults have reduced daily output to well below 2.5 million barrels, less than during Saddam Hussein’s regime, U.S. and Iraqi officials said.

The attacks “have caused great damage,” said Issam Chalabi, a former Iraqi oil minister and now a private consultant based in Jordan. “For the past month, particularly the last few weeks, every single sabotage has had an impact on production and export of oil.”

Although record-high oil prices have helped compensate for the production decline, industry analysts expect Iraq to bring in far less oil revenue than the $15 billion previously projected for the year.

As a result, U.S. taxpayers may be forced to make up for shortages in revenue that Pentagon officials once promised would cover much of the reconstruction costs.

In an appearance before Congress in March 2003, Deputy Secretary of Defense Paul D. Wolfowitz said Iraqi oil revenue could bring in as much as $100 billion over two to three years.

This week, however, Bush administration officials asked Congress to divert $450 million earmarked for reconstruction to increase oil production. That’s on top of $1.7 billion already devoted to rebuilding the industry.

“The premise was that we’d go to Iraq, and oil would provide the money. That’s not what is happening, and somebody is going to have to pay,” said Gal Luft, executive director of the Institute for the Analysis of Global Security.

Sabotage of the pipelines began soon after the invasion but was confined mostly to the north. Today, about 200,000 barrels a day move through the northern pipeline, a fraction of its capacity.

Since the United States restored Iraqi sovereignty, insurgents have turned their attention to the southern fields, which produce 90% of Iraq’s oil.

The spread of attacks to the south has been accompanied by an increase in their sophistication, experts say. Insurgents have selected targets carefully, picking junctions of multiple lines or aging pipelines that are especially vulnerable.

Insurgents also have stepped up strikes against Oil Ministry personnel and other petroleum infrastructure. Last month, guerrillas believed to be linked to rebel Shiite Muslim cleric Muqtada Sadr set fire to the state oil company’s southern headquarters in Basra. In April, suicide bombers in boats attempted to destroy Iraq’s southern oil terminal.

The success of the bombings and the expansion of targets have signaled to some experts that the insurgents have inside help. Some of Iraq’s 55,000 oil technicians and engineers who are disenchanted with the U.S. occupation may be providing instruction.

“A significant number are supplying information and intelligence to the various insurgents to blow up facilities,” said Youssef Ibrahim, a director of the Strategic Energy Investment Group, an energy consultancy based in Dubai, United Arab Emirates. “It’s part and parcel of the effort to bring down a government that they see as collaborators.”

The effectiveness of the pipeline attacks also has led to worries that dissidents in neighboring Saudi Arabia, the world’s largest oil exporter, could copy the strategy. “A simple attack produces a huge impact,” said Mustafa Alani, a security analyst with the Gulf Research Center in Dubai. “It’s cheap, easy and achievable.”

With 40% of the world’s oil transported by pipelines and global demand at an all-time high, an outbreak of pipeline bombings could have disastrous economic consequences, analysts said. “The world can live with Iraq pumping 2 million barrels per day. The world cannot live with pipelines popping all over the place,” Luft said.

U.S. and Iraqi officials have been at a loss to determine how to contain the damage.

Iraq’s 14,000-man force dedicated to pipeline protection has neither enough people nor equipment to effectively monitor the country’s 4,300 miles of pipelines, security experts say.

Iraqi oil officials recently announced a deal with southern tribes to mount pipeline patrols. The tactic is controversial, however, because some tribal members are believed to be among the saboteurs.

Iraqi and U.S. officials hope that more effective patrolling and aerial surveillance will help stem the attacks.

But ultimately, it is all but impossible to stop an attacker with a few sticks of dynamite from doing serious damage, security experts said.

“At the end of the day, if they want to get to it, they’ll get to it,” Ibrahim said.