Oil War News from 2006 -

Oil War News from 2004-2005

Oil War News from 2003 & Earlier

Links To Iraq War News

Oil & War Backgrounder

Oil War News
compiled by George Draffan of

"It is not possible to explain the dynamics of global security affairs without recognizing the pivotal importance of resource competition. For almost every country in the world, the pursuit or protection of essential materials has become a paramount feature in national security planning... [and] figure in the organization, deployment, and actual use of many of the world's military forces." -- Michael Klare, author of Resource Wars and Blood And Oil


In 1950, it cost the energy equivalent of one barrel of oil to find 100 barrels of new oil. Now the same investment yields 5 barrels.

It takes a barrel of oil to manufacture a barrel of biodiesel.

"Go massive. Sweep it all up.
Things related and not."
-- US Secretary of War Rumsfeld,
5 hours after the 9/11 attacks
(CBS News, Sept 4, 2002)

FAIR USE NOTICE: This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of the issues of energy and war. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C.Section 107, the material on this site is made available without profit to those who have an interest in receiving the information for research and educational purposes.

"Can I tell you the truth? I mean, this isn't the TV news, is it? Here's what I think the truth is: We are all addicts of fossil fuels in a state of denial. And like so many addicts about to face cold turkey, our leaders are now committing violent crimes to get what little is left of what we're hooked on." -- Kurt Vonnegut

"Think of Iraq as a military base with a very large oil reserve underneath. You can't ask for better than that." -- Fadel Gheit, Oppenheimer & Co. Toronto Star, Sept 20, 2004


"I really do believe that we will be greeted as liberators." -- U.S. VP Dick Cheney on Meet the Press, March 16, 2003

"War is sweet to those who have not experienced it." -- Erasmus

"True democracy is not and cannot be imperialistic." -- US President Herbert Hoover, 1928


Afghanistan's President Karzai signs deal on gas pipeline project

By Borzou Daragahi, Los Angeles Times, December 12, 2010

Afghan President Hamid Karzai met with regional leaders Saturday to sign an agreement for a massive energy project that could eventually net his country billions of dollars in revenue: a 1,000-mile natural gas pipeline whose proposed route cuts through the heartland of the Taliban insurgency.

As if to highlight the complications facing the project, at least 26 people were killed in attacks Friday and Saturday, including a Taliban commander and several people believed to be with a private security firm, Afghan and NATO officials said.

Get dispatches from Times correspondents around the globe delivered to your inbox with our daily World newsletter. Sign up »

The United States strongly supports the proposed pipeline because it could draw Central Asia's significant energy resources to Pakistan and India an bypass Iran, Washington's top adversary in the region.

Karzai met with Turkmen, Indian and Pakistani officials in Ashgabat, the capital of neighboring Turkmenistan, to sign the accord.

"On this very important occasion, let me once again highlight our vision for regional cooperation, which is to contribute to regional stability and prosperity," Karzai said in a statement, "and to enhance the conditions for Afghanistan to resume its central role as a land bridge in this region."

But the proposed $7.6-billion TAPI Gas Pipeline project and any revenue it may generate may be years away. The planned route passes from Turkmenistan, a former Soviet republic, through violent territory still unsettled by insurgencies, including the southern Afghan city of Kandahar, the birthplace of the Taliban, and the Pakistani city of Quetta, which is considered the home of the Taliban leadership.

The latest violence took place in Afghanistan's south and the northern province of Kunduz.

In the most deadly attack, a roadside bomb blast struck a pickup truck carrying Afghan men Friday in a rural stretch of Helmand province, killing 15 people, Daoud Ahmadi, a spokesman for Helmand's governor, said Saturday.

Also in Helmand, a man described as a senior Taliban commander and three members of his family were killed Saturday in a North Atlantic Treaty Organization airstrike, the official Bakhtar news agency reported.

A car bomb exploded Saturday afternoon in the parking lot of the Information and Culture Directorate in Kandahar, injuring four police officers and two youths, said Zalmay Ayoubi, spokesman for the governor there.

"The enemies of peace and the people have lost the ability to fight against the government, and now they want to terrorize the public by committing such criminal acts just to show their existence," said a statement issued by the governor's office.

In Kunduz, a suicide bomber driving an explosives-laden car attacked an Afghan army checkpoint, injuring five soldiers and nine civilians in nearby homes, mostly women and children, said Muhbullah Sayedi, a spokesman for the provincial governor.

U.S.-led forces also announced an investigation of allegations that seven Afghan members of a private security firm were killed Saturday during a counterinsurgency operation near the eastern Afghan city of Gardez, the site of a Dec. 5 suicide bombing that killed Western troops.

A military news release said the U.S.-led troops opened fire after armed men emerged from a vehicle and compound suspected of being linked to the Haqqani network, which is allied with the Taliban.

"The security force takes civilian casualty allegations seriously and is currently accessing who the individuals were, why they were armed and why they were in that area at that time of the morning," the news release said.

Protecting civilian lives has become a key component of the international force's strategy in Afghanistan. Deteriorating security erodes the Afghan civilians' trust in the central government and its armed forces, sometimes leading them to turn to the Taliban for protection.

The United States hopes the Afghan army and police force will be able to secure the country and tamp down the Taliban once international troops begin to depart. But attempts at political reconciliation between the central government and the Taliban, which ruled Afghanistan from the mid-1990s until the U.S. invasion in 2001, appear to have stalled.

Defense Secretary Robert M. Gates told reporters Wednesday in Kabul, the Afghan capital, that a large U.S. troop buildup in Afghanistan was showing results.

After a meeting with Karzai, Gates told reporters he would return to Washington believing that Afghanistan will be ready for a U.S. troop drawdown by 2014, as set out by President Obama.


Iraq’s Insurgency Runs on Stolen Oil Profits.

By Richard A. Oppel Jr. New York Times, March 16, 2008

The Baiji refinery, with its distillation towers rising against the Hamrin Mountains, may be the most important industrial site in the Sunni Arab-dominated regions of Iraq. On a good day, 500 tanker trucks will leave the refinery filled with fuel with a street value of $10 million.

The sea of oil under Iraq is supposed to rebuild the nation, then make it prosper. But at least one-third, and possibly much more, of the fuel from Iraq’s largest refinery here is diverted to the black market, according to American military officials. Tankers are hijacked, drivers are bribed, papers are forged and meters are manipulated — and some of the earnings go to insurgents who are still killing more than 100 Iraqis a week.

"It’s the money pit of the insurgency," said Capt. Joe Da Silva, who commands several platoons stationed at the refinery.

Five years after the war in Iraq began, the insurgency remains a lethal force. The steady flow of cash is one reason, even as the American troop buildup and the recruitment of former insurgents to American-backed militias have helped push the number of attacks down to 2005 levels.

In fact, money, far more than jihadist ideology, is a crucial motivation for a majority of Sunni insurgents, according to American officers in some Sunni provinces and other military officials in Iraq who have reviewed detainee surveys and other intelligence on the insurgency.

Although many American military officials and politicians — and even the Iraqi public — use the term Al Qaeda as a synonym for the insurgency, some American and Iraqi experts say they believe that the number of committed religious ideologues remains small. They say that insurgent groups raise and spend money autonomously for the most part, with little centralized coordination or direction.

Money from swindles in Iraq and from foreign patrons in places like Saudi Arabia allows a disparate, decentralized collection of insurgent cells to hire recruits and pay for large-scale attacks. But the focus on money is the insurgency’s weakness as well as its strength, and one reason loyalties can be traded. For now, at least 91,000 Iraqis, many of them former enemies of the American forces, receive a regular, American-paid salary for serving in neighborhood militias.

"It has a great deal more to do with the economy than with ideology," said one senior American military official, who said that studies of detainees in American custody found that about three-quarters were not committed to the jihadist ideology. "The vast majority have nothing to do with the caliphate and the central ideology of Al Qaeda."

The corruption that drives money to the insurgency is hardly limited to the Baiji refinery, which a reporter visited last month. In Mosul, for example, insurgents have skimmed profits from soda and cement factories, American officers said.

Insurgents in Mosul also make money from kidnapping for ransom and by extorting 5 to 20 percent of the value of contracts local businessmen get from the government, said Khasro Goran, the deputy governor of Nineveh Province.

A military official familiar with studies on the insurgency estimated that half of the insurgency’s money came from outside Iraq, mainly from people in Saudi Arabia, a flow that does not appear to have decreased in recent years.

Iraq’s Black Market

Before the invasion of Iraq, eight gasoline stations dotted the region around Sharqat, an hour north of the refinery at the northern edge of Saddam Hussein’s home province, Salahuddin. Now there are more than 50.

Economic growth? Not exactly. It is one of the more audacious schemes that feed money to the black marketeers. Most tanker trucks intended for Sharqat never make it there. "It’s all a bluff," said Taha Mahmoud Ahmed, the official who oversees fuel distribution in Salahuddin. "The fuel is not going to the stations. It’s going to the black market."

Gas stations are often built just to gain the rights to fuel shipments, at subsidized government rates, that can be resold onto the black market at higher prices. New stations cost more than $100,000 to build, but black market profits from six or seven trucks can often cover that cost, and everything after that is profit, said officials who have studied the scheme.

The plan also requires bribing officials in the province and Baghdad, said Col. Mohsen Awad Habib, who is from Sharqat and is now police chief in Siniya, near Baiji. He said owners of bogus gas stations told him they paid $20,000 bribes to an Oil Ministry official in Baghdad to get their paperwork approved. Local and provincial officials then extort their own cut. "In each station you’ll find high Iraqi officials who have shares," he said.

In Baiji, dozens of active insurgent groups feed off corruption from the refinery, said Lt. Ali Shakir, the commander of the paramilitary Iraqi police unit here. "If I give you all the names, your hand is going to be tired" from writing them down, he said.

Lieutenant Shakir said the more hard-core insurgent groups had a lot of money to pay other fighters, and he grumbled that part of the reason they thrived was that obvious thievery was never prosecuted.

Another scheme, he said, involves a trucking company owned by a man tied to the insurgency who is also a relative of Baiji’s mayor. The trucks take fuel from the refinery but are then unloaded just south of Tikrit. Making arrests would be a waste of time, he said, because provincial officials would let the perpetrators go.

"What can I do?" he said. "After a half hour, they would be released."

Last year, the Pentagon estimated that as much as 70 percent of the Baiji refinery’s production, or $2 billion in fuels like gasoline, kerosene and diesel, disappeared annually into the black market. Baiji supplies eight provinces.

Some of the most obvious corruption and theft, like tanker trucks hijacked at gunpoint from distribution pumps, has been curbed by Captain Da Silva and his predecessors. The American troops live inside the compound.

Moreover, American officials say they believe that in recent weeks, some illicit profits flowing from the refinery have diminished. The refinery has been operating at almost full capacity, they say, pouring more fuel on the market and narrowing the spread between government-mandated rates for fuel and what it fetches on the black market.

Exploiting that spread is one key to illicit profits from the refinery. For example, in January a tanker filled with kerosene that was supposed to be worth about $10,000 was going for $19,000 in Baiji, according to surveys of black market prices for the American military. In Samarra, it cost $35,000, a result of what soldiers described as the former mayor’s efforts to manipulate fuel prices.

Most theft occurs outside the refinery, but fraud still abounds inside, too. At one refinery office, a broken control-room machine has a hole where an object has been jammed through the glass to stop a dial from turning. Most everything is recorded using paper, and tubes of correction fluid sit on the desks of clerks overseeing the flow of fuel. It is regularly used to cover up huge discrepancies in production and distribution tallies that soldiers say can only be explained by theft.

"We’d all be hanged" if the refinery had operated this way under Mr. Hussein’s government, one senior refinery official confided to American soldiers.

Refinery workers plead for jobs dispensing fuel, offering to work for no pay. Far more money can be made conspiring with tanker truck drivers to skim gas from the pumps, a job some soldiers liken to being a valet parking attendant at a Las Vegas casino.

The Flow of Illicit Profits

American and Iraqi officials struggle to say exactly how much the insurgency reaps from its domestic financing activities. In the past, Iraqi officials have estimated that insurgents receive as much as half of all profits attributable to oil smuggling. And before the troop buildup began a year ago, an American report estimated that insurgents generated as much as $200 million a year.

Nor is the skimming limited to the insurgency; illicit earnings from the Baiji refinery also flow to criminal gangs, tribes, the Iraqi police, local council members and provincial officials who also smuggle fuel, Iraqi officials say.

Barham Salih, the Iraqi deputy prime minister, said he believed that the pool of money available to insurgents across Iraq had fallen in the past year, but he declined to provide an estimate himself. He said Iraqi security analysts estimated that Al Qaeda in Mesopotamia received $50,000 to $100,000 per day from swindles related to the Baiji refinery. "It’s a serious problem," he said.

Those amounts are significant given the hard realities of Iraq, especially in Sunni areas where unemployment and discontent with the Shiite-run government run high. Men can be hired to hide roadside bombs for $100, officers say. And while American troops have captured stockpiles of artillery shells from Mr. Hussein’s days, insurgents have adapted, building bombs from cheap materials like fertilizer and cocoa.

The insurgents appear to understand how valuable the Baiji refinery is to their operations. "They have not attacked the oil refinery, because they don’t want to damage their cash cow," said First Lt. Trent Teague, who commands the Third Platoon in Captain Da Silva’s unit, the headquarters company of the First Battalion, 327th Infantry.

