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Oil War News (2004-2005)
compiled by George Draffan of

Competition for resources is increasing. In 1950, it cost the energy equivalent of one barrel of oil to find 100 barrels of new oil. Now the same investment yields five barrels.

"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 2005 there were 120,000 private foreign contractors in Iraq;
about 20,000 of them working for private security companies.

 "So let me get this straight: We ransacked the house of the con man whom we paid millions to feed us fake intelligence on W.M.D. that would make the case for ransacking the country that the con man assured us would be a cinch to take over because he wanted to run it. And now we're shocked, shocked and awed to discover that a crook is a crook and we have nobody to turn over Iraq to, and the Jordanian embezzler-turned-American puppet-turned-accused Iranian spy is trying to foment even more anger against us and the U.N. officials we've crawled back to for help, anger that may lead to civil war..."
Maureen Dowd, Bay of Goats,
New York Times, May 23, 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

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Iraq's Oil: The Spoils of War, by Philip Thornton, Independent / UK, November 22, 2005

Iraqis face the dire prospect of losing up to $200bn (116bn) of the wealth of their country if an American-inspired plan to hand over development of its oil reserves to US and British multinationals comes into force next year. A report produced by American and British pressure groups warns Iraq will be caught in an "old colonial trap" if it allows foreign companies to take a share of its vast energy reserves. The report is certain to reawaken fears that the real purpose of the 2003 war on Iraq was to ensure its oil came under Western control.

The Iraqi government has announced plans to seek foreign investment to exploit its oil reserves after the general election, which will be held next month. Iraq has 115 billion barrels of proved oil reserves, the third largest in the world.

According to the report [Crude Designs: the Rip Off of Iraq's Oil Wealth], from groups including War on Want and the New Economics Foundation (NEF), the new Iraqi constitution opened the way for greater foreign investment. Negotiations with oil companies are already under way ahead of next month's election and before legislation is passed, it said.

The groups said they had amassed details of high-level pressure from the US and UK governments on Iraq to look to foreign companies to rebuild its oil industry. It said a Foreign Office code of practice issued in summer last year said at least $4bn would be needed to restore production to the levels before the 1990-91 Gulf War. "Given Iraq's needs it is not realistic to cut government spending in other areas and Iraq would need to engage with the international oil companies to provide appropriate levels of foreign direct investment to do this," it said.

Yesterday's report said the use of production sharing agreements (PSAs) was proposed by the US State Department before the invasion and adopted by the Coalition Provisional Authority. "The current government is fast-tracking the process. It is already negotiating contracts with oil companies in parallel with the constitutional process, elections and passage of a Petroleum Law," the report, Crude Designs, said.

Earlier this year a BBC Newsnight report claimed to have uncovered documents showing the Bush administration made plans to secure Iraqi oil even before the 9/11 terrorist attacks on the US. Based on its analysis of PSAs in seven countries, it said multinationals would seek rates of return on their investment from 42 to 162 per cent, far in excess of typical 12 per cent rates.

Taking an assumption of $40 a barrel, below the current price of almost $60, and a likely contract term of 25 to 40 years, it said that Iraq stood to lose between 74bn and $194bn. Andrew Simms, the NEF's policy director, said: "Over the last century, Britain and the US left a global trail of conflict, social upheaval and environmental damage as they sought to capture and control a disproportionate share of the world's oil reserves. Now it seems they are determined to increase their ecological debts at Iraq's expense. Instead of a new beginning, Iraq is caught in a very old colonial trap."

Louise Richards, chief executive of War on Want, said: "People have increasingly come to realise the Iraq war was about oil, profits and plunder. Despite claims from politicians that this is a conspiracy theory, our report gives detailed evidence to show Iraq's oil profits are well within the sights of the oil multinationals."

The current Iraqi government has indicated that it wants to treble production from two million barrels a day this year to six million. The US Energy Information Administration said such an increase would ease "market tensions" that have kept the price high. But governments and oil companies in the West said the report was purely hypothetical and that the issue was a matter for the Iraqi people. They also pointed out that Iraq needed money to rebuild in the sector.

A spokesman for the Foreign Office said the country's oil industry was in desperate need of investment after years of under-investment, UN sanctions, vandalism by Saddam Hussein and more recent sabotage by insurgents and general looting. "The Iraqi government has made it clear that the decision is a matter for its authorities but they understand that it would require a lot of investment," he said. He said it was not surprising that Iraq should look to outside experts to help rebuild an industry that was the key source of revenue to help rebuild the country.

"We work closely with other departments such as the Treasury to give assistance and advice," he said, adding that the Foreign Office had not been involved in specific lobbying.

Gregg Muttitt, of Platform, a campaign group that co-authored the report, said Iraq had an existing - albeit damaged - network of oil expertise and could use current revenues or new borrowings to fund investment. The report named several companies, including the Anglo-Dutch Shell group, as jockeying for position before a new government is elected. In 2003, Walter van de Vijver, then head of exploration and production, said investors would need "some assurance of future income and a supportive contractual arrangement". The groupsaidyesterday that the involvement of foreign oil companies would be determined by the new Iraqi administration. "We aspire to establish a long-term presence in Iraq and a long-term relationship with the Iraqis, including the newly elected government."

No multinationals are operating in Iraq now because of the poor security situation.


S. America Goes Nationalist With Oil, Gas. By Natalie Obiko Pearson. Associated Press / Yahoo News, Oct 13, 2005

Protesters in Ecuador have dynamited oil pipelines, a Bolivian presidential candidate says he wants to seize private gas fields, and Venezuela is threatening to kick out any foreign oil companies that won't submit to more state control.

For international oil companies like BP PLC and Exxon Mobil Corp. and their customers, who used to look to South America for stable supplies, this powerful wave of nationalist sentiment comes at a particularly bad time.

Tight supplies worldwide already have driven oil prices close to record highs, and while the nationalist swing is unlikely to further escalate prices unless it curtails oil production or exports, it's heightening risk in a region that once was willing to offer much more to attract foreign investment, experts say.

Some warn that such changes could land governments in a tight spot if oil prices fall, investment has been compromised, and there's less to meet the inflated expectations of poorer citizens who have been promised more benefits.

But many political leaders say those are risks worth taking for a region where 35 percent of the residents live on less than $2 a day. "We need to take back our national power, our sovereignty to manage our resources," said Venezuelan President Hugo Chavez, who has become one of the continent's most forceful voices for redirecting oil money from corporate giants to the poor.

Venezuela supplies 13 percent of U.S. crude oil imports, and Chavez's government has passed laws in the last four years that require state-owned Petroleos de Venezuela S.A. (PDVSA) to obtain a majority stake in all oil production projects, raised royalties on heavy crude production from 1 percent to as high as 30 percent, and required firms pumping oil to pay income taxes at a top rate of 50 percent, up from the previous 34 percent.

All firms with oil-pumping contracts now face a Dec. 31 deadline to sign new joint-venture agreements giving PDVSA up to an 80 percent stake or have their oil fields reclaimed by the state. Before the joint ventures can be completed, the firms must also pay $3 billion in back tax claims.

Besides BP and Exxon Mobil, the changes affect international majors such as Chevron Corp. and Royal Dutch Shell PLC.

"We're looking at a transitory period in which things are a little bit tense, but if we get through this, we'll be in a much better place. I believe there is a role for private oil companies here, and that the government believes there is a role for us here," said Sean Rooney, president of Shell Venezuela.

It's a trend mirrored across South America, where governments are squeezing more control and money from the energy sector, much as state-owned oil companies have done in many Middle East countries.

In Ecuador, demonstrators in two oil-rich provinces seized oil wells, dynamited pipelines and provoked spills during August protests that prompted a state of emergency.

It's time oil companies "give us our due," said Guillermo Munoz, governor of Sucumbios province, who helped lead the protests that froze oil exports for two weeks. Those protests and earlier disturbances in May cost Ecuador $445 million in lost production.

Ecuadorean President Alfredo Palacio later announced all contracts with private oil firms would be revised to ensure the government at least 50 percent of oil profits, up from 20 percent.

Poor Indians in Bolivia also are demanding a greater share of natural gas revenues. Bolivia has Latin America's second-largest gas reserves after Venezuela, and protests in the past two years have sparked violence and forced out two presidents - Gonzalo Sanchez de Lozada and Carlos Mesa.

Congressman Evo Morales, an Aymara Indian who has led the protests and is close to Chavez, has emerged as a front-runner for December presidential elections. "You have to be brave. The president has to have the courage to take the oil fields," he said. "It doesn't mean the expulsion of the transnationals, but that we'll make new contracts."

Morales has said he wants to seize private gas fields held by foreign companies like Repsol YPF of Spain, Petrobras of Brazil and Total of France. But he has also said that he remains open to foreign investment as long as better terms can be negotiated.

Elsewhere, Argentina approved a new state-owned energy company last year, reversing a decade-old privatization policy. Peru passed a law to ensure 25 percent of royalties from its Camisea natural gas pipeline are funneled to poor communities.

In one sign of a backlash, investment in Bolivia's gas and oil industries dropped by 40 percent in the first half of 2005 compared to the same period in 2004, reversing a seven-year trend, according to the Bolivian Hydrocarbons Chamber.

But analysts say the region is unlikely to repeat past mistakes, when governments were forced to dismantle and privatize segments of the energy industry that had been nationalized in the 1970s. Countries are responding to pressures "to realign that deal in favor of the governments" now that energy prices are much higher than when contracts were first signed, said Roger Tissot of PFC Energy, an energy consultancy.

"We didn't expect a change to existing contracts but we do expect that governments will adapt their terms to the ... oil price reality - not just here but all around the world. That's not a surprise," said Rooney of Shell.

Chavez, who blames U.S.-style capitalism for creating poverty in Venezuela, has spent billions of dollars in oil revenues from state company PDVSA for public works projects and social programs. Petrodollars have turned one abandoned oil depot into a bustling $3.2 million community center with a textile cooperative and a medical clinic, nestled between green hills and the Caracas slums.

"I'm proud of what Chavez is doing. He's brought us resources," said Margarita Rojas, 44, who works in a training program at the textile shop.

Chavez also has sought to solidify political alliances by offering oil sales on preferential terms to countries throughout the Americas. And he denies criticisms by some who say his policies are turning PDVSA into a government slush fund and are weakening the company by starving it of needed investment.

He has threatened to sell some refineries of PDVSA's wholly owned subsidiary, Citgo Petroleum Corp., arguing that current refinery contracts produce losses for Venezuela and constitute a subsidy for the U.S. economy.

PFC Energy's Roger Tissot points out, however, that Citgo has 14,000 U.S. retail outlets and "is a very important asset" because its refineries are able to process heavy Venezuelan crude and secure a market for it.

In a tight oil market, companies in Venezuela have so far accepted the increasingly tough terms. Representatives of Chevron, Exxon Mobil and Repsol didn't return calls seeking comment, but Susana Brugada of Norway's Statoil ASA said the firm remains committed to its investments here.

"Venezuela is a country of opportunities," said Brugada, whose company pumps crude with Chevron. "Statoil is in Venezuela to stay, and our plans are for the long term." 


Blood, Ink, and Oil: the Case of Darfur. By David Morse. CommonDreams.org, July 21, 2005.
The ink is scarcely dry on oil deals signed between the Islamist dictatorship that rules Sudan from the northern capital, Khartoum, and an eager bevy of oil companies from China, India, Japan, and Britain - even as the genocide continues full tilt in the western region known as Darfur. Every new contract signed in Khartoum makes it clearer that this genocide is fueled by the world's unquenchable thirst for petroleum.
Oil rigs are now drilling on land seized from black African farmers - who have been killed, raped, and driven off their land by their own government through its proxy militias, known as Janjaweed, in a campaign of ethnic cleansing now in its third year.
The Islamist regime of Lt. General Umar Hassan Ahmad al-Bashir bears primary responsibility for the slaughter. Khartoum's claims that it can't control the Janjaweed are refuted by United Nations observers and by human rights organizations, as are Bashir's denials that rape of women and children is used systematically to intimidate and demoralize black farmers and prevent them from returning to their ruined villages. Khartoum's continuing slaughter of its own people should make it a pariah among nations.
Obviously the oil companies are deeply complicit. Attacks by Janjaweed, often with aerial support from Sudan government forces, have cleared the way for pipelines and drilling. Oil company roads and bridges are used by government troops to carry the genocide into more remote communities in Darfur. And it is an unhappy fact of recent history that violence, disorder, and corruption generally accompany the exploitation of oil in undeveloped nations. Oil revenues do not translate into schools and hospitals for the people; they translate into arms and Swiss bank accounts for the elite. Sudan, the largest country in Africa, and one of the poorest, is a case in point.
Sudan's governing elite have whipped up ancient ethnic rivalries in their pursuit of oil revenues, half of which is spent on arms. Oil has thus contributed indirectly and directly to the death of roughly 370,000 Darfurians and the displacement of some 3.5 million more, who are now dependent on outside aid for food and water.
American oil companies are not visibly part of the scramble, because in 1997 the Clinton administration added Sudan to the list of states sponsoring terrorism, which included Iran and Libya. Under these trade sanctions, Americans who do business with Sudan face up to ten years imprisonment and fines of $500,000.
But why, especially in the absence of "strategic interests" in Sudan, does President Bush not take the moral high road? Why does he seem so reluctant to take even the smallest step to end the genocide?
Congress, to its credit, is way ahead of the President - reflecting most Americans' essential decency in believing that the genocide should be brought to a halt. The Darfur Peace and Accountability Act, now being deliberated in Congress, purports to do that. It calls for beefing up the African Union peacekeeping forces, which are now stretched dangerously thin in Darfur, providing the AU with logistical support, and broadening its mandate to include protection of civilians. The bill also provides for prosecuting before the International Criminal Court individuals - such as Major General Salah Abdallah Gosh, head of Sudan's intelligence agency = who are suspected of helping orchestrate the present genocide.
Why has the Bush administration lobbied to weaken the Darfur Peace and Accountability Act?
Why has the administration sought instead to cozy up to this bloodiest of regimes? Last spring, the CIA sent one of its own jets to Khartoum to fly none other than intelligence chief Gosh to meet with intelligence officials in Washington D.C. The official reason offered by the Bush administration? Sudan was proving a "valuable ally" in the war against terrorism.
The real reason may lie with the oil money that has backed George W. Bush from early in his first campaign for president.
U.S. oil companies, sidelined since 1997, are clearly eager for a piece of the action in Sudan. One of the recent oil deals signed with Khartoum is worth noting. On June 10, a "British" oil tycoon named Friedhelm Eronat acquired for $8 million the largest stake in a drilling contract signed two years ago on behalf of Cliveden Sudan, a company owned by Eronat at that time and had registered in the Virgin Islands to avoid paying taxes. Until then, Friedhelm Eronat had been an American citizen. He swapped his American citizenship for British just before signing the contract, thereby avoiding a jail sentence or fine.
But was Eronat - a high-risk wheeler-dealer who owns extensive drilling rights in neighboring Chad, where he played the Chinese against Canadian oil interests - acting on his own behalf in the recent deal, or was he fronting for other interests? Eronat has fronted for Exxon Mobil and other companies in the past. He narrowly escaped indictment on corruption and fraud charges in connection with a deal allegedly involving shell companies, bribery, and the swapping of Iranian oil for oil from Kazakhstan in order to circumvent the American law against trading with Iran.
U.S. oil companies, to judge by Eronat, can scarcely wait to drill in Sudan. "The war against terrorism" is, once again, a red herring to cover the administration's true interest: oil.
The only thing standing in the president's way is the ugly fact of genocide and the ability of the American people to make it politically unacceptable for our president to avert his eyes from what is happening in Darfur.

Chinese dragon awakens, By Bill Gertz, Washington Times, June 26, 2005.
"... [China] also is facing a major energy shortage that, according to one Pentagon study, could lead it to use military force to seize territory with oil and gas resources.
The report produced for the Office of Net Assessment, which conducts assessments of future threats, was made public in January and warned that China's need for oil, gas and other energy resources is driving the country toward becoming an expansionist power.
China "is looking not only to build a blue-water navy to control the sea lanes [from the Middle East], but also to develop undersea mines and missile capabilities to deter the potential disruption of its energy supplies from potential threats, including the U.S. Navy, especially in the case of a conflict with Taiwan," the report said.
The report said China believes the United States already controls the sea routes from the oil-rich Persian Gulf through the Malacca Strait. Chinese President Hu Jintao has called this strategic vulnerability to disrupted energy supplies Beijing's "Malacca Dilemma."
To prevent any disruption, China has adopted a "string of pearls" strategy that calls for both offensive and defensive measures stretching along the oil-shipment sea lanes from China's coast to the Middle East.
The "pearls" include the Chinese-financed seaport being built at Gwadar, on the coast of western Pakistan, and commercial and military efforts to establish bases or diplomatic ties in Bangladesh, Burma, Cambodia, Thailand and disputed islands in the South China Sea.
The report stated that China's ability to use these pearls for a "credible" military action is not certain.
Pentagon intelligence officials, however, say the rapid Chinese naval buildup includes the capability to project power to these sea lanes in the future.
"They are not doing a lot of surface patrols or any other kind of security evolutions that far afield," the intelligence official said. "There's no evidence of [Chinese military basing there] yet, but we do need to keep an eye toward that expansion."
The report also highlighted the vulnerability of China's oil and gas infrastructure to a crippling U.S. attack.
"The U.S. military could severely cripple Chinese resistance [during a conflict over Taiwan] by blocking its energy supply, whereas the [People's Liberation Army navy] poses little threat to United States' energy security," it said.
China views the United States as "a potential threat because of its military superiority, its willingness to disrupt China's energy imports, its perceived encirclement of China and its disposition toward manipulating international politics," the report said..." (from Chinese dragon awakens, By Bill Gertz, Washington Times, June 26, 2005).

Oil Fuels Suriname-Guyana Border Clash, by Anton Foek, Special to CorpWatch, July 5th, 2005.
The humid heat covers you like a blanket when you step from the air-conditioned plane at Guyana's international airport. Even before you reach customs, the boundary between sodden air and damp skin has disappeared. It is not the only border that blurs into vagueness on this remote Northern coast of South America.
Since colonial times, the division between Guyana and neighboring Suriname has been as indistinct and shifting as the haze that settles over it during the rainy season. When Guyana gained its independence from Britain in 1966 and the Dutch cut Suriname loose in 1975, the contested area was the relatively worthless realm of farmers and poor fishermen. But even then, one of Suriname's leaders, Dr. Jaggernath Lachmon, warned the Dutch that giving independence to a country without established borders would generate stacks of problems for future generations. The Dutch, at the independence negotiations, answered that a country, like Suriname with its magnificent poets, would always survive.
A few decades later, the discovery of vast off-shore oil reserves in the contested territorial waters has fulfilled Lachmon's warning. International corporations-lured by the prospect of an estimated 15 billion barrels of oil-are vying for drilling rights and pushing a centuries' old simmer to the boiling point of open war. Even old sayings have changed. In Suriname it used to be told that "a close neighbor is worth more than a far-flung friend." Now the favored proverb has become: "If things go wrong, your best friend and neighbor may become your biggest foe."
The line between friend and foe runs down the Corantijn River which divides the countries and extends into the sea. The dispute "has spiraled the people of these two countries into an unnecessary conflict and waste of costly time," says Brian Johnson in Guyana who collects taxes and tolls in the Iwokrama nature reservation on one side of the river. On the other bank, customs officer Frank Bruining agrees: "A complete waste of time; these politicians should know better. Instead of cooperating, they fight for political gains at the expense of the common people."
Suriname and Guyana overlap in more than geography: They were both shaped by the immigration trends beginning in the mid 19th century when the abolition of slavery led to settlements and then to overpopulation in urban areas. Later the migration of workers from India, China, and Indonesia created a multi-cultural society and a turbulent political dynamic. And now both countries share a host of social problems intensified by the risks and promises of oil wealth and by the avaricious focus of international corporations jockeying for control.
Border Clash, Corporate Rivalry
Representing Guyana is CGX Energy Inc. of Toronto, Canada. Suriname's claim is being supported by Spain's Repsol YPF of and Denmark's Maersk Oil. And despite moves to try and settle the border dispute though compromise, none of the corporations seem interested in a political solution to the problems.
"Their interest is not ours," says Guyana's Johnson. "Theirs is individual, they have to satisfy their stockholders. Our governments have to feed our people properly and provide us with adequate shelter and sufficient healthcare and schooling."
The international corporations first raised the stakes in 1998 when Guyana granted CGX a concession to drill for oil in the coastal areas it claimed as its own. By 2000 a platform rested over one of Guyana's two promising oil fields. But before drilling started, a Surinamese air force plane spotted the rig and Suriname ordered the it out of what it claims was its territory. Then, in the middle of the night, Surinamese gunboats towed off the Guyana's oil rig and launched a full-scale international crisis.
The Canadians left and waited for further developments. Since then off-shore development by both countries has been stalled while the price of oil and the potential worth of the claims steadily rises.
In February 2004 Guyana, out of peaceful options, took the dispute to the International Tribune of Sea Law in Hamburg, Germany. It accused Suriname of frustrating negotiations the past few years and of provoking trouble when it chased CGX Energy from the disputed sea-area.
Because of procedural rules and bureaucracy regarding communication about the conflict, high officials and attorneys in both countries are not allowed to say much. But both sides charge that it is the other country that is frustrating the bilateral negotiations. Predictions for a ruling range from decades to recent reports from spokespeople in Georgetown and Paramaribo (the capitals of Guyana and Suriname, respectively) that news will break in a few weeks.
Waiting Game
Meanwhile, as the nations and corporations play out the dispute, development is largely on hold, with both countries waiting for future oil wealth.
Suriname, with both oil and other resources is in a better position to wait it out. An almost century-long boom of the bauxite industry catapulted it into one of the more prosperous and affluent countries in the region. Now that exploitation of supplies and resources are reaching their end, the Aluminum Company of America (Alcoa) is looking for prospects in neighboring countries.
And State Oil Company, the pride of Suriname, is a huge and efficient enterprise that generates $70 million annual income for Suriname's 500,000 inhabitants. Managing Director Eddy Jharap runs it like a private corporation rather than with the slow bureaucracy typical of state companies with massive government involvement. State Oil's on-shore drilling in the Saramacca district furnishes the local market with heavy crude and still leaves 25 percent of production for exports. Bauxite and gold also generate income as do developments agreements with the Netherlands...[MORE at CorpWatch]

Unocal Bid Denounced at Hearing, By Steve Lohr, New York Times, July 14, 2005.
A former director of central intelligence testified Wednesday that a Chinese company's bid for Unocal should be seen as part of that government's strategy for energy security in competition with the United States and that the American government should consider preventing such a deal.
"This is a national security issue," R. James Woolsey, director of the C.I.A. in the Clinton administration, said in a hearing of the House Armed Services Committee. "China is pursuing a national strategy of domination of the energy markets and strategic dominance of the western Pacific."
Testimony before the committee came as Unocal's directors were preparing to meet on Thursday in El Segundo, Calif., to review the $18.5 billion bid from the China National Offshore Oil Company, or Cnooc, executives involved in the negotiations said.
Unocal's board will look at several new provisions that Cnooc has offered as it seeks to persuade directors to accept its bid. Cnooc is racing an Aug. 10 deadline, when Unocal shareholders get to vote on a $16.8 billion offer made by Chevron in April.
Cnooc, which has been in talks with Unocal's management since June 22, has added several concessions and safeguards to its offer, seeking to ease worries that the deal could be stalled or blocked by the United States government. These include a commitment to divest certain assets if needed to secure government approval, an escrow account of $2.5 billion to protect Unocal if Cnooc were to break any part of its deal and a separate $500 million break-up fee.
Cnooc may still hold another card. The company's board has authorized its management to increase the bid if necessary, the executives said.
Still, Cnooc may face more than just financial obstacles. In Washington Wednesday, Representative Duncan Hunter, chairman of the armed services committee, said he might introduce legislation to block Cnooc from buying Unocal, even if a deal were approved by shareholders and by the government committee that reviews corporate takeovers by foreign enterprises.
"I think it would be a mistake to let a Cnooc deal go through," Mr. Hunter, a California Republican, said. "I want to keep all options open."
Congress has the power to "regulate commerce with foreign nations," under the Constitution, Article I, Section 8. Yet it is uncertain that legislation to thwart a single takeover - the step Mr. Hunter mentioned - would go very far.
But Mr. Hunter's comment, and other comments at the Congressional hearing, point to the depth of political opposition that Cnooc faces in its bid for Unocal. The more political uncertainty that surrounds the Cnooc bid, the greater the financial risk for Unocal shareholders.
Three of the four witnesses at the hearing made the argument that Cnooc's attempt to buy Unocal, a midsize American oil company, should be regarded as a matter of national security. Their case, in summary, is that Cnooc is an arm of the Chinese government, which is engaged in a strategic campaign to control oil assets worldwide and that its energy strategy helps feed China's military ambitions. Aiding these Chinese aims, they said, may also strengthen the hand of a centralized communist government often criticized for its human rights record.
The government-owned Cnooc, Mr. Woolsey said, was "an organ, effectively, of the world's largest communist dictatorship." Allowing Cnooc to buy Unocal, he added, "should be beyond the pale, given the nature of the Chinese government."
The witnesses making the national security argument had intelligence and military backgrounds. Jerry Taylor, an energy economist from the Cato Institute, a libertarian free-market policy group, presented a very different view of the Cnooc bid.
The fear that Cnooc might be a step in a Chinese mercantilist strategy of buying and hoarding energy assets to obtain an "oil weapon," Mr. Taylor said, was "very ill-founded."
Oil, he noted, is a widely traded, global commodity. Owning petroleum in the ground gives a nation no real security from sudden spikes in oil and gas prices.
In the late 1970's, Mr. Taylor said, Britain was self-sufficient in oil because of its North Sea fields. Japan, by contrast, was entirely dependent on imported oil. Britain paid as much for its oil as Japan did.
"Because you have a world market for oil, it did not matter that Britain had reached the holy land of oil self-sufficiency," Mr. Taylor said.
But the witnesses concerned about national security pointed to statements by Chinese government officials emphasizing the importance of owning oil and gas reserves to enhance China's energy security. China, they added, has been paying high prices to buy oil and gas assets worldwide for the last few years. "The Chinese don't care what the price is, they want access to the oil," said C. Richard D'Amato, chairman of an advisory panel to Congress on economic and security matters.
Mr. D'Amato and other witnesses called for legislative change to broaden the mandate for the Committee on Foreign Investment in the United States, or Cfius, a multiagency government group that reviews takeovers by foreign companies for national security concerns. The witnesses said national security reviews must include economic security, including oil supplies, and that Congress must oversee the committee's deliberations.
The investment committee reviews, said Frank G. Gaffney Jr., a former senior Defense Department official in the Reagan administration, should be "a far more rigorous, transparent and national security-minded process for evaluating Chinese investments like Cnooc's proposed purchase of Unocal."
Mr. Hunter said he and Congressional colleagues were working on amending the 1988 law that created the committee on foreign investment, to "make sure we bolster the Cfius process." That work, he said, will continue regardless of what happens with the Cnooc bid.

