Iraq Has Built Network of Oil Pipelines

The abandonment of a proposed Iraqi pipeline project that has involved U.S. Atty. Gen. Edwin Meese III in controversy has not prevented Iraq from dramatically increasing its network of pipelines to export the crude oil that finances its war against Iran.

The recent growth of the pipeline network in Iraq and the region is viewed as a plus for the energy security of the United States and other oil-importing nations, because it diminishes the chance of supply interruptions. It has also been a boon to Iraq’s war effort.

New pipelines have enabled the Iraqis--with help from Turkey and Saudi Arabia--to increase their oil exports from 700,000 barrels to as much as 2.5 million barrels a day since Iran blew up Iraq’s export terminals on the Persian Gulf early in the war.

Iran Relies on Tankers

Today, although Iran must rely entirely on tankers plying the dangerous waters of the gulf to export its crude oil and fund its war effort, Iraq is viewed as relatively invulnerable to attacks on its oil exports because of the security afforded by the pipelines.

“In effect, the Iranians remain vulnerable and Iraq does not,” said Robert G. Neumann, director of Middle East studies at the Center for Strategic and International Studies and a former U.S. ambassador to Saudi Arabia.

Although pipeline construction in the region is especially striking in Iraq, where it was driven in part by military demand, it has accelerated in other gulf states as well. Energy analysts say that this has been encouraged by Western nations since the oil shocks of the 1970s.

Whatever the merits of the pipeline now at the center of controversy in Washington and Israel, the West has pushed for the opening of alternative routes for crude oil from the gulf states to ease reliance on the gulf and for economic benefits.

U.S. Supports Exports

“American policy since 1980 has been to systematically support expansion of everybody’s capacity to export. The more outlets, the more competition, the lower the prices,” said energy economist Philip K. Verleger Jr. of the Institute for International Economics.

With the added imperatives presented by the war, which broke out in 1981, the result has been pipelines across Saudi Arabia to the Red Sea and through Iraq to Turkey that are diminishing the strategic importance of the gulf.

“The bottom line is that, out of 11 or 12 million barrels of production a day in the gulf states, 7 million will be moving through pipelines by the early 1990s,” Energy Secretary John S. Herrington recently told The Times. “That is a major geopolitical shift.” For that reason, Herrington said, “I see stable oil supplies.”

But the economic virtues of the proposed Iraqi pipeline through Jordan to the Red Sea port of Aqaba were apparently dwarfed by the problems involving Meese, the Israeli government and other unusual elements of the deal that have come to light in recent days.

A Familiar Twist

Although the project may have had unique trappings, a U.S. oil executive with expertise in gulf oil projects said that one twist sounded familiar. He was referring to Iraq’s proposal that a U.S. firm, Bechtel Group Inc., once headed by Secretary of State George P. Schultz, build the $1-billion Aqaba pipeline.

“The Iraqis have used these pipeline deals not only to export their oil but as a way of using commercial bait to curry favor with Washington,” this executive said. “The logical extension of that scenario would be for top Administration people to be involved.”

Since 1981, when Iraq’s exports plummeted to 700,000 barrels a day, the Iraqis have expanded a pipeline through Turkey to the Mediterranean and built a new pipeline adjacent to it. In addition, they built a pipeline that connects with the Saudis’ newly expanded east-west pipeline to the Red Sea. Now, Iraq is building its own pipeline through Saudi Arabia to the Red Sea. By next year, it will bring Iraq’s export capacity to about 3.2 million barrels a day.

$1 Billion for 500 Miles

The pipelines, which typically cost $1 billion for 500 miles, have apparently been paid for by Saudi Arabia and Kuwait, Neumann said. They are Iraq’s chief financial supporters in the war. However, pipelines can have so many potential customers for their oil around the world that “the picture is never entirely clear who finances them,” Neumann said.

Iran, meanwhile, has proposed a number of pipeline projects without success. One plan called for exporting oil into the Soviet Union through a converted natural gas pipeline, but that is regarded in oil circles as impractical.

Iraq’s ability to expand its pipeline network has been a bone of contention within the Organization of Petroleum Exporting Countries over the last year. Iraq has tried to use its higher capacity as leverage to obtain a higher OPEC production quota, but the cartel has refused and Iraq has been producing far above its assigned quota.

That, in turn, has tended to weaken world oil prices--which has damaged Iran more than Iraq because the vulnerable Iranians have had difficulty in expanding their oil output.