Instead, when the insurgents want to send an angry message to someone at the refinery, they attack neighborhoods where oil workers live. Two suicide bombings in these Baiji neighborhoods in December killed at least 30 people and wounded more than 100. "It was the refinery being hit, without it being hit," Lieutenant Teague said.

But the insurgents do have agents inside, and some are the very people who are supposed to thwart graft and the insurgents’ influence. In February, American troops detained Ghalib Ali Hamid, the intelligence and internal affairs chief of the Oil Protection Force at the refinery, on suspicion of skimming fuel profits and having ties to insurgents.

Among other things, officers said Mr. Hamid had issued a stern warning to one of his superiors at the refinery: "If you’re going to work here, you’ve got to be friends with the Islamic State of Iraq," a reference to an insurgent group with ties to Al Qaeda in Mesopotamia.

Last year, a new Iraqi Army brigade commander, Col. Yaseen Taha Rajeeb, was assigned to the refinery. He helped stop some of the most blatant theft. But the colonel’s paychecks were stopped soon after he began cracking down, and he was fired this year.

While black market fuel prices and profit margins have dropped recently, they could rise again, especially if refinery production falls off.

Capt. Stephen Wright, who works at the refinery with Captain Da Silva, is concerned about whether there may be unseen problems looming, like the sort of fatigue that ruptured a propane unit in January. "If something happens to this refinery from neglect, you won’t have fuel for eight provinces," he said, "and we’ll have 6,000 unemployed Sunnis, who are people we definitely don’t want unemployed."

The money feeds an insurgency that is constantly adapting, and information about its exact composition and organization has continued to elude the Americans.

The Motivations of Insurgents

Some American officials and politicians maintain that Sunni insurgents have deep ties with Qaeda networks loyal to Osama bin Laden in other countries. Al Qaeda in Mesopotamia, whose members are mainly Iraqi but whose leadership has been described by American commanders as largely foreign, remains a well-financed and virulent force that carries out large-scale attacks.

But there are officers in the American military who openly question how much a role jihadism plays in the minds of most people who carry out attacks. As the American occupation has worn on and unemployment has remained high, these officers say the overwhelming motivation of insurgents is the need to earn a paycheck.

Nor do American officers say they believe that insurgent attacks are centrally coordinated. "As far as networked coordination of attacks, we are not seeing that," said a military official familiar with studies on the insurgency.

Opposition to the occupation and fear of the Shiite- and Kurdish-dominated government and security forces "clearly are important factors in the insurgency," the official said. "But they are being rivaled by the economic factor, the deprivation that exists."

Maj. Kelly Kendrick, operations officer for the First Brigade Combat Team of the 101st Airborne Division in Salahuddin, estimates that there are no more than 50 hard-core "Al Qaeda" fighters in Salahuddin, a province of 1.3 million people that includes Baiji and the Sunni cities of Samarra and Tikrit.

He said most fighters were seduced not by dreams of a life following Mr. bin Laden, but by a simpler pitch: "Here’s $100; go plant this I.E.D."

"Ninety percent of the guys out here who do attacks are just people who want to feed their families," Major Kendrick said.

The First Brigade’s commander, Col. Scott McBride, concurs. "I don’t know that I’ve ever heard one person say, ‘I believe in a caliphate,’ " he said.

Abu Azzam, a prominent leader of American-backed Sunni militiamen in Nasr Wa Salam, between Baghdad and Falluja, estimated that only 10 percent of Al Qaeda in Mesopotamia’s members adhered to extremist jihadist doctrines.

"Many joined Qaeda for financial and personal reasons," said Abu Azzam, whose militia includes former insurgents. "The others joined Qaeda because they hate the government, or they hate the American army, or for revenge."

The focus on Al Qaeda in Mesopotamia obscures the activities of other major guerrilla groups in the country. Some, like Jaish-e-Muhammad, or the Army of Muhammad, which includes ex-Baathists and former military officers, continue to battle American forces. Some American officers consider another organization, the Islamic State of Iraq, to be a front group for Al Qaeda in Mesopotamia.

But some members of other groups, including the 1920s Revolutionary Brigades and Jaish al-Islami, or the Islamic Army, have agreed to support American-financed Sunni militia forces.

Paying former insurgents to stop attacking American forces and join neighborhood militia forces has played a crucial role in turning around security in many Sunni parts of Iraq. But American officers worry that the failure to incorporate these Sunni militiamen into the government of Iraq or find them other jobs could portend trouble.

"There’s got to be an outlet," the senior military official said, referring to a job and salary not related to the insurgency. "Without that outlet, a lot of guys will gravitate back. They are not going to starve their families. You have got to do what you have got to do to survive."


Let impeachment process begin.

By Richard W. Behan, Guest Columnist. Seattle Post-Intelligencer, January 31, 2008

"The War on Terrorism" is a facade.

It was launched, we were told, to apprehend Osama bin Laden in Afghanistan and to effect regime change in Iraq.

President Bush was handed opportunities to achieve each of those purposes quickly and without resorting to warfare, but he literally refused to do so.

Saddam Hussein offered in February 2002, a month before his country was invaded, personally to leave Iraq for exile in Egypt or Saudi Arabia. His offer was kept secret -- and rejected. Regime change was in fact a facade for a more ambitious objective: The Bush administration was already committed to the invasion and occupation of Iraq.

Also kept secret was a standing offer from the Taliban to the Bush administration to surrender Osama bin Laden -- an offer made long before the Trade Towers fell and the Pentagon burned. Three times before 9/11 and twice afterward, the administration refused the surrender. Bin Laden's capture was in fact a facade for a more ambitious objective: The administration already was committed to the invasion and occupation of Afghanistan.

The incursions into those countries were premeditated wars of unprovoked conquest and territorial occupation. They were undertaken to assure the geostrategic control of Middle Eastern oil and gas resources: Long suspected, this is now beyond dispute.

If you scrutinize the cumulative body of information about those wars -- scattered but robust -- you uncover a story strikingly at odds with the administration's narrative about a war on terrorism. You discover the administration, when it took office, brushed aside explicit warnings about al-Qaida and bin Laden. You unearth the administration angrily negotiating pipeline rights-of-way with the Taliban through the summer of 2001, finally threatening them with "a carpet of bombs." And then you learn Bush notified Pakistan and India in late August -- five weeks before 9/11 -- that he would attack Afghanistan "before the end of October." And he did.

You find the commitment to invade Iraq was formalized at the first meeting of the National Security Council on Jan. 30, 2001 -- seven months before 9/11. You read how the National Security Council was ordered to "meld" its work with that of Vice President Dick Cheney's Energy Task Force, which in March 2001 was studying maps of the Iraqi oil fields. (Copies of the maps can be downloaded from the Web site of Judicial Watch, a citizen's group.)

You come across a once-secret memorandum dated Feb. 3, 2001, discussing the "capture of new and existing oil and gas fields" in Iraq. You discover the State Department designing, at least a year before the invasion, the privatization of Iraq's nationalized oil industry. You are shown how the State Department's plan was written into a draft "hydrocarbon law" for Iraq -- by Paul Bremer's Coalition Provisional Authority, with the participation of U.S. and British oil companies. Then you watch Bush on television in January 2007 demanding enactment of the hydrocarbon law: He made it a mandatory "benchmark."

George Bush and Dick Cheney, in defiance of honesty, morality and law, orchestrated and prosecuted two wars of unprovoked conquest and territorial occupation.

With at least 935 instances of deliberate lying, the Bush administration persuaded Congress and the American people to support the illegal, immoral wars. Bush and Cheney must be impeached.

Passively waiting for their terms to expire is criminally negligent, a violation of justice and arguably of the Constitution itself. Fortunately, there are bills before the Washington Legislature asking for the process to begin. SJM8016, introduced by Sen. Eric Oemig, and HJM4027, introduced by Rep. Maralyn Chase, deserve the support of every patriotic Washingtonian. There is no more important issue before our Legislature today.

Richard W. Behan, Lopez Island, taught at the School of Forestry at the University of Montana in Missoula and was dean of the School of Forestry at Northern Arizona University in Flagstaff. He served in the U.S. Navy during the Korean War.


Venezuela seizes operations from big oil companies.

Reuters, Yahoo, May 1, 2007

Venezuela stripped the world's biggest oil companies of operational control over massive Orinoco Belt crude projects on Tuesday, sending in workers backed by troops to occupy the multi-billion-dollar installations.

Rallying thousands of workers dressed in the signature red of his self-styled revolution, President Hugo Chavez hailed what he called the end of U.S.-prescribed policies that had opened up the largest oil reserves in the hemisphere to foreign investment.

"Today, we are ending this perverse era," Chavez shouted looking out from a platform over a sea of red hats, helmets and flags after the major step in his nationalization drive.

"We have buried this policy of the opening up of our oil ... an opening that was nothing more than an attempt to take away from Venezuelans their most powerful and biggest natural resource," he told the cheering crowd squeezed into a road alongside the imposing crude facilities.

Behind him was a huge banner reading "Full oil sovereignty. Road to socialism," Russian-made fighter jets roared overhead and in front of him women pushed toward the stage screaming for him to blow kisses. He obliged.

U.S. companies Exxon Mobil, ConocoPhillips and Chevron, Britain's BP, Norway's Statoil and France's Total obeyed a February decree to transfer operational control of their projects developing the

OPEC nation's Orinoco crude reserve, one of the largest oil deposits outside the Middle East.

The May Day takeover came exactly a year after Bolivian President Evo Morales, a leftist ally of the anti-U.S. Chavez, startled investors by ordering troops to seize gas fields in his country, accelerating Latin America's bid to reclaim resources.

The four Venezuelan projects are valued at more than $30 billion and can turn about 600,000 barrels per day (bpd) of heavy, tarry crude into valuable synthetic oil.


At midnight, workers exploded into a frenzied celebration after a New Year's Eve-style countdown, dancing until the early dawn hours with some standing atop a pipeline that runs toward the installations.

Industry analysts fear Venezuela's state oil company could ultimately run into production and safety problems when it loses the management and technology of the experienced majors.

The foreign companies are still discussing continued shareholding and compensation in sometimes contentious negotiations before a deadline next month.

Buoyed by an oil price bonanza in a major crude exporter to the United States, Chavez is popular among Venezuela's poor majority for spending freely on schools, clinics and food handouts.

The man who calls Cuban leader

Fidel Castro his mentor vowed to take at least 60 percent of the projects, radicalizing his policies as he rules by decree and politicizes the army, state oil company and judiciary.

He is also nationalizing power utilities and the country's biggest telephone company.

Although Venezuela claims output of more than 3 million barrels per day, analysts estimate it strains to pump 2.6 million bpd. U.S. data peg it as the world's No. 8 exporter.

Standard & Poor's, one of the world's leading credit ratings agencies, warned investors that the takeover "signifies continued deterioration in Venezuela's country risk" as the business climate worsens.

But Chavez dismisses such concern as interference inspired by the U.S. empire that wants to destabilize his government.

On the eve of the takeovers, Chavez thumbed his nose at the international economic community, withdrawing the South American nation from the world's top multilateral lending institutions, the Washington-based IMF and the World Bank.

"You can't take the shovel out of the man's hand. He just keeps on digging," U.S. State Department spokesman Sean McCormack told reporters. "He's digging a hole for the Venezuelan people.


Venezuela vows Orinoco oil takeover on May 1.

By Brian Ellsworth. Reuters, ABCnews.com, Feb 1, 2007

Venezuela on Thursday vowed to strip some of the world's biggest oil companies of their controlling stakes in the heavy oil projects of the country's Orinoco Belt by May 1.

The pledge, which would affect firms such as Chevron, Exxon Mobil, Conoco Phillips, Statoil and BP Plc, forms a vital part of the nationalizations at the heart of President Hugo Chavez's leftist revolution.

"I have given instructions that on May 1 -- May 1 -- all the fields of the Orinoco Belt should wake up under our control," Chavez told a news conference, emphasizing the date..

The four Orinoco heavy crude projects turn tarry oil into some 600,000 barrels per day of synthetic oil.

Chavez set his deadline a day after receiving powers to rule by decree for 18 months, a measure that will help him step up his centralizing reforms of the OPEC nation's economy and political system.

Chavez has promised to take over not only oil and gas projects in the No. 4 crude exporter to the United States but also power utilities and Venezuela's biggest telecommunications company.

Such moves have sparked accusations that Chavez, a close ally of Iran, is trying to model Venezuela on the economic system of his Communist mentor, Cuban President Fidel Castro, a charge he denies.

Although Chavez seeks a single party to steer his revolution, is denying an opposition television channel a license, wants to revoke central bank autonomy and desires no limits on re-election, he denies he is a despot in the making.

He argues he will always allow opposition parties and will step down if he loses an election.

President Bush said on Wednesday he was worried the centralization of political power was whittling away democratic institutions, but Chavez rejected all charges of tyranny.

"The president of the United States should resign, if he had the least dignity ... if only the United States had a democracy like what we have here. If only the American people could call a recall referendum," he added.

Despite the political will to strip oil giants of their managing stakes in the Orinoco, the moves will not be easy.

A senior Venezuelan oil official acknowledged last month the country could face hundreds of millions of dollars in penalties, if it takes over the projects, because of financing agreements with international banks.

Ratings agency Fitch said Venezuela would be in default on some $4 billion in project financing if the government unilaterally takes over the Orinoco projects.