Chinese bid for Unocal raises human rights and national security issues. By Michael Kieschnick. Working for Change, July 7, 2005.

Before the resignation of Sandra Day O'Connor, official Washington was awash with the news that the Chinese government, through its China Offshore Oil Corp, might purchase Unocal, the 9th largest U.S. based oil company. It's obvious why the Chinese government might want Unocal -- just for starters, it has significant oil and gas reserves in Asia and some promising proprietary oil exploration technology. And perhaps it's obvious why ChevronTexaco wants it -- the dramatic rise in oil prices has left Chevron, as well as its fellow giant Exxon, with literally tens of billions in cash sitting in the bank.

Dozens of legislators have written Mr. Bush asking him to seriously consider the national security implications of the Chinese communists owning this once proud American oil company. According to Roll Call, most of this bipartisan group had received campaign contributions from Chevron. Both sides have hired lobbyists with close ties to the Bush Administration to press their case. The House has already passed legislation that seeks to bar the Chinese takeover.

I, for one, would have felt much better about appealing to the President if these same legislators had raised a dozen other national security issues with Mr. Bush, ranging from our world-worst car fuel efficiency to growing nuclear proliferation.

It is worth noting that Unocal is an oil company with a distinctly unpleasant aroma to it -- drawn to oil and gas exploration and distribution in precisely those areas with the greatest human rights violations. Of most note is Unocal's pipeline in Myanmar -- the former Burma. Unocal operates there despite official U.S. policy and with full knowledge of the brutal human rights record of the generals who run the country.

And who can forget from Fahrenheit 911 that it was Unocal that was lobbying the Bush Administration to allow it to construct a pipeline through Afghanistan in a financial arrangement that would have enriched the Taliban? I am not making this up!

Some years ago, Unocal was the subject of a very rare effort by a group of California consumers and environmentalists to have its corporate charter revoked by the state of California. No doubt they deserved the fate, even though the effort failed.

China's demand for oil and gas is skyrocketing -- one of the key factors in the rise in oil prices over the past year. As a nation -- through its state owned oil companies and through joint venture -- China is aggressively seeking access to oil. It clearly wants to own and control oil resources where it can rather than relying on the vagaries of the international oil market -- hardly a surprise for a communist regime. Due largely to cheap labor and an undervalued currency, the U.S. trade deficit with China has exploded, providing cash reserves that make it trivial for CNOOC to purchase Unocal.

Do progressive have a stake in this battle between Chevron and China? Here are a few questions to ponder.

In a pinch -- say, a future conflict where oil exports to the U.S. are cut off temporarily in a dispute with Venezuela or a Shiite regime in Baghdad -- would China or Chevron be more likely to seek political or commercial advantage against American consumers from the Unocal resources?

Is China or Chevron more likely to pressure Myanmar to release from periodic house arrest Nobel Peace laureate Suu Kyi? One clue is that China is one of the largest international investors in Burma, as well as a major supplier of arms to the Burmese military.

This debate is another bit of evidence that the Bush Administration's economic and energy policies are failures. If oil prices were lower due to lessened demand for gasoline, perhaps Chevron would not have enough idle cash to purchase its competitors. And if China's exports to the United States were half what they are, Unocal would not be such a tempting target.

Perhaps the best approach is a pox on all their houses. Unocal should go out of existence, and progressives should pressure both China and Chevron to join the campaign for democracy in Burma.

Michael Kieschnick is the President and CEO of Working Assets.

Oil, CO2, Environment, Climate, War. By Caroline Arnold. Kent-Ravenna Record Courier, June 19, 2005.

This year there are real, physical issues for the humans on Planet Earth. We hear hints of them when our mainstream media can tear itself away from runaway brides and the gong-show in Rome, where old men in red dresses and lacy rochets fiddle around with edicts about sex and sin while AIDS smolders, populations explode, and fossil fuels burn steadily worldwide.

This decade has brought a new reality of terror, torture, and high-tech war, all obscured by secrecy, forgeries, lies, distorting frames and red-herrings that serve the purposes of Power and Money. The Newsweek/ Koran-flushing story was a massive conflagration that effectively bedazzled everyone into disregarding fundamental questions of torture. (Even this paragraph is more about the abuses of communication than about the abuses of real flesh-and-blood human beings.)

This new millennium, hailed as the dawn of a golden future, is suddenly facing the sunset of the oil that sustains Western economies and lifestyles. And while fossil fuel supplies dwindle, human population and per capita consumption of hydrocarbon fuels are growing rapidly, spawning vast carbon dioxide emissions that are warming our planet by disrupting the atmospheric and oceanic systems that regulate our planet's climate.

This week global warming is again in headlines. A White House aide resigned after charges that he changed federal science reports to downplay the effects of greenhouse gasses to global warming. The US contribution of CO2 was updated: each US citizen's share of the national total CO2 releases is about 6 tons/year. For comparison, each citizen of India accounts for about 0.3 ton/year.

Dire forecasts are being made. In "The Long Emergency "James Howard Kunstler predicts that both American society and the global consumer economy will crash as cheap energy disappears, and that it is already too late to mend our ways: "It is no exaggeration to state that reliable supplies of cheap oil and natural gas underlie everything we identify as the necessities of modern life - ... central heating, air conditioning, cars, airplanes, electric lights, inexpensive clothing, recorded music, movies, hip-replacement surgery, national defense -- you name it." (read http://www.commondreams.org/views05/0413-28.htm )

Jared Diamond, in "Collapse", postulates four reasons why societies or civilizations collapse: environmental destruction, climate change, increase in hostilities, and decrease in friendly relations. And he adds a fifth, overarching reason: failing to address any of the first four.

Meanwhile President Bush fancies that "clean nukes" and soy biodiesel fuel will solve all our problems, and the punditocracy dismisses environmentalists and anti-globalizationists as "people with the right moral fervor and ethical viewpoint" but "a knee-jerk antipathy to capitalism" (Jeffrey Sachs)

We have a big problem: civilization is being physically crunched between not enough energy and too much CO2. The more we burn hydrocarbon fuels, the worse it is for life on earth. This energy-carbon crunch won't be well addressed by throwing money at it - neither taxpayers' money nor private capital. In fact, any money thrown at it will come out of public pockets either as rate-payers for fuel and power, or as taxpayers, - or it will come from Social Security to pay for tax breaks for the wealthy.

Nuclear power is no panacea for the energy-carbon crunch - it's neither clean nor cheap, and has uncertain long-term consequences. It could help tide us over until we can cut consumption, increase efficiency, develop alternatives, and reduce transmission & transportation costs. It could buy us time to tune human fertility, human politics & economics, and personal lifestyles & habits to more renewable, sustainable, equitable and humane energy systems.

But right now we need to recognize that we can't fuel our life-styles or cool the planet with faith-based science, marketing ideologies, or the coercion of war, terror and torture. The crunch between scarce energy and excessive CO2 will finally have to be dealt with by the crunched - us.

We need a new revolution - not an armed, adversarial revolution, but a peaceable revolution in what we buy, how we use energy, how we distribute and assess information, and in how we allow ourselves to be governed.

The most successful revolution of all time was one in which individuals saw the menace of rule from above and the opportunity for ruling themselves, and took matters into their own hands. In a rather broad sense, George Washington didn't so much raise an army to fight the British as take command of an army that had already arisen to meet a public need.

Carbon dioxide/global warming. War, terror and torture. Oil depletion. Hunger, poverty, water scarcity, pollution. Environmental destruction and climate change are already here; hostilities have increased , and friendly relations - treaties, the Geneva conventions - have deteriorated. We have trouble even finding out about them, let alone addressing them.

These are serious challenges to humankind that we are unlikely to address until we tune out the farcical sit-coms produced by middle-aged men with good hair and tasteful neckties in Washington playing word-games, staging tantrums, pastposting their bets on Iraq, nuclear weapons, and free markets, and claiming Divine Privilege for their conceits and superstitions.

Recent articles in major newspapers suggest that the "American Dream" is largely dead for most Americans. Only powerful large corporations can dream, and their dreams are mostly: "All those lovely consumers, how can we make them buy what we sell?" And even more tellingly, "How can we make profits selling things people crucially need - like water, electricity, medical care, education, transportation?"

We environmentalists may well be deluded by notions of preserving the commons, beguiled by the romance of fuel cells, solar panels or windmills, or infatuated with biodiesel fuel or hybrid cars. We are probably naive about a few amateurs changing the world. But the environmentalist vision of renewable, sustainable, equitable and humane energy systems - in the hands of the people who use them - is certainly preferable to Cheney's calculated imperial algorithms of power, or the faith-based, strategic ignorance of our President.

Caroline Arnold served 12 years on the staff of Senator John Glenn and is now active with the Portage Democratic Coalition and Kent Environmental Council.

Caspian oil pipeline opens. By Mark Tran, The Guardian [UK], May 25, 2005.

Officials today inaugurated the first section of a 1,100-mile pipeline bringing oil from the Caspian Sea to the west, a project that has sparked environmental and human rights concerns.

The presidents of Azerbaijan, Kazakhstan, Georgia and Turkey attended a ceremony at the Sangachal oil terminal, about 25 miles south of the Azeri capital, Baku, to open the taps for the first drops of oil to enter the Baku-Tbilisi-Ceyhan (BTC) pipeline...

Most Caspian oil exports have previously moved through Russian pipelines. The new pipeline from Baku to the Turkish Mediterranean port of Ceyhan is seen as a significant move toward reducing western dependence on oil from the Middle East.
The largest private construction project in the world, the pipeline is part of a $20bn (10.9bn) series of energy developments to produce and transport oil and gas from the landlocked Caspian.

The $3.2bn BTC pipeline, with a capacity of 1m barrels a day, is the first direct oil link between the Caspian, thought to contain the world's third largest oil and gas reserves, and the Mediterranean.

Built by a consortium led by BP , it passes through Georgia en route to Turkey. Countries involved in the project hope to earn substantial revenue through transit fees and royalties.

While the governments involved enthusiastically endorse the project, environmental and human rights have strongly criticised the scheme.
A report published last September by the Kurdish Human Rights project, the Corner House, Friends of the Earth and Environmental Defence expressed shock at the extent "the project is being breached of agreed standards, particularly on issues of land acquisition".
The groups voiced particular concern at the extensive use of emergency powers in Turkey to expropriate land for construction prior to compensation being paid to landowners...

Giant Caspian oil pipeline opens, BBC News, May 25, 2005

The pipeline has been an international effort and was built by a consortium led by UK oil giant BP, which has a 30% stake.

Other consortium members include Azerbaijan's state oil company Socar, Amerada Hess, ConocoPhillips, Eni, Inpex, Itochu, Statoil, Total, TPAO and Unocal...

Caspian oil set for fast flow to the West, By Kieran Cooke, BBC News, May 5, 2005.

[L]ong before work started on the pipeline in early 2003, concerns were raised about running it through such a volatile political region.

In Azerbaijan, the pipeline goes close to the ceasefire line separating the forces of Azerbaijan and Armenia, its neighbour and bitter enemy to the west.

The two countries are locked in a bloody territorial dispute and, despite the ceasefire, clashes often occur.

Elsewhere en-route, concern has been raised about the pipeline's vulnerability to attack from anti government groups.

Georgia battles various separatist conflicts, while in Turkey the pipeline skirts the heartlands of Kurdish areas.

"We have secured the pipeline to the highest standards," insists Tamam Bayatly, BP's communications manager in Baku.

"Governments involved are responsible for security. The pipeline is buried and no one will be able to see where it runs.

"Unarmed local people, trained by BP, will guard the length of the pipeline."

Non-governmental organisations have complained.

Some about human rights being abused, others about the pipeline's environmental impact.

Green groups question the presence of such a project in what is a highly active seismic zone, saying any rupture of the pipeline would cause widespread damage.

In Georgia in particular there have been strong protests about the pipeline's route through the Borjomi Valley, one of the country's most scenic areas and a centre of tourism.

"I cannot say that there are not any problems," says Faig Askerov, who monitors the environmental impact of the project for BP.

"We use technology that makes the minimum impact on the environment. We are not ideal, but we're good."

 Western governments and financial institutions have given strong backing to the project.

The United States has given significant political support, seeing the pipeline as a way of transporting vital energy supplies out of the Caspian, avoiding alternative routes to the south through Iran, or to the north through Russia.

But Russia has been unhappy with the project, seeing it as further evidence of the West seeking to exert power and influence in an area Moscow has traditionally seen as its own backyard.

The Caspian Sea's oil and gas riches have long been known, but difficulties in transporting energy reserves to markets outside the landlocked area have been a handicap to further exploration work.

BP says the pipeline is the solution to the problem, but critics say the future is uncertain, insisting that the pipeline is a big gamble in an unstable region.

The Intensifying Global Struggle for Energy. By Michael T. Klare. TomDispatch.com, May 9, 2005.

From Washington to New Delhi, Caracas to Moscow and Beijing, national leaders and corporate executives are stepping up their efforts to gain control over major sources of oil and natural gas as the global struggle for energy intensifies. Never has the competitive pursuit of untapped oil and gas reserves been so acute, and never has so much money as well as diplomatic and military muscle been deployed in the contest to win control over major foreign stockpiles of energy. To an unprecedented degree, a government's success or failure in these endeavors is being treated as headline news, and provoking public outcry when a rival power is seen as benefiting unfairly from a particular transaction. With the officials of numerous governments coming under mounting pressure to satisfy the needs of their individual countries -- at whatever cost -- the battle for energy can only become more inflamed in the years ahead.

This struggle is being driven by one great inescapable fact: the global supply of energy is not growing fast enough to keep up with skyrocketing demand, especially from the United States and the developing nations of Asia. According to the U.S. Department of Energy (DoE), global energy consumption will grow by more than 50% during the first quarter of the 21st century -- from an estimated 404 to 623 quadrillion British thermal units (BTUs) per year. Oil and natural gas will be in particular demand. By 2025, global oil consumption is projected to rise 57%, from 157 to 245 quadrillion BTUs, while gas consumption is projected to have a 68% growth rate, from 93 to 157 quads. It appears increasingly unlikely, however, that the world's energy firms will actually be able to deliver such quantities of oil and gas in the coming decades, whether for political, economic, or geological reasons. With prices rising all over the world and serious shortages in the offing, every major consuming nation is coming under increasing pressure to maximize its relative share of the available energy supply. Inevitably, these pressures will pit one state against another in the competitive pursuit of oil and natural gas.

Frenzied Search

In the past, such zero-sum contests between major powers over valuable resources have often led to war. Whether that will prove to be true in the case of oil and gas remains to be seen. But the pressure to maximize supplies is already shaping the foreign policy decisions of many states and generating fresh international tensions. Consider, for example, the following recent developments:

* A decision by Japan to initiate natural gas production in a disputed area of the East China Sea sparked massive anti-Japanese protests in China on April 16, the worst outpouring of such animosities in over 30 years. Although leaders of both countries sought to diffuse the crisis by promising fresh efforts at reconciliation, neither side has backed off its claims to the offshore territories. While other issues also fed into Chinese popular discontent, notably Japan's reluctance to express regret for atrocities committed by its forces in China during World War II, Tokyo's unilateral move to extract natural gas from the East China Sea was the precipitating factor. At stake potentially is the ownership of a vast undersea gas field in disputed waters lying between China's central coast and Japan's Ryukyu island chain. Because the offshore boundary between China and Japan has not been established, neither side is willing to countenance the extraction of gas by the other in the disputed "national territory." Thus, when Tokyo announced on April 13 that it would allow drilling by Japanese companies in waters claimed by China, Beijing had no compunctions about allowing an unprecedented, weekend-long display of nationalistic fervor.

* During her first visit to India as Secretary of State, Condoleezza Rice called on New Delhi to back away from a plan to import natural gas by pipeline from Iran, claiming that any such endeavor would frustrate U.S. efforts to isolate the hard-line clerical regime in Tehran. "We have communicated to the Indian government our concerns about the gas pipeline cooperation between Iran and India," she said on March 16 after meeting with Indian Foreign Minister Natwar Singh in New Delhi. But the Indians let it be known that their desire for additional energy supplies trumped Washington's ideological opposition to the Iranian regime. Declaring that the proposed pipeline will be necessary to meet India's soaring energy needs, Singh told reporters, "We have no problem of any kind with Iran."

* One month after her meetings in New Delhi, Rice flew to Moscow and pressured President Vladimir Putin to open up Russia's energy industry to increased investment by American firms. Noting that Moscow's crackdown on the privately-owned energy giant, Yukos, along with proposed restrictions on foreign investment in Russian energy projects would discourage U.S. companies from collaborating in the development of Russia's vast oil reserves, Rice implored Putin to adopt a more inviting posture. "What Russia can do is to adopt policies in its energy sector in terms of the development of its energy sector that will increase the supply of oil both in the short term . . . and the long term," she avowed. But while embracing Rice's call for enhanced U.S.-Russian relations, Putin evinced no inclination to back off from his plans to bolster state control over Russian energy companies and to use this authority to advance Moscow's geopolitical objectives.

* On April 25, President George W. Bush met with Crown Prince Abdullah of Saudi Arabia at his ranch in Crawford, Texas, and exhorted him to substantially expand Saudi petroleum output so as to bring down American gasoline prices. "The Crown Prince understands that it is very important to make sure that the price is reasonable," Bush observed before the meeting. "A high oil price will damage markets, and he knows that." Bush and Abdullah also discussed the Israeli-Palestinian conflict and the continuing threat of terrorism, but it was oil demand that dominated the Crawford summit.

Highlighting the degree to which energy issues had come to overshadow more traditional security concerns, both Secretary of State Condoleezza Rice and National Security Adviser Stephen Hadley emphasized the importance of boosting world oil output in their comments on the meeting. "Obviously, with the states like China, India, and others coming on line, there is concern about demand and supply," Rice observed. "And these issues have to be addressed."

Developments like these, and Rice's comments on the Bush-Abdullah meeting, capture the essence of the current energy equation: Demand is rising around the world; supplies are not growing fast enough to satisfy global requirements; and the global struggle to gain control over whatever supplies are available has become more intense and fractious. Because the first and second of these factors are not likely to abate in the years ahead, the third can only grow more pronounced.

Insatiable Demand

Economies -- all economies -- run on energy. Energy is needed to produce food and manufacture goods, power machines and appliances, transport raw materials and finished products, and provide heat and light. The more energy available to a society, the better its prospects for sustained growth; when energy supplies dwindle, economies grind to a halt and the affected populations suffer.

Since World War II, economic growth around the world has been fueled largely by abundant supplies of hydrocarbons -- that is, by petroleum and natural gas. Since 1950, worldwide oil consumption has grown eightfold, from approximately 10 to 80 million barrels per day; gas consumption, which began from a smaller base, has grown even more dramatically. Hydrocarbons now satisfy 62% of the world's total energy demand, approximately 250 quadrillion BTUs out of a total supply of 404 quads. But no matter how important they may be today, hydrocarbons are sure to prove even more critical in the future. According to the Department of Energy, oil and gas will account for 65% of world energy in 2025, a larger share than at present; and because no other source of energy is currently available to replace them, the future health of the global economy rests on our ability to produce more and more of these hydrocarbons.

The future availability of oil and gas also affects another key aspect of the global economic equation: the growing challenge to the older industrialized nations posed by dynamic new economies in East Asia, South Asia, and Latin America. At present, the industrialized countries account for approximately two-thirds of total world energy use. Because these countries, for the most part, possess mature and efficient economies, their demand for energy is expected to increase by a relatively modest 35% between 2001 and 2025, a conceivably manageable rate. But demand in the developing world is soaring. By 2025, developing countries are projected to hold a startling half-share in total world energy consumption. When their added demand is combined with that of the industrialized countries, the net world increase jumps 54% over the same set of years, a far more demanding challenge for the global energy industry.

The competition for hydrocarbon supplies will be particularly intense. According to the Department of Energy, oil consumption by the developing world will increase by 96% between 2001 and 2025, while consumption of natural gas will rise by 103%. For China and India, the rate of growth is even more dramatic: China's oil consumption is projected to jump by 156% over this period and India's by 152%. The struggle these countries, and other developing powerhouses like South Korea and Brazil, face in obtaining additional oil and gas for their growing economies will naturally pit them against the older industrialized countries in the competitive pursuit of energy. As suggested by Rice, "with the states like China, India, and others coming on line, there is concern about demand and supply."

Questionable Supply

Accommodating the growing Chinese and Indian demand would not be a significant problem if we had great confidence that the energy industry is capable of generating the necessary additional amounts. In fact, the Department of Energy wants us to believe that this is indeed the case. Future oil and gas supplies, DoE claims, will be more than adequate to satisfy anticipated world demand. But many experts dispute this view. World oil and gas supplies, they argue, will never achieve such elevated levels. This is true because much of the world's known hydrocarbon reserves have already been exhausted and not enough new fields have been discovered in recent years to make up for the depletion of older reservoirs.

Take the case of oil. The DoE predicts that global petroleum output will reach 120.6 million barrels per day in 2025 -- 44 million barrels more than at present and just a tad shy of the anticipated world demand of 121 million barrels per day. For this to occur, however, the major oil firms must discover massive new reserves and substantially increase their output from existing fields. However, few new large fields have been discovered during the past 40 years, and only one, the Kashagan field in the Caspian Sea, has been found in the past decade. At the same time, many older fields in North America, Russia, and the Middle East have experienced significant declines in daily production. As a result, many geologists now believe not only that the global petroleum industry will not be capable of rising to the 120 million barrel level but will fall far below it.

Predictions that global oil output will peak between now and 2025, far short of the DoE's projections, are highly controversial. This is not the place to consider clashing assessments in detail. But one way to get at this issue is to consider the all-important case of Saudi Arabia, the world's leading supplier and the most likely prospect for higher production in the future. According to the DoE, Saudi Arabian oil output will more than double between 2001 and 2025, jumping from 10.2 to 22.5 million barrels per day. If Saudi Arabia could, in fact, raise its output by this amount we would have some degree of confidence that total world supplies could satisfy anticipated demand even at the end of this period. But there are growing indications that Saudi Arabia is not capable of coming anywhere close to that figure. In a much-discussed 2004 article in the New York Times, business analyst Jeff Gerth reported that "[o]il executives and government officials in the United States and Saudi Arabia... say capacity will probably stall near current levels, potentially creating a significant gap in the global energy supply."

In response to Gerth's assertions, Saudi officials insisted that their country is fully capable of boosting daily production by a sufficient amount to satisfy anticipated world requirements. "Should [higher world demand] actually materialize... we're going to be ready to meet it," Saudi Oil Minister Ali I. Al-Naimi declared in February 2004. In particular, "we have looked at scenarios of 12 million [barrels per day] capacity, we have looked at 15 million capacity, and those are all feasible." Such pronouncements have provided some relief to those alarmed by Gerth's report. But note that Al-Naimi spoke only of "scenarios" for reaching 12 to 15 million barrels per day -- hardly an ironclad guaranty -- and even an increase of that size would fall far short of the 22.5 million barrels projected by the Department of Energy. Many energy analysts have suggested, moreover, that any drive by Saudi Arabia to boost its daily output above 10 million barrels for any length of time will cause irreparable harm to its fields and result in an inevitable long-term drop in production. As noted by one senior Saudi oil executive, an attempt to reach 12 million barrels per day would "wreak havoc within a decade."

