What to do about the oil in Iraq?

Jul 27, 2006 02:00 AM

by Ryan Lenz

Pipelines carrying crude oil through Iraq's unguarded desert suddenly collapse after weeks without disruption -- a single bullet puncturing a line, halting Iraq's main source of revenue.
At the same time, daily bloodshed is pushing the country closer to a civil war. These two dynamics at work in Iraq -- the quest for prosperity amid an endless struggle for security -- tug firmly on Iraq's future and the US involvement here.

Since resuming petroleum exports after the US invasion in 2003, Iraq has struggled for lasting security of its pipelines and refineries. It sits atop the world's third-largest reserves, but saboteurs routinely disrupt the 4,300-mile system of pipelines.
For weeks in June, Iraq exported millions of barrels to Turkey. But during the second week of July, flow to the country's largest refinery in Beiji stopped when pipelines were attacked. Such topsy-turvy progress is symbolic of the delicate balance between oil and security. The irony, military and US government officials say, is that oil is both the quickest fix to rebuilding Iraq's infrastructure and a source of considerable violence.

More than 250 Oil Ministry officials, workers and security guards have been assassinated since the fall of Saddam Hussein's regime in 2003, according to the ministry. During a recent visit to Baghdad, Energy Secretary Samuel Bodman said frequent attacks on oil workers and infrastructure have kept Iraq from moving forward. International investors won't come, and Iraq continues to struggle, he said.
Back in 2003, then-Deputy Secretary of Defence Paul Wolfowitz told Congress that Iraq's oil could bring as much as $ 100 bn in the two years immediately following the invasion. But continual attacks have kept Iraq's largest refinery in Beiji, about 155 miles north of Baghdad, from producing amid an oil shortage.

Iraq's oil ministry estimates about $ 6.25 bn was lost in damage to oil infrastructure and shortfalls in revenues that could have been generated from crude oil exports in 2005. That money, if funnelled back into the country, could change the face of Iraq.
"It's critical. What else do they have to export? It's such a huge source of revenue for them. And until they get any type of secondary industry developed, that's all they have," said Lt. Col. Craig Collier, deputy commander of the 3rd Brigade, 101st Airborne Division.

Military commanders have struggled to understand the system of long-practiced corruption surrounding the country's oil industry. Under Saddam Hussein's regime, various government and provincial leaders quietly skimmed from the country's oil revenue. It was a way to secure a vulnerable system of unguarded pipelines by paying off those who might otherwise attack it, officials said.
Officials say the US mission in Iraq hinges on the future of the country's oil. Iraq has the capability with its resources to sustain itself but it cannot prosper without selling its oil.

Oil has always been an albatross for the US in Iraq. Some alleged it was the reason behind the invasion; the White House promised it would be the key to rebuilding Iraq.
Before recent attacks crippling the country's northern oil flow, Iraq exported millions of barrels from the oil-rich region near Kirkuk to Turkey. Of the three lines running south from Kirkuk, at least two have collapsed, officials said. The cause is an ancient pipeline system Westerners compare to the former Soviet Union's oil industry. After the fall of communism, world leaders were astonished to find an industry believed to be booming in rust and ruin.

More than three years after the fall of Saddam's regime, the fight to resurrect Iraq's industry continues.
"Due to the former regime's wars and its foolish, disastrous policies, the country is totally dependent on oil," Prime Minister Nouri al-Maliki told parliament earlier this month. "Iraqis are suffering."

Source: money.canoe.ca
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