U.S. puts squeeze on Iran's oil fields. A campaign to dry up financing for projects poses a threat to Tehran's ability to maintain exports, analysts say.

By Kim Murphy, Los Angeles Times, January 7, 2007

As Washington wages a very public battle against Iran's quest for nuclear power, it is quietly gaining ground on another energy front: the oil fields that are the Islamic Republic's lifeblood.

Iran's oil industry has raked in record amounts of cash during three years of high oil prices. But a new U.S. campaign to dry up financing for oil and natural gas development poses a threat to the republic's ability to continue exporting oil over the next two decades, many analysts say.

The campaign comes at a moment of unique vulnerability for Iran's oil industry, which also faces challenges from rising domestic energy consumption, international isolation, a populist spending spree by President Mahmoud Ahmadinejad and trouble closing contracts with foreign oil companies — a recipe for potential disaster in a nation with one of the world's largest reservoirs of oil.

"If the government does not control the consumption of oil products in Iran … and at the same time, if the projects for increasing the capacity of the oil and protection of the oil wells will not happen, within 10 years, there will not be any oil for export," Mohammed Hadi Nejad-Hosseinian, Iran's deputy oil minister for international affairs, said in a telephone interview.

If Iran were to suddenly stop exporting its 2.6 million barrels of oil a day, such as in the event of a military strike, world oil prices probably would skyrocket. But a gradual decline might be offset by other OPEC members, analysts say, particularly as Iraq increases its oil production and Saudi Arabia carries out plans for significant increases in its production capacity.

The efforts by the United States and its allies over the last few months to persuade international banks and oil companies to pull out of Iran threaten dozens of projects, including development of Iran's two massive new oil fields that could expand output by 800,000 barrels a day over the next four years.

"Many European banks which had accepted financing some oil industries projects have recently canceled them," Nejad-Hosseinian said.

In addition, banks are no longer granting letters of credit for delivery of some supplies, ministry officials say. And as nations such as Japan begin to back out of Iran oil development under U.S. pressure, the government in Tehran is being forced to dig into its own reserve funds to get crucial new projects off the ground.

But Nejad-Hosseinian said Iran had recognized the gravity of the threat and launched steps to head it off, including new "smart" rationing cards, scheduled for distribution in March to check skyrocketing sales of cheap gasoline, and an overhaul of Iran's historically stingy contract terms in an attempt to lure big oil companies into skirting the U.S. roadblocks.

Iran also is hoping to turn to China and Russia for help. But U.S. officials already have warned that they will seek to hold China accountable under Washington's unilateral sanctions laws if it proceeds with a $16-billion project to develop Iran's North Pars gas field. China also has signed a memorandum of understanding under which it may take on development of the Yadavaran field in southwestern Iran, expected to boost production by 300,000 barrels a day.

Domestic problems

Iran's oil and natural-gas dilemma has no direct connection with the sanctions adopted last month by the United Nations Security Council, which are narrowly aimed at assistance to Iran's nuclear program. Although Tehran insists it has strictly peaceful intentions, the U.S. and others believe the program is linked to development of nuclear weapons.

Rather, the looming crisis stems from a series of domestic problems that have converged at a time when Iran is susceptible to U.S. attempts to capitalize on them to coerce Tehran's compliance on the nuclear issue.

First is the condition of Iran's aging oil fields, which have never fully recovered from damage inflicted during the Iran-Iraq war of the 1980s.

To maintain sufficient pressure to keep them pumping, Iran has to divert large amounts of natural gas that might otherwise be sold.

"You need billions of dollars invested in order to stand still — to avoid a decline," said Manouchehr Takin, a former Iranian petroleum geologist who is a senior analyst for the Center for Global Energy Studies in London.

Likewise, increased output from refinery construction is being outpaced by the swelling number of young Iranians with a fondness for gas-guzzling cars. Heavily subsidized gasoline is just 35 cents a gallon, a price that invites smuggling, and talk about raising the price has, until recently, gone nowhere.

Moreover, the country has one of the most extensive residential heating infrastructures in the world, with homes in the most remote villages warmed toastily with cheap natural gas.

Total domestic energy subsidies total $20 billion to $30 billion a year, Takin said.

"These subsidies are now costing the government roughly 15% of Iran's GDP. That should knock you over. That's a mind-boggling number," said Hossein Askari, professor of international business at George Washington University. "And the nub of the problem is that if you were to cut the subsidies, I think there would be riots in the streets."

Iran could be reinvesting in the oil and gas infrastructure, and it is to a degree, but Ahmadinejad also has diverted billions of dollars in oil revenue to social welfare programs, major infrastructure building programs in neighboring countries such as Afghanistan and importation of consumer products — to the consternation of many of those in his government.

Foreign investment

The heavy lifting in recent years has been left to foreign oil companies, which in the 1990s began working in Iran in substantial numbers for the first time since the Islamic Revolution.

U.S. sanctions in place since the seizure of the American Embassy in Tehran in 1979 have prevented U.S.-based oil companies from operating in Iran, but companies such as Royal Dutch Shell, France's Total and Italy's Eni have invested, some heavily, despite on-again, off-again threats by Washington to pursue sanctions against foreign companies under U.S. laws.

To a great degree, though, Iran has created its own woes by dragging out contract negotiations and offering only skimpy paybacks to foreign oil companies interested in building new production, industry analysts say.

"People have said that even with sanctions and all the rest, if Iranians want investment in their oil industry, what they need to do is offer decent terms, and whatever the sanctions, they would have companies flooding in," said one Western oil company official, who spoke on condition of anonymity.

"But the issue for us at this point is both political and commercial. The state of the country is such that it's just not the right time to be there."

That is the message Washington is trying to reinforce. For years, U.S. sanctions prohibited investments of more than $20 million in Iran's oil industry, but in practice, they were applied only to U.S.-based oil companies. But as the nuclear showdown has unfolded, and as it became clear the U.N. sanctions would not impose serious economic penalties on Iran, Bush administration officials decided on a different tack.

Envoys from the Treasury Department have approached international banks and companies, reminding them of Iran's record of financing militant Islamic organizations such as Hamas, in the Palestinian territories, and Hezbollah, in Lebanon, through the banking system and its defiance of U.N. resolutions on nonproliferation, and warning that investing in such a country may not be a good business risk.

Simultaneously, the Justice Department reportedly has opened investigations of several banks to determine whether investments in Iran violated U.S. sanctions laws. In late 2005, Dutch bank ABN Amro agreed to pay $80 million in fines stemming in part from improper transactions with Iran through its subsidiary in Dubai, United Arab Emirates.

UBS Bank and Credit Suisse of Switzerland recently announced they were suspending most new business with Iran, and British-based HSBC said it would no longer accept dollar transactions from within Iran.

"Banks are constantly doing risk assessments about what kind of business they want to be involved in," Stuart Levey, Treasury undersecretary for terrorism and financial intelligence, said in a telephone interview.

"There's a lot out there suggesting that there's an element of coercion involved. But I think that for a lot of these executives, the main thing driving them is they really don't want to be involved in facilitating terrorism or proliferation or any other crime."

More than two decades of U.S. sanctions have had little effect on Iran's oil industry — U.S.-based companies have been replaced, largely by Europeans. But this new attack on financing has rapidly started to dry up potential loans on dozens of projects, according to oil industry insiders in Tehran and the West.

One of them is reportedly the giant Azadegan oil field in southwestern Iran near the Iraqi border. Japan's INPEX Holdings Inc. in October pulled out of all but a 10% stake in the $2-billion project under U.S. pressure, and alternative financing from foreign banks has failed to materialize, said one source with close connections to the Iranian Oil Ministry.

"It has been very effective. Nobody is prepared to loan Iran anything on anything," said Fereidun Fesharaki, an energy advisor to the Iranian prime minister in the 1970s who now heads the FACTS Inc. petroleum consulting firm in Honolulu.

In a report published this month by the National Academy of Sciences, Johns Hopkins University geography professor Roger Stern argued that the confluence of high domestic demand, a delay in adding production capacity, the diversion of natural gas to keep wells producing and other factors could lead to a decline of 33% to 46% in Iran's exports by 2011 and a halt to exports by 2015 or so.

Other analysts have said those forecasts are too dismal, and output is more likely to remain flat at about 4 million barrels a day. Iranian officials say they have signed $28.4 billion worth of new oil and gas development contracts over the last 15 months, and hope to increase production to 7 million barrels a day by 2014 — a goal that the International Energy Agency says will require $80 billion in investments.

The nuclear issue

Whether that will be realized could depend, in large part, on what happens on the nuclear issue.

In fact, Iran's oil and gas dilemma appears to point up a "genuine" need for civilian nuclear power, Stern said.

"When I first started hearing this claim that Iran needed these nuclear plans to substitute for oil and gas, I thought, 'That's ridiculous,' " he said. "So it has really been a surprise to me," he added, to see evidence that Tehran's stated purpose for the nuclear reactor is not "simply a weapons deception."

"I don't think they're nice guys," he said. "This is a regime that funds terrorism and is making outrageous claims that Israel should disappear. But it just happens to be a convenient truth for them that they do need nuclear power."


Pentagon Renews Focus On Africa

By Richard Whittle. Christian Science Monitor, Cbsnews.com, Jan. 5, 2007

New Africa Command Likely To Be Formed To Counter Al Qaeda's Growing Presence.

Africa, long beset by war, famine, disease, and ethnic tensions, has generally taken a backseat in Pentagon planning - but US officials say that is about to change.

One of Donald Rumsfeld's last acts before Robert Gates replaced him last month as Defense secretary was to urge President Bush to let the Pentagon create a new Africa Command to pay more attention to the troubled continent. Mr. Bush is said to have agreed to the idea and is expected announce it early this year.

The creation of the new command will be more than an exercise in shuffling bureaucratic boxes, experts say. The US government's motives include countering Al Qaeda's known presence in Africa, safeguarding future oil supplies, and competing with China, which has been courting African governments in its own quest for petroleum, they suggest.

The expected new command "speaks to the fact that Africa now matters to the US government as it never has in the past," says Melvin Foote, chief executive officer of Constituency for Africa, a nonprofit group devoted to strengthening US relations with African governments.

The idea of an Africa Command has been discussed for years, but Mr. Foote says it has taken on new urgency in light of recent events.

# Islamists took over Somalia last June and ruled until this week, when Ethiopian troops drove them out of power.

# China hosted a conference of African presidents in Beijing last year - and made about $5 billion in deals to build infrastructure in Africa for oil.

A source of oil

The US gets about 10 percent of its oil from Africa, notes Foote. Some experts say it may need to rely on the continent for as much as 25 percent by 2010. "With all the instability in the Middle East, there's some thought that we had better build partnerships in Africa," he says.

A senior Pentagon official, who requested anonymity because announcing the decision is the president's prerogative, said current events have less to do with the move than does Africa's instability. "Africa's a place with a lot of crises," this official says. Bush is "on record saying he doesn't want another genocide on his watch. This is a way of ensuring that there's a military command, a four-star, paying attention."

Currently, responsibility for Africa is divided among three of the Pentagon's five regional "unified commands," each headed by a four-star general or admiral who reports to the president.

The European Command, responsible for Europe and Russia, oversees US defense activities for most of continental Africa. The Central Command covers largely Arab northeast Africa as part of its oversight of the Middle East and sections of Central and Southwest Asia. The Pacific Command is responsible for Madagascar and the waters off southeast Africa.

Need for a 'streamlined' strategy

Lt. Cmdr. Joe Carpenter, a Pentagon spokesman, says the division of labor "causes some difficulty in trying to ... execute a more streamlined and comprehensive strategy when it comes to Africa."

The Pentagon official who requested anonymity says the new command will exclude Egypt, a major player in Middle East politics. And Central Command will retain responsibility for the Horn of Africa for about 18 months while the Africa Command gets set up, the official says.

After the 9/11 attacks, the Pentagon created a Horn of Africa joint task force under Central Command that is headquartered in Djibouti, but the senior official said the Africa Command's headquarters will be in Stuttgart, Germany, where the European Command is based, for the time being.

The Horn of Africa task force includes about 1,500 troops whose mission is to detect and defeat transnational terrorism, primarily through offering military training and humanitarian aid to friendly governments. Those troops constitute the bulk of the US military presence in Africa.

African countries won't see much difference in the US military presence on the ground under the new command, says Herman Cohen, assistant secretary of State for African affairs under the first President Bush. "They're already getting a lot of attention from the US military," he says. The Defense Intelligence Agency "has built up its offices throughout Africa in US embassies. Right after the cold war, they reduced a lot, but they've built back up."

The new Africa Command is "long overdue," says Susan Rice, assistant secretary of State for African affairs under President Bill Clinton. Sept. 11 "did what common sense should have done earlier, which is to elevate the understanding ... in the Pentagon of our strategic stake in Africa," she says. "Africa has the preponderance of the world's weak and failed states, and we ignore it at our peril."


$20bn gas project seized by Russia

By Terry Macalister and Tom Parfitt. The Guardian, Dec 12, 2006

Shell is being forced by the Russian government to hand over its controlling stake in the world's biggest liquefied gas project, provoking fresh fears about the Kremlin's willingness to use the country's growing strength in natural resources as a political weapon.

After months of relentless pressure from Moscow, the Anglo-Dutch company has to cut its stake in the $20bn Sakhalin-2 scheme in the far east of Russia in favour of the state-owned energy group Gazprom.