The question of Saudi Arabia's future oil output is terribly important to this discussion because it is highly unlikely that any other supplier, or combination of suppliers, can make up the difference between Saudi Arabia's sustainable yield of 10-12 million barrels per day and the DoE's 22.5 million-barrel goal for Saudi output in 2025. Other big suppliers -- Iran, Iraq, Kuwait, Nigeria, Russia, and Venezuela -- are expected to have a hard enough time maintaining their own output at current levels, let alone filling in for the "missing" Saudi oil. This being the case, it appears highly unlikely that the global oil industry will be capable of satisfying anticipated world demand in the years ahead; instead, we should expect chronic petroleum shortages, higher prices, and persistent economic hardship.

Precisely because of this prospect, many national leaders are now placing greater emphasis on the acquisition of increased natural gas supplies. Because gas was developed later in the industrial cycle than oil, its principal sources of supply have not yet been fully exhausted, and new fields -- such as those in Iran and the East China Sea -- await full-scale development. Like oil, natural gas will eventually reach a global peak in output, but this is not likely to occur for a decade or so after oil has peaked. As petroleum output declines, therefore, natural gas is expected to take up some of the slack -- but only some, because there is not enough gas in the world to fully replace petroleum in all its myriad uses. And it is for this reason that many governments seek to gain control over or access to major gas reserves now, before they are locked up by someone else.

Intensifying Struggle

What can we expect from this intensifying struggle over valuable energy resources? Certainly, national leaders are placing ever greater emphasis on the competitive pursuit of energy as Condoleezza Rice made clear in her recent jaunts around the world. Whether in India, Russia, or Latin America, she has raised the energy issue at every turn, pressing America's allies and business partners both to supply us with more oil and to ignore the appeal of "rogue" producers like Iran and Venezuela. Other world leaders like Vladimir Putin of Russia and Junichiro Koizumi of Japan have behaved in a similar fashion. Striking, in fact, is the degree to which the quest for energy has been elevated into the realm of national security, on an equal plane with efforts to combat nuclear proliferation and international terrorism. Thus, it was the President's adviser for national security affairs, Stephen Hadley, who briefed reporters on the outcome of the Crawford summit between Bush and Abdullah. "The news that came out of the meeting today ought to be good news for the [energy] markets," he declared on April 25 -- not good news in the war against terror or in the drive to promote peace between Israel and the Palestinians.

Secretary of State Rice, however, offered the most telling observations after the April 25 meeting. The problems arising from insufficient supply to meet rising world oil demand, she said, "have to be addressed, not by jawboning, but by having a strategic plan for dealing with the problem." Anyone familiar with the Bush administration lexicon cannot help but be troubled by this call for a "strategic plan" to obtain additional energy, redolent as it is of the administration's bellicose, pre-emptive strategy for dealing with terrorism, "rogue states," and weapons of mass destruction. Just exactly what Rice means is not yet entirely clear, but it certainly suggests that energy issues will be paramount in U.S. foreign and military policy in a Bush second term.

And what is true for the United States is also likely to prove the case for other major oil-importing countries. Warning that China has outperformed India in the pursuit of new oil and gas reserves, Indian Prime Minister Manmohan Singh declared in January that New Delhi would have to accelerate its efforts in this area. "I find China ahead of us in planning for the future in the field of energy security," he told a convention of Indian oil and gas executives. "We can no longer be complacent and must learn to think strategically, to think ahead, and to act swiftly and decisively."

Japanese leaders, too, have stressed the need for decisive action. Energy-poor Tokyo's decision to proceed with drilling in contested areas of the East China Sea is just one indication of this outlook. Equally striking is Japan's effort to convince the Russians to extend a new Siberian oil pipeline to Nakhodka on the Sea of Japan. Originally, Moscow had expected to terminate the pipeline at Daquing in China as part of a plan to strengthen Sino-Russian energy cooperation. But after Prime Minister Koizumi flew to Moscow and offered billions of dollars in additional aid and technology to Russia, President Putin indicated a preference for the Nakhodka route, which will, of course, facilitate oil deliveries to Japan. This has not deterred Chinese leaders from seeking a reversal of this decision, claiming that the "strategic partnership" between Moscow and Beijing outweighs the purely mercantile interests of Japan.

So far, none of these efforts has led to more than verbal sparring -- "jawboning," to use Rice's term -- along with high-stakes bidding wars and the occasional outbreak of street protests, as in Shanghai and Beijing. But if history is any guide, such friction -- when combined with other sources of animosity like China's smoldering resentments over Japanese atrocities during World War II -- can lead to more violent forms of competition. This is certainly the case in the East China Sea, where Chinese and Japanese planes and gunboats have already made threatening passes at one another.

Tensions are sure to rise, moreover, if Japan actually commences drilling in waters claimed by China. "If real exploration starts, we cannot totally exclude the possibility of Japanese private company ships having to face Chinese military ships," Junichi Abe, an analyst at the Kazankai Foundation in Tokyo, told a reporter for the New York Times. And if this were to occur, the Japanese government would come under enormous political pressure to protect those private vessels with planes and warships of its own, thereby setting the stage for an armed confrontation with China, whether intended or not.

Similar escalation could occur in other cases of disputed energy claims. In the Caspian Sea, for example, Iran seeks control over offshore oil and gas fields also claimed by Azerbaijan, an ally of the United States. In July 2001, an Iranian gunboat steamed into the contested area and chased off an oil-company exploration vessel operating there under Azerbaijani auspices. In response, the United States has pledged to help Azerbaijan build a small Caspian navy, to better protect its offshore energy claims. On April 11, John J. Fialka of the Wall Street Journal revealed that the U.S. Department of Defense will spend $100 million over the next few years to establish the "Caspian Guard," a network of police forces and special-operations units "that can respond to various emergencies, including attacks on oil facilities." Russia is also expanding its Caspian Fleet, as it too presses its claims to offshore fields in the region. Under such circumstances, it is all too easy to imagine how a minor confrontation could erupt into something much more serious, involving the U.S., Russia, Iran, and other countries.

Territorial disputes of this sort with significant energy dimensions can be found in the Red Sea, the South China Sea, the Persian Gulf, the Gulf of Guinea, and the Bakassi Peninsula (a narrow stretch of land claimed by both Nigeria and Cameroon) among other regions. In each of these areas, opposing claimants have employed military force on occasion to assert their control or to drive off the forces of a challenger. None of these incidents has led to a full-scale conflict, but lives have been lost and the risk of renewed fighting persists. As the global struggle for energy intensifies, therefore, the danger of escalation will grow.

It is important to recognize that energy-related pressures are bound to increase as global demand continues its upward course and the supply of oil and natural gas fails to keep pace. The Bush administration, in particular, is aware of these pressures, having analyzed the global energy equation in its May 2001 report on U.S. energy requirements. While administration officials have repeatedly denied that oil played any role in the 2003 decision to invade Iraq, they clearly believed that control of the country would provide the United States with enormous advantages in any coming struggle with competitors like China over Persian Gulf energy.

Indeed, once a problem like energy security has been tagged as a matter of national security, it passes from the realm of economics and statecraft into that of military policy. Then, the generals and strategists get into the act and begin their ceaseless planning for endless "contingencies" and "emergencies." In such an environment, small incidents evolve into crises, and crises into wars. Expect a hot couple of decades ahead.

Michael T. Klare is a professor of peace and world security studies at Hampshire College and the author of Blood and Oil: The Dangers and Consequences of America's Growing Dependency on Imported Oil (Metropolitan Books) among other works.

Oil, Geopolitics, and the Coming War with Iran. By Michael T. Klare. TomDispatch.com, April 11, 2005.

As the United States gears up for an attack on Iran, one thing is certain: the Bush administration will never mention oil as a reason for going to war. As in the case of Iraq, weapons of mass destruction (WMD) will be cited as the principal justification for an American assault. "We will not tolerate the construction of a nuclear weapon [by Iran]," is the way President Bush put it in a much-quoted 2003 statement. But just as the failure to discover illicit weapons in Iraq undermined the administration's use of WMD as the paramount reason for its invasion, so its claim that an attack on Iran would be justified because of its alleged nuclear potential should invite widespread skepticism. More important, any serious assessment of Iran's strategic importance to the United States should focus on its role in the global energy equation.

Before proceeding further, let me state for the record that I do not claim oil is the sole driving force behind the Bush administration's apparent determination to destroy Iranian military capabilities. No doubt there are many national security professionals in Washington who are truly worried about Iran's nuclear program, just as there were many professionals who were genuinely worried about Iraqi weapons capabilities. I respect this. But no war is ever prompted by one factor alone, and it is evident from the public record that many considerations, including oil, played a role in the administration's decision to invade Iraq. Likewise, it is reasonable to assume that many factors -- again including oil -- are playing a role in the decision-making now underway over a possible assault on Iran.

Just exactly how much weight the oil factor carries in the administration's decision-making is not something that we can determine with absolute assurance at this time, but given the importance energy has played in the careers and thinking of various high officials of this administration, and given Iran's immense resources, it would be ludicrous not to take the oil factor into account -- and yet you can rest assured that, as relations with Iran worsen, American media reports and analysis of the situation will generally steer a course well clear of the subject (as they did in the lead-up to the invasion of Iraq).

One further caveat: When talking about oil's importance in American strategic thinking about Iran, it is important to go beyond the obvious question of Iran's potential role in satisfying our country's future energy requirements. Because Iran occupies a strategic location on the north side of the Persian Gulf, it is in a position to threaten oil fields in Saudi Arabia, Kuwait, Iraq, and the United Arab Emirates, which together possess more than half of the world's known oil reserves. Iran also sits athwart the Strait of Hormuz, the narrow waterway through which, daily, 40% of the world's oil exports pass. In addition, Iran is becoming a major supplier of oil and natural gas to China, India, and Japan, thereby giving Tehran additional clout in world affairs. It is these geopolitical dimensions of energy, as much as Iran's potential to export significant quantities of oil to the United States, that undoubtedly govern the administration's strategic calculations.

Having said this, let me proceed to an assessment of Iran's future energy potential. According to the most recent tally by Oil and Gas Journal, Iran houses the second-largest pool of untapped petroleum in the world, an estimated 125.8 billion barrels. Only Saudi Arabia, with an estimated 260 billion barrels, possesses more; Iraq, the third in line, has an estimated 115 billion barrels. With this much oil -- about one-tenth of the world's estimated total supply -- Iran is certain to play a key role in the global energy equation, no matter what else occurs.

It is not, however, just sheer quantity that matters in Iran's case; no less important is its future productive capacity. Although Saudi Arabia possesses larger reserves, it is now producing oil at close to its maximum sustainable rate (about 10 million barrels per day). It will probably be unable to raise its output significantly over the next 20 years while global demand, pushed by significantly higher consumption in the United States, China, and India, is expected to rise by 50%. Iran, on the other hand, has considerable growth potential: it is now producing about 4 million barrels per day, but is thought to be capable of boosting its output by another 3 million barrels or so. Few, if any, other countries possess this potential, so Iran's importance as a producer, already significant, is bound to grow in the years ahead.

And it is not just oil that Iran possesses in great abundance, but also natural gas. According to Oil and Gas Journal, Iran has an estimated 940 trillion cubic feet of gas, or approximately 16% of total world reserves. (Only Russia, with 1,680 trillion cubic feet, has a larger supply.) As it takes approximately 6,000 cubic feet of gas to equal the energy content of 1 barrel of oil, Iran's gas reserves represent the equivalent of about 155 billion barrels of oil. This, in turn, means that its combined hydrocarbon reserves are the equivalent of some 280 billion barrels of oil, just slightly behind Saudi Arabia's combined supply. At present, Iran is producing only a small share of its gas reserves, about 2.7 trillion cubic feet per year. This means that Iran is one of the few countries capable of supplying much larger amounts of natural gas in the future.

What all this means is that Iran will play a critical role in the world's future energy equation. This is especially true because the global demand for natural gas is growing faster than that for any other source of energy, including oil. While the world currently consumes more oil than gas, the supply of petroleum is expected to contract in the not-too-distant future as global production approaches its peak sustainable level -- perhaps as soon as 2010 -- and then begins a gradual but irreversible decline. The production of natural gas, on the other hand, is not likely to peak until several decades from now, and so is expected to take up much of the slack when oil supplies become less abundant. Natural gas is also considered a more attractive fuel than oil in many applications, especially because when consumed it releases less carbon dioxide (a major contributor to the greenhouse effect).

No doubt the major U.S. energy companies would love to be working with Iran today in developing these vast oil and gas supplies. At present, however, they are prohibited from doing so by Executive Order (EO) 12959, signed by President Clinton in 1995 and renewed by President Bush in March 2004. The United States has also threatened to punish foreign firms that do business in Iran (under the Iran-Libya Sanctions Act of 1996), but this has not deterred many large companies from seeking access to Iran's reserves. China, which will need vast amounts of additional oil and gas to fuel its red-hot economy, is paying particular attention to Iran. According to the Department of Energy (DoE), Iran supplied 14% of China's oil imports in 2003, and is expected to provide an even larger share in the future. China is also expected to rely on Iran for a large share of its liquid natural gas (LNG) imports. In October 2004, Iran signed a $100 billion, 25-year contract with Sinopec, a major Chinese energy firm, for joint development of one of its major gas fields and the subsequent delivery of LNG to China. If this deal is fully consummated, it will constitute one of China's biggest overseas investments and represent a major strategic linkage between the two countries.

India is also keen to obtain oil and gas from Iran. In January, the Gas Authority of India Ltd. (GAIL) signed a 30-year deal with the National Iranian Gas Export Corp. for the transfer of as much as 7.5 million tons of LNG to India per year. The deal, worth an estimated $50 billion, will also entail Indian involvement in the development of Iranian gas fields. Even more noteworthy, Indian and Pakistani officials are discussing the construction of a $3 billion natural gas pipeline from Iran to India via Pakistan an extraordinary step for two long-term adversaries. If completed, the pipeline would provide both countries with a substantial supply of gas and allow Pakistan to reap $200-$500 million per year in transit fees. "The gas pipeline is a win-win proposition for Iran, India, and Pakistan," Pakistani Prime Minister Shaukat Aziz declared in January.

Despite the pipeline's obvious attractiveness as an incentive for reconciliation between India and Pakistan -- nuclear powers that have fought three wars over Kashmir since 1947 and remain deadlocked over the future status of that troubled territory -- the project was condemned by Secretary of State Condoleezza Rice during a recent trip to India. "We have communicated to the Indian government our concerns about the gas pipeline cooperation between Iran and India," she said on March 16 after meeting with Indian Foreign Minister Natwar Singh in New Delhi. The administration has, in fact, proved unwilling to back any project that offers an economic benefit to Iran. This has not, however, deterred India from proceeding with the pipeline.

Japan has also broken ranks with Washington on the issue of energy ties with Iran. In early 2003, a consortium of three Japanese companies acquired a 20% stake in the development of the Soroush-Nowruz offshore field in the Persian Gulf, a reservoir thought to hold 1 billion barrels of oil. One year later, the Iranian Offshore Oil Company awarded a $1.26 billion contract to Japan's JGC Corporation for the recovery of natural gas and natural gas liquids from Soroush-Nowruz and other offshore fields.

When considering Iran's role in the global energy equation, therefore, Bush administration officials have two key strategic aims: a desire to open up Iranian oil and gas fields to exploitation by American firms, and concern over Iran's growing ties to America's competitors in the global energy market. Under U.S. law, the first of these aims can only be achieved after the President lifts EO 12959, and this is not likely to occur as long as Iran is controlled by anti-American mullahs and refuses to abandon its uranium enrichment activities with potential bomb-making applications. Likewise, the ban on U.S. involvement in Iranian energy production and export gives Tehran no choice but to pursue ties with other consuming nations. From the Bush administration's point of view, there is only one obvious and immediate way to alter this unappetizing landscape -- by inducing "regime change" in Iran and replacing the existing leadership with one far friendlier to U.S. strategic interests.

That the Bush administration seeks to foster regime change in Iran is not in any doubt. The very fact that Iran was included with Saddam's Iraq and Kim Jong Il's North Korea in the "Axis of Evil" in the President's 2002 State of the Union Address was an unmistakable indicator of this. Bush let his feelings be known again in June 2003, at a time when there were anti-government protests by students in Tehran. "This is the beginning of people expressing themselves toward a free Iran, which I think is positive," he declared. In a more significant indication of White House attitudes on the subject, the Department of Defense has failed to fully disarm the People's Mujaheddin of Iran (or Mujaheddin-e Khalq, MEK), an anti-government militia now based in Iraq that has conducted terrorist actions in Iran and is listed on the State Department's roster of terrorist organizations. In 2003, the Washington Post reported that some senior administration figures would like to use the MEK as a proxy force in Iran, in the same manner that the Northern Alliance was employed against the Taliban in Afghanistan.

The Iranian leadership is well aware that it faces a serious threat from the Bush administration and is no doubt taking whatever steps it can to prevent such an attack. Here, too, oil is a major factor in both Tehran's and Washington's calculations. To deter a possible American assault, Iran has threatened to close the Strait of Hormuz and otherwise obstruct oil shipping in the Persian Gulf area. "An attack on Iran will be tantamount to endangering Saudi Arabia, Kuwait, and, in a word, the entire Middle East oil," Iranian Expediency Council secretary Mohsen Rezai said on March 1st.

Such threats are taken very seriously by the U.S. Department of Defense. "We judge Iran can briefly close the Strait of Hormuz, relying on a layered strategy using predominantly naval, air, and some ground forces," Vice Admiral Lowell E. Jacoby, the director of the Defense Intelligence Agency, testified before the Senate Intelligence Committee on February 16th.

Planning for such attacks is, beyond doubt, a major priority for top Pentagon officials. In January, veteran investigative reporter Seymour Hersh reported in the New Yorker magazine that the Department of Defense was conducting covert reconnaissance raids into Iran, supposedly to identify hidden Iranian nuclear and missile facilities that could be struck in future air and missile attacks. "I was repeatedly told that the next strategic target was Iran," Hersh said of his interviews with senior military personnel. Shortly thereafter, the Washington Post revealed that the Pentagon was flying surveillance drones over Iran to verify the location of weapons sites and to test Iranian air defenses. As noted by the Post, "Aerial espionage [of this sort] is standard in military preparations for an eventual air attack." There have also been reports of talks between U.S. and Israeli officials about a possible Israeli strike on Iranian weapons facilities, presumably with behind-the-scenes assistance from the United States.

In reality, much of Washington's concern about Iran's pursuit of WMD and ballistic missiles is sparked by fears for the safety of Saudi Arabia, Kuwait, Iraq, other Persian Gulf oil producers, and Israel rather than by fears of a direct Iranian assault on the United States. "Tehran has the only military in the region that can threaten its neighbors and Gulf security," Jacoby declared in his February testimony. "Its expanding ballistic missile inventory presents a potential threat to states in the region." It is this regional threat that American leaders are most determined to eliminate.

In this sense, more than any other, the current planning for an attack on Iran is fundamentally driven by concern over the safety of U.S. energy supplies, as was the 2003 U.S. invasion of Iraq. In the most telling expression of White House motives for going to war against Iraq, Vice President Dick Cheney (in an August 2002 address to the Veterans of Foreign Wars) described the threat from Iraq as follows: "Should all [of Hussein's WMD] ambitions be realized, the implications would be enormous for the Middle East and the United States.... Armed with an arsenal of these weapons of terror and a seat atop 10 percent of the world's oil reserves, Saddam Hussein could then be expected to seek domination of the entire Middle East, take control of a great portion of the world's energy supplies, [and] directly threaten America's friends throughout the region." This was, of course, unthinkable to Bush's inner circle. And all one need do is substitute the words "Iranian mullahs" for Saddam Hussein, and you have a perfect expression of the Bush administration case for making war on Iran.

So, even while publicly focusing on Iran's weapons of mass destruction, key administration figures are certainly thinking in geopolitical terms about Iran's role in the global energy equation and its capacity to obstruct the global flow of petroleum. As was the case with Iraq, the White House is determined to eliminate this threat once and for all. And so, while oil may not be the administration's sole reason for going to war with Iran, it is an essential factor in the overall strategic calculation that makes war likely.

Michael T. Klare is a professor of peace and world security studies at Hampshire College and the author of Blood and Oil: The Dangers and Consequences of America's Growing Dependency on Imported Oil (Metropolitan Books).

Documents: U.S. condoned Iraq oil smuggling, by Elise Labott and Phil Hirschkorn, CNN.com, February 2, 2005.
Documents obtained by CNN reveal the United States knew about, and even condoned, embargo-breaking oil sales by Saddam Hussein's regime, and did so to shore up alliances with Iraq's neighbors.
The oil trade with countries such as Turkey and Jordan appears to have been an open secret inside the U.S. government and the United Nations for years.
The unclassified State Department documents sent to congressional committees with oversight of U.S. foreign policy divulge that the United States deemed such sales to be in the "national interest," even though they generated billions of dollars in unmonitored revenue for Saddam's regime.
The trade also generated a needed source of oil and commerce for Iraq's major trading partners, Turkey and Jordan.
"It was in the national security interest, because we depended on the stability in Turkey and the stability in Jordan in order to encircle Saddam Hussein," Edward Walker, a former assistant secretary of state for Near East affairs, told CNN when asked about the memo documents.
"We had a great amount of cooperation with the Jordanians on the intelligence side, and with the Turks as well, so we were getting value out of the relationship," said Walker, who served in both the Clinton and Bush administrations.
The memos obtained by CNN explain why both administrations waived restrictions on U.S. economic aid to those countries for engaging in otherwise prohibited trade with Iraq.
The justifications came at a time when the United States was a staunch backer of U.N. sanctions on Iraq imposed after it invaded Kuwait in 1990.
"Despite United Nations Security Council Resolutions," a 1998 memo signed by President Clinton's deputy secretary of state, Strobe Talbott, said, "Jordan continues to import oil from Iraq."
But Jordan had a "lack of economically viable alternatives" to Iraqi oil, Talbott's memo said.
Talbott's memo lauded Jordan's commitment to the Middle East peace process, citing the late King Hussein's personal efforts to broker a resolution to the Palestinian-Israeli conflict.
"Timely, reliable assistance from the United States fosters the political stability and economic well-being critical to Jordan's continuing role as a regional leader for peace," Talbott said.
Identical language was used four years later in a 2002 memo by Richard Armitage, undersecretary of state under President George W. Bush.
"Jordan has made clear its choice for peace and normalization with Israel," Armitage said, calling Jordan "an important U.S. friend" and citing its 2001 free trade treaty with the United States.
"U.S. assistance provides the Jordanian government needed flexibility to pursue policies that are of critical importance to U.S. national security and to foreign policy objectives in the Middle East," Armitage said.
Economic and military ties to Turkey were cited by Talbott and Armitage in justifying waivers of U.S. penalties to Iraq's northern neighbor. Indeed, their memos advocated hundreds of millions of dollars in aid to the U.S. allies.
Talbott's memo praised Turkey for deploying troops to the peacekeeping mission in the former Yugoslavia, policing heroin trafficking through Turkey, and cooperating with enforcement of the "no-fly" zone in northern Iraq by allowing U.S. and British jets to use Incirlik, Turkey, as a base.
Armitage's memo said Turkey "provides irreplaceable assistance in countering the threat the Baghdad regime poses" and lauded the U.S. ally for sending troops to Afghanistan after the September 11, 2001, attacks.
"The primacy of Turkey's role as a front-line ally in the war on terrorism is expected to assume even greater prominence and urgency as the global war on terrorism continues," Armitage said.
Deputy State Department spokesman Adam Ereli told CNN Tuesday the waivers were given to Jordan and Turkey every year since 1998.
He called both countries "special cases" in which the money Saddam made through the smuggling did not allow him weapons.
"With Jordan and Turkey the circumstances were unique," Ereli said. "We approached them in a way that preserved key alliances and didn't help the regime of Saddam Hussein."
He added that Saddam's smuggling to Syria, which the United States tried to curtail, raised far more concerns because of the possibility of "dual use" goods reaching Iraq.
Illicit revenue
Estimates of how much revenue Iraq earned from these tolerated side sales of its oil to Jordan and Turkey, as well as to Syria and Egypt, range from $5.7 billion to $13.6 billion.
This illicit revenue far exceeds the estimates of what Saddam pocketed through illegal surcharges on his U.N.-approved oil exports and illegal kickbacks on subsequent Iraqi purchases of food, medicine, and supplies -- $1.7 billion to $4.4 billion -- during the maligned seven-year U.N. oil-for-food program in Iraq.
The Government Accountability Office estimated last July that Iraq earned $5.7 billion from smuggling oil out of the country, especially to Jordan, Turkey, and Syria between 1996 and 2002.
A CIA-backed Iraq Survey Group report by former Iraq weapons inspector Charles Duelfer estimated last October that Saddam acquired $8 billion by smuggling oil to Jordan, Turkey, Syria, and Egypt through 2003, when oil for food ended with the toppling of Saddam.
The Senate Governmental Affairs Permanent Subcommittee on Investigations estimated last November that the Iraqi regime earned $13.6 billion by smuggling oil during the sanctions period it defined as 1991-2003, or five years before oil-for-food started.
The oil-for-food program is being investigated by U.S. congressional committees, the Justice Department, the Securities and Exchange Commission, and a special committee appointed by the United Nations and led by former Federal Reserve Bank Chairman Paul Volcker.
Volcker's committee is to issue an interim report on Thursday.
In an interview last month with the U.S.-based Arabic-language TV station Al Hurrah, Volcker said, "The big figures are smuggling, which took place before the oil-for-food program started, and it continued while the oil-for-food program was in place."
'Either silent or complicit'
Rep. Robert Menendez, a New Jersey Democrat on the House International Relations Committee, one of five panels probing the oil-for-food program, told CNN the United States was "complicit in undermining" the U.N. sanctions on Iraq.
"How is it that you stand on a moral footing to go after the U.N. when they're responsible for 15 percent maybe of the ill-gotten gains, and we were part and complicit of him getting 85 percent of the money?" Menendez asked.
"Where was our voice on the committee that was overseeing this on the Security Council?
"The reality is that we were either silent or complicit, and that is fundamentally wrong."
Former State Department diplomat Walker said, "It was almost a 'don't ask, don't tell' kind of policy. It was accepted in the Security Council. No one challenged it."
John Ruggie, a former senior adviser to U.N. Secretary-General Kofi Annan, said U.S. diplomats focused on assuring U.N.-approved shipments to Iraq were free of military components, and the United States felt Jordan and Turkey needed to be compensated for the adverse impact of the sanctions.
Ruggie said, "The secretary of state of the United States said each and every year that those illegal sales were in the national security interest of the United States. So it wasn't just that the U.S. was looking the other way."