The Russian authorities are also threatening BP over alleged environmental violations on a Siberian field in what is seen as a wider attempt to seize back assets handed over to foreign companies when energy prices were low.

The moves will alarm many investors in the City of London as Shell and other share prices are hit, but the news will also increase ministers' concerns about Britain's energy security.

Russia is becoming a key source of natural gas to the UK and Gazprom has already made clear it would like to buy a company such as Centrica, which owns British Gas. One third of western Europe's natural gas is supplied by Russia - a figure expected to rise over the next decade. The security of energy supply is now the main political issue between the EU and the Kremlin. Nervousness about the Russians was heightened last winter when the gas supply to Ukraine was cut off in the middle of a political dispute.

Shell confirmed last night that its chief executive, Jeroen van der Veer, met Gazprom's chairman, Alexei Miller, in Moscow last Friday but would say only that the talks on Sakhalin-2 were "constructive". The Russian company said that "Shell did indeed make several proposals concerning Sakhalin-2" at the meeting which came after Shell was threatened with having its operating licence withdrawn.

The energy minister, Viktor Khristenko, is expected to give details today of a deal under which Shell and its Japanese partners are likely to get a cash payment in return for giving Gazprom a stake in the project.

Dmitry Peskov, the official spokesman of Russia's president, Vladimir Putin, hit out yesterday at critics in the western media who implicated the Russian government in manipulating oil projects and the poisoning of dissidents. He said there was too much "anti-Russian hysteria".With reference to BP's oil spills in Alaska, he added: "If it's an environmental problem in Alaska it's environmental. If it's in Russia you call it politics."

But other senior politicians in Moscow had no doubt Shell was being harassed into reducing its 55% stake in Sakhalin-2 to something close to 25% through relentless pressure from ministries.

"In the current situation Shell will not be able to defend its economic interests in a civilised process with the Russian authorities, so they will be obliged to give up control if they want to save at least some adequate part of the project," said Vladimir Milov, Russia's former deputy energy minister.

Bob Amsterdam, the lawyer of the jailed oil oligarch Mikhail Khodorkovsky, said the Kremlin was "once again" using legal pretexts to cover what was essentially an expropriation of private resources in the energy sector. "The Kremlin ought to cease this behaviour," he said.

The Sakhalin-2 project is scheduled to start operations in 2008 and involves finding and producing oil and gas near Sakhalin island, formerly known only as a penal colony during the tsarist and Soviet eras.

The two fields that make up Sakhalin-2 have an estimated 1.2bn barrels of oil and 500bn cubic metres of natural gas. The gas is to be brought ashore, liquefied and frozen before being shipped to customers in Japan and elsewhere.

The scheme created almost immediate controversy with western conservation groups because it involves putting equipment close to breeding grounds of endangered western grey whales. There has also been criticism that sensitive salmon fishing areas are being hit by dumping of dredging spoil waste amid worries about oil spills from platforms in the Okhotsk and Japanese seas.

But even non-governmental organisations have expressed surprise at the way the Russian authorities have taken up environmental issues since the summer after taking little interest before.

Mr Peskov said it was a coincidence of timing and that it was "a process that is natural for every country" to come to eventually. Mr Putin's spokesman said Russia wanted to encourage western investment and wanted closer links with west European countries to foster mutual "interdependence".


Attacks on Iraq Oil Industry Aid Vast Smuggling Scheme

By James Glanz and Robert F. Worth, New York Times, June 4, 2006.

The sabotage attacks that have crippled Iraq's oil pipelines and refineries for the past three years are now being used to aid a vast smuggling network that is costing the Iraqi government billions of dollars a year, senior Iraqi and American officials here say.

Once thought to be only a tool for insurgents to undermine the government, the pipeline attacks have evolved into a lucrative moneymaking scheme for insurgents and enterprising criminal gangs alike. Ali Al Alak, the inspector general for the Oil Ministry, said the attacks are now orchestrated by both groups to force the government to import and distribute as much fuel as possible using thousands of tanker trucks.

In turn, the insurgents and criminal gangs — distinguishing among them has become increasingly problematic — have transformed the trucking trade into a potent tool for smuggling.

In many cases documented by Mr. Alak and other Iraqi officials, truckers, often collaborating with smuggling gangs, pay bribes or use forged papers to inflate the value of their load, tamper with their fuel meters, or simply turn their loads over to the gangs.

As a result, as much as 30 percent of imported gasoline is promptly stolen and resold abroad by smugglers, according to American and Iraqi officials. The shortfall is part of what forces Iraqi families to spend more on fuel from the black market, where it is far more expensive than from legal outlets.

The poisonous blend of smuggling and sabotage is yet another blow to the economy of a country whose huge oil reserves were expected before the 2003 invasion to pay for its reconstruction.

The network is so pervasive and entrenched, the officials say, that fuel importers brazenly arrive at depots with half-empty tankers and arrange to have their deliveries certified as complete. It is also lucrative for the smallest of businesses. Bakers, brick makers and even fishing boat operators find it more profitable to sell fuel, which they receive at subsidized prices, to illicit traders rather than operate their businesses.

It is unclear where in these operations the simple urge to make a buck ends and schemes to finance insurgent activities or disrupt the workings of the Iraqi government begin. But American and Iraqi officials say that a mix of insurgents, organized criminal groups and scores of independent operators are working together in some loose network to keep their grip on the system and turn enormous profits.

Borders are porous, roads are unsafe, officials at state-run oil companies are accused of being in league with insurgents and Iraq's oil wealth is carried out of the country in ships and tanker trucks as American and British overseers look the other way, the Iraqi and American officials say.

The smugglers interrupt domestic tanker deliveries as well as those bringing in fuel from abroad.

Ibrahim Bahr al-Uloum, a former oil minister, said it was obvious that crude oil pipelines connecting the northern wells with refineries and power plants farther south, in the Baghdad area, had been repeatedly struck to force trucks to move the crude. Oil employees trying to fix the pipelines had sometimes been kidnapped and killed. Both the trucking companies and groups in the protection rackets were probably complicit in some way, he said.

"This is a business for the people who are working in the trucks," he said. "So any attempt to fix the pipeline will stop such activities."

Mr. Alak and other officials said the pipeline hits are remarkable for their sophistication. The gangs strike the oil industry's backbone: the pipelines that carry crude oil directly from wells and those that move gasoline and kerosene from refineries.

"It's amazing what they are doing," Mr. Alak said of the gangs behind the attacks. At times, he said, the attacks are so precisely timed that they allow just enough crude oil to flow from Iraq's northern oil fields to feed the huge Baiji refinery, the nation's largest, about 100 miles north of Baghdad.

Once Baiji receives enough oil for its production, crude oil would normally be diverted to pipelines that run to export terminals in Turkey. Smugglers can make money from the gasoline that is carried in trucks, but little or nothing from crude oil exported through the pipelines.

So they often strike at that point and halt the flow of crude, said Mr. Alak, who sent agents into the field and delivered a major report on smuggling to the Oil Ministry in April. "You need hundreds of trucks to bring those quantities," he said.

The Scheme's Anatomy

Attacks can sometimes shut down refineries completely by starving them of crude oil or hitting them directly, forcing the country to ship more fuel across its notoriously corrupt international borders. The economics of cross-border smuggling show why the practice is unlikely to stop as long as Iraq's price subsidies are in place, Mr. Alak found.

The subsidies, set up under Saddam Hussein, create a vast differential between fuel prices in Iraq and across the border in Turkey and Syria, and a natural point of exploitation for smugglers.

In theory, the Iraqi government buys fuel from neighboring countries at market rates and then resells it to Iraqis at cheaper subsidized prices. Subsidized diesel, for instance, was sold by the government for less than three cents a gallon for most of 2005, meaning that a 9,000-gallon tanker truck carried fuel officially worth around $250. But the same fuel was worth perhaps a dollar a gallon on the black market. With typical rates of $500 for protection money or police bribes and $800 to pay the truck driver, a smuggler could make at least $7,450 by bringing in fuel from Jordan, Syria or Turkey, according to Mr. Alak's report to the Oil Ministry.

After filling their trucks in neighboring countries, the drivers sell their load at a higher rate on the Iraqi black market. The beauty of the system from the smuggler's standpoint is that if arriving at an Iraqi fuel depot with an empty truck cannot be smoothed over with a bribe, the truck can be filled again elsewhere in Iraq at the cheap subsidized price.

After fulfilling the contract by delivering that load, Mr. Alak said, the truck driver can make an extra profit on the way back by filling up with cheap gasoline before leaving Iraq. He then crosses the border into one of the neighboring countries and unloads for the lucrative market price there. Even if the driver illicitly sells only a fraction of his load, the profit from the double-dipping can be considerable.

According to Mr. Alak's report, the ruse has sometimes been unmasked by checking the fuel delivered to Iraqi terminals for things like octane levels, which vary from country to country. "They would come with empty trucks and buy products inside Iraq, and deliver as imported products," he said.

At least one such operation came with a clearinghouse in Baghdad for creating forged papers, he said. It was discovered and broken up late last year.

Iraq spent $4 billion to $5 billion in 2005 to import fuel from abroad. Mr. Alak's research indicates that because of the huge price incentives, between 10 percent and 30 percent of that fuel is smuggled out of the country again.

The chief of the Commission on Public Integrity, Radhi al-Radhi, who has investigated dozens of smuggling cases, agreed with Mr. Alak's assessment, as did a Western diplomat in Baghdad, who spoke anonymously according to official procedure. Similar figures were also cited in little-noticed Congressional testimony in April by David M. Walker, comptroller general of the United States, after a visit to Iraq.

Iraqi and American officials said they could not offer a total figure for what smuggling is costing the country every year, beyond asserting that it is in the billions.

But Oil Ministry data suggest that the total was $2.5 billion to $4 billion in 2005, said Yahia Said, a research fellow at the London School of Economics and director of the Iraq Revenue Watch at the Open Society Institute, a policy foundation.

Even at the low end, that would mean smuggling costs account for almost 10 percent of Iraq's gross domestic product, $29.3 billion in 2005.

The Impact on Iraqis

The impact on Iraqi families is undeniable. A random survey of thousands of Iraqi households by the Central Organization for Statistics and Information Technology at the Ministry of Planning assembled statistics on how much Iraqis spend on the black market for fuel. (The organization is headed by Mehdi Al Alak, the brother of the Oil Ministry inspector general.)

The survey found that 40 percent of the gasoline consumed annually in Iraq was purchased on the black market, where prices recently spiked to more than $2.50 a gallon during the latest round of shortages. That is far more than the government-subsidized price of 65 cents a gallon.

The situation is even more tilted toward the black market for diesel, kerosene and liquid gas, which Iraqis use for cooking and heating. Families must satisfy most of their needs for those fuels on the black market, the survey found. The sellers make a huge profit: of about $1 billion spent on black market fuels by Iraqi households in 2005, an estimated $800 million went straight into profits for those who run the illicit network.

Gangs have also made a lucrative business of forcing truckers to pay protection money to use public roads. The practice is so common that prices are fairly standardized, said Mussab H. al-Dujayli, who until March was general director of the State Oil Marketing Organization, known as SOMO, and remains on as a technical expert.

In the area around Baiji, which is tightly controlled by Sunni insurgents, the going protection price is roughly $500 for a large tanker truck, Mr. Dujayli said. That is just one way in which sabotage, smuggling and the trucking trade are "used to finance terrorism," he said.

The $500 protection rate for trucks in the north was confirmed by Capt. Abdullah Hassan, who lives in the northern village of Safra and works in one of the battalions that are supposed to guard the pipelines. Captain Hassan said the undergrowth of corruption was so thick that saboteurs, smugglers and even members of the guard force work together with low-level government employees to create a stranglehold on oil proceeds.

"It is not necessary that the minister or the D.G. is involved," he said, using an abbreviation for director generals, as heads of state-owned companies are called here, "but line operators, accountants, suppliers and transporters work within the networks and carry out these plans."

Still, in some cases, more senior Iraqi officials have been implicated. Late last year Meshaan al-Juburi, a member of Parliament, was charged with stealing millions of dollars meant to pay for a vast pipeline protection force drawn from the tribes in Salahuddin Province. One commander hired by Mr. Juburi was arrested and charged with organizing insurgent attacks on the pipeline, although it was not clear whether Mr. Juburi knew about the attacks. A warrant was issued for his arrest, but Parliament has not revoked his immunity from prosecution as a legislator.

In some ways, the pattern of the corruption now plaguing Iraq was set by Saddam Hussein, who began encouraging oil smuggling and graft during the 1990's. Although there was little public corruption in Iraq before the Persian Gulf war, the American victory and the sanctions imposed by the United Nations loosened Mr. Hussein's hold on the country.

"After the war Saddam began encouraging low-level graft to generate cash outside of the sanctions, but also as a channel of patronage," said Mr. Said of Revenue Watch. "Everyone involved got a cut and that made them happy."

Somehow the government "found a way for buyers to come through the gulf," said Issam Chalabi, a former Iraqi oil minister and an oil consultant. (He is not related to Ahmad Chalabi, the former exile who served in the interim National Assembly last year). "Mainly it was through the Iranians, who gave bills of lading saying it was Iranian product. That is how it started."

Soon a whole smuggling network developed inside and outside the country, with all of the players taking a cut of the cash. The bulk of the profits, of course, went to the government. Many of these intermediaries are still involved today in smuggling Iraqi oil, though they no longer answer to the Iraqi government, industry analysts say.