Crisis Towers Over the Dollar, by By W Joseph Stroupe, Asia Times Online, Nov 25, 2004.
"... President Vladimir Putin has stated both publicly and privately that invoicing Russia's crude-oil and gas exports to the European Union in euros instead of in dollars makes very good sense for both Russia and the EU. Putin is known to have very close relations with "old Europe", primarily Germany and France. His statements and those of German and French leaders have even on occasion drawn attention to the fact that US global dominance fundamentally rests on the fact that the dollar is the international currency, and that if an exit from the dollar were to occur in the sphere of global petro-transactions, the effect would be seriously to undermine that global dominance. Furthermore, a number of oil-exporting countries have already gone on public record as to their preference to make an exit from petro-dollars in favor of petro-euros. They have indicated that if Russia begins such a move to petro-euros, they will rapidly follow Russia's lead. The net effect would be a rapid international abandonment of the dollar as the international currency, which would in turn "bring down the towers" of the heavily debt-ridden US economy.
Al-Qaeda has recently mounted a second attack on the fundamental framework of the US economy. Its clear strategy of attacking oil-exporting infrastructure around the globe to tighten global supply and drive up crude-oil prices is a further act of instigating a raging fire in the immediate vicinity of the US economic girders. Al-Qaeda knows crude oil is the economic lifeblood of industrialized economies. And it also knows the fundamental fragility and deep imbalances that exist in the US economy in particular. It fully understands that international support for the dollar is weakening and that a sustained elevated crude-oil price is the key to producing a set of circumstances in which persistent inflation returns, requiring a set of interest-rate hikes, which in turn will act like a needle to burst the credit, real-estate and stock-market bubbles. The resulting decline of the dollar will be steep and persistent, undermining what is left of international support for dollar..."

Being "Over There:" Location, Location, Location, By Colonel Daniel Smith, Foreign Policy in Focus report, Nov 11, 2004.
Essay on energy security and U.S. military presence.

Bank lapses cited in Iraq oil program, By Bill Gertz, Washington Times, Nov 17, 2004.
The French bank that handled funds for the U.N. oil-for-food program in Iraq made tens of millions of dollars in fees and did not properly monitor transactions involving Saddam Hussein's oil sales, congressional investigators said yesterday.
The New York branch of the Banque Nationale de Paris-Paribas, or BNP Paribas, was the sole bank for administering the $64 billion U.N. program and did not have adequate checks on whether money was being funneled to terrorists, a House International Relations Committee probe found.
"We have uncovered what appears to be serious malfeasance on an international scale," said Rep. Henry J. Hyde, Illinois Republican and chairman of the committee. "There are indications that the bank may have been noncompliant in administering the oil-for-food program. If true, these possible banking lapses may have facilitated Saddam Hussein's manipulation and corruption of the program."
Committee investigators uncovered evidence that BNP Paribas made payments without proof that goods were delivered and sanctioned payments to third parties not identified as authorized recipients, Mr. Hyde said at a hearing yesterday.
Mr. Hyde said investigators think the bank "facilitated improper payments to companies that were shipping illegal goods to Iraq."
Investigators estimate that the bank received more than $700 million in fees under the U.N. program that began in 1996 and ended after the ouster of Saddam in March 2003, Mr. Hyde said.
"This is a lot of money, and it is reasonable to ask if BNP Paribas adequately supervised its compliance programs overseeing the administration of the oil-for-food program," he said.
Mr. Hyde said problems with the oil-for-food program prompted him to introduce legislation yesterday to require greater accountability at the United Nations. "We need international institutions that are transparent, answerable to outside scrutiny and beyond reproach," he said. The bill was co-sponsored by Rep. Tom Lantos, California Democrat.
The House inquiry is one of at least three congressional investigations into the oil-for-food program. In addition, the Bush administration is investigating the program, and the United Nations has started its own probe, led by former Federal Reserve Chairman Paul Volcker.
Everett Schenk, the chief executive officer of BNP Paribas in North America, told the committee that the bank followed the direction of the United Nations in issuing letters of credit under the oil-for-food program.
He denied that the bank improperly made payments under the program. Apart from "temporary backlogs" in administering letters of credit, the bank acted within U.S. laws and regulations, he said.
However, committee investigators said that in at least one case, the bank issued three U.N.-approved payments for Al Riyahd International Flowers that instead were paid to a company known as East Star Trading Co. Ltd.
"These third-party payments were an exception to BNP's procedures relating to the assignment of letter of credit proceeds," one investigator said. "BNP explained that a senior manager at BNP authorized this exception based on the request of Al Riyahd International Flowers and did so in accordance with BNP's procedures for the escrow account."
Committee investigators said eight government agencies notified the French bank about "deficiencies" in handling money in the U.N. program. Four internal audits and memoranda also found problems with the bank's procedures.
Mr. Hyde said some U.S. allies "did all they could to facilitate business" with Saddam's regime, and that committee investigators think Saddam used money obtained through oil sales to fund terrorists.
"According to the information provided to this committee, Saddam paid $25,000 rewards to the families of Palestinian suicide bombers through the Iraqi ambassador to Jordan out of accounts in the Rafidain bank in Amman, which held kickback money Saddam demanded from suppliers to his regime," Mr. Hyde said.
Mr. Lantos, the committee's ranking Democrat, said Russia and France were involved in helping the regime through commercial transactions and political support within the United Nations. He also said the State Department failed to act against illegal activities in the U.N. program.
"I'm stunned at the failure of our own State Department to put a halt to Saddam's larceny," Mr. Lantos said, adding that the committee should "turn our attention as far as Moscow and Paris, and as near as Foggy Bottom."
The panel investigators say Saddam was allowed to set the sale price of Iraqi oil 50 cents per barrel above market prices. That added amount was then paid back to his aides by oil purchasers and placed in banks in Jordan, Lebanon and Syria.
The U.S. and British governments first uncovered the kickback scam in 2001 and, through a diplomatic battle at the United Nations, ended the "spot-pricing" of oil.
Russia and France opposed the U.S. and British effort because both countries were making money from the illicit oil sales, the investigators said.

Chevron profit soars, David R. Baker, San Francisco Chronicle, October 30, 2004.
The same high oil prices that have rattled economists and horrified commuters gave ChevronTexaco Corp. a huge boost last quarter, driving up profit 62 percent from the same period last year to hit $3.2 billion.
That's not as much money as the San Ramon company made this summer, when quarterly profit reached a record $4.13 billion. Tighter profit margins and a devastating hurricane season in the Gulf of Mexico's oil producing region saw to that.
But with crude oil prices parked above $50 per barrel, ChevronTexaco and the world's other oil giants are reaping substantial profits.
Earlier this week, Royal Dutch/Shell Group reported profit of $5.4 billion, compared with $2.45 billion in the same quarter last year. ExxonMobil made $5.68 billion, up from $3.65 billion last year.
Those high profits may last well into next year...

In oil's wake... recession? History of price spikes points to an economic downturn for the world's economies. Reuters/CNNMoney.com, Oct 26, 2004.
A recession could be staring the world's major economies in the face by next summer if history repeats itself and a 30-year rule holds true that output slumps after oil prices spike.
Optimists say that the old relationship is dead, that companies are more competitive, energy efficiency is ingrained into corporate culture and today's high oil prices are driven by huge demand.
But others say the link between the four big oil price spikes of the past three decades and industrial production in the world's biggest economies means recession is inevitable after a year-to-date 70 percent surge in oil prices.
"The percentage increase from previous levels show the same pattern as the present one," Dieter Wermuth, consultant to UFJ Bank Ltd and partner of Wermuth Asset Management told Reuters.
"In the previous cases, such oil price increases were followed by a recession and one could come, even though the oil price increase is the result of a booming economy," he said.
U.S. light crude oil prices hit a record of $55.67 a barrel on Monday.
The strong inverse relationship between oil and U.S. and German industrial production has been observed since 1973, and confirmed in 1981, 1991 and most recently post 9/11 2001.
Recent moves in industrial metals prices also appear to support the view that the global economy is slowing more quickly than expected, especially after a sharp sell-off last week.
"If this sell-off were to gather momentum, it would provide one of the clearest signs yet that global growth might be about to enter a slower pace," said Merrill Lynch chief global investment strategist David Bowers.
Investors have cut speculative positions on the London Metal Exchange, with total open interest for LME metal and product contracts sinking by about 10 percent to around 800,000 lots in the week ending October 22.
But others play down the risks.
Slowing at the margin
"Higher oil prices have less effect on the industrialized economies than they had some decades ago, and the recent hikes have only marginally slowed growth in the major OECD economies," the OECD said in a report entitled Financial Market Trends. Like the OECD, many private sector economists expect red-hot oil prices to shave robust global growth by only about 50 basis points next year.
They say the industrialized world's substantial services sector is another factor balancing out the impact of higher oil costs on the comparatively small, albeit energy-intensive, manufacturing industry.
They also say the absence of inflation and low wage growth show that the risks to economic expansion remain muted.
Wermuth disagrees and says if policy makers fail to trigger counter-cyclical rate moves when the need arises, a recession cannot be ruled out.
He expects the U.S. Federal Reserve to pause in its rate tightening cycle after an increase at its November meeting and sees no hikes from the European Central Bank anytime soon.
"When you have such high oil prices it's not just investment but consumption that will be affected," Wermuth said.
More analysts are coming to this view on the back of slowing consumer spending.
"We see (U.S.) consumer spending growth slowing to 2.7 percent in 2005 from what looks to be a 3.5 percent advance this year. This would represent the softest pace since 2001 and second weakest since 1995," said Merrill Lynch economist David Rosenberg. Retail sales in the euro zone and the UK are starting to show signs of fatigue with rising utility and heating oil bills set to crimp consumer spending further going into the winter.
Industrial production is still inching up in the United States, but is becoming patchy in the euro zone, falling 0.6 percent in August after rising 0.2 percent in July.
In the UK -- which has been hiking rates since November 2003 to curb inflation risks that have worsened as oil has soared -- manufacturing output fell for the third month running in August and at the sharpest pace in nearly two years.
Oil prices are unlikely to shed the bulk of their recent big gains due to several factors including the demand/supply imbalance, lack of spare production capacity and security woes in Iraq and the Middle East, experts say.
Demand for oil in fast-growing China and India shows no sign of slowing either and that means prices are set to stay high -- further exacerbating the problems of industrialized economies.
"They will keep oil prices high even if we get a slowdown in the U.S.," Wermuth said.

The Independent Inquiry Committee into the United Nations Oil-for-Food Programme, which was created by Secretary-General Kofi Annan, [on October 21, 2004] released a list of more than 3,000 companies that had dealings with the Iraqi government of Saddam Hussein during the life of the program, which was allegedly rife with corruption. The Committee found that 248 companies received and paid for Iraqi oil under contracts totaling $64 billion, while another 3,545 firms exported goods to south and central Iraq while the program was in effect as part of the sanctions imposed on the Hussein regime. Among the oil companies involved were units of ExxonMobil and ChevronTexaco. (from the Dirt Diggers Digest No. 56, Oct 25, 2004).

Oil Spending Balloons Nearly $300 Billion, Creating Historic Transfer of Wealth. AP/ABCNews.com, Oct 25, 2004.
While Americans wince as they fill up their SUVs with $2-a-gallon gasoline, market forces are smiling on the Saudi Arabias and Exxon Mobils of the world.
A transfer of wealth of historic proportions is taking place as worldwide spending on oil is expected to grow this year by about $295 billion, or 27 percent, compared with 2003, according to government data. Consumers and businesses are paying substantially more for gasoline, heating oil, diesel and other products derived from crude as demand and prices surge.
While the corresponding windfall of profits for oil exporting nations and petroleum companies is sapping strength from the international economic recovery, it's not causing the kind of financial shock that followed the oil crises of the 1970s.
Still, experts warn that the market constraints underlying high and volatile energy prices suggest that higher oil price could be here to stay. "There's not a consensus out there, but the question is being asked more now than it has been at any time in the last 20 years," said Jim Rising oil costs are linked as much to America's apparent drive-at-any-price car culture and China's raging industrial expansion, as they are to the world's unusually thin supply cushion, a condition that has magnified anxieties about potential supply disruptions in Venezuela, Russia and Nigeria.
Consumption continues to rise in spite of higher prices that are expected to slow global economic growth by about 0.5 percent in 2005. Much sharper financial pain will be felt in poor, developing countries that are net oil importers.
"As with most things, the global impact is not spread evenly around the world," said Jeffrey D. Lewis, manager of international finance research at The World Bank. Lewis predicted that, without emergency funding, much of the organization's $2.5 billion aid to struggling nations this year will have to be reallocated to fuel purchases by local governments, leaving health and education programs grossly underfunded or scrapped altogether.
With oil futures marching to the $55 a barrel level this month up from about $30 a year ago the list of winners is topped by Saudi Arabia, Russia, Norway, Iran, Venezuela and other leading exporting nations. Saudi Arabia alone supplies about 12 percent of the world's daily oil fix.
Exxon Mobil Corp., Royal Dutch/Shell Group and the rest of the private petroleum giants are also flush with cash as profits and stock prices soar. The same goes for oilfield services firms such as Schlumberger Ltd. and Baker Hughes Inc., as well as the countless smaller providers of the equipment, ships and workers needed to produce and transport some 82 million barrels a day.
The extra $295 billion spent on oil this year comes courtesy of, but not without complaint from, motorists, homeowners, manufacturers, airlines and truckers. The biggest share would come from (no shocker here) Americans, who account for nearly one quarter of global daily oil demand.
United States consumers are expected to shell out an additional $40 billion this year just to heat their homes and fuel their cars and trucks. The greatest financial squeeze is felt by low- and fixed-income families, who spend about three times as much of their wealth on energy as do middle-income families.
European economies are generally worse off, with the prospects for rising inflation and unemployment in the region somewhat higher, according to a report by the International Energy Agency and the International Monetary Fund.
European countries do not have as much of their own oil production as the United States, where roughly 2 out of every 5 barrels consumed is pumped domestically.
To keep consumption in check, European nations levy significantly higher fuel taxes than the United States, which helps to explain why the total imports of Germany, France, Italy and Spain are about a third smaller than America's. Even so, the four countries combined will spend about $25 billion more for oil in 2004 than they did in 2003.
In Germany, Europe's largest economy, experts are worried that the country's nascent financial turnaround could falter next year, in part because of higher energy prices, but also because of an indirect oil-price pinch as exports to China and the United States taper off. This comes at a time when Germany's unemployment rate is around 10 percent and consumer demand has barely risen in three years.
In Asia, the picture is somewhat mixed.
In China, where daily oil imports have risen an estimated 35 percent, or roughly 700,000 barrels a day, and have helped propel global demand and prices to unexpectedly high levels, the rising cost of fuel is merely contributing to a minor slowdown of the country's economic boom. Put another way, mammoth industrial growth is dwarfing any negative impact caused by higher energy prices.
In Japan, the country's near-total dependence on imports is offset significantly by the economy's relatively high fuel efficiency. But like Germany, it is very concerned about the weakening financial power of its trading partners due to soaring oil prices.
East Asian countries are likely to be hit harder, according to the Asian Development Bank, which recently predicted the region's growth would decline by 0.8 percent in 2005.
To limit fuel consumption the Phillippines has banned unofficial use of government vehicles, Thailand has ordered gas stations to close early and South Korea has cut back field maneuvers for its 650,000 troops.
With some exceptions, the world's mushrooming oil tab falls hardest on developing nations, particularly those in Asia and sub-Saharan Africa, which tend to be the most dependent on imports and the least energy efficient.
"We in the rich countries complain a lot about higher prices but it is not our countries that will be hurt the most," said Fatih Birol, chief economist of the Paris-based International Energy Agency.
Yet despite the severe economic hardship likely in low-income energy importers such as Laos, Mongolia, Pakistan and Ethiopia, according to World Bank estimates, the oil price spike of 2004 has not delivered nearly as much economic punishment in the developed world as the energy shock of a generation ago, which was marked by recessions and fuel shortages.
A major difference is that the per-barrel cost of crude peaked at $80 in 1981, or about $25 more than the current futures price, on inflation-adjusted terms. Greater fuel efficiency has also helped blunt the effects of higher energy prices this time around.
The U.S. economy is holding up better than most, several economists said, because billions of petro-dollars flowing out of the country eventually are recycled back through it as Saudi Arabia and others buy U.S. Treasury securities, in addition to investing in their own countries.
Developing countries are likely to have a harder time attracting such investment, particularly if their financial prospects are weakened by rising oil costs, according to the World Bank's Lewis. So far, though, emerging markets such as Brazil, India, South Africa and others have not had to borrow money in order to cover higher fuel bills, he said.
Even if today's high energy prices have less abrupt and dire consequences than the oil crises of the 1970s, a "meaningful economic shift" is taking place, according to William Ferer, president and director of research at W.H. Reaves, a New Jersey-based firm that invests in the oil sector.
That's because while the amount of energy needed to run factories and drive trucks is lower as a percentage of the total cost of production and transportation, the world now consumes 45 percent, or 25 million barrels, more oil a day than it did 30 years ago. Moreover, the industry's grip has been extended to many more parts of the world.
The countries and companies responsible for quenching this ever-increasing oil thirst are raking in the dough.
Based on Energy Department estimates, the value of Russian exports will rise by about $28 billion in 2004, while the value of Norwegian exports is on track to grow by $10 billion. The Russian and Norwegian industries rely on extensive investment from private companies, which are sharing in the growing wealth.
The Organization of the Petroleum Exporting Countries alone is expected to see its oil export revenues rise by $115 billion, or 47 percent, in 2004, according to Cambridge Energy Research Associates.
But while OPEC's members share the riches, they differ somewhat on how to spend the money.
Venezuela has been funneling billions of dollars into social programs for the poor, although some say this largesse from President Hugo Chavez could backfire if the state-run oil company's exploration and production budget suffers as a result.
In Saudi Arabia, the government is taking a more cautious approach to spending its petro-dollars than it did 30 years ago, when much of the funds went toward highways, airports and subsidized education and health care. This time, Crown Prince Abdullah has said the bulk of the surprise bonanza will go toward paying down the country's $176 billion debt.
Private oil companies are also reaping fatter profits money they're using to pay down debt, buy back stock and raise dividend payments to shareholders, who've already seen their investments flourish at a time when most major stock indexes have stagnated.
Shares of Exxon Mobil, the largest integrated oil company, are up 30 percent from a year ago, while those of Schlumberger, one of the largest oilfield services providers, are up 37 percent. By comparison, the Dow Jones industrial average is up about 2 percent.

Transforming the American Military into a Global Oil-Protection Service. By Michael T. Klare. TomDispatch.com, October 8, 2004.

In the first U.S. combat operation of the war in Iraq, Navy commandos stormed an offshore oil-loading platform. "Swooping silently out of the Persian Gulf night," an overexcited reporter for the New York Times wrote on March 22, "Navy Seals seized two Iraqi oil terminals in bold raids that ended early this morning, overwhelming lightly-armed Iraqi guards and claiming a bloodless victory in the battle for Iraq's vast oil empire."

A year and a half later, American soldiers are still struggling to maintain control over these vital petroleum facilities -- and the fighting is no longer bloodless. On April 24, two American sailors and a coastguardsman were killed when a boat they sought to intercept, presumably carrying suicide bombers, exploded near the Khor al-Amaya loading platform. Other Americans have come under fire while protecting some of the many installations in Iraq's "oil empire."

Indeed, Iraq has developed into a two-front war: the battles for control over Iraq's cities and the constant struggle to protect its far-flung petroleum infrastructure against sabotage and attack. The first contest has been widely reported in the American press; the second has received far less attention. Yet the fate of Iraq's oil infrastructure could prove no less significant than that of its embattled cities. A failure to prevail in this contest would eliminate the economic basis upon which a stable Iraqi government could someday emerge. "In the grand scheme of things," a senior officer told the New York Times, "there may be no other place where our armed forces are deployed that has a greater strategic importance." In recognition of this, significant numbers of U.S. soldiers have been assigned to oil-security functions.

Top officials insist that these duties will eventually be taken over by Iraqi forces, but day by day this glorious moment seems to recede ever further into the distance. So long as American forces remain in Iraq, a significant number of them will undoubtedly spend their time guarding highly vulnerable pipelines, refineries, loading facilities, and other petroleum installations. With thousands of miles of pipeline and hundreds of major facilities at risk, this task will prove endlessly demanding - and unrelievedly hazardous. At the moment, the guerrillas seem capable of striking the country's oil lines at times and places of their choosing, their attacks often sparking massive explosions and fires.

Guarding the pipelines

It has been argued that our oil-protection role is a peculiar feature of the war in Iraq, where petroleum installations are strewn about and the national economy is largely dependent on oil revenues. But Iraq is hardly the only country where American troops are risking their lives on a daily basis to protect the flow of petroleum. In Colombia, Saudi Arabia, and the Republic of Georgia, U.S. personnel are also spending their days and nights protecting pipelines and refineries, or supervising the local forces assigned to this mission. American sailors are now on oil-protection patrol in the Persian Gulf, the Arabian Sea, the South China Sea, and along other sea routes that deliver oil to the United States and its allies. In fact, the American military is increasingly being converted into a global oil-protection service.

The situation in the Republic of Georgia is a perfect example of this trend. Ever since the Soviet Union broke apart in 1992, American oil companies and government officials have sought to gain access to the huge oil and natural gas reserves of the Caspian Sea basin -- especially in Azerbaijan, Iran, Kazakhstan, and Turkmenistan. Some experts believe that as many as 200 billion barrels of untapped oil lie ready to be discovered in the Caspian area, about seven times the amount left in the United States. But the Caspian itself is landlocked and so the only way to transport its oil to market in the West is by pipelines crossing the Caucasus region -- the area encompassing Armenia, Azerbaijan, Georgia, and the war-torn Russian republics of Chechnya, Dagestan, Ingushetia, and North Ossetia.

American firms are now building a major pipeline through this volatile area. Stretching a perilous 1,000 miles from Baku in Azerbaijan through Tbilisi in Georgia to Ceyhan in Turkey, it is eventually slated to carry one million barrels of oil a day to the West; but will face the constant threat of sabotage by Islamic militants and ethnic separatists along its entire length. The United States has already assumed significant responsibility for its protection, providing millions of dollars in arms and equipment to the Georgian military and deploying military specialists in Tbilisi to train and advise the Georgian troops assigned to protect this vital conduit. This American presence is only likely to expand in 2005 or 2006 when the pipeline begins to transport oil and fighting in the area intensifies.

Or take embattled Colombia, where U.S. forces are increasingly assuming responsibility for the protection of that country's vulnerable oil pipelines. These vital conduits carry crude petroleum from fields in the interior, where a guerrilla war boils, to ports on the Caribbean coast from which it can be shipped to buyers in the United States and elsewhere. For years, left-wing guerrillas have sabotaged the pipelines -- portraying them as concrete expressions of foreign exploitation and elitist rule in Bogota, the capital -- to deprive the Colombian government of desperately needed income. Seeking to prop up the government and enhance its capacity to fight the guerrillas, Washington is already spending hundreds of millions of dollars to enhance oil-infrastructure security, beginning with the Cano-Limon pipeline, the sole conduit connecting Occidental Petroleum's prolific fields in Arauca province with the Caribbean coast. As part of this effort, U.S. Army Special Forces personnel from Fort Bragg, North Carolina are now helping to train, equip, and guide a new contingent of Colombian forces whose sole mission will be to guard the pipeline and fight the guerrillas along its 480-mile route.

Oil and Instability

The use of American military personnel to help protect vulnerable oil installations in conflict-prone, chronically unstable countries is certain to expand given three critical factors: America's ever-increasing dependence on imported petroleum, a global shift in oil production from the developed to the developing world, and the growing militarization of our foreign energy policy.