A survey of senior officials in about 20 state-owned oil companies and training institutes that was summarized in Mr. Alak's most recent annual report gives a striking view of how deeply the corruption has entrenched itself in Iraq's oil infrastructure.

Asked exactly where corrupt activities were taking place in their companies, 45 percent of those officials pointed to storage areas, 35 percent to the transport and supply network and about the same number to maintenance facilities.

More than half the officials said that bribes or out-and-out theft supported corruption in their companies, while 80 percent said that the poor security situation in Iraq helped promote the practices. Nearly every one of the officials said corruption infected their companies at some level, suggesting that expertise of every kind is available to smugglers.

"These are professionals: they have their own equipment, they have contacts in Turkey and Jordan and Syria," said Gal Luft, co-director of the Institute for the Analysis of Global Security, which follows the Iraqi oil industry. "They are an industry like any other."

The Mounting Costs

The profits of what amounts to a shadow oil industry are also infinitely greater now than in the 1990's. Then, smugglers operated out of only two southern Iraqi ports; now there are eight illegal anchorages on the Shatt al Arab, the waterway that runs between Basra and the Persian Gulf. They have names worthy of a Robert Louis Stevenson novel: Hjam Island, Al Tahaddi, Mhejran, Al Zuher.

That extensive smuggling trade apparently takes place right under the noses of British, American, Iraqi, Iranian and Kuwaiti authorities operating on ships and on the coast of those same waters. Col. Larry D. McCallister, a commander of the Army Corps of Engineers in southern Iraq, said Iraqi construction workers were regularly attacked while trying to build a new Iraqi coast guard post along that shoreline because they happened to find themselves at a prime smuggling location.

Colonel McCallister said that once the crews recognized their predicament, they negotiated with the smugglers, who eventually agreed to move their operation a short distance up the coast.

The report on smuggling by Mr. Alak, the Oil Ministry inspector general, shed light on just how those southern anchorages are used to spirit petroleum products away. In one case that his investigators uncovered, most of a ragtag fleet of 1,600 fishing boats plying the waters around the southern city of Basra were selling their monthly quotas of diesel to smugglers rather than fishing.

Not only that, but new boats were being manufactured at the rate of 50 to 60 a month just to obtain new quotas that could then be smuggled, the investigation found. The boats, which in late 2005 were receiving a total of some four million gallons of diesel a month almost free of charge, would load the fuel onto small ferry-sized tankers that would steam into the gulf and fill larger tankers, Mr. Alak said.

"And then they come back," he said of the fishing boats. "Where is the fish?"

Thomas L. Delare, counselor for economic affairs at the American Embassy here, said that the only way to undercut the vast smuggling trade would be to eliminate the Saddam Hussein-era price supports. An agreement to do just that was a central part of the deal brokered by the International Monetary Fund to forgive much of Iraq's staggering international debt last year.

But taking that step could be politically perilous for a new Iraqi government that is trying to find favor with the Iraqi people.

One constituency is especially unhappy with that prospect, Mr. Delare said. In demonstrations that broke out when the plan to raise prices was announced, he said, American observers saw "some faces in the crowd who were known black marketeers."


Higher oil prices profitable for world's oil companies

By Toby Sterling. Associated Press, Seattle Times, May 5, 2006

Royal Dutch Shell and French oil giant Total reported higher first-quarter profit Thursday on the back of high oil prices, rounding out a set of mostly solid results by the world's largest oil companies.

However, both European companies suffered from production woes that highlight the difficulties the industry faces in finding oil and bringing it to market — troubles that have driven prices to recent highs above $75 a barrel.

Shell's net profit rose 3.1 percent to $6.89 billion, while Total's earnings rose 15 percent to $4.68 billion.

Taken as a group, Exxon Mobil, BP, Shell, Total, ChevronTexaco and ConocoPhillips reported profit of $32.8 billion in the first quarter, a 6.5 percent rise.

But Shell said its volume production had fallen by 3 percent due, in part, to attacks on its facilities in Nigeria, and the company may not be able to restore its proven oil reserves as quickly as it had forecast after its 2004 accounting scandal.

Total's volume production fell 5 percent, and the company declined to say how much it stands to suffer from moves by governments in Bolivia and Venezuela to regain partial or full control of the hydrocarbon industry.

"Crude-oil prices are the linchpin of the whole profit picture," said Oppenheimer analyst Fadel Gheit. Given oil's recent rise, industrywide profit is likely to head even higher in the second quarter. "The market has been very kind to them as of late."

Gheit also noted that refining profit is likely to rise considerably in the second quarter due to soaring gasoline prices.

Some analysts questioned whether big oil is profiting enough, given the 30 percent rise in crude-oil prices from a year ago. "It's a widespread misunderstanding that oil-company earnings will exactly reflect the rise in oil prices," said analyst Bert van Hoogenhuyze of De Vries Capital Management.

For most of the major oil companies, he said, the bulk of production in projects they participate in is sold in advance at fixed rates. Earnings in the coming quarters are not likely to be affected by moves in the price of oil, he said, unless they are extremely wild — above $100 per barrel or below $20 per barrel.

Both Shell and Total lost production in Nigeria, where militias have attacked pipelines and pumping stations. The militias, who demand a bigger cut of proceeds from oil production in the Niger Delta, took hostages in February who were later released.

Total said new producing wells in Bonga, Nigeria, and Britain helped offset disruptions in production in Niger.


Cheney on mission to get more oil for U.S. markets

By David Espo. Associated Press, Seattle Times, May 5, 2006

Vice President Dick Cheney traveled to Kazakhstan on today for talks with President Nursultan Nazarbayev, seeking to maximize access to the vast oil and gas reserves in the central Asian nation with a troubled human-rights record.

Cheney became the fourth top administration official to visit the former Soviet republic in recent months, underscoring the importance placed on a country that is strategically located and an ally in the war on terror, as well as rich in energy resources.Administration policy favors development of multiple means of delivering Kazakhstan's energy supplies to markets in the West and elsewhere.

Among them, Assistant Secretary of State Richard Boucher told Congress recently, the United States is "working on securing the flow of oil" from North Caspian oil fields by tanker to a pipeline terminus in Azerbaijan. That route would bypass Russia and Iran. There has also been periodic talk of building a pipeline under the Caspian Sea.

Energy aside, one senior administration official said the vice president would prod Nazarbayev to make further democratic reforms in the country he has ruled since the Soviet Union dissolved in 1991.

"The government's human-rights record remains poor," according to a recent State Department report.

It was unclear how Cheney would attempt to balance the two concerns — American energy needs in a time of high prices alongside a desire for political reforms. His talks came one day after a speech to East European leaders in Lithuania that sharply criticized Russia for backsliding on democracy.

One senior administration official traveling with Cheney said the remarks, which drew quick criticism from Moscow, had been "very well vetted" in advance within the administration.

Officials disclosed belatedly that while in Lithuania to attend a meeting of eastern European leaders, Cheney had met Thursday afternoon with Inna Kulei, the wife of the jailed Belarusian opposition leader, Alexander Milinkevich .

Meanwhile, a private group said Kazakh authorities on today barred an opposition leader from traveling to the capital Astana for a meeting with Cheney.

Police refused to grant Galymzhan Zhakiyanov permission to leave his home city, the commercial capital Almaty, the For a Fair Kazakhstan Alliance said in a statement. Zhakiyanov and other leaders of the alliance were invited to meet with Cheney in Astana on Saturday.

Last month, Zhakiyanov and another opposition leader, Bolat Abilov, were barred from leaving the country for meetings with European officials. Sentenced to seven years in prison for abuse of office, Zhakiyanov was considered the Central Asian nation's highest-profile political prisoner before his early release in January.

The vice president's stop in Kazakhstan followed visits in recent months by Secretary of State Condoleezza Rice, Agriculture Secretary Mike Johanns and Samuel Bodman, secretary of energy.

According to the Web site of the U.S.-Kazakhstan Business Association, the Asian country has potential oil reserves of as much 110 billion barrels.

American energy companies are heavily invested in that nation's oil industry, and Halliburton, the company Cheney ran before becoming vice president, has an oil-field services presence there.

"Kazakhstan, an economic success story, is rapidly becoming one of the top energy producing nations in the world," Boucher told a House committee on April 26.

Along with its economic reforms, Boucher said, the nation "has an opportunity to achieve stability by upholding standards of democracy and human rights."

Nazarbayev has ruled the country, which shares borders with China and Russia, since the Soviet Union broke up, and recently was elected to what he has said will be his last term. The elections have been criticized for failing to meet international standards, but administration reaction has been muted. One official, who spoke on condition of anonymity, told reporters that the "trend, even though it's not as fast as we would like, is in the right direction."

Still, an opposition leader, Altynbek Sarsenbayev, was killed earlier this year, prompting protests.

The vice president concludes a three-nation trip with a weekend visit to Croatia and is scheduled to return home Monday.


Chad threatens oil cutoff over World Bank dispute

CNN.com, April 15, 2006

Chad threatened Saturday to cut off its flow of oil unless the World Bank releases $125 million frozen in a dispute over how the central African country should spend its oil revenues.

The announcement followed a late-night meeting between President Idriss Deby and his Cabinet ministers to discuss their response to a rebel attack on the capital. The rebels were repulsed but are believed to be regrouping nearby, and the threat of a violent overthrow of Deby's government has not diminished.

The government presumably wants the frozen funds to finance its fight against the rebels.

Oil Minister Mahmat Hassan Nasser told The Associated Press that the World Bank in January froze an escrow account with $125 million in oil royalties in London, where the royalties are deposited on behalf of the government. Without payment, the government would have to shut down the pipeline that flows through Cameroon to an Atlantic Ocean oil terminal, he said.

"Chad has the right to do this," the oil minister told the AP. "The government has the right to act as its sees fit if obligations are not met."

Nasser said the World Bank had until midday Tuesday to release the funds or the pipeline would be shut down. He said such action would not hurt his government because the royalties already had been cut, but it would hurt other businesses and Cameroon, which have been collecting their revenues.

He spoke as thousands of people gathered in central N'djamena for a rally in support of Deby's government.

Chad had a deal with the World Bank for the financing of a pipeline on condition that most of the revenues would be used to alleviate poverty. Deby broke that deal earlier this year so he could use the money to finance his military, prompting the World Bank action.

Earlier, Prime Minister Pascal Yaodimnadji was defiant while explaining the government's decision about the pipeline to the diplomatic corps.

"The people of Chad have lived in the past without oil and will live tomorrow without oil," he said, adding that the elected government had the right to spend its money as it saw fit.

Chad exports about 160,000 barrels per day, a small amount by world standards.

An Exxon Mobil-led consortium exported 133 million barrels of oil from Chad between October 2003 and December 2005, according to the World Bank. Chad earned $307 million from those exports, the bank said.

Earlier, Deby said he was severing relations with neighboring Sudan, and he threatened to expel 200,000 Sudanese refugees if the international community did not do more to stop what he claimed were Sudanese efforts to destabilize his government. (Full story)

Deby repeatedly has accused Sudan of hiring mercenaries to overthrow his government. Sudan has denied the accusation, and in turn has accused Chad of supporting fighters in its volatile Darfur region, where Arab militias and African rebels have fought for nearly three years.

The Central African republic said Friday it was closing its border with Sudan after the rebels passed through the northern part of the country while their way from Sudan to attack N'djamena.

The rebels released a statement on their Web site, again condemning Deby's refusal to negotiate with them. A key issue has been Deby's decision to change the constitution so he can run for a third term in elections set for May 3.

"The regime of Idriss Deby is the basis of the crisis in this part of the African continent," the rebel statement said.

Chad, an arid, landlocked country about three times the size of France, has been convulsed by violence for most of its history, including more than 30 years of civil war since gaining independence from France in 1960. There also have been various small-scale insurgencies since 1998.

Some 180,000 people have died in Darfur in western Sudan over the past three years, some at the hands of Arab militias, many from disease and hunger.

While observers believe Sudan has provided at least some support to the Chadian rebels, the insurgents are led by former senior military officers, who until recently served under Deby. There has been enormous dissent within Deby's clan over his decision to run for a third term and over how royalties from recently exploited oil reserves have disappeared.

Army officers first attempted to oust Deby on March 14 by trying to seize power while he was out of the country.


Armed Group Shuts Down Part of Nigeria's Oil Output

By Lydia Polgreen. New York Times, Feb 25, 2006.

They have, by all appearances, just a handful of boats, some machine guns and grenade launchers and, perhaps equally important, an e-mail address.

But with just those tools the Movement for the Emancipation of the Niger Delta has managed to shut down nearly a fifth of this nation's vast oil production, briefly push global crude oil prices up more than $1.50 a barrel and throw Nigeria's government into crisis over the group's demand that the oil-rich but squalid region be given a greater share of the wealth it creates.

"They have marginalized us for many years now!" shouted a machine-gun-wielding member of the militant group, his face covered in black cloth. "We are taking the bull by the horns now. Niger Delta is ready."

For the last two months the shadowy militant group has mounted attacks on oil facilities here and taken more than a dozen foreign oil workers hostage, including some Americans, wreaking havoc on the industry that is the mainstay of Nigeria's economy. All of the hostages taken last month were released after 19 days, but new ones were seized last week.