America's dependence on imported petroleum has been growing steadily since 1972, when domestic output reached its maximum (or "peak") output of 11.6 million barrels per day (mbd). Domestic production is now running at about 9 mbd and is expected to continue to decline as older fields are depleted. (Even if some oil is eventually extracted from the Arctic National Wildlife Refuge in Alaska, as the Bush administration desires, this downward trend will not be reversed.) Yet our total oil consumption remains on an upward course; now approximating 20 mbd, it's projected to reach 29 mbd by 2025. This means ever more of the nation's total petroleum supply will have to be imported -- 11 mbd today (about 55% of total U.S. consumption) but 20 mbd in 2025 (69% of consumption).

More significant than this growing reliance on foreign oil, an increasing share of that oil will come from hostile, war-torn countries in the developing world, not from friendly, stable countries like Canada or Norway. This is the case because the older industrialized countries have already consumed a large share of their oil inheritance, while many producers in the developing world still possess vast reserves of untapped petroleum. As a result, we are seeing a historic shift in the center of gravity for world oil production -- from the industrialized countries of the global North to the developing nations of the global South, which are often politically unstable, torn by ethnic and religious conflicts, home to extremist organizations, or some combination of all three.

Whatever deeply-rooted historical antagonisms exist in these countries, oil production itself usually acts as a further destabilizing influence. Sudden infusions of petroleum wealth in otherwise poor and underdeveloped countries tend to deepen divides between rich and poor that often fall along ethnic or religious lines, leading to persistent conflict over the distribution of petroleum revenues. To prevent such turbulence, ruling elites like the royal family in Saudi Arabia or the new oil potentates of Azerbaijan and Kazakhstan restrict or prohibit public expressions of dissent and rely on the repressive machinery of state security forces to crush opposition movements. With legal, peaceful expressions of dissent foreclosed in this manner, opposition forces soon see no options but to engage in armed rebellion or terrorism.

There is another aspect of this situation that bears examination. Many of the emerging oil producers in the developing world were once colonies of and harbor deep hostility toward the former imperial powers of Europe. The United States is seen by many in these countries as the modern inheritor of this imperial tradition. Growing resentment over social and economic traumas induced by globalization is aimed at the United States. Because oil is viewed as the primary motive for American involvement in these areas, and because the giant U.S. oil corporations are seen as the very embodiment of American power, anything to do with oil -- pipelines, wells, refineries, loading platforms -- is seen by insurgents as a legitimate and attractive target for attack; hence the raids on pipelines in Iraq, on oil company offices in Saudi Arabia, and on oil tankers in Yemen.

Militarizing energy policy

American leaders have responded to this systemic challenge to stability in oil-producing areas in a consistent fashion: by employing military means to guarantee the unhindered flow of petroleum. This approach was first adopted by the Truman and Eisenhower administrations after World War II, when Soviet adventurism in Iran and pan-Arab upheavals in the Middle East seemed to threaten the safety of Persian Gulf oil deliveries. It was given formal expression by President Carter in January 1980, when, in response to the Soviet occupation of Afghanistan and the Islamic revolution in Iran, he announced that the secure flow of Persian Gulf oil was in "the vital interests of the United States of America," and that in protecting this interest we would use "any means necessary, including military force." Carter's principle of using force to protect the flow of oil was later cited by President Bush the elder to justify American intervention in the Persian Gulf War of 1990-91, and it provided the underlying strategic rationale for our recent invasion of Iraq.

Originally, this policy was largely confined to the world's most important oil-producing region, the Persian Gulf. But given America's ever-growing requirement for imported petroleum, U.S. officials have begun to extend it to other major producing zones, including the Caspian Sea basin, Africa, and Latin America. The initial step in this direction was taken by President Clinton, who sought to exploit the energy potential of the Caspian basin and, worrying about instability in the area, established military ties with future suppliers, including Azerbaijan and Kazakhstan, and with the pivotal transit state of Georgia. It was Clinton who first championed the construction of a pipeline from Baku to Ceyhan and who initially took steps to protect that conduit by boosting the military capabilities of the countries involved. President Bush junior has built on this effort, increasing military aid to these states and deploying American combat advisers in Georgia; Bush is also considering the establishment of permanent U.S. military bases in the Caspian region.

Typically, such moves are justified as being crucial to the "war on terror." A close reading of Pentagon and State Department documents shows, however, that anti-terrorism and the protection of oil supplies are closely related in administration thinking. When requesting funds in 2004 to establish a "rapid-reaction brigade" in Kazakhstan, for example, the State Department told Congress that such a force is needed to "enhance Kazakhstan's capability to respond to major terrorist threats to oil platforms" in the Caspian Sea.

As noted, a very similar trajectory is now under way in Colombia. The American military presence in oil-producing areas of Africa, though less conspicuous, is growing rapidly. The Department of Defense has stepped up its arms deliveries to military forces in Angola and Nigeria, and is helping to train their officers and enlisted personnel; meanwhile, Pentagon officials have begun to look for permanent U.S. bases in the area, focusing on Senegal, Ghana, Mali, Uganda, and Kenya. Although these officials tend to talk only about terrorism when explaining the need for such facilities, one officer told Greg Jaffe of the Wall Street Journal in June 2003 that "a key mission for U.S. forces [in Africa] would be to ensure that Nigeria's oil fields, which in the future could account for as much as 25 percent of all U.S. oil imports, are secure."

An increasing share of our naval forces is also being committed to the protection of foreign oil shipments. The Navy's Fifth Fleet, based at the island state of Bahrain, now spends much of its time patrolling the vital tanker lanes of the Persian Gulf and the Strait of Hormuz -- the narrow waterway connecting the Gulf to the Arabian Sea and the larger oceans beyond. The Navy has also beefed up its ability to protect vital sea lanes in the South China Sea -- the site of promising oil fields claimed by China, Vietnam, the Philippines, and Malaysia -- and in the Strait of Malacca, the critical sea-link between the Persian Gulf and America's allies in East Asia. Even Africa has come in for increased attention from the Navy. In order to increase the U.S. naval presence in waters adjoining Nigeria and other key producers, carrier battle groups assigned to the European Command (which controls the South Atlantic) will shorten their future visits to the Mediterranean "and spend half the time going down the west coast of Africa," the command's top officer, General James Jones, announced in May 2003.

This, then, is the future of U.S. military involvement abroad. While anti-terrorism and traditional national security rhetoric will be employed to explain risky deployments abroad, a growing number of American soldiers and sailors will be committed to the protection of overseas oil fields, pipeline, refineries, and tanker routes. And because these facilities are likely to come under increasing attack from guerrillas and terrorists, the risk to American lives will grow accordingly. Inevitably, we will pay a higher price in blood for every additional gallon of oil we obtain from abroad.

Michael T. Klare is a professor of peace and world security studies at Hampshire College. This article is based on his new book, Blood and Oil: The Dangers and Consequences of America's Growing Petroleum Dependency.

Crude Dudes: US Oil Companies Just Happened to Have Billions of Dollars They Wanted to Invest in Undeveloped Oil Reserves. By Linda McQuaig. Toronto Star, September 20, 2004.

From his corner office in the heart of New York's financial district, Fadel Gheit keeps close tabs on what goes on inside the boardrooms of the big oil companies. An oil analyst at the prestigious Wall Street firm Oppenheimer & Co., the fit, distinguished-looking Gheit has been watching the oil industry closely for more than 25 years. Selling the modern world's most indispensable commodity has never been a bad business to be in particularly for the small group of companies that straddle the top of this privileged world. But never more so than now. "Profit-wise, things could not have been better," says Gheit, "In the last three years, they died and went to heaven .... They are all sitting on the largest piles of cash in their history."

But to stay rich they have to keep finding new reserves, and that's getting tougher. Increasingly it means cutting through permafrost or drilling deep underwater, at tremendous cost. "The cheap oil has already been found and developed and produced and consumed," says Gheit. "The low-hanging fruit has already been picked." Well, not all the low-hanging fruit has been picked. Nestled into the heart of the area of heaviest oil concentration in the world is Iraq, overflowing with low-hanging fruit. No permafrost, no deep water. Just giant pools of oil, right beneath the warm ground. This is fruit sagging so low, as it were, that it practically touches the ground under the weight of its ripeness.

Not only does Iraq have vast quantities of easily accessible oil, but its oil is almost untouched. "Think of Iraq as virgin territory .... This is bigger than anything Exxon is involved in currently .... It is the superstar of the future," says Gheit, "That's why Iraq becomes the most sought-after real estate on the face of the earth." Gheit just smiles at the notion that oil wasn't a factor in the U.S. invasion of Iraq. He compares Iraq to Russia, which also has large undeveloped oil reserves. But Russia has nuclear weapons. "We can't just go over and ... occupy (Russian) oil fields," says Gheit. "It's a different ballgame." Iraq, however, was defenceless, utterly lacking, ironically, in weapons of mass destruction. And its location, nestled in between Saudi Arabia and Iran, made it an ideal place for an ongoing military presence, from which the U.S. would be able to control the entire Gulf region. Gheit smiles again: "Think of Iraq as a military base with a very large oil reserve underneath .... You can't ask for better than that."

There's something almost obscene about a map that was studied by senior Bush administration officials and a select group of oil company executives meeting in secret in the spring of 2001. It doesn't show the kind of detail normally shown on maps cities, towns, regions. Rather its detail is all about Iraq's oil. The southwest is neatly divided, for instance, into nine "Exploration Blocks." Stripped of political trappings, this map shows a naked Iraq, with only its ample natural assets in view. It's like a supermarket meat chart, which identifies the various parts of a slab of beef so customers can see the most desirable cuts .... Block 1 might be the striploin, Block 2 and Block 3 are perhaps some juicy tenderloin, but Block 8 ? ahh, that could be the filet mignon.

The map might seem crass, but it was never meant for public consumption. It was one of the documents studied by the ultra-secretive task force on energy, headed by U.S. Vice-President Dick Cheney, and it was only released under court order after a long legal battle waged by the public interest group Judicial Watch. Another interesting task force document, also released under court order over the opposition of the Bush administration, was a two-page chart titled "Foreign Suitors for Iraqi Oilfields." It identifies 63 oil companies from 30 countries and specifies which Iraqi oil fields each company is interested in and the status of the company's negotiations with Saddam Hussein's regime. Among the companies are Royal Dutch/Shell of the Netherlands, Russia's Lukoil and France's Total Elf Aquitaine, which was identified as being interested in the fabulous, 25-billion-barrrel Majnoon oil field. Baghdad had "agreed in principle" to the French company's plans to develop this succulent slab of Iraq. There goes the filet mignon into the mouths of the French!

The documents have attracted surprisingly little attention, despite their possible relevance to the question of Washington's motives for its invasion of Iraq ? in many ways the defining event of the post-9/11 world but one whose purpose remains shrouded in mystery. Even after the supposed motives for the invasion weapons of mass destruction and links to Al Qaeda have been thoroughly discredited, talk of oil as a motive is still greeted with derision. Certainly any suggestion that private oil interests were in any way involved is hooted down with charges of conspiracy theory. Yet the documents suggest that those who took part in the Cheney task force including senior oil company executives were very interested in Iraq's oil and specifically in the danger of it falling into the hands of eager foreign oil companies, rather than into the rightful hands of eager U.S. oil companies.

As the documents show, prior to the U.S. invasion, foreign oil companies were nicely positioned for future involvement in Iraq, while the major U.S. oil companies, after years of U.S.-Iraqi hostilities, were largely out of the picture. Indeed, the U.S. majors would have been the big losers if U.N. sanctions against Iraq had simply been lifted. "The U.S. majors stand to lose if Saddam makes a deal with the U.N. (on lifting sanctions)," noted a report by Germany's Deutsche Bank in October 2002. The disadvantaged position of U.S. oil companies in Saddam Hussein's Iraq would have presumably been on the minds of senior oil company executives when they met secretly with Cheney and his task force in early 2001. The administration refuses to divulge exactly who met with the task force, and continues to fight legal challenges to force disclosure. However a 2003 report by the General Accounting Office, the investigative arm of Congress, concluded that the task force relied on advice from the oil industry, whose close ties to the Bush administration are legendary. (George W. Bush received more money from the oil and gas industry in 1999 and 2000 than any other U.S. federal candidate received over the previous decade.)

The Cheney task force has been widely criticized for recommending bigger subsidies for the energy industry, but there's been little focus on its possible role as a venue for consultations between Big Oil and the administration about Iraq. One intriguing piece of evidence pointing in this direction was a National Security Council directive, dated February 2001, instructing NSC staff to co-operate fully with the task force. The NSC document, reported in The New Yorker magazine, noted that the task force would be considering the "melding" of two policy areas: "the review of operational policies towards rogue states" and "actions regarding the capture of new and existing oil and gas fields." This certainly implies that the Cheney task force was considering geopolitical questions about actions related to the capture of oil and gas reserves in "rogue" states, including presumably Iraq. It seems likely then that Big Oil, through the Cheney task force, was involved in discussions with the administration about getting control of oil in Iraq. Since Big Oil has sought to distance itself from the administration's decision to invade Iraq, this apparent involvement helps explain the otherwise baffling level of secrecy surrounding the task force.

It's interesting to note that the Cheney task force deliberations took place in the first few months after the Bush administration came to office the same time period during which the new administration was secretly formulating plans for toppling Saddam. Those early plans were not publicly disclosed, but we know about them now due to the publication of several insider accounts, including that of former Treasury secretary Paul O'Neill. So, months before the attacks of 9/11, the Bush White House was already considering toppling Saddam, and at the same time it was also keenly studying Iraq's oil fields and assessing how far along foreign companies were in their negotiations with Saddam for a piece of Iraq's oil. It's also noteworthy that one person Dick Cheney was pivotal both in advancing the administration's plans for regime change in Iraq and in formulating U.S. energy policy.

As CEO of oil services giant Halliburton Company, Cheney had been alert to the problem of securing new sources of oil. Speaking to the London Petroleum Institute in 1999, while still heading Halliburton, Cheney had focused on the difficulty of finding the 50 million extra barrels of oil per day that he said the world would need by 2010. "Where is it going to come from?" he asked, and then noted that "the Middle East with two-thirds of the world's oil and the lowest cost, is still where the prize ultimately lies." Cheney's focus on the Middle East and its oil continued after he became Bush's powerful vice-president. Within weeks of the new administration taking office, Cheney was pushing forward plans for regime change in Iraq and also devising a new energy policy which included getting control of oil reserves in rogue states. His central role in these two apparently urgent initiatives is certainly suggestive of a possible connection between the U.S. invasion of Iraq and a desire for the country's ample oil reserves ? the very thing that is vehemently denied.

One reason that regime change in Iraq was seen as offering significant benefits for Big Oil was that it promised to open up a treasure chest which had long been sealed private ownership of Middle Eastern oil. A small group of major international oil companies once privately owned the oil industries of the Middle East. But that changed in the 1970s when most Middle Eastern countries (and some elsewhere) nationalized their oil industries. Today, state-owned companies control the vast majority of the world's oil resources. The major international oil companies control a mere 4 per cent. The majors have clearly prospered in the new era, as developers rather than owners, but there's little doubt that they'd prefer to regain ownership of the oil world's Garden of Eden. "(O)ne of the goals of the oil companies and the Western powers is to weaken and/or privatize the world's state oil companies," observes New York-based economist Michael Tanzer, who advises Third World governments on energy issues. The possibility of Iraq's oil being reopened to private ownership with the promise of astonishing profits ? attracted considerable interest in the run-up to the U.S. invasion. In February 2003, as U.S. Secretary of State Colin Powell held the world's attention with his dramatic efforts to make the case that Saddam posed an imminent threat to international peace, other parts of the U.S. government were secretly developing plans to privatize Iraq's oil (among other assets). A confidential 100-page contracting document, drawn up by the U.S. Agency for International Development and the U.S. Treasury Department, laid out a wide-ranging plan for a "Mass Privatization Program ... especially in the oil and supporting industries."

The Pentagon was also working on plans to open up Iraq's oil sector. In the fall of 2002, months before the invasion, the Pentagon retained Philip Carroll, a former CEO of Shell Oil Co. in Texas, to draft a strategy for developing Iraqi oil. Carroll's plans apparently became the basis of a proposed scheme, which became public shortly after the war, to redesign Iraq's oil industry along the lines of a U.S. corporation, with a chairman, chief executive and a 15-member board of international advisers. Carroll was chosen by Washington to serve as chairman, but the plans were shelved after they encountered stiff opposition inside Iraq.

Still, the prospect of privatizing Iraq's oil remained of great interest to U.S. oil companies, according to Robert Ebel, from the influential Washington-based Center for Strategic and International Studies (CSIS). Ebel, former vice-president of a Dallas-based oil exploration company, retains close ties to the industry. In an interview in his Washington office, Ebel said it was up to Iraq to make its own decisions, but he made clear that U.S. oil companies would prefer Iraq abandon its nationalization. "We'd rather not work with national oil companies," Ebel said bluntly, noting that the major oil companies are prepared to invest the $35 to $40 billion to develop Iraq's reserves in the coming years. "We're looking for places to invest around the world. You know, along comes Iraq, and I think a lot of oil companies would be disappointed if Iraq were to say `we're going to do it ourselves' " Along comes Iraq? How fortuitous. U.S. oil companies just happened to have billions of dollars that they wanted to invest in undeveloped oil reserves when Iraq presented itself, ready for invasion. Along comes Iraq, indeed. In the past 14 decades, we've used up roughly half of all the oil that the planet has to offer. No, we're not about to run out of oil. But long before the oil runs out, it reaches its production peak. After that, extracting the remaining oil becomes considerably more difficult and expensive.

This notion that oil production has a "peak" was first conceived in 1956 by geophysicist M. King Hubbert. He predicted that U.S. oil production would peak about 1970 a notion that was scoffed at at the time. As it turned out, Hubbert was dead on; U.S. oil production peaked in 1970, and has been declining ever since. Hubbert's once-radical notion is now generally accepted. For the world as a whole, the peak is fast approaching. Colin Campbell, one of the world's leading geologists, estimates the world's peak will come as soon as 2005 next year. "There is only so much crude oil in the world," Campbell said in a telephone interview from his home in Ireland, "and the industry has found about 90 per cent of it." All this would be less serious if the world's appetite for oil were declining in tandem. But even as the discovery of new oil fields slows down, the world's consumption speeds up ? a dilemma Cheney highlighted in his speech to the London Petroleum Institute in 1999. For every new barrel of oil we find, we are consuming four already-discovered barrels, according to Campbell. The arithmetic is not on our side.

Particularly worrisome is the arithmetic as it applies to the U.S. With its oil production already long past peak, and yet its oil consumption rising, the U.S. will inevitably become more reliant on foreign oil. This is significant not just for Americans, but for the world, since the U.S. has long characterized its access to energy as a matter of "national security." With its unrivalled military power, the U.S. will insist on meeting its own voracious energy needs and it will be up to the rest of the world to co-operate with this quest. Period.

Canada plays a greater role in this "keep-the-U.S.-energy-beast-fed" scenario than many Canadians may realize. A three-volume report prepared by a bipartisan Congressional team and CSIS, the Washington think tank, highlights how important Canada is in the U.S. energy picture of the future. The report, The Geopolitics of Energy into the 21st Century, notes that Canada is "the single largest provider of energy to the United States," and that "Canada is poised to expand sharply its exports of oil to the United States in the coming years." Fine ? as long as Canada doesn't want to change its mind about this. Well, in fact, Canada can't change its mind about this ? a point celebrated in the report. When Canada signed the North American Free Trade Agreement (NAFTA) in 1993, we gave up our right to cut back the amount of oil we export to the U.S. (unless we cut our own consumption the same amount). Interestingly, Mexico, also a party to NAFTA, refused to agree to this section, and was granted an exemption. The U.S. report points out that that, under NAFTA, Canada is not allowed to reduce its exports of oil (or other energy) to the U.S. in order to redirect them to Canadian consumers. Redirecting Canadian oil to Canadians isn't permitted regardless of how great the Canadian need may be. Some outside observers, like Colin Campbell over in Ireland, find the situation striking. "You poor Canadians are going to be left freezing in the dark while they're running hair dryers in the U.S.," says Campbell. It's a situation that comforts the U.S. senators, congressmen and think-tank analysts who wrote the report. With obvious satisfaction, they conclude: "There can be no more secure supplier to the United States than Canada."

Alas, for the U.S., not every part of the world is as pliant as Canada. Most of the world's oil is in the Middle East. And while different oil regions will reach their production peaks at different times, the Middle East will peak last, underlying Cheney's point that the region is where "the prize ultimately lies." Whoever controls the big oil reserves of the Middle East will then be positioned to, pretty much, control the world.

But we're supposed to believe that, as the Bush administration assessed its options just before invading Iraq in the spring of 2003, the advantages of securing vast, untapped oil fields in order to guarantee U.S. energy security in a world of dwindling reserves and to enable U.S. oil companies to reap untold riches ? were far from mind. What really mattered to those in the White House, we're told, was liberating the people of Iraq.

Adapted from It's The Crude, Dude: War Big Oil, And The Fight For The Planet, by Linda McQuaig, 2004. Published by Doubleday Canada.

About the Author: Toronto-based political commentator Linda McQuaig is a past winner of a National Newspaper Award and an Atkinson Fellowship for journalism in public policy. Her column appears Sundays on the Star's op-ed page.

Cheney: Oil Not Basis for U.S. Actions. By James Gerstenzang, Los Angeles Times, Sept 10, 2004.
"Vice President Dick Cheney said today that anyone who thought the wars waged during the Bush administration were conducted to protect U.S. sources of oil did not understand the problems President Bush faced before launching the invasions of Afghanistan and Iraq.
Speaking outside a sausage factory in this eastern Wisconsin town, Cheney addressed for the first time in recent weeks one of the underlying challenges that critics of the war in Iraq have posed to the administration: That Bush sought to remove Saddam Hussein to secure access to Iraqi oil for U.S. companies.
It is one of the most sensitive issues that the administration has faced in defending its decision, and it is particularly sensitive for Cheney, a former chief of Halliburton, an oil supply company... Cheney, denying that oil was a factor in the war decisions, replied: "Anybody who'd suggest oil" was the reason for the military action was missing the challenges the administration faced, in Afghanistan - which Cheney pointed out has no oil - and in Iraq....

Thatcher Son Arrested In Coup Plot. CBSNews.com / AP, August 25, 2004
Mark Thatcher, the son of former British Prime Minister Margaret Thatcher, was arrested Wednesday and charged with helping to finance a foiled plot to overthrow the government of oil-rich Equatorial Guinea.
Thatcher, a 51-year-old businessman who has lived in South Africa since 2002, was arrested at his Cape Town home shortly after 7 a.m. and taken before the Wynberg Magistrate's Court, where he was charged with violating South Africa's Foreign Military Assistance Act.
"We have evidence, credible evidence, and information that he was involved in the attempted coup," police spokesman Sipho Ngwema said before the arraignment. "We refuse that South Africa be a springboard for coups in Africa and elsewhere."...
Defense lawyer Peter Hodes said Thatcher was arrested on suspicion of providing financing for a helicopter linked to the coup plot. "He will plead not guilty," Hodes said....
Thatcher is accused of helping finance a plot to oust President Teodoro Obiang of Equatorial Guinea, which authorities say was foiled in March.
"We allege that Mr. Thatcher contravened [the Foreign Military Assistance] Act by financing the attempted coup in Equatorial Guinea," said Ngwema. "We believe Mr. Thatcher assisted in finance and logistics."
Equatorial Guinea, Africa's third-largest oil producer, put 19 people on trial this week for the alleged plot. One other defendant died in custody under suspicious circumstances. Seventy other accused mercenaries are on trial separately in Zimbabwe....
The 19 defendants on trial since Monday are charged with attempting to assassinate a head of state, illegal possession of arms and explosives, terrorism, treason and endangering the public.
A lead defendant, South African arms dealer Nick du Toit, testified Wednesday that he attended a July 2003 meeting in South Africa with Thatcher and Simon Mann of Britain, who is on trial in Zimbabwe as the alleged head of the plot.
But Thatcher only showed interest in buying military helicopters for a mining enterprise in Sudan, said du Toit, who faces the death penalty for his alleged role in the plot. "This was a normal business deal," du Toit testified.
Obiang's 25-year-old regime - accused by the U.S. State Department and others of torture and other abuses - is at the center of an oil boom in the Gulf of Guinea. The region is estimated to hold 10 percent of the world's oil reserves, and some of its most corrupt governments.
Since the development of Equatorial Guinea's oil industry began in the mid-1990s, the rain-soaked nation of just 500,000 people has enjoyed one of the fastest economic growth rates in the world, at up to 70 percent a year.
South Africa, which has sought to crack down on the involvement of its nationals in foreign mercenary activities, has been involved in the investigation of the alleged plot against Obiang since the start.
Its intelligence services tipped Zimbabwean authorities off to the arrival of a plane carrying 67 suspected coup participants in Harare on March 7 as they were allegedly en route to Equatorial Guinea. All were arrested with three other suspects, including Mann, and charged with seeking to procure weapons from the state arms manufacturer.
The 70 defendants maintain they were heading to Congo to provide security for a mining operation....
He started his own company and moved to Texas in April 1984 after a lengthy controversy over reports that he represented a British construction firm that won a contract worth $600 million in Oman while Prime Minister Thatcher was there on a trade-boosting trip in 1981.
He moved to South Africa two years ago and has been involved in various ventures after business troubles in the United States, including a civil racketeering lawsuit in Dallas that he settled for an undisclosed sum and charges from the Internal Revenue Service for his role with a Dallas-based home security company that went bankrupt.
Thatcher also was under scrutiny in Parliament in Britain in 1994 over allegations he was involved in international arms deals while his mother was prime minister."