In e-mail messages sent to the news media, the group says it seeks to liberate the Ijaw people, who make up the bulk of the population here and, the group says, have provided the lifeblood of the Nigerian economy, but with little reward.

The government says the group is made up of oil thieves and criminal gangs seeking to control the lucrative trade in oil stolen from pipelines in the labyrinth of creeks that make up the Niger Delta.

"It is pure criminality," said Information Minister Frank Nweke Jr. "These are thugs who are using the plight of the poor to cover their illegal activities."

Groups of militant youths in this restive region have long used hostage taking and sabotage to extort money from oil companies and prevent the authorities from stopping oil theft from pipelines, a process known as bunkering.

But the ferocity and frequency of the recent attacks, in which more than a dozen soldiers have been killed, have increased concern. The violence comes as oil prices have spiked and the political climate in Nigeria has deteriorated ahead of its next presidential election, to be held early next year.

Although the attacks have been directed primarily at Royal Dutch Shell, the oldest and largest oil producer in Nigeria, their real target is the government, said Sebastian Spio-Garbrah, an analyst at the Eurasia group, a private research firm.

"They are trying to hurt the government, not really the oil companies," Mr. Spio-Garbrah said. "If the central government, which receives all these monies, is starved of money, the government will be weakened and they will be stronger."

On Friday, boatloads of members of the group met with journalists on a creek in the delta to outline their demands and show their strength. They reiterated their insistence that foreign oil companies leave the region and the Nigerian military withdraw. They are also demanding the release of the leader of a militant group and the nation's only Ijaw governor, both of whom are in jail.

"We want the Nigerian military men to evacuate from this terrain," one of the militants declared, brandishing his M-60 machine gun. "If we get them anywhere we are going to kill them one by one."

Dressed in military fatigues and white T-shirts, dozens of men armed with Kalashnikov machine guns and grenade launchers sat aboard speedboats decked with the white flags of Egbesu, the Ijaw god of warfare. They showed one of the nine hostages they seized last week from a barge operated by an oil company contractor, and said they were prepared to seize more hostages and blow up more oil facilities if their demands were not met.

"These people are serious, very serious, about what they are doing," said the hostage, Macon Hawkins, 68, an American from Kosciusko, Tex., who works for a company hired by Royal Dutch Shell to lay pipe in the region.

"They are going to fight," Mr. Hawkins said, "and they are going to fight till death. So the army is not going to do a whole lot of good here. The best thing the army can do is pull out and get some negotiators in here and try to settle this thing before it really gets bad."

Efforts to defeat the group militarily have not gone well, and it has managed to carry out several audacious attacks on oil facilities. The government says the group pays for its weapons by stealing oil, but several government officials, including two admirals of the Nigerian Navy, have been charged with stealing oil as well.

Nigeria is the world's eighth largest exporter of oil and an important supplier to the United States. Despite generating hundreds of billions of dollars in revenue since oil was discovered here in the 1950's, the Niger Delta is one of the poorest and least developed parts of the country.

Shell told to pay Nigeria's Ijaw

BBC News, Feb 24, 2006.

A Nigerian court has ordered oil giant Shell and its partners to pay $1.5bn to the Ijaw people of the Delta region.

The Ijaw have been fighting since 2000 for compensation for environmental degradation in the oil-rich region.

They took the case to court after Shell refused to make the payment ordered by Nigeria's parliament.

Ijaw militants have staged a spate of attacks against Shell facilities recently and are holding seven foreign oil workers hostage.

Following the violence, Shell - the biggest oil producer in Nigeria - has halved its output from the country.

Shell says it believes there is no evidence to support the claim, and will appeal against the ruling.

A statement said: "We remain committed to dialogue with the Ijaw people."


Lawyers for the Shell Petroleum Development Company argued in the federal court in Port Harcourt that the joint committee of the National Assembly that made the order in 2000 did not have the power to compel the oil company to make the payment.

But Judge Okechukwu Okeke ruled that since both sides had agreed to go before the National Assembly, the order was binding on both sides.

Ijaw community leader Ngo Nac-Eteli said that if Shell wanted to buy time by taking the case to the appeal court, the company would not be allowed to operate on Ijaw land until the case was settled.

He did not elaborate on how the community would stop Shell's operations.

The BBC's Abdullahi Kaura Abubakar in Port Harcourt says the case has the support both of community elders and the militant groups that have been attacking oil installations in the Delta region.

But our correspondent warns that even if the money is paid, the region would not necessarily be pacified unless the various groups were happy with how it was distributed.

Nigeria is one of the world's biggest oil exporters but despite its oil wealth, many Nigerians live in abject poverty.

Nigeria Militants Destroy Oil Pipeline, Boat

AP/Foxnews.com, February 20, 2006

Militants holding nine foreign hostages in southern Nigeria destroyed an oil pipeline Monday and blew up a boat in violence that has cut about 20 percent of crude production in Africa's oil giant.

The Movement for the Emancipation of the Niger Delta said it attacked a Shell-operated oil-pipeline switching station known as a "manifold" and a military houseboat in the oil-rich southern region. "Both were destroyed with explosives," the group said in an e-mail.

Shell Spokeswoman Lisa Givert confirmed the oil-pipeline attack and said the houseboat was abandoned when the attackers blew it up. It was unclear who owned the boat.

The militants announced no casualties, and said the Nigerian sailors fled when the assailants attacked the boat aboard which sailors based in the region live. Military officials in the region could not be reached for comment.

The West African nation is reeling from weekend attacks in which militants blasted oil and gas pipelines and sabotaged a key oil loading terminal belonging to Royal Dutch Shell. That and an earlier attack has forced the company to halt the flow of about 455,000 barrels a day — about one-fifth of daily output in Africa's top crude producer.

The weekend violence sent crude prices higher in international markets.

April Brent crude futures rose $1.47 to $61.36 a barrel on London's ICE Futures exchange. Trading on the New York Mercantile Exchange was closed for the Presidents Day holiday. Oil prices had jumped more than $1 and settled near $60 a barrel Friday over supply concerns.

The militants claiming the attacks say they have kidnapped nine foreign oil workers and threatened to spread the violence further across the restive south, and said they would kill President Olusegun Obasanjo if he entered the region.

"We are going to continue with the destruction of oil facilities in Delta State while concluding arrangements for our wider attacks on the entire region," the group said. "We are declaring a war on Obasanjo. We will attack and kill him should he venture into the Niger Delta for any reason."

Violence and sabotage of oil operations have been common in the oil-rich Niger Delta for the past 15 years amid demands by the region's impoverished communities for a greater share of the oil revenue flowing from their land.

The militants, who say they are fighting for the same cause and the freedom of imprisoned ethnic Ijaw leaders, launched a series of pre-dawn attacks Saturday that shook the nation's volatile oil industry.

In one assault in the swampy delta's Forcados estuary, dozens of armed militants seized nine foreigners after storming a barge belonging to the Houston-based oil services company Willbros Group Inc., which was laying pipeline for Shell.

The hostages include three Americans, two Egyptians, two Thais, one Briton and one Filipino, militants and Willbros officials said.

Responding to local rumors they planned to execute the hostages, militants said in an e-mail to AP they had not decided what to do with them.

Nigeria is Africa's leading oil exporter and the United States' fifth-largest supplier, usually exporting 2.5 million barrels daily. Hostage takings are also a common occurrence in the volatile delta, but most are released unharmed. Last month, militants held four foreigners for 19 days before releasing them unscathed.

Crude Oil May Rise as Nigerian Exports Cut by Militant Attacks

Bloomberg, Feb 20, 2006

Crude oil may rise in London today after weekend attacks on facilities operated by Royal Dutch Shell Plc cut Nigeria's export capacity by about 20 percent and militants in the nation vowed to carry out further strikes.

Shell on Saturday, Feb. 18, closed and evacuated its EA offshore field, cutting output by 115,000 barrels a day, and suspended loadings at its Forcados export platform, which can ship 400,000 barrels a day. Shell can't say when Forcados may reopen, spokeswoman Caroline Wittgen said yesterday by telephone from London. Nigeria is Africa's biggest oil producer.

"The attacks are a concern given Nigeria's importance as an oil-producing nation," said Francisco Blanch, a senior oil strategist with Merrill Lynch & Co. in London. "It's a factor that will keep prices supported."

Brent crude for April delivery rose $1.10, or 1.9 percent, to $59.89 a barrel on Friday, Feb. 17, on London's ICE Futures exchange. Electronic trading in Brent starts at 9 a.m. Singapore time today. The New York Mercantile Exchange, the world's largest energy futures market, is closed today for a U.S. holiday.

Nigeria produced 2.36 million barrels of oil a day last month, making it the sixth-biggest producer in the Organization of Petroleum Exporting Nations, according to Bloomberg data.

The militants, who also took nine hostages on Feb. 18, have said they want to cut Nigeria's export capacity by 30 percent this month. The Movement for the Emancipation for the Niger Delta said it targeted Shell because government military helicopters used an airstrip operated by the company to attack villagers in the delta, where the platforms are located.

'Fresh Targets'

"Fresh targets will be hit shortly," Jomo Gbomo, a self- described spokesman for the militants said yesterday in an e- mailed response to questions. "There is no shortage of things to destroy."

The militants issued a new warning late yesterday, saying oil workers should leave the Niger River delta "immediately."

"We will not take one more hostage in Delta state again,'' an e-mailed statement said.

The events in Nigeria are "going to spook the market," said Fadel Gheit, an oil and natural gas analyst at Oppenheimer & Co. in New York. "The market is going to go up, maybe 50 cents, a dollar, $1.20, depending on severity of the situation. "

The shutdowns may prompt OPEC, the 11-member group that pumps about 40 percent of the world's oil, to decide against cutting production when it meets next month in Vienna, analysts said. OPEC has traditionally cut production in the second quarter due to a decline in demand after the end of winter in the U.S. and Europe.

OPEC Targets

"If the 400,000 were to be shut down for a significant period of time, then OPEC would have to reassess what they were going to do at the meeting, " said Adam Sieminski, Washington, DC-based chief energy economist at Deutsche Bank AG.

Qatar Oil Minister Abdullah bin Hamad al-Attiyah said yesterday OPEC still may cut production by as much as one million barrels a day from April 1, as rising temperatures in the northern hemisphere reduce demand for heating oil.

"If we need to cut at the next meeting, we will cut, " al- Attiyah, 54, told reporters in Doha, Qatar, after a speech at a petroleum conference. "I don't feel my customers are in a rush to buy more oil, " he said.

Nigeria, the fifth-biggest oil supplier to the U.S., produces low-sulfur, or sweet, crude, prized by refiners for the proportion of high-value gasoline it yields. Shell, based in The Hague and the world's third-biggest oil company, produces about half of Nigeria's output.

Force Majeure

The U.S. received an average 1.1 million barrels of crude oil a day from the West African country last year, according to the U.S. Energy Department.

Shell will probably extend the force majeure it declared on exports from Forcados last month after the attack on the Trans- Ramos pipeline, Wittgen said. Force majeure is a legal clause that allows a company to miss contracted deliveries because of circumstances beyond its control.

Shell's venture last month halted the flow of 106,000 barrels a day, or about 5 percent of the country's total output, through Forcados after a Jan. 11 attack by the militants on the Trans-Ramos pipeline. No loadings were scheduled over the weekend at Forcados, Wittgen said.

Communities in the Niger Delta, a maze of creeks and rivers feeding into one of the world's biggest remaining areas of mangroves, are among Nigeria's poorest, a Shell-funded report on the area said in 2004. It cited studies showing per-capita income in the region to be below the national average of $260. Unemployment surpasses 90 percent in some areas.

Exxon Mobil, Chevron

The militants say their aim is to win control of Nigeria's oil riches for the people of the Niger Delta.

Exxon Mobil Corp., the second-biggest oil producer in Nigeria, hasn't reduced operations in the country following Saturday's attacks, spokeswoman Susan Reeves said in a telephone interview from Houston Feb. 18. Exxon Mobil's daily production in Nigeria is 650,000 barrels of oil per day, she said.

Chevron Corp. is the third-biggest producer in Nigeria.

Nigerian Militants Threaten Oil Tankers

By Osmond Chidi, Associated Press. Los Angeles Times, Feb 19, 2006

Militants who kidnapped nine foreign oil workers in a flurry of attacks that forced a 20 percent cut in Nigerian crude exports vowed Sunday to escalate the violence, threatening for the first time to fire rockets at international oil tankers.

While the military said tankers in Nigerian waters were safe, the West African nation is reeling from militant attacks that blasted oil and gas pipelines Saturday, damaged a key oil loading terminal and halted the flow of more than 500,000 barrels a day.

Nigeria is Africa's leading oil exporter and the United States' fifth-largest supplier, usually exporting 2.5 million barrels daily.

Efie Alari, who identified himself as commander of the Movement for the Emancipation of the Niger Delta, told The Associated Press by telephone Sunday his group was poised to attack foreign oil tankers offshore.

"We'll use our rockets on the ships to stop them from taking our oil," Alari said. His identity could not be independently verified, but the call came from a number used previously by the group based in the oil region of the Niger River delta.

The military said it would do whatever was necessary to ensure the safety of tankers.

"I don't know their capabilities, but we're not leaving anything to chance," said Maj. Said Hammed, a spokesman for the military task force in the delta. "The assurance has been given at the highest level of government that oil tankers are safe in Nigerian waters. That assurance remains."