US warplanes strafe Najaf as world oil prices go through the roof. Space War UAV News, Aug 13, 2004. "US warplanes screamed over this Iraqi holy city Thursday in a massive assault aimed at crushing a Shiite Muslim uprising, as the specter of attacks on the country's petroleum infrastructure sent world oil prices to record highs for the second time in 48 hours..."

Sudan Accuses West of Seeking Its Oil and Gold. Reuters, Aug 13, 2004. "Sudanese President Omar Hassan al-Bashir Thursday accused Western nations of inflaming the conflict in Sudan's troubled Darfur region in the hope of exploiting the country's gold and oil resources..." 

Lesson of Iraq: High Oil Prices May Not Be Temporary. New York Times, Aug 13, 2004. "Saudi Arabia had quietly promised to step up oil production to offset a temporary decline in Iraqi oil exports, but the Saudis have not been able to come up with the oil..."

Nigerian Oil Industry Reels Amid Fighting, By Glenn McKenzie, Associated Press, Chicago Tribune, Aug 8, 2004.
"... Nigeria's oil industry -- Africa's largest and the fifth-biggest source of U.S. oil imports -- is likewise concerned for its future. A yearlong spree of bloodletting has killed more than 1,000 people in the delta -- unrest comparable in scale to Chechnya and Colombia.
The growing insecurity in Nigeria's most lucrative industry comes as oil prices briefly hit a record intraday trading high Tuesday of $44.24 a barrel on the New York Mercantile Exchange following a heightened U.S. terror alert and supply concerns in Russia and OPEC, of which Nigeria is a key member.
Oil majors hope to double production in West Africa's Gulf of Guinea, estimated to hold up to 10 percent of the world's oil reserves. The United States, Europe and Asia are increasingly looking to the region's oil as an alternative to crude from the Middle East.
Yet residents of Nigeria's southern oil-producing delta complain their elected leaders have failed to fight poverty in the region. Tensions over oil revenues have aggravated ethnic strife. Kidnappings and sabotage have escalated, forcing costly shutdowns by companies pumping crude.
The Nigerian subsidiary of San Ramon, Calif.-based ChevronTexaco Corp. is among the companies hit hardest by Nigeria's worsening oil-related violence, suffering an estimated $750 million in costs from sabotage to its wells, pipelines and other facilities since March 2003.
Sixteen months later, the company still can't restart production at pipeline pump stations and wells considered unusable or unsafe, resulting in production losses estimated at more than $1 billion.
Royal Dutch/Shell, Nigeria's largest oil operation which produces half of the 2.5 million barrels Nigeria's exports daily, also is reeling.
A confidential 93-page security report commissioned by Shell in December 2003 and obtained by The Associated Press and other news organizations warns that mounting attacks by criminals and ethnic militants could force the oil giant to abandon its onshore operations in the delta by 2008.
Shell spokesman Simon Buerk rejects the possibility of a company pullout.
"We don't agree with that conclusion. We are committed to our operations in Nigeria," Buerk told The AP.
Other company officials concede, however, that the firm is increasingly turning its attention to offshore oil fields because it considers them safer from attack by bandits and activists.
Buerk declined to discuss the confidential report's other conclusions: that Shell "exacerbates conflict" in the way it gives cash and contracts to delta residents and offers "stay-at-home pay" to disgruntled youths.
Such "lack of transparency" encourages villagers to fight Shell -- and each other -- for a share of the oil money, the report's authors concluded.
Multinational companies encourage crime through "corruption in the contracting process and the payment of ransoms that make crime lucrative," the study warned, adding that Shell's "social license to operate is fast-eroding."
Indeed, delta residents, most of whom earn less than $1 a day despite the region's petroleum wealth, accuse oil companies of colluding with Nigeria's government to foment divisions between rival community groups in a strategy to deprive them of oil earnings.
Addressing such allegations, the Shell-commissioned report's authors say there is "no evidence" companies have these sinister motives. Yet the authors warn that some oil company employees do "engage in criminal activities" that deprive residents of benefits.
Oil companies are feeling the backlash from militants and other groups, which increasingly use sophisticated equipment to syphon oil from pipelines for resale to tankers bound for Europe, Asia and South America. Nigeria's government estimates the industry loses up to 300,000 barrels a day -- the equivalent of 15 percent of total exports.
Another growing concern for oil multinationals, company officials privately acknowledge, is the possibility of being blamed for killings, robberies or other abuses inflicted by Nigerian police and soldiers trying to control the restive delta.
Earlier this month, security forces raided five delta villages, leaving 15 people dead and ransacking and burning homes, according to witnesses and militants. The operation was part of an effort to combat attacks on multinational oil operations, the security forces said.
In March, a U.S. federal judge in San Francisco ruled that ChevronTexaco could be made to stand trial for civil damages in the United States on allegations that its Nigerian subsidiary was linked to the deaths of nine people allegedly shot by soldiers during protests on an offshore oil platform in 1998. ChevronTexaco has denied any wrongdoing in the case.
Similar U.S. cases are pending against other oil concerns. A lawsuit brought by members of Nigeria's ethnic Ogoni tribe in New York accuses Shell of colluding with Nigeria's former military regime to cause the hanging of nine activists, including author and Nobel Peace Prize nominee Ken Saro-Wiwa, in November 1995. Shell contends it lobbied Nigeria's government to free the activists.
Many residents of the delta, increasingly awash with automatic weapons and rocket launchers, say they have given up hope of a peaceful resolution to the conflicts between armed gangs, soldiers and oil companies.
One group led by Alhaji Dokubo Asari, a self-styled warlord in the jungle creeks near the oil city of Port Harcourt, openly challenges President Olusegun Obasanjo's government in what activists call an "armed struggle" for territory and crude.
"If we had guns, we wouldn't be running," said Walter, the resident remaining in Omadino after all his fellow villagers had fled."


Comment: For insurgents, it's all about oil, by Robert Bryce, Special to the San Antonio Express-News, Aug 1, 2004.
Robert Bryce of Austin is the author of Cronies: Oil, the Bushes and the Rise of Texas, America's Superstate.
In November 2002, Defense Secretary Donald Rumsfeld assured us that the then-looming second Iraq war had "nothing to do with oil, literally nothing to do with oil."
Unfortunately, Rumsfeld still hasn't convinced Abu Musab al-Zarqawi or the insurgents in Iraq of that fact.
In the past few weeks, America's enemies in Iraq and Saudi Arabia have made it painfully clear that they think the ongoing war has everything to do with oil. The latest evidence came July 3, when the pipelines that feed Iraq's most important oil export points - the Mina al-Bakr and Khor al-Amaya terminals in the Persian Gulf - were bombed yet again.
The bombing occurred just 11 days after the pipelines were put back into service. They were shut down in mid-June, when a massive bomb made them inoperable for nearly a week. Each day they're down costs about $50 million.
And therein lies the problem: Al-Qaida and the insurgents know that the best way to hurt America's long-term plan for Iraq is by attacking Iraq's oil infrastructure.
"Whoever controls Iraqi oil, controls Iraq's destiny," says A.F. Alhajji, an oil industry analyst at Ohio Northern University. By preventing Iraq from exporting large amounts of oil, the insurgents are assuring that the nascent Iraqi government remains in tatters.
On April 24, three bomb-laden boats piloted by suicide bombers attacked both of Iraq's oil terminals in the Persian Gulf. None hit their targets.
But two days after the attacks, al-Zarqawi, an al-Qaida leader, issued a statement that makes it clear oil is the issue.
"We tell you enemies of God, robbers of oil and riches and drug traders ... we will exterminate and debilitate you by land, sea and air until God makes us victorious or until we die." He went on to say that al-Qaida was "striking vital economic links of the infidel and atheist states."
One week after the attack on the terminals, Saudi gunmen killed two Americans, two Brits and an Australian working for ABB Lummus in the oil town of Yanbu, Saudi Arabia's most important port on the Red Sea.
On May 29, al-Qaida assassins attacked an oil industry complex in Khobar, leaving 22 people dead. After the Khobar attack, al-Qaida leader Abdulaziz al-Moqrin (now believed to be dead) said the attack was carried out because the Saudi leaders have been providing "America with oil at the cheapest prices according to their masters' wish, so that their economy does not collapse."
Al-Qaida's leaders have talked about the oil issue for years. Osama bin Laden has repeatedly referred to what he calls the "rape" and "plunder" of Saudi Arabia's oil riches by the United States.
Since June 2003, insurgents have attacked various parts of Iraq's oil infrastructure more than 100 times. Most vulnerable are the pipelines. More than 14,000 security personnel are deployed throughout Iraq, guarding pipelines, pumping stations, refineries and oil wells. But another 14,000 guards may be needed.
Nearly 4,400 miles of oil pipelines crisscross Iraq. And defending all that territory has proven nearly impossible. The 400-mile-long pipeline that connects the oil-rich town of Kirkuk in northern Iraq to the Turkish port at Ceyhan has been bombed dozens of times in the past year. Pipelines in central Iraq have also been hit. One of Iraq's biggest refineries has been shut down because of the pipeline bombings. And on July 4, insurgents bombed Iraq's north-south pipeline, setting it ablaze.
The unfortunate truth is that America has lost the war in Iraq. And the sad irony: We lost because we cannot defend the one resource that has driven U.S. foreign policy in Iraq for six decades - oil."

Workers Suspected in Iraq Sabotage Jobs, By The Associated Press, New York Times, July 11, 2004
Saboteurs launching attacks on Iraq's oil and electricity infrastructure appear to be employees working in the industry or others acting on inside information, reconstruction officials said Sunday.
A Western diplomat in Baghdad said the ``precise'' targeting of especially vulnerable or valuable portions of the oil and electricity systems -- and even a sewage treatment plant -- has increased the damage to critical infrastructure beyond what would be expected from random attacks.
The diplomat declined to reveal the sections that had been sabotaged.
Interim Prime Minister Iyad Allawi has blamed such attacks for a nationwide loss of power of more than four hours a day. Iraq's pipelines transport crude oil for export and also carry it to oil-fired power generators that provide domestic electricity.
Allawi said saboteurs have attacked vital oil pipelines 130 times in the last seven months, causing hundreds of millions of dollars in damage and lost revenues, hindering Iraq's efforts to rebuild and adding to the hardships of average Iraqis.
The Western diplomat said insurgents were suspected of using blackmail and threats to coerce Iraqi workers to launch attacks or to provide information on vulnerable locations in the country's oil pipelines and electric power lines.
Funding and information for the sabotage also may be flowing into Iraq from other countries, the diplomat said.
Oil Minister Thamer al-Ghadban told Dow Jones Newswires on Sunday that his ministry would extend for ``a few months'' a contract with South African security contractor Erinys International that was set to expire in less than a month.
Al-Ghadban said he would also expand the 14,000-member Iraqi force created to protect the infrastructure.
Steve Wright, a spokesman for the U.S. Army Corps of Engineers, said sabotage of key infrastructure appears to have been planned before the U.S.-led invasion last year by members of Saddam Hussein's government. In some cases, Iraqi oil wells were wired to be set on fire.
In the months after the invasion, saboteurs -- suspected of being insiders -- set fire to a computerized control room for a liquid propane gas plant as well as the plant's warehouse, damaging millions of dollars in equipment, he said. Elsewhere, a water treatment plant used in Iraq's oil industry was sabotaged, Wright said.
Even a repaired sewage treatment plant was sabotaged -- probably by insiders, the Western diplomat said.
Now, Iraqis hired by the Army Corps of Engineers to work in Iraq's oil and electric infrastructure have to go through background checks overseen by the new U.S. Embassy, Wright said.
Arab tribal leaders living near pipeline routes are also being hired to protect the lines, he said.
Attacks in northern Iraq have hamstrung exports from the country's oil pipeline to Ceyhan, Turkey, with the line opening only intermittently before saboteurs' bombs sever it again. That northern pipeline, which accounts for only a small fraction of oil exports, has been closed since it was severed by a blast a month ago.
Three major attacks also temporarily halted exports from southern Iraq, which handles 90 percent of Iraq's oil exports.
Guerrilla fighters also have targeted foreign experts the coalition has contracted to help carry out technical repairs and bring in badly needed spare parts.
And last month, insurgents ambushed and killed the security chief for Iraq's Northern Oil Company, Ghazi Talabani. Police officials said five men arrested in connection with the assassination belonged to Ansar al-Islam, a Kurdish group believed linked to al-Qaida.

Behind the Scenes U.S.-China Cooperation May Focus on Oil, by Franz Schurmann, Pacific News Service, June 24, 200.
"As a Sing Tao Daily headline reported on the paper's front page, President Bush and Vice President Dick Cheney met with China's foreign minister in Houston earlier this month, after former President Ronald Reagan's funeral.
But, aside from noting that China President Hu Jintao had made Foreign Minister Li Zhaoxing his personal representative to the funeral, the Chinese-language newspaper wrote: "Other than this, we don't know what they talked about."
One among several peculiarities of the June 12 meeting in Houston was that all three could have talked at one point or another during the five days the Reagan funeral lasted. In fact the media were summoned to the Houston airport only to be told that the threesome had nothing to say. Another peculiarity was that the U.S. and Chinese media were repeatedly told that Foreign Minister Li had separate meetings with Bush and Cheney.
Just a short time before the meeting Foreign Minister Li had given a speech in China in which he said: "the common interests of China and the United States are on the increase rather than on the decrease."
On May 18, Assistant Secretary of State John Wolf told the Congress that United States played an active role in supporting China's bid to join the Nuclear Supply Group (NSG). This is an example of growing Sino-American co-operation on the world scene.
Why would the threesome have come to Houston, the center of the U.S. oil trade? The main reason could have been to send a signal to the world that the United States and China are working together on their respective fossil fuel policies. Why did they meet in Houston?
A growing trend on the world scene means that there is a reason for President Bush, Vice President Cheney and Foreign Minister Li to make contact in Houston. The reason is that and more terrorist attacks are being aimed at oil personnel and infrastructure. And, while most of the victims are U.S. personnel, Britons and Iraqis, terrorists have also been turning their weapons against Chinese.
Eleven Chinese engineers and workers were killed in the northern Afghan town of Kunduz. They had just arrived to begin the Kunduz section of a road they had been building for some months. German soldiers under NATO command have been protecting the Kunduz sector for many months. The Chinese who are known for their road-building capability operate under a United Nations contract.
The Kunduz authorities have not accused any group that might have killed the Chinese. Part of the reason may be that the region, though in northern Afghanistan, is mostly Pashtun, who were settled there by successive regimes. And Pashtuns are still a thin majority of Afghanistan's total population. In the southern provinces, where Pushtuns prevail, the revived Taliban have been killing foreigners with enough frequency that some international agencies have shut down their operations.
Earlier this year three Chinese engineers and workers were killed in the Pakistani LNG (Liquified Natural Gas) Arabian Sea port of Gwarda. Gwarda is located close to the Iranian border and able to pipe LNG from Turkmenistan. This Central Asian republic is reputed to have the world's greatest reserves of natural gas.
In oil-rich Sudan, Chinese oil infrastructure projects have been going for over a decade. In fact there are good grounds for believing that Chinese oil companies in Sudan have long collaborated with U.S. oil companies who were barred by Washington D.C. from working in Sudan and other "rogue states." The Chinese built many roads and a 1,000-mile pipeline that went from Sudan's southern oil fields to the Red Sea port of Port Sudan.
Now that a peace treaty has been signed between the government and the rebels, the Anglo-American oil giants want to move into Sudan but they are hesitating. On March 30, two Chinese workers were abducted and killed. Later two more were abducted but lived.
The United States consumes at least 25 percent of the world's fossil fuels. China's lickety-split economic growth is rapidly catching up with that figure. Many in the United States fear China, but others take the view that if it weren't for China our shopping malls -- stocked by merchandise manufactured in China -- would crumble into dust.
Ever since Nixon broke down the walls separating the United States and China, every single president has, in the end, taken a friendly posture vis-à-vis China.
What they likely talked about was oil, even if the larger policy picture and the question of Taiwan were also discussed.
If the two countries have agreed to synchronize their fossil fuel policy and coordinate security for oil workers then Foreign Minister Li's talk with Vice President Cheney may have even greater weight than his talk with President Bush. It's only been a month or so since Cheney visited China. As is the case with the peculiar Houston meeting, so was Cheney's visit to China peculiar.
China is now a world power and its sphere of influence includes the oil-rich Middle East. Earlier, terrorists killed an Italian engineer but released South Korean, Chinese and Japanese hostages. Now, the terrorists are killing people from these three economically booming countries. It looks like, up to the transfer of Iraqi sovereignty to Iraqis June 30 and beyond, terrorists are going to be targeting civil and military personnel from these five super-advanced countries: the United States, Britain, China, Japan and South Korea.
The Cheney-Li talks may have focused on how the engineers and technicians from these five countries can be protected. To get a sense of how huge a task these two men talked about is that Saudi Arabia, the world's biggest oil power, alone employs 30,000 foreign workers."

The Undeclared Oil War, By Paul Roberts, Washington Post, June 28, 2004. "While some debate whether the war in Iraq was or was not "about oil," another war, this one involving little but oil, has broken out between two of the world's most powerful nations. For months China and Japan have been locked in a diplomatic battle over access to the big oil fields in Siberia. Japan, which depends entirely on imported oil, is desperately lobbying Moscow for a 2,300-mile pipeline from Siberia to coastal Japan. But fast-growing China, now the world's second-largest oil user, after the United States, sees Russian oil as vital for its own "energy security" and is pushing for a 1,400-mile pipeline south to Daqing. The petro-rivalry has become so intense that Japan has offered to finance the $5 billion pipeline, invest $7 billion in development of Siberian oil fields and throw in an additional $2 billion for Russian "social projects" -- this despite the certainty that if Japan does win Russia's oil, relations between Tokyo and Beijing may sink to their lowest, potentially most dangerous, levels since World War II. Asia's undeclared oil war is but the latest reminder that in a global economy dependent largely on a single fuel -- oil -- "energy security" means far more than hardening refineries and pipelines against terrorist attack. At its most basic level, energy security is the ability to keep the global machine humming -- that is, to produce enough fuels and electricity at affordable prices that every nation can keep its economy running, its people fed and its borders defended. A failure of energy security means that the momentum of industrialization and modernity grinds to a halt. And by that measure, we are failing.
In the United States and Europe, new demand for electricity is outpacing the new supply of power and natural gas and raising the specter of more rolling blackouts. In the "emerging" economies, such as Brazil, India and especially China, energy demand is rising so fast it may double by 2020. And this only hints at the energy crisis facing the developing world, where nearly 2 billion people -- a third of the world's population -- have almost no access to electricity or liquid fuels and are thus condemned to a medieval existence that breeds despair, resentment and, ultimately, conflict. In other words, we are on the cusp of a new kind of war -- between those who have enough energy and those who do not but are increasingly willing to go out and get it. While nations have always competed for oil, it seems more and more likely that the race for a piece of the last big reserves of oil and natural gas will be the dominant geopolitical theme of the 21st century... Granted, the United States, with its vast economic and military power, would probably win any direct "hot" war for oil. The far more worrisome scenario is that an escalating rivalry among other big consumers will spark new conflicts -- conflicts that might require U.S. intervention and could easily destabilize the world economy upon which American power ultimately rests. As demand for oil becomes sharper, as global oil production continues to lag (and as producers such as Saudi Arabia and Nigeria grow more unstable) the struggle to maintain access to adequate energy supplies, always a critical mission for any nation, will become even more challenging and uncertain and take up even more resources and political attention. This escalation will not only drive up the risk of conflict but will make it harder for governments to focus on long-term energy challenges, such as avoiding climate change, developing alternative fuels and alleviating Third World energy poverty -- challenges that are themselves critical to long-term energy security but which, ironically, will be seen as distracting from the current campaign to keep the oil flowing. This, ultimately, is the real energy-security dilemma. The more obvious it becomes that an oil-dominated energy economy is inherently insecure, the harder it becomes to move on to something beyond oil. Paul Roberts is the author of The End of Oil: On the Edge of a Perilous New World."

Mideast Isn't Only Spot Oil Is Vulnerable, By Beth Gardiner, Associated Press, Yahoo News.com, June 27, 2004. "Violence in Saudi Arabia and Iraq have kept oil-importing nations' worries focused on the Middle East, but a recently resolved labor dispute in Norway is a reminder that supplies elsewhere can be vulnerable too. With OPEC production stretched and the world guzzling ever more oil, analysts say a significant disruption in often-volatile Venezuela or another big exporter could cause a big price spike. Still, they're mostly optimistic that such a scenario is unlikely, and say it would have to coincide with more Middle Eastern trouble - like a big decline in Saudi or Iraqi production - to cause a real crisis. An unforeseen supply disruption "is an ever-present threat," said David Fyfe, principle oil supply analyst at the Paris-based International Energy Agency. Bad weather, political unrest, guerrilla attacks, labor disputes, technical problems, maintenance and accidents are always risk factors, Fyfe said. "Random events can hold the potential to undermine non-OPEC supplies for a given year by anything up to 300,000 to 400,000 barrels a day," he said. World oil production hovers around 81 million barrels daily. On Friday, the government of Norway, the world's third-largest oil exporter, ordered an end to an offshore oil workers' labor dispute that had threatened to halt pumping. Officials said they were ordering binding arbitration because a strike and lockout would have had serious consequences for the nation's economy and reputation as a reliable supplier of petroleum. Axel Busch, chief correspondent for industry newsletter Energy Intelligence, said Norway can be counted upon to settle oil disputes before they cause real trouble. In other parts of the world, the outcomes are less certain. In Venezuela, where a general strike paralyzed oil exports in late 2002 and early 2003, President Hugo Chavez has consolidated his control of the industry, reducing the chance of another damaging walkout, Fyfe said. But the South American nation, the world's fifth-largest oil exporter and holder of the western hemisphere's biggest reserves, remains unstable, and Chavez faces a planned recall vote in August. Hints of labor unrest in Ecuador and guerrilla attacks on pipelines in Colombia make those nations potential trouble spots too, Fyfe said. Ethnic violence in Nigeria's volatile oil delta and the potential for labor trouble are ongoing issues, although they have not had a major impact on the country's production in recent years, Fyfe said. Busch, the energy newsletter correspondent, said the Caucasus and Caspian Sea are also potential trouble spots, though he predicted political tensions there would ease before interfering with oil production. Oil prices spiked to record highs earlier this month, under the combined pressure of rising demand from fast-developing nations like China and fears about future production in the Middle East. Sabotage and general instability are hurting oil production in Iraq. Saudi Arabia, the world's biggest oil producer, is struggling with an upsurge of violence against Westerners and its oil industry. With OPEC pumping at close to maximum capacity and other exporting countries already there, simultaneous problems in two or more oil nations could create a price shock, Busch said. "For instance, if you totally stopped Iraq, no more exports out of Iraq for whatever reason ... and then you also have Venezuela imploding ... then it starts getting close to a crisis point," he said. "I would foresee the markets going mad and prices would ratchet up, but we wouldn't go cold, the wheels of commerce wouldn't grind to a halt, not for a long time," he added. Busch said OPEC nations could probably produce about 1.5 million additional barrels a day if they had to, and noted that big oil-consuming countries have large strategic reserves. Beyond that, he said, "we are up against it," and the world would have to start tapping new oil supplies, perhaps in west or north Africa or Russia."

Sabotage Costs Iraq $1 Billion in Lost Oil Revenue, Allawi Says. Bloomberg, June 20, 2004. "Iraq, the Middle East's fifth-largest oil producer last month, has lost about $1 billion in oil income during the last year as a result of sabotage to its oil infrastructure, the country's prime minister said. Attacks against pipelines and other facilities that help Iraq export oil through the Persian Gulf and Turkey will continue, Ayad Allawi said in comments distributed by the U.S.- led occupation authority. ``The pollution that has been caused to the agriculture and to the water networks has been really gigantic,'' Allawi said. Allawi was visiting a sabotaged pipeline near Karbala, south of the Iraqi capital, Baghdad, when he made the comments, which were provided by a Boston Globe journalist for a pool report. Iraq relies on oil for almost all its export revenue, which it uses to fund government salaries and reconstruction. Since resuming exports in June last year following March's U.S.- invasion, Iraq has collected almost $10.8 billion in oil revenue in its Development Fund of Iraq, set up to channel revenue from various sources. Iraq may resume exporting oil today after damage caused by sabotage to a southern pipeline is fixed, an occupation authority spokesman said. Exports through the Persian Gulf halted on Tuesday."