Violence and sabotage of the delta's oil operations have been common for 15 years amid demands by the region's impoverished communities for a greater share of oil revenue flowing from their land.

Kidnappings are also a common occurrence in the volatile area. Most hostages are released unharmed. Last month, militants held four foreigners for 19 days before releasing them unscathed.

Dozens of militants seized nine foreigners Saturday in an assault in the swampy Forcados estuary after storming a barge belonging to the Houston-based oil services company Willbros, which was laying pipeline for Royal Dutch Shell.

The hostages included three Americans, two Egyptians, two Thais, a Briton and a Filipino, militants and Willbros officials said.

Militants said in an e-mail to AP that they had not decided what to do with the hostages.

"They are being moved around with our units and may likely only be killed in a crossfire" with government forces, the militants said. "We have not reached a decision on what to do with these individuals, but it is difficult to tell what may happen in the coming days. The next few days will determine what steps we will take."

Nigerian President Olusegun Obasanjo called a crisis meeting late Saturday with security chiefs and said "everything possible is already being done to secure the speedy release of the hostages through dialogue," Information Minister Frank Nweke said.

Nweke called on "the so-called militants and hostage takers in the Niger Delta to abandon their criminal activities ... these actions must be condemned by all persons of goodwill within and outside the country."

The militants said they staged Saturday's attacks after a series of military helicopter strikes on ethnic Ijaw villages. The military said the assaults targeted only people stealing oil on barges in the area.

Hammad said no soldiers were killed Saturday, contrary to some Nigerian newspaper reports that five died. No violence was reported Sunday.

The attack that damaged Shell's Forcados oil loading platform forced the company to shut off 400,000 barrels daily. Shell also evacuated staff from a nearby offshore platform, halting an additional 115,000 barrels a day.

A Shell pipeline was blown up Saturday by the delta's Chanomi Creek, and industry officials said militants destroyed a state-run pipeline that feeds natural gas from the Escravos gas plant in the delta to the country's commercial capital, Lagos.

On Sunday, Thai Foreign Ministry spokesman Sihasak Phuangketkeow confirmed the identities of two of the kidnap victims as Somsak Mhadmho, 43, and Arak Suwanna, 33, both of Bangkok, Thailand. Sihasak said both men were married.

Britain's Foreign Office said the kidnapped Briton was John Hudspith of southern England. U.S. officials confirmed three American oil workers were among those kidnapped, but did not identify them.

Nigeria launches helicopter attack in oil delta

By Segun Owen. Reuters / Abcnews.com, Feb 15, 2006

The Nigerian military launched a helicopter gunship attack on targets in the oil-producing Delta state on Wednesday, and militants threatened to shoot down aircraft unless military flights stopped.

The attack was the first major military operation in the Niger Delta since a militant group staged a series of attacks against the oil industry, and hours after British Foreign Minister Jack Straw called on the Nigerian government to improve security in the delta.

Militants from the Movement for the Emancipation of the Niger Delta said the attack was against Ijaw communities in the Gbaramatu area of the state, but a Navy source said it was directed against oil barges suspected of being used in the theft of crude oil.

"A military helicopter belonging to the Nigerian Army attacked Ijaw communities in Gbaramatu area of Delta state firing rockets and machine guns at targets on land," the militants said in an email statement.

The helicopter took off from the Osubi airstrip in Warri, operated by Royal Dutch Shell, which militants said was meant to be a civilian airfield.

"Operators of civilian aircraft in this airfield will do well to advise Shell to desist from the practice of permitting the use of this airfield for military use," the militants said.

"We are very well capable of shooting down aircraft landing and taking off from this airstrip and may consider doing so should it be discovered that the use of this privately owned civilian airstrip for military operations is not discontinued."

Crude Theft

Industry and government officials estimate that about 100,000 barrels a day, or 5 percent of Nigerian oil output, is stolen by well-connected Nigerian criminal gangs working with international syndicates.

The proceeds often go toward buying arms for gangs in the delta, fuelling a cycle of violence.

A boat taxi operator in Warri town said he thought Wednesday's attack might be directed against people who have opened a hole in a pipeline in that area operated by the state oil company which feeds the Warri refinery.

The 125,000 barrel-a-day refinery has been shut since last month because of the damaged pipeline.

After meeting with top Shell executives in Port Harcourt, at the other end of the delta, Straw said oil theft was going down, but added that more had to be done to reassure the international community and encourage investment in Nigeria. Some areas of the delta were still lawless, he added.

"There is a big security challenge. A lot of effective security enforcement depends very significantly on cooperation that can be achieved at a state level," Straw said.

"This delta covers a number of states. In some you have good quality leaders, in others less good quality. That is reflected in the security situation in the delta," he said.

The Movement for the Emancipation of the Niger Delta, which is fighting for more local control over the oil wealth, cut Nigerian oil output by 10 percent last month with a series of attacks on oil pipelines and plaftorms.

They also kidnapped four foreign oil workers, including a Briton, for 19 days.

A military response had been expected because the militants, who are heavily armed and operate in speedboats with military-style efficiency, killed 14 soldiers in one attack on an oil platform on January 13.


Oil Graft Fuels the Insurgency, Iraq and U.S. Say

By Robert F. Worth and James Glanz. New York Times, Feb 5, 2006

Iraqi and American officials say they are seeing a troubling pattern of government corruption enabling the flow of oil money and other funds to the insurgency and threatening to undermine Iraq's struggling economy.

In Iraq, which depends almost exclusively on oil for its revenues, the officials say that any diversion of money to an insurgency that is killing its citizens and tearing apart its infrastructure adds a new and menacing element to the challenge of holding the country together.

In one example, a sitting member of the Iraqi National Assembly has been indicted in the theft of millions of dollars meant for protecting a critical oil pipeline against attacks and is suspected of funneling some of that money to the insurgency, said Radhi Hamza al-Radhi, the chairman of Iraq's Commission on Public Integrity. The indictment has not been made public.

The charges against the Sunni lawmaker, Meshaan al-Juburi, are far from the only indication that the insurgency is profiting from Iraq's oil riches.

On Saturday, the director of a major oil storage plant near Kirkuk was arrested with other employees and several local police officials, and charged with helping to orchestrate a mortar attack on the plant on Thursday, a Northern Oil Company employee said. The attack resulted in devastating pipeline fires and a shutdown of all oil operations in the area, said the employee, who was granted anonymity because he was not authorized to speak publicly about the matter.

Ali Allawi, Iraq's finance minister, estimated that insurgents reap 40 percent to 50 percent of all oil-smuggling profits in the country. Offering an example of how illicit oil products are kept flowing on the black market, he said that the insurgency had infiltrated senior management positions at the major northern refinery in Baiji and routinely terrorized truck drivers there. This allows the insurgents and their confederates to tap the pipeline, empty the trucks and sell the oil or gas themselves.

"It's gone beyond Nigeria levels now where it really threatens national security," Mr. Allawi said of the oil industry. "The insurgents are involved at all levels."

American officials here echo that view. "It's clear that corruption funds the insurgency, so there you have a very real threat to the new state," said an American official who is involved in anticorruption efforts but refused to be identified to preserve his ability to work with Iraqi officials. "Corruption really has the potential of undercutting the growth potential here."

An example of how the insurgents terrorize oil truck drivers occurred last month, as a 60-truck convoy of fuel tankers from Baiji that was intended to alleviate fuel shortages in Baghdad was attacked by insurgents with grenades and machine guns despite the heavy presence of Iraqi security forces. In some cases Iraqi guards on the Syrian border have been paid off to let stolen shipments through, and the oil is then sold on the black market, Mr. Radhi said.

Senior officials in Iraq's Oil Ministry have been repeatedly cited in the Iraqi press as complaining about what they call an "oil smuggling mafia" that not only siphons profits from the oil industry but also is said to control the allocation of administrative posts in the ministry.

The former oil minister, Ibrahim Bahr al-Ulum, told the London-based newspaper Al Hayat late last year that "oil and fuel smuggling networks have grown into a dangerous mafia threatening the lives of those in charge of fighting corruption," according to a translation by the BBC.

Mr. Ulum said in an interview with the television network Iraqiya that raids on "smuggling dens" in Baghdad had netted forged documents and tanker trucks.

The indictment against Mr. Juburi, who is now believed to be hiding in Syria, charge that he stole money intended to hire and equip thousands of guards in 2004 and 2005 to protect an oil pipeline running between Baiji and the northern city of Kirkuk, Mr. Radhi said. Iraqi officials also suspect, but have not proved, that Mr. Juburi funneled some of the money he was given to protect the pipeline to the insurgents who were attacking it.

An Iraqi Army battalion commander Mr. Juburi hired was arrested recently and accused of organizing insurgent attacks on the pipeline, said a high-ranking Iraqi official who is close to the investigation. The official spoke on the condition of anonymity because he was not authorized to speak about the indictment. It is not clear whether Mr. Juburi knew that the commander was helping plan the attacks, the official said.

Frequent insurgent attacks on the pipeline have been one reason Iraqi oil exports have plummeted over the past year. The mortar attack on Thursday that led to the arrests of oil company officials and police officials was described by Northern Oil company employees as one of the most damaging in years.

The battalion commander hired by Mr. Juburi was identified as Ali Ahmed al-Wazir, commander of the second battalion of the first brigade of the Special Infrastructure Brigades, based in the Wadi Zareitoun district, said the high-ranking Iraqi official close to the investigation. Mr. Juburi fled Iraq just before a warrant was issued for his arrest in late December, Mr. Radhi said. Mr. Juburi's son, Yazen Meshaan al-Juburi, has also been charged in the case and is believed to have fled with him.

Mr. Juburi's party, the Conciliation and Liberation Bloc, won three seats in December's elections. But the charges against him are not likely to affect the current negotiations over forming a new Iraqi government, Mr. Radhi said, because the party Mr. Juburi formed can nominate someone to replace him in the new National Assembly.

Mr. Juburi has long been a controversial figure in Iraq. He was once intimate with the family of Saddam Hussein, but joined other Iraqi exiles in calling for Mr. Hussein's overthrow after fleeing Iraq in 1989.

He claimed that he worked with American Special Forces in the weeks before the war in a covert attempt to undermine the Iraqi military, broadcasting calls to military commanders to lay down their arms from a television station in Kurdistan. He claimed to have taken control of Mosul by the outbreak of the war, but he was later ousted by American commanders.

Mr. Juburi's tribe, the Juburis, is powerful in Salahuddin Province, through which the oil pipeline from Baiji runs. Partly for that reason, Mr. Juburi was asked in 2004 to organize 17 battalions of soldiers to protect the pipeline. In January 2005, Mr. Juburi was elected to the National Assembly, becoming one of a few Sunni Arab members and a hard-line critic of the government, led by Ibrahim al-Jaafari. Iraqi and American officials say they believe that some members of the Juburi tribe are involved in the insurgency.

After attacks on the pipeline grew worse in 2005, a three-month investigation found that Mr. Juburi had hired only a small number of commanders, paying them to appoint hundreds of ghost soldiers on paper and funnel the salaries back to him, Mr. Radhi said.

Mr. Juburi's son, Yazen, was responsible for supplying food for the soldiers, and he appears to have pocketed much of the money allocated for that purpose, the Iraqi official said.

Oil smuggling is only one part of a broader corruption problem that ranges from small-scale kickbacks to major fraud of the kind that took place in Iraq's Defense Ministry, where investigators last August said they had identified more than $1.3 billion in misspent military contracts. Hazem Shaalan, who was defense minister under former Prime Minister Ayad Allawi and gave Mr. Juburi the job of protecting the Baiji pipeline, was charged with public corruption last year and is now living in London.

Not all the corruption is related to the insurgency. But American and Iraqi officials say its scale is so broad as to be a serious threat to Iraq's economic rebirth.

The Commission on Public Integrity has referred about 450 cases for prosecution, and it has more than 1,000 other cases under investigation, Mr. Radhi said.

The reports of corruption have set off a major reform effort in recent months, with American advisers assisting internal investigations and promoting new rules like requiring financial disclosure forms for government officials.

But the changes have often been stymied by intimidation and violence. Iraq set up a new post in each government ministry to do internal monitoring, the inspector general, but two of the officials were assassinated last year just as they were about to publicize the results of investigations. Six other employees of the Commission on Public Integrity have been killed, and the rest live in constant fear of retaliatory violence.

"When the corruption is large, people incline to terror," Mr. Radhi said.

Some of the officials in charge of fighting corruption appear to have been drawn into it instead. The Iraqi inspector general program has suffered from "significant missteps and lapses in progress," and several inspector generals have been relieved of their jobs pending indictments, according to a State Department report on Iraq's reconstruction efforts.

The threat of violence has also deterred many Iraqi journalists from reporting on corruption, despite a campaign by American officials, who have optimistically declared the week starting Feb. 19 to be Anti-corruption Week.

"We have talked to three editors in the past week about anticorruption stories," said an American official in Baghdad who spoke on the condition of anonymity. "They are afraid of getting whacked if they print them."

In other cases, anticorruption officials have helped to hide illegal behavior, joining what Mr. Radhi called "Mafia type" organizations within the government ministries.

The Iraqi government has begun requiring all employees to sign a code of conduct, and all high-level officials must fill out complete financial disclosure forms. But 40 percent of them have refused to do so, saying they fear that filling out such forms will be equivalent to telling kidnappers what ransom to charge, Mr. Radhi said.