Iraq Oil Flow From Gulf Still Halted; North Attacked. Bloomberg, June 16, 2004."Iraqi oil exports through its two Persian Gulf terminals were halted for a second day after two pipelines were damaged. Another pipeline was bombed in northern Iraq, and the head of oil-company security there was killed. The sabotaged pipeline that helps feed the Persian Gulf terminals may ``take up to a week to repair,'' Clare Baxter, a spokeswoman for the U.S.-led occupation authority in southern Iraq, said in a telephone interview from Basra. The pipeline was attacked late Monday and exports through the terminals, which halted yesterday, haven't resumed, Baxter said. In the north, unidentified gunmen shot dead Ghazi al- Talabani, the chief of security for the North Oil Co., according to Agence France-Presse, which cited the Kirkuk police chief, Turhan Yussef. The company, a division of the Oil Ministry, is responsible for oil production around Kirkuk. The attack in the south was the second in less than six weeks that disrupted exports through the Basra and Khor al-Amaya terminals. The country relies on the platforms for almost 90 percent of its oil exports. A rocket attack in the city of Balad, north of Baghdad, today wounded 23 people, killing two soldiers, the U.S. military said. Five Iraqis and four foreigners were killed today after a bombing in the town of Ramadi, west of the Iraqi capital, Agence France- Presse reported, citing a doctor. Jabbar al-Leaby, director-general of the South Oil Co., and his deputy, Kifah Numan, declined to comment when Bloomberg News called them in Basra. Mike Stinson, the U.S.'s senior adviser to the Iraqi Oil Ministry, also declined to comment when he was called in Baghdad, the Iraqi capital. In London, Brent crude oil for August settlement added 16 cents to $35.19 a barrel on London's International Petroleum Exchange at 11:53 a.m. local time, then fell 13 cents, or 0.4 percent, to $34.90 a barrel. It reached a 13 1/2-year intraday high of $39.12 on June 1. On the New York Mercantile Exchange, crude oil for July delivery was down 11 cents, or 0.3 percent, at $37.08 a barrel as of 12:44 p.m. after rising as high as $37.67. Tankers Loading Three 2 million-barrel oil tankers had docked at the Basra terminal, Iraq's largest, while another two vessels had anchored, according to an official at the facility who declined to be identified. Shipments were halted shortly after midday yesterday. The Hampstead, a vessel chartered by Exxon Mobil Corp., the world's largest publicly traded oil company, was half full when pumping stopped. The other two tankers -- Virgo Voyager booked by ChevronTexaco Corp., and Settebello chartered for U.S.-based oil trader Bayoil -- were empty. Saboteurs also bombed an oil pipeline in the north serving Iraq's domestic needs on Monday evening, probably affecting the supply of crude to refineries, AFP reported. ``An oil pipeline connecting the fields in Kirkuk and a processing station in Bajwan, 20 kilometers (12 miles) north of the city, was sabotaged and a fire broke out,'' Adel Kazaz, a North Oil director, told AFP. Damage caused by a May 9 attack on a southern pipeline near Al Faw, which cut flows to the Basra terminal by half, wasn't fully repaired until at least nine days later. Iraqi crude exports may have declined about 11 percent last month to 1.6 million barrels a day, Stinson, the U.S. adviser to oil ministry, said in a phone interview from Baghdad on June 1."

New Attack on Oil Pipeline in Iraq, By Todd Pittman, Associated Press, Yahoo News, June 16, 2004. "Saboteurs blasted a key southern pipeline for the second time in as many days Wednesday, shutting down Iraq (news - web sites)'s oil exports, and gunmen killed a security chief for the state-run Northern Oil Co. Later Wednesday, a rocket slammed into a U.S. logistics base near the city of Balad, killing two U.S. soldiers and wounding 21 people, the military said. Balad is 50 miles north of Baghdad. The military statement did not specify whether the injured were U.S. soldiers or included civilians or others on the sprawling compound. The latest attacks at Iraq's oil sector have slowed the process of reviving its economy after decades of war, international sanctions and Saddam Hussein (news - web sites)'s tyranny. Insurgents also are targeting the country's infrastructure apparently to undermine confidence in the new government, which takes power from the U.S.-led coalition June 30. "What you are seeing here is effectively a terrorist war against Iraq's critical infrastructure, including the oil infrastructure," coalition spokesman Dan Senor told CNN... Wednesday's attack north of the town of Faw crippled two already damaged pipelines, forcing authorities to stop the flow of crude oil southward to the Basra oil terminal on the Gulf, said Southern Oil Co. spokesman Samir Jassim. Exports were halted last month through the other export avenue - the northern pipeline from Kirkuk to Ceyhan, Turkey - after a May 25 bombing, Turkish officials said on condition of anonymity. Two explosions on the southern pipeline occurred in the same area as a blast Tuesday. It could take up to a week to repair, Jassim said. In another assault on the country's petroleum industry, Northern Oil Co. security chief Ghazi Talabani was killed in an ambush while going to work in the city of Kirkuk, said Gen. Anwar Amin of the Iraqi Civil Defense Corps. Three gunmen attacked Talabani's car after his bodyguard briefly left the vehicle in a crowded market. The bodyguard was wounded. Talabani, the third Iraqi official to be killed since Saturday. was the cousin of the head of one of the two main Kurdish political parties, the Patriotic Union of Kurdistan. Kirkuk sits on some of the world's largest oil reserves. The biggest northern oil field contains an estimated 7 billion barrels of recoverable crude, putting it in the same league as Prudhoe Bay, Alaska, during its heyday in the 1970s. Saboteurs also blasted a northern oil pipeline about midnight Tuesday near the town of Dibis, some 20 miles west of Kirkuk, said Northern Oil official Mustafa Awad. The Dibis attack did not disrupt exports and the fire was extinguished, Iraqi oil officials said Wednesday. Iraq's southern pipeline has been its main export artery ever since the U.S.-led invasion. Repeated sabotage attacks have forced Iraqis to curtail oil shipments in the north, and most of Iraq's crude exports now come from the south. OPEC president Purnomo Yusgiantoro said Wednesday he would ask major oil producing countries who don't belong to the cartel - such as Mexico, Oman, Angola and Russia - to boost output to compensate for the loss of Iraqi exports. However, the director of Russia's Federal Energy Agency rejected the call, saying Russia did not have enough spare capacity, the Interfax news agency reported. Although Iraq's reserves are huge, it is not a major player in global energy markets and a short-term interruption won't have a major effect. That could change if insurgents continue to interrupt Iraq's exports. Pipeline sabotage, however, "has a large psychological effect on the markets and leads to higher prices," independent economist Jassem al-Saadoun told The Associated Press."

Chemical Fire Erupts at Israeli Refineries in Haifa Port City. Associated Press, ABCnews.com, June 16, 2004. "A chemical fire erupted Wednesday after several explosions were heard at an oil refinery in the Israeli port city of Haifa, but there was no immediate indication of foul play, Israel police said. Israel Police spokesman Raanan Stolobiski said the fire had been put out. Eleven people were injured, he added. A fire erupted last week at the same refinery, and Israelis who live in the area are concerned about the environmental dangers caused by the chemical plants. Explosions in Israel often cause anxiety that a Palestinian suicide bomber or other attacker has struck. On several occasions, bus tires blowing out or airplanes breaking the sound barrier have caused panic. Twin Palestinian suicide attacks at the Ashdod seaport in March caused Israel to increase security at sensitive locations including chemical plants and other ports, such as the one in Haifa. Ten people were killed in the Ashdod bombings. In May 2002, a mine attached to a tanker truck blew up at Israel's huge Pi Glilot fuel depot outside Tel Aviv. The explosive failed to ignite the fuel in the truck and caused little damage. This week the depot, near Tel Aviv, was closed because of the potential danger to the heavily populated surrounding area."

Gunmen Kill Senior Iraqi North Oil Official. Reuters, ABCNews.com, June 16, 2004. "Gunmen killed a senior official in Iraq's North Oil Company on Wednesday, dealing another blow to the country's oil industry. Iraqi police said gunmen opened fire at Ghazi Talabani's car with automatic rifles as he drove to work, killing him and seriously injuring his driver. Talabani, a Kurd, served as a senior adviser to the North Oil Company, which runs Iraq's main Kirkuk oil fields. His portfolio included security for northern oil infrastructure. Al Jazeera television had earlier identified Talabani as the head of security for the Kirkuk oil fields. Saboteurs bent on disrupting Iraq's post war recovery have been blowing up oil pipelines in the region and assassinating oil and other officials since the U.S. led invasion last year. On Tuesday, an explosion ripped through a crude oil pipeline linking northern Iraqi fields. Saboteurs blasted an oil pipeline feeding storage tanks at the southern city of Basra in the Gulf, cutting most exports. Sabotage attacks on the main export pipeline from the northern Kirkuk fields to Turkey forced pumping to stop earlier this month. Saboteurs also blew up two oil wells in April. International oil prices surged a dollar a barrel following news of the attack in the South."

Iraq 'aims to increase oil flow'. BBCNews.com, June 15, 2004. "Iraq is struggling to reopen its refineries. Iraq's newly appointed oil minister, Thamir Ghadbhan, has said his country aims to export two million barrels of crude oil a day soon. Mr Ghadbhan said the interim Iraqi government has earmarked $800m to spend on rebuilding oil infrastructure. It also plans to expand the existing 14,000-strong security force protecting oil installations, he said in an interview with Reuters news agency. Iraq has the second biggest proven reserves of oil, at 112.5bn barrels. But years of neglect and underinvestment under UN sanctions imposed during ex-president Saddam Hussein's rule have crippled Iraq's output. Since he was deposed by US-led troops, Iraq's new rulers have struggled to regain pre-war output levels of 3 million barrels a day as militants have waged a campaign of attacks on pipelines. "We have a force of 14,000 people and we are expanding it. If things go well we want to sustain an export figure of two million barrels per day in the coming months," said Mr Ghadbhan, who has spent 30 years working in Iraq's oil industry. A further 800,000 barrels of oil a day are needed for Iraq's domestic needs, as demand is rising rapidly, he said. Mr Ghadbhan is part of the interim government which will take over from the US-led coalition on 30 June, paving the way for elections in January 2005. "The number one challenge is security for the whole country. Number two is that we have to avoid facing the crisis of the availability of products locally," said Mr Ghadbhan. Local demand for petrol is soaring because of a "huge influx" of imported cars, so the oil ministry is "taking measures to get our refineries working in proper conditions," said Mr Ghadbhan. Difficulties restoring the flow of oil from Iraq have disappointed Western hopes that its reserves help bring down global prices. Instead, instability there has become a factor in pushing oil prices to record highs. Although Iraq is a member of Opec, its oil exports are not counted as part of Opec output. During the years of sanctions, Iraq was only allowed to sell oil abroad as part of the UN's oil-for-food aid programme, suspended in November 2003. At present, any money earned from oil sales is paid into an account at the Federal Reserve Bank of New York controlled by the US. Iraq is expected to take control of the funds after the 30 June handover. The new government is lobbying the UN to abandon a 5% levy on oil revenue to cover war reparations imposed alongside sanctions. Iraq has exported $9bn-worth of oil since the US-led invasion last year."

Attacks cripple Iraq oil exports. BBCNews.com, June 15, 2004. "Sabotage attacks on a southern Iraqi oil pipeline have sharply reduced oil exports, the oil minister says. Thamir Ghadhban said blasts on Monday and Tuesday had damaged a pipeline from the southern oilfields - severing the flow to the Basra oil terminal. It was the second attack on the Basra terminal - one of the few operational outlets - in just over a month. It comes two weeks before the US-led coalition is due to hand over power to an interim Iraqi government. The latest attack effectively stopped the flow of crude through Iraq's main export route - reducing it by as much as two-thirds. Ninety percent of Iraqi government revenues comes from oil, and the flow of funds is essential to pay for the country's reconstruction, says BBC business reporter Mark Gregory. "There were two sabotage cases," Mr Ghadhban was quoted as saying. "After the sabotage attack, oil workers tried to use an alternate pipeline, but it could not support the pressure because it was an old installation dating back to the 1970s," said Captain Mowayad Hashem, according to the Associated Press news agency. "After that, exports stopped from Basra oil terminal and Khor al-Amaya." It is estimated that repairs to the pipeline will take up to 10 days and cost $60m a day unless deliveries are resumed. Recently crude exports have been running at around 1.7m barrels of oil a day - that figure has now been cut by as much as two thirds. Officials recognise there is now no chance of meeting a target of pumping two million barrels a day in time for the transfer of sovereignty at the end of June, our correspondent says. Iraqi oil exports are still below the pre-war level, even though a 14,000-strong Iraqi guard force has been set up specifically to protect pipelines and other vital parts of the oil infrastructure from attack, he says. The Basra terminal, together with the smaller Khor al-Amaya terminal, in southern Iraq jointly export 1.6 million barrels daily. According to Iraqi Prime Minister Iyad Allawi, pipeline sabotage has cost the country more than $200m in lost revenues over the past seven months. Mr Allawi recently blamed foreign militants opposed to the survival of Iraq for the attacks. Iraq's oil exports are exceptionally vulnerable because there are only two main routes for crude to leave the country, including the pipeline from the northern oilfields around Kirkuk to Ceyhan in Turkey - that has barely been in operation since the war thanks to repeated sabotage. Traders on the global oil markets have come to expect the resumption of Iraqi oil exports to be slow and subject to endless disruption, our business correspondent says. But any sign of trouble in the volatile Middle East tends to make the markets jumpy - the latest pipeline attack in Iraq prompted an immediate spike in the price of crude, he says."

4 Foreign Contractors Die in Ambush; Blast Shuts Oil Port. By Edward Wong, New York Times, June 15, 2004. "... The overnight bombing of a set of oil pipelines near the Persian Gulf forced the shutdown of Iraq's main oil export terminal for up to 10 days, potentially costing the country $600 million in revenue. The sabotage was the most devastating attack so far in a recent series of ambitious infrastructure assaults clearly intended to paralyze the country...

Oil Rally on Iraqi Blast Fizzles Out. By Barbara Lewis, Reuters, ABCNews.com, June 15, 2004. "Oil prices fell on Tuesday as traders took profits from a rally spurred by a blast near Iraq's main export terminal that cut exports to a virtual standstill and underlined the risk of supply disruption in the Middle East..."

Saboteurs Blast Iraq's Oil, Test Government. Reuters, Yahoo News, June 15, 2004. "Insurgents stepped up pressure on Iraq's new interim government on Tuesday with another blow to the vital oil industry just two weeks before a formal end to the U.S. occupation. Oil Minister Thamir Ghadhban confirmed saboteurs blasted an oil pipeline feeding storage tanks at Basra in the Gulf, cutting exports by a third. "There were two sabotage cases," he told Reuters... Shippers in the region said crude export rates had fallen below 500,000 barrels per day (bpd) from about 1.7 million, another setback to efforts to boost export revenues vital for Iraq's postwar reconstruction. Some later said exports from Basra were halted and an Iraqi industry official said repairs could take seven to 10 days....

Pentagon, Ex-Workers Hit Halliburton on Oversight, Costs. By T. Christian Miller, Los Angeles Times, June 15, 2004. "Halliburton Inc. was hit Monday with some of the sharpest criticism yet of its work in Iraq and Kuwait, as government auditors faulted its control over subcontractors and whistle-blowers alleged massive overspending. The Pentagon's Defense Contract Audit Agency found that Halliburton's system of billing the government for billions of dollars in contracts was "inadequate in part," failing to follow the company's internal procedures or even to determine whether subcontractors had performed work. At the same time, four former Halliburton employees issued signed statements charging that the company had routinely wasted money. Among other things, they said the company had paid $45 apiece for cases of soda and $100 per bag of laundry, and had abandoned nearly new, $85,000 trucks in the desert for lack of spare parts... [Rep. Henry] Waxman's demands followed his statement Sunday that political appointees, not procurement experts, had recommended in the fall of 2002 that Halliburton be awarded a contract to plan the postwar reconstruction of Iraq's oil industry. Pentagon officials confirmed that account. Halliburton won a secretly negotiated contract worth as much as $7 billion to carry out the reconstruction effort. However, no evidence has been presented that Cheney influenced the awarding of contracts to his former company... The defense audit is the latest to find fault with Halliburton's practices. Earlier audits concluded that the company overcharged more than $27 million for meals at dining facilities in Iraq, a finding Halliburton has disputed. It also found potential overcharges of up to $61 million for gasoline costs... "

U.S. Marines Kill More Than 80 Militants in Three-Week Anti-Taliban Offensive in Afghanistan. Associated Press, ABCNews.com, KABUL, Afghanistan June 12, 2004. "In the bloodiest fighting this year, U.S. Marines killed more than 80 insurgents in a three-week offensive against a Taliban stronghold in the mountains of southern Afghanistan, the military said Saturday. The U.S. military insisted the battle was a victory that will help secure fall elections rather than a sign of the resilience of Taliban-led militants Two Marines were wounded in the fighting, the military said. "The Marines have been aggressive, relentless and successful," U.S. military spokesman Lt. Col. Tucker Mansager said. "They have demonstrated that there is no refuge for the terrorists." Some 2,000 Marines were sent to Afghanistan this spring, swelling the U.S.-dominated force to 20,000 its largest yet in an attempt to put rebels on the defensive ahead of September elections.... Seven U.S. serviceman have been killed in southern Afghanistan since early May including four when a mine ripped through their Humvee and dozens of Afghan soldiers have died in the region this year..."

Iraq's Power Woes Becoming Pressing Issue, By Todd Pitman, Associated Press, Guardian (UK), June 11, 2004. "Power pylons toppled. Fuel pipelines blown apart. Foreign engineers gunned down and yanked out. Insurgents are stepping up attacks on Iraq's fragile infrastructure even as the U.S. pumps in billions of dollars to rebuild it... Restoring stable electricity supplies is widely considered a benchmark of progress for Iraq's American rulers since they toppled Saddam Hussein's regime in April 2003... On June 3, the U.S. Army Corps of Engineers resuscitated a turbine at northwest Iraq's 660 megawatt Haditha hydroelectric dam, marking the first time it operated at full power since 1990. A few days later, insurgents bombed a pipeline fueling the 700 megawatt Musayyib power plant south of Baghdad, cutting its capacity in half, said Hamid al-Suri, an Electricity Ministry spokesman. Saboteurs struck again Wednesday in central Iraq, blowing up another pipeline at Beiji, forcing a 10 percent cut on the national grid... Iraq's interim Prime Minister Iyad Allawi condemned the violence, saying such strikes had ``caused a nationwide loss of power of more than four hours per day.'' He said saboteurs have attacked vital oil pipelines 130 times in the last seven months, causing hundreds of millions of dollars in damage and lost revenues, and were increasingly targeting infrastructure. Guerrilla fighters have also targeted foreign experts the coalition has contracted to help carry out technical repairs and bring in badly needed spare parts. Last month, guerrillas ambushed Russian engineers at Musayyib, kidnapping two and killing one. At Baghdad's Dora power station on May 26, masked gunmen fired automatic weapons at a bus taking Russian technicians to work, killing two and an Iraqi. The violence prompted Moscow-based Interenergoservis to pull out all its 241 employees - including 70 at Dora. Only ``five or six'' technicians from the German company Siemens are left, according to chief engineer Bashir K. Omir... raqi authorities have deployed about 6,000 ``electricity police'' to guard key sites over the last three months to prevent the sabotage, al-Suri said. But a senior coalition official said attacks were lately ``more spectacular and aggressive.''...

Iraq: Controversial Commando Wins Iraq Contract to Create the World's Largest Private Army. Corpwatch news release, June 10, 2004.

Three weeks before Iraq is to be handed over to a new government, the United States led occupation has quietly awarded a contract to create the world's largest private army to a company headed by Lieutenant Colonel Tim Spicer, a former officer with the Scots Guard, an elite regiment of the British military, who has been investigated for illegally smuggling arms and planning military offensives to support mining, oil, and gas operations around the world.

In an exclusive four part series published today on CorpWatch's award-winning website, managing editor Pratap Chatterjee reveals the details behind a $293 million "cost-plus" contract to Aegis Defence Services of London, to create an "integrator" or coordination hub for the security operation for every single reconstruction contractor and sub-contractor throughout Iraq.

There are currently several dozen groups Iraq that provide private security to both the military and the private sector, with more than 20,000 employees altogether. The companies include Erinys, a South African business, that has more than 15,000 local employees charged with guarding the oil pipelines; Control Risks Group, a British company that provides security to Bechtel and Halliburton; and North Carolina-based Blackwater Consulting, which provides everything from back-up helicopters to bodyguards for Paul Bremer, the American ambassador in charge of the occupation

The military will pay all of Aegis' expenses, plus a pre-determined percentage of whatever they spend, which critics say is a license to over-bill. The company has also been asked to provide 75 close protection teams--comprised of eight men each--for the high-level staff of companies that are running the oil and gas fields, electricity, and water services in Iraq.

Analysts like Peter Singer, author of Corporate Warriors: The Rise of the Privatized Military Industry and a fellow at the Brookings Institution, a liberal think tank in Washington, D.C., say that the news took them by surprise. " It's like a blast from the past, like I took a leap back into the time-machine to the late '90s," said Singer. "To be honest, though, I am doubtful that the folks awarding the contract had any sense of Spicer's spicier history."

Spicer was the chief executive officer for Sandline, which first made the headlines in the British media when Spicer was jailed in Papua New Guinea in 1997 for attempting to mount an invasion of the island of Bougainville and later for this role in smuggling arms to Sierra Leone in 1998 in violation of a United Nations embargo.

The CorpWatch series includes the story behind the creation of Aegis, Tim Spicer's new company, and three background stories including one on Spicer's life, one on how a number of companies run by ex-British commandos control the most lucrative security contracts in Iraq and a look at one of the commandos: Major General Jeremy Phipps and his fall from grace from an embassy hero to a racing disgrace.

View the articles at: Controversial Commando Wins Iraq Contract - Ex-SAS Men Cash in on Iraq Bonanza - Give War a Chance: the Life and Times of Tim Spicer - From Embassy Hero to Racing Disgrace

Fear Enters the Pipeline of Saudi Oil Industry, By Megan K. Stack, Los Angeles Times, June 5, 2004. "In the desert washes where Americans first found this kingdom's black gold, Saudis scrambled this week to harden their defenses. New security checkpoints cropped up at the edge of the vast tangles of steel in the oil fields. Makeshift sniper nests appeared around town. A Saudi magnate logged on to an Israeli settler website for a few tips on home fortification. Last weekend's carnage by suspected Islamic militants in the nearby petrochemical hub of Khobar drove the price of oil to a new high and laid bare an uncomfortable truth: The world oil market depends heavily on a calm that seems to be vanishing in this volatile desert kingdom. Many people here believe that after years of threats, a struggle aimed at wrecking Saudi Arabia's storied oil industry has begun. The nature of the violence has morphed; suicide bombings at housing compounds in Riyadh gave way to two major shooting rampages at oil companies last month. Workers are no longer rattled or nervous - they are scared. Saudi stability once seemed a relatively safe bet; now analysts are questioning the security of the kingdom's oil facilities and the tight grip of its ruling family. After gunmen killed 22 people last weekend, then vanished into a neighborhood swarming with Saudi commandos, official explanations were tinged with inconsistencies and marked by inexplicable security lapses...Wrapped in layers of fencing, barbed wire and hydraulic barriers, watched with cameras and night-vision goggles, Aramco's oil facilities are monitored by more than 5,000 guards. Backed by Saudi troops, armed guards patrol on foot, in cars and in the sky. "You'd need a nuclear power," said Ibrahim Muhanna, advisor to the petroleum and mineral resources minister. "To damage the biggest oil facilities you'd need to come from the sea, like only the U.S. is capable of." But even if the kingdom's heavily fortified network of pumping stations and ports prove immune to assault, there is a soft spot: The workers. About 6 million foreign engineers, software experts, schoolteachers and cooks live in Saudi Arabia, and they keep the oil business humming... The kingdom has responded to many a global crisis by increasing production - during World War II, the Korean War, the Iranian oil cutoff, the Iranian revolution and the 1991 Persian Gulf War. On Thursday, OPEC agreed to raise production yet again after prodding by an insistent Saudi Arabia. But terrorism has its price, and in the case of oil, it's not a small one. Analysts say fear alone fattens the price of a barrel of oil by $4 to $10. Even before last weekend's attacks, the suspicion that Saudi Arabia might not be able to protect its oil from sabotage was driving prices to new heights. This week, the price peaked at a record $42 a barrel... But it's precisely the oil industry - and the royal family it supports - that Saudi Arabia's radical Islamists yearn to destroy. The insurgents deride the government, which they deem apostate, for cooperating with the United States while growing fat on oil profit. There are only two recipes for immediate disaster in Saudi oil, and few analysts think either one is likely. A cataclysmic strike on a key oil facility, particularly the massive refinery in Ras Tanura, could clog production for months. The spasms of suicide bombings and shootouts could grow strong and fast enough to break the hold of the ruling family, leaving a vacuum or allowing for the creation of a regime hostile to the United States, which would endanger the flow of oil. The second threat seems particularly improbable. The Saudi regime is under pressure and divided, but it's still strong, diplomats say. The real threat is terrorism - and thanks to the extreme secrecy of the Saudi regime, the depth and strength of the insurgency remains hidden behind a flurry of government statements..."

Saudis say oil industry 'secure.' BBC News, June 2, 2004. "The Saudi authorities say that Islamic militants chose the wrong target by attacking the kingdom's oil industry. A senior government adviser said recent attacks showed terrorists were trying to damage the industry by scaring away foreign workers. Adel al-Jubeir said militants' aim was to undermine the economy and bring down the Saudi government, but said such a strategy would not succeed... Mr Jubeir said: "The oil installations are very, very secure."... The official American advice remains for US citizens to leave the kingdom while Britain says travel to Saudi Arabia is to be avoided if at all possible, predicting that more attacks are on the way..."