There have been some successes, he said: eight government officials have been convicted on corruption charges and sentenced, though many more have escaped prosecution by fleeing to other countries.

Nigerian Militants Warn of Attacks. The release of four hostages, including an American, does not signify an end to hostilities, a rebel group in the oil-rich delta says

By Robyn Dixon, Los Angeles Times, Jan 31, 2006

Nigeria's volatile Niger Delta is unlikely to see a reduction in violence, despite Monday's release of four kidnapped foreign oil contractors, analysts say.

The swampy, oil-rich region is notorious for its violence, political corruption, large-scale oil theft and kidnappings, and the international price of oil sometimes soars in response to the rhetoric of militant leaders.

Militants released the four after holding them nearly three weeks, but immediately threatened new attacks and warned foreign oil workers to leave.

An e-mail statement to news agencies said the rebel group would carry out "significant" new attacks to cut Nigeria's oil exports by 30%.

"The release does not signify a cease-fire or softening of our position to destroy the oil export capability of the Nigerian government," a Reuters account of the statement said.

Nigeria supplies about 10% of U.S. oil, and its growth as a supplier depends on its ability to contain the mayhem in the delta. Analysts predict that the region's problems will surge as 2007 elections approach.

The four freed hostages, American sea captain Patrick Landry, British security expert Nigel Watson-Clark and engineers Milko Nichev of Bulgaria and Harry Ebanks of Honduras were kidnapped Jan. 11 when heavily armed militants in speedboats ambushed their oil industry supply vessel, skippered by Landry.

They were whisked into the grassy swamps of the delta, where militants hold sway and security forces seldom venture.

The Movement for the Emancipation of the Niger Delta claimed responsibility and demanded that the government release two local ethnic Ijaw leaders, and that the region's biggest producer, Royal Dutch Shell, pay $1.5 billion to local communities affected by oil spills.

No money was paid, nor were any militants released, government officials said.

Analysts often link some militias to corrupt government officials. But most suggest that resentment over the lack of any local benefit from the millions of dollars in oil exports fuels the violence.

Major attacks have increased in recent weeks, including a raid on the Port Harcourt headquarters of Italian oil firm Agip, which left nine people dead. Armed men also stormed the headquarters of a South Korean oil services company Sunday and made off with more than $300,000.

Shell has withdrawn hundreds of workers, and regional production has dropped an estimated 10% because of attacks on its facilities.

Michael Peel, West Africa analyst for London-based think tank Chatham House, said it would be a grave mistake for the Nigerian and Western governments and oil companies to see the crisis as resolved with the release of the hostages.

"That's precisely the attitude that has allowed the situation to slide and deteriorate to the dreadful state it is today," he said. "Living conditions for most people in the Niger Delta are appalling."

Peel said violence before the 2003 elections left dozens of people dead and shut down a third of the nation's oil production. Proceeds from oil theft may have been used as payoffs to help rig elections, he said.

Ekiyor Welson, a spokesman for the government of Bayelsa state, said in a telephone interview that the oil workers were freed after intense negotiations involving leaders of the Ijaw community. Three Ijaw intermediaries delivered the men to state government officials about 5 a.m., after which they were flown to Abuja, the capital, to meet with Nigerian President Olusegun Obasanjo.

Steve Dick, executive vice president of Tidewater, the Louisiana company that employs Landry, said in a telephone interview from London that the men had been flown to Lagos after the meeting and would be flown home as soon as possible.

"They're all in good spirits and anxious to get home," he said. "I know they spoke to their families, all four of them."

He said the violence and instability in the delta remained major concerns to the industry. "It's a very volatile area, there's no doubt about that. The Nigerian government has got a real problem, and they're going to have to address it."

Nigerian oil fuels Delta conflict

BBC News, Jan 25, 2006

Nigeria's Delta region is home to vast oil reserves, which make the country one of the world's biggest oil exporters.

But the region remains poor, undeveloped and riven by conflict.

For many years, armed gangs of youths, who hide out in the swamps and creeks that make up the Delta, have attacked oil pipelines and kidnapped foreign workers for ransom.

A recent report commissioned by Shell said the level of conflict in the region was comparable to Colombia and Chechnya.

Attacks on Shell installations have forced a 10% drop in Nigeria's oil production.

Many of the armed groups claim to support impoverished local communities and say the oil belongs to the Delta people in the first place.

Oil tankers stolen

"The Niger Delta is awash with weapons," Prof George Frynas, a specialist in Nigeria's oil industry, told the BBC's World Today programme.

He says the weapons have been bought from the proceeds of kidnapping oil workers, selling oil they steal from pipelines and that some have been distributed by politicians at election time.

Some of the strongest allegations of electoral fraud from the last elections came from the Niger Delta.

Local human rights activists said that in some areas, armed men had turned up at polling stations and calmly made off with the ballot boxes, which they proceeded to stuff.

Another specialist on Nigeria, Anthony Goldman, says the scale of the attacks and the vast quantities of oil being siphoned confirms that senior Nigerian officials have protected and backed the armed militia that operate in the Niger Delta.

In some cases, huge oil tankers - mostly from the former Soviet Union - have been used to carry away the stolen oil to foreign markets.

Two Nigerian rear admirals were court-martialled last year for their part in the attempted theft of thousands of tons of Nigerian oil by an international crime syndicate operating in Russia and eastern Europe.

'Too little, too late'

Although troops have been deployed to try to restore order, they are frequently outgunned by the militia.

Analysts say the military can do little without parallel efforts to tackle the roots of the problem.

Prof Frynas, from Middlesex University in the UK, says it is unlikely that oil companies will pull out of Nigeria but they have already started to move to off-shore oil fields, which are further from population centres and so less vulnerable to attack.

"Nigeria will still be a big producer of oil but people will not venture into villages - it is just too dangerous."

Over the past few decades the population of Nigeria has grown rapidly but despite the country's vast oil wealth, the large majority of the population have continued getting poorer.

In order to raise living standards in the region, the government and oil companies have set up the Niger Delta Development Commission.

This is supposed to use oil money to improve the region's infrastructure, such as schools and health clinics and to create jobs.

But Prof Frynas says it seems to be "too little, too late".

"A lot of the efforts have been bogged down in corruption and inefficiency. Still very little money has trickled down to the people."

Russia Blasts Cut Gas to Georgia, Armenia

Foxnews.com, January 22, 2006

Explosions hit pipelines running through southern Russia early Sunday, cutting the supply of natural gas to the Caucasus countries of Georgia and Armenia during a cold snap.

Russia's NTV showed footage of twisted and smoking pipelines in a high mountain pass in North Ossetia. Overnight temperatures in Tbilisi plunged to minus 14, and by afternoon, much of the capital was without gas.

An explosion also hit an electricity transmission tower west of North Ossetia, interrupting electricity supplies to Georgia, said Sergei Petrov, a duty officer at Russia's Emergency Situation Ministry. He said the cause of the explosion near the city of Cherkessk, was not yet known.

"The situation is very difficult. We have enough gas for just one day," Georgia Energy Ministry spokeswoman Teona Doliashvili told The Associated Press.

It was not immediately clear whether the pipeline and power line explosions were connected, Russia's Emergency Situations Ministry said. Spokesman Viktor Beltsov initially said the pipeline blasts appeared to be accidental, but Nikolai Shepel, chief prosecutor for Russia's southern region, said a criminal investigation had been opened on charges of sabotage.

In recent years, explosions have damaged pipelines in Russia's turbulent North Caucasus region in blasts investigators have ruled sabotage. Criminal groups as well as militants with ties to Chechnya's separatist rebels have been suspected.

Georgian officials headed to neighboring Azerbaijan to negotiate getting gas through a pipeline between the Azerbaijani capital, Baku, and the Georgian port of Batumi. The RIA-Novosti news agency reported Georgia had started bringing in gas from Azerbaijan.

Georgian President Mikhail Saakashvili angrily called on Russia to do more to explain the cutoff and restore supplies and honor its "contract as is provided for under civilized, international trade relations," he said.

"Everyone should understand that Georgia is prepared for partnership and friendly relations but I don't advise anyone to speak to any country with threats or blackmail," he told reporters.

Russian gas goes across Georgia to Armenia, which sends back some electricity to Georgia. Electricity supplies also were cut in Armenia.

Shushan Sardarian, a spokeswoman for Armenia's gas distributor, told the AP that officials had tapped the country's emergency gas reserves and urged Armenians to cut back on electricity usage.

Neither Georgia nor Armenia produce significant amounts of gas, and they rely on Russia for the overwhelming majority of their supplies.

Armenia hopes to reduce its dependence on Russia by building a pipeline to bring gas from Iran, but the first section is not expected to be completed until 2007.


Nigeria told not to use force to free oil workers

TheGuardian (UK), Jan 20, 2006

British diplomatic officials today cautioned Nigeria against using force to free four oil workers kidnapped in the south of the country.

Consular staff met Nigerian authorities in the state of Bayelsa, in Nigeria's oil-rich delta region, to discuss how to secure the safe release of the foreign workers - a Briton, an American, a Bulgarian and a Honduran - who were seized on January 11 near a Shell oil field.

"The safety of the hostages is paramount to us, and we would not wish to see military action that would endanger their safety," the British high commission spokesman, Graeme Bannatyne, said.

"Consular officials will remain in the Niger delta until the conclusion of this situation," Mr Bannatyne said.

Militants have launched a string of attacks on Nigerian oil installations, cutting the country's crude exports by nearly 10%.

They are demanding $1.5bn (£849m) in compensation from Shell for environmental damage, and that the government release two figureheads of their ethnic Ijaw group, the militia leader Mujahid Dokubo-Asari and the former Bayelsa governor, Diepreye Alamieyeseigha.

Mr Dokubo-Asari was detained in September on treason charges, while Mr Alamieyeseigha faces extradition to Britain, after jumping bail in the UK on charges of money laundering.

Mr Alamieyeseigha apparently dressed up as a woman and used a forged passport to skip bail on charges of laundering £1.8m.

The day after the kidnapping, a major Shell pipeline leading to its Forcados export terminal was blown up. Shell has evacuated hundreds of workers from the delta since the unrest began.

The kidnapped workers are employed by two companies contracted by Shell in the delta: the British firm, Ecodrill, and the US company, Tidewater. Nigeria, Africa's leading oil producer, exports 2.5m barrels of oil a day and is the fifth-biggest source of US oil imports.

Nigerian militants to kill hostages if US man dies

By Tom Ashby. Reuters, news.yahoo.com, Jan 19, 2006

Nigerian kidnappers said on Thursday their U.S. hostage was gravely ill and threatened to kill three other foreign oil workers held captive if he died.

A leader of the Movement for the Emancipation of the Niger Delta, whose month-long campaign against oil installations has driven up world oil prices, told Reuters by telephone that the health of U.S. oil worker Patrick Landry was failing.

"One of them is sick, badly sick and could give up tonight," said the man who identified himself as the ground commander of the movement. "If one of them dies, we kill them all."

The hostages -- who also include a Briton, a Honduran and a Bulgarian -- complained by telephone of diarrhea and fatigue from constant movement in the humid, mosquito-plagued creeks of Nigeria's southern delta.

The workers appealed to their governments to press Nigerian President Olusegun Obasanjo to meet the militants' demands for the release of ethnic Ijaw leaders and for local control over the region's oil wealth.

The Ijaw militant group said they have not received any contact from Nigeria's government and would not accept a ransom for the hostages, abducted nine days ago from an offshore oilfield operated by Royal Dutch Shell.

"We are in bad shape here, we really are," Landry told Reuters by telephone. "Meet these people's demands. We are not military: we came here to work."

The militants are also demanding that Shell, the top investor in Nigeria, pay $1.5 billion to Bayelsa state to compensate for pollution. Shell has cut its production by 210,000 barrels a day -- a tenth of Nigeria's output -- and pulled out 500 staff.

Bombing Campaign

From hideouts in the delta's maze of tidal creeks and mangrove swamps, the militants have already bombed two export pipelines, causing a massive spill, and attacked at least two large oil platforms. Dozens have been killed, including about 12 Nigerian soldiers, intelligence sources say.

"To demonstrate our disregard for the Nigerian military presence in the Niger Delta, we will carry out a series of very significant attacks very shortly," the group said in an email earlier on Thursday.

The group said two jailed Ijaw leaders, militant Mujahid Dokubo-Asari and former Bayelsa state governor Diepreye Alamieyeseigha, were the only qualified mediators for talks with the government.

Nigeria's only Ijaw governor, Alamieyeseigha was impeached last month for money-laundering after escaping arrest in Britain and now faces criminal charges. Asari, who led a bloody militant rebellion in the delta in 2004, is on trial for treason.

The kidnappers had earlier said they would not harm the hostages and had offered to free Landry, who suffers from high blood pressure, if his firm's managing director took his place. Landry works for U.S.-based oil service firm Tidex.

Amid rising north-south polarization in Africa's most populous country, some analysts believe the violence could be intended to reinforce the delta's claim over the choice of the ruling party candidate for presidential elections next year.

An Ijaw uprising before 2003 elections curbed 40 percent of Nigerian output.

So far, Shell is the only oil major to admit it has suffered at the hands of the Ijaw militants. France's Total and Italy's Agip, a unit of ENI, have both denied militant claims they were attacked.



Oil War News from 2006 -

Oil War News from 2004-2005

Oil War News from 2003 & Earlier