The Politics of Petroleum, Part 3: Riding Shotgun on a Pipeline. By T. Christian Miller, Los Angeles Times, May 16, 2004. " Last fall, the United States and Colombia launched an extraordinary military operation that sent thousands of troops into Arauca, a remote region of this South American country plagued by warring rebel factions and the cocaine trade. By outward appearances, Operation Red Moon opened a new front in the two countries' long war on drugs. This time, however, the fight also was over oil. U.S.-trained Colombian troops, backed by U.S. intelligence and private contractors, unleashed the offensive to stop rebel attacks on a pipeline that Los Angeles-based Occidental Petroleum Corp. depends on to transport oil. They also had another goal, company officials said: secure an area deep in the heart of rebel territory so Occidental could explore a new field believed to hold 20 million barrels of oil. The three-month campaign was carried out under a little-noticed shift in U.S. policy in Colombia after the Sept. 11 attacks. The United States had previously confined its role in Colombia to battling drugs. But with the Bush administration urging a global war on terrorism, Congress lifted restrictions on counterinsurgency aid to allow the U.S. to help Colombia fight its leftist groups, who are listed by the State Department as terrorist organizations. Arauca and its oil were the first big test of the new policy. The U.S. regarded the hundreds of millions of dollars in royalties Colombia received from Oxy's oil operations as vital to shoring up its ally. Colombia's stability, in turn, was seen as crucial to a region that had become one of the most important and reliable sources of U.S. oil imports. Latin America -- including Mexico -- long ago surpassed the volatile Middle East as the No. 1 supplier of oil to its northern neighbor... Oxy pumps nearly 100,000 barrels of oil per day through it, a black stream worth about $3 million a day on the world market. Colombia says the money from the pipeline is crucial to helping defeat insurgents. Through its revenue-sharing arrangement with Oxy, Colombia gets about $500 million a year for its treasury, about 5% of the country's annual budget... The perception among many in Colombia is that Washington stepped in to benefit a U.S. company, and that has raised cries of Yankee imperialism. Critics of the program question why the State Department recommended funding to protect only Oxy's pipeline -- not a pipeline carrying oil from British-owned BP or pipelines controlled by Colombia's state-run oil company, Ecopetrol. State Department officials respond that BP's pipeline is not attacked frequently, and that Ecopetrol's pipeline generates only a fraction of the revenue that the Oxy pipeline does.. In 1983, Occidental discovered one of the world's biggest oil fields, Caño Limon, which held about 1.3 billion barrels of high-value medium crude. Money generated by the oil field flows not only to Oxy and the Colombian government, but also back to Arauca. The province received $60 million to $80 million a year in royalties, suddenly making one of the country's poorest provinces into the wealthiest per capita. Not much wound up in the hands of locals. But those riches became a treasure chest for the ELN rebel group, an organization whose Spanish initials stand for the National Liberation Army. The ELN, a small army of about 3,000 fighters created in 1964, was inspired by Fidel Castro's revolution in Cuba a few years earlier. But by the early 1980s, the Colombian army had almost wiped it out. Then Occidental and the pipeline contractor began funneling money, jobs and food to the group to buy its cooperation, according to Colombian law enforcement and locals who participated in some of the deals. It is estimated, all told, that millions flowed to the ELN in the early years of operations. The rebels used the money to gain new recruits and weaponry. In effect, Occidental rescued the group that later turned against it. Oxy today denies acceding to any extortion demands..."

The Politics of Petroleum, Part 2: Gusher to a Few, Trickle to the Rest. By Ken Silverstein, Los Angeles Times, May 13, 2004. "Courted by oil firms and the U.S., the elite of impoverished Angola have extracted wealth from the boom, documents say."

The Politics of Petroleum, Part 1: Oil Adds Sheen to Kazakh Regime. By Ken Silverstein, Los Angeles Times, May 12, 2004. "Some of Washington's top political consultants traveled to this city in the summer of 1998 to huddle with Kazakh President Nursultan Nazarbayev. Their daunting mission: Convince the world that his oil-rich, authoritarian regime..."

Saudi Arabia gives assurance of security at Energy Forum. Saudi Economic Survey, Alexander's Gas and Oil Connections, May 4, 2004. "The governor of Saudi Arabia's Eastern Province sought to reassure energy executives gathered in the region that the country would not be deflected from developing its huge gas reserves by militant strikes in the past year. Delivering the keynote address at the First Saudi Arabian International Gas Conference at the Eastern Province Chamber of Commerce and Industry in Dammam, Eastern Province Governor Prince Muhammad bin Fahd gave this assurance..."

The Warri killing. Vanguard Media, May 2, 2004."The first Western traders who rode on the wave of adventure across the Atlantic ocean to make contact with the Warri people in the 14th century, if they were alive, would have been stunned by the news from the region earlier. The early Portuguese traders came marrying and giving in marriages while trading all sorts of goods in relative ease.
But their 21st century descendants were in hopeless gloom as the on-again-off-again Warri crisis was for the first time directed at them. The news of the murder of seven oil workers and naval personnel by yet unidentified looters operating in the Benin River, in the Niger Delta region, is the latest in the spate of violence that has visited the region.
Among those killed were two United States employees of International Business Systems, an American contractor company to ChevronTexaco Nigeria, the major oil producer in the Western Niger Delta. Their killing has inevitably drawn international anger, particularly from the United States, which is reportedlypilling pressures on the Federal Government to bring the murderers to book.
The fury from Uncle Sam adds to the bitterness of the Nigerian Navy which lost two naval personnel who served as escort during the attack on the oil workers on April 23. Also seething with yet ''unexploded rage'' is President Olusegun Obasanjo, who besides wallowing in the indignity of having his international status beclouded by the incident, is also counting the economic loss arising from the incident.
The stress in the region, has led to ChevronTexaco abandoning plans of reopening six oil fields that have been closed since March 23, 2003 at the height of the ethnic violence between the Ijaws and Itsekiris, the two dominant ethnic nationalities living in the creeks and coastal regions of Warri.
The closure of the fields means continued loss of at least 140,000 bpd of oil. Besides, 285 mm cf of gas can not be exported from the country's first gas processing facility in Escravos, Warri. The Americans, Denny Fowler, from Dallas Texas and Ryne Hathaway alongside the yet unidentified Nigerians were on their way to inspect the Olero creek and Dibi flow stations in the Benin River, preparatory to re-opening when they were suddenly attacked by the looters.
In March 2003, following persistent agitations against the company and the intermittent conflicts between Itsekiri and Ijaw militants, the company had voluntarily closed down its producing fields in Abiteye, Otunana, Makaraba, Dibi, Olero Creek and Opuekeba. Part of the underlying agitation then, were demands from the two major ethnic groups in the region, the Itsekiris and Ijaws on ChevronTexaco to carry out its social responsibility functions on its environment.
In July 2002, hundreds of women from both tribal groups had taken control of the Escravos pumping stations, trapping more than 700 expatriate and local staff in the massive facility from where Chevron pumps out its crude for international distribution. As that siege ended on the tenth day, following concessions from ChevronTexaco management including a party for the women who were lauded for not destroying sensitive oil equipment, another siege was staged on four ChevronTexaco stations, but this time, by native Ijaw women from around the area.
That siege, which like the first women action, drew international focus, again ended with some concessions from the company management. Following intermittent clashes between the Itsekiris and the Ijaws which peaked in March, 2003, the company on March 23, shut-in all its oil production in the Western Niger Delta, cutting off 440,000 bpd from the country's oil production.
Defending the closed down as a last resort for the safety of its personnel, Mr Jay Pryor, Chevron Nigeria Managing Director, said:
"The safety of people is our absolute priority and is the reason for our decision to shut in production and relocate our people and community members displaced by the crisis to safe locations. While we do not believe the unrest is directed towards CNL people or assets, we do not consider it safe for our people to remain in the Western Niger Delta, given the current situation."
On April 4, 2003 following reassurances from the highest authorities in Nigeria, the company resumed operations at the pivotal Escravos station allowing an estimated 310,000 barrels of oil to be produced and another 150 mm cfpd of gas. However, while production resumed in most of the other areas of the Western Niger Delta, production in six fields including Abiteye, Otunana, Makaraba, Dibi, Olero Creek and Opuekeba were put on hold.
All six fields accounted for 140,000 bpd of oil. The company's return to the area had until recently been hindered allegedly, by the conflicting demands of ethnic militants in the region. Activists of the two major ethnic groups in the area had wanted to gain ascendancy over each other in drawing attention to themselves from Chevron.
Actions seen as favouring a rival ethnic group were immediately frowned upon by the rival group. Indeed, there were suppositions that militants of one of the ethnic groups had vowed that it would use every force to ensure that the stations were not re-opened, believing that the attempt to re-open was because militants from the other group had been compromised.
In February, 2004 after eleven months of voluntary closure, Chevron took the initial steps to reopen operations in the five fields, when company staff in the company of the Delta State Governor, Chief James Onanefe Ibori embarked on a tour of Abitiye field.
After the visit to the Abitiye flow station on February 11, Chevron announced its readiness to resume operations in all remaining stations following reassurances by both the Delta State government and the Federal Government that it had brought security under control.
Indeed, to buttress the security situation in the area, the Nigerian Army in conjunction with the Nigerian Navy had set up a Joint Security Task Force dubbed Operation Restore Hope, which was mandated to ensure security of lives and property in the region. But not all would agree that the violence in the region was inspired by ethnic cleavages.
Ms Temi Harriman, who represents the three Warri local governments in the House of Representatives pointed at the activities of criminal gangs, who she alleged had seized opportunity of the ethnic battles to carry out their activities. She particularly lamented the activities of illegal bunkerers and sea pirates who perfected their operations under the cover of lawlessness that operates during ethnic agitations. While affirming the historical deprivation of the people of the oil rich region as one of the causative factors of the violence in the region, Ms Harriman observed that the attack on the Chevron staff could indeed be criminally motivated.
"The historical cause and the symptoms have been evident in the last couple of years with the onset of democracy when people have been actually free to express themselves and often in a very negative manner out of frustration. However, the current problems I think, are due also to illegal activities of bunkerers who are taking advantage of legitimate grievances of suffering people. So, there are illegal activities going on, so there is a criminal element in this matter as well. Pirates are operating with reckless abandon in the area, it must be stressed that the criminal activities are escalating, making the city inhospitable to business and leaving the inhabitants of the area economically impoverished," she said.
Testimony to Ms Harriman's assertion was given last November when the Nigerian Naval Ships, NNS Nwoama and Kyanwa operating as part of Operation Safety Valve intercepted eight vessels caught illegally lifting Nigerian crude. Among those captured in the vessels allegedly already carrying 142 mm barrels of Nigerian crude were 94 crew members including 57 foreigners amongst whom were 18 Russians, 15 Poles, 3 Romanians, 2 Georgians and 4 Sri Lankans.
The capture of the vessels immediately gave credence to the involvement of Nigerian men of power and influence in the illicit deal, as many wondered on the capacity of ordinary Itsekiri or Ijaw militants to procure the ocean going vessels used for the illegal crude extraction. Human Rights Watch, the US based human rights agency which monitors civic rights across the world said as much in its 29 page report on Nigeria last year.
The report which documents how money procured from illegal oil activities were siphoned into the political process Mr Bronwen Manby, Deputy Director of the Africa Division of Human Rights Watch and the author of the report said,
"The people of the Niger Delta have suffered horribly from living amid the source of Nigeria's wealth. And the perpetrators get away with these crimes without even the faintest chance of being brought to justice."
According to the report, about 10 % of Nigeria's crude oil production rakes in about $ 1 (N 135 bn) annually for the illegal bunkering operators.
"Although the violence has both ethnic and political dimensions, it is essentially a fight over the oil money, both government revenue and the profits of stolen crude," Manby said as he called for more government accountability to check the leakages.
Senator James Manager (PDP, Delta South) who represents the Warri area in the Senate while shying away from directly apportioning blame for the nefarious killing of the Americans excused his constituents, pointing at a hidden agenda by mischief makers.
"It will be premature at this level for one to say that it is connected to ethnic violence that is going on over there. Certainly it cannot be for economic reasons. So it must be a set of malicious, mysterious group of people that must have carried it out. Certainly nobody is doing this on behalf of the people. I want to say categorically that criminals are at work in the environment and must be brought to book," he told.
With the Americans breathing down on his neck, President Obasanjo has had to do same on the security forces, sending the army chief and the naval chief to the region ofthe killing. The need for high level intervention into the issue was reinforced when security agents investigating the murder themselves came under heavy gun fire in Ogheye Creek, not far from the Olero creek where the seven people were killed.
In the resulting gun duel that reportedly lasted two hours, two of the attackers were killed. With security operative reportedly being helped by American operatives in the investigations, division is said to have arisen among Nigerian officials involved in the investigations.
The Delta State government has branded the attackers as pirates, while security operatives of the Joint Task Force, whose men were killed in the penultimate attack allege that the killers are native militant youths from the area. With such crisis of confidence, it was not unexpected that the US government would bring more pressure to bear on President Obasanjo to find the killers.
For a President who is not unabashed about protecting the dignity of the military and indeed his own international reputation, the challenge facing him could indeed be ominous for the Niger Delta region and hence, the soft advise from their representative, Ms Harriman, that they should actively assist the security agents in the search for the culprits. That is if they are not really in Abuja!"

Americans Killed In Saudi Attack. CBSNews.com/AP, May 1, 2004. "Gunmen opened fire Saturday at an oil refinery co-owned by Exxon Mobil and the Saudi company SABIC in northwestern Saudi Arabia, killing at least three Americans, two Britons, an Australian and a Saudi, company officials and diplomats said... Interior Ministry officials said three attackers also were killed. The attack killed at least three American engineers working for oil services company ABB... The Saudi Interior Ministry said three suspected terrorists and several Saudis and foreigners were killed in the shooting... The assailants fled into residential neighborhoods of Yanbu and commandeered cars, "but security forces were able to kill three of them and injure and capture the fourth."... The last attack that killed Americans in Saudi Arabia was in May 2003, when eight Americans were among 34 people killed in a series of coordinated suicide bombings in the capital, Riyadh... Saudi Arabia relies heavily on 6 million expatriate workers, including about 30,000 Americans, to run its oil industry and other sectors. The Yanbu region is home to oil refineries and petrochemical plants that employ many foreigners...."

U.S. Troops Pull Back, Bomb Falluja on Bloody Day. By Fadel Badran, Reuters, ABCNews.com, April 29, 2004. "U.S. Marines eased their grip on Falluja on Thursday, but details of a deal with former Iraqi army officers remained sketchy and new air strikes on the besieged city showed a month-old insurgency was not over. On another bloody day in the bloodiest month for U.S. troops in Iraq, 10 soldiers were killed -- including eight by an apparent suicide car bomber -- in attacks around Baghdad. Within hours of Marine officers and Falluja's police chief saying troops were pulling back from some siege positions around the Sunni bastion west of Baghdad, U.S. warplanes again pounded districts where as many as 2,000 guerrillas are holed up. As darkness fell, gunfire crackled across streets where ambulances raced to the scene of the bombings. Doctors say about 600 people have been killed since Marines encircled the city at the beginning of April after the killing of four American security guards, whose bodies were then mutilated in public.

U.S. Planes Strike Fallujah Targets. FoxNews.com, April 29, 2004. "Ten U.S. soldiers were killed in Iraq - eight of them in a car bomb explosion south of Baghdad... The death in the roadside bombing Thursday raised to 117 the number of U.S. servicemembers killed in April, the bloodiest month for U.S. forces in Iraq. At least 725 U.S. troops have died in Iraq since the war began in March 2003. Up to 1,200 Iraqis also have been killed this month..."

Many Iraqi pipeline attacks go unreported. UPI, Alexander's Gas and Oil Connections, April 27, 2004. Insurgent attacks on Iraq's oil infrastructure, added to the damage caused by US forces during the war last year, are helping to cripple economic and other reconstruction efforts in that strife-torn country, US intelligence officials told. The result is that Iraq's oil production, which was projected by the Bush administration to double and be used to pay for the costs of the war, has not served that purpose because exports are down from 2.5 mm bpd to around 1.5 mm bpd, according to these sources.
Deputy Defence Secretary Paul Wolfowitz has disputed this. In recent congressional testimony, he declared, "Today Iraqi oil revenues go to the Development Fund for Iraq, where it helps to build new infrastructure and a new future for the Iraqi people." And he gave the current Iraqi export level as 2.5 mm bpd, or "pre-war levels."
"Simply not accurate," said Gal Luft, director of the Institute for the Analysis of Global Security and publisher of the online newsletter, Energy Security. "Iraq's oil exports are not up at pre-war levels because of incessant pipeline attacks."
He said that the prevention of pipeline sabotage has been a top priority of the Coalition Provisional Authority and that currently about 14,000 security workers have taken up positions along important pipeline routes or critical oil installations. Contract security workers are equipped with the latest electronic motion sensors, advanced surveillance equipment, night vision equipment, and that mobile security patrols have increased "six-fold." None of this is working, he said.
Luft provided a list of some of the sabotage onslaughts. Beginning with June 12, 2003, there were attacks on a pipeline near Kirkuk that carries oil to the Turkish port of Cayhan on the Mediterranean; on June 19, an explosion at the Bayji refinery complex about 125 miles north of Baghdad; on June 24, an explosion near Barwanah that carries crude oil to the al Dawrah refinery.
In August last year, there were three very damaging attacks, two near Bayji,according to Luft's data. On Sept. 8, an attack ripped through a pipeline from the Jabour oil field 20 miles from Kirkuk to the main originating pipeline, according to the data.
The list, by no means complete, reports 35 major and severely damaging attacks from June 12 to the end of the year and gives a total of eight major attacks from January 2004 through April, a major attack taking place on March 25, when there was a blast at the main oil well in northern Iraq that feeds exports through Qazzaz, a chief installation of the Northern Iraqi Oil Company that caused "massive damage," according to a company official quoted by Luft.
An executive of Hess Oil confirmed this: "These security arrangements of ours aren't working, nor are they preventing sabotage. The pipelines remain very vulnerable, and the attacks on pipelines simply aren't being reported."
In fact, Luft claimed that the pipeline attacks are on the increase. After staging more than 100 major attacks on pipelines in northern Iraq, terrorists last month began to hit pipelines in southern Iraq, near Basra. Another problem besetting the system is the slowness on the part of US authorities in repairing wartime damage to the system, according to US intelligence officials. The Hess executive claimed that in April of last year, US Air Force planes bombed the Al Fatha Bridge over a tributary of the Tigris River near the Iraqi oil centre of Kirkuk. According to the Hess executives, whose account was confirmed in general by US intelligence officials, US Air Force bombs destroyed "a key mass of crude oil and LPG pipes" that were part of a "critical node" of the oil industry in that area.
No effort was made by CPA officials to repair the pipes until three weeks ago, when it was decided to begin, the Hess Oil executive said. Before the US bombing, the installation was pumping at full capacity -- 670,000 bpd to 690,000 bpd, but after makeshift repairs, its output was "barely a trickle" -- around 300,000 bpd, this oil official said.
Even now, the source said, a quarrel over whether the Iraqi Ministry of Oil or the Ministry of Public Works should restore the pipes have stalled repair efforts. The Pentagon did not return repeated phone calls.
Suicide bombers attacked Iraqi oil facilities in the Gulf, costing he country between $ 40 mm to $ 150 mm in lost revenues. According to a report, three US sailors were killed and five wounded near Khawr al Amaya, when a suicide boat flipped over the 8-man US Navy craft that was approaching it. The Khawr al Amaya Oil Terminal was damaged and at least 1 mm barrels of oil lost in the attack.
A US intelligence official told: "This was an extremely serious attack, perhaps the worst so far on an Iraqi oil installation." He added that it was designed to distract US military efforts from quelling insurgents in Fallujah and Najaf and demonstrated that the terrorists "are flexible in their targets and tactics."
He also noted that the attacks appeared "to have been in conjunction with and support of the Fallujah and Najaf insurgency." He said new safeguards and countermeasures were being put in place "even as we speak" and that some progress has been made.
Luft said Iraq's northern pipeline to the Turkish oil installation at Ceyhan has been reopened after months of repeated sabotage, but that its current output of 160,000 bpd is "way below its full capacity." Luft also observed that pipeline attacks are not simply a tactic but part "of a sustained and orchestrated effort" to destroy a valuable strategic target, increase the Iraqi people's sense of insecurity and boost resentment of the US presence there."

Nigerian Military Mounts Offensive in Oil Delta. By Segun Owen, ABCNews.com, April 26, 2004. "Nigeria launched a new military offensive against ethnic militants and criminals in the oil-rich southern delta region Monday after five people, including two U.S. oil workers, were killed in violence. Leaders of the Ijaw ethnic group condemned last week's killings, but said a general clampdown on community leaders, bitter about poverty and neglect in the region, could backfire and spark even more violence. Hundreds of people have died in ethnic fighting in the anarchic region of river channels and mangrove swamps over the past two years, but the killings Friday took the level of violence against foreigners to a new level. The Niger delta is one of the OPEC country's poorest regions despite producing all of its crude oil... ChevronTexaco said it had suspended efforts to restore 140,000 barrels per day of output from the area near the Escravos export terminal until security improved. After a meeting of senior government, military and oil company officials, Delta State Governor James Ibori offered a reward of 10 million naira ($75,000) for information leading to the arrest of the killers. An Ijaw leader, Samson Mamamu, said militants were being funded and armed by local politicians, not community leaders. "A general clampdown on ethnic groups may just worsen the situation because innocent groups may be targeted and nobody can say how they will react," he said.... An uprising by Ijaw militants last year, in which hundreds of people were killed and international companies were forced to temporarily shut 40 percent of production in the world's seventh largest oil exporter, was quelled by a huge military deployment. The uprising was rooted in popular anger at the poverty of most delta inhabitants despite its huge natural resources..."

Iraqi Security Forces 'Worked Against' U.S. By Lourdes Navarro, AP, Washington Times, April 23, 2004. "A U.S. military commander said 10 percent of newly trained Iraqi security forces "worked against" U.S. forces in the past three weeks of fighting in Fallujah and the southern city of Najaf, a sign of how difficult it will be to assemble an Iraqi army and police force. An additional 40 percent of the Iraqi security forces walked off the job because they did not want to fight fellow Iraqis, said Maj. Gen. Martin Dempsey, commander of the Army's 1st Armored Division..."

Oil and conflict - a natural mix, By Paul Reynolds, BBC News Online, April 20, 2004. Oil and what it represents - energy - have always been a source of conflict. The Japanese attack on Pearl Harbor had its origins, at least in part, in a decision by the United States to limit oil exports to Japan in 1941 in response to the Japanese invasion of China. Japan was almost totally reliant on imported oil, mainly from the United States, and it needed oil for its navy. It concluded that if the American tap was going to be turned off, it would have to get its oil elsewhere. This was a factor in its decision to invade the oil-rich Dutch-held Indonesian islands.
Coups and power-play
Japan still relies on imported oil but this now comes substantially from the Middle East, another part of the world where oil has long played a vital role. Britain first became interested in the Gulf because of its maritime interests, long before oil was discovered. Then, when oil extraction was developed in the 1930s, the strategic value of the region increased significantly. Other powers began to get interested, especially the United States. The West was determined to secure the Gulf as a main source of its energy. Oil played its part in a 1953 coup in Iran - organised by the US and Britain. They managed to overthrow an elected prime minister, Mohammed Mossadegh, and installed Shah Reza Pahlavi whose reign came to an inglorious end at the hands of Islamic fundamentalists in 1979. Mossadegh's main sin was to have nationalised the British-owned Anglo Iranian oil company. Just how far the United States was prepared to go for oil was shown by the recent release of documents from the British National Archives. An intelligence assessment by the British government in January revealed that in 1973 Washington drew up a plan to seize oilfields in Saudi Arabia, Kuwait and Abu Dhabi to counter an Arab oil embargo against the West. One recent study paper by an American military analyst even suggests that one day the United States and Europe might be in conflict over dwindling Middle East oil supplies. The analyst, Major Chris Jeffries, Assistant Professor at the US Air Force Academy wrote: "Is it unthinkable that the US might enter into an agreement with the Middle East to secure its supply over the interests of the other industrialized nations - including Europe?"
Gulf wars
The intervention by the United States and its allies over Kuwait in 1991 was in large part motivated by a need to secure oil and also to prevent Saddam Hussein from expanding his access to it. And, although the more recent war with Iraq had other motives as well, oil was a factor as the US Vice President Dick Cheney, warning of Iraq's ambitions, said in August 2002: "Saddam Hussein could then be expected to seek domination of the entire Middle East [and] take control of a great proportion of the world's energy supplies..." But oil does not just produce outside intervention. It can produce internal abuse of power. Saddam Hussein himself is a prime example: it was oil that gave him the resources with which to arm himself. Looking ahead, new areas of interest are opening up, especially the Caspian Sea where a new "Great Game" is developing to mirror the rivalry between Russia and Great Britain in Asia in the 19th Century. One of the countries at the heart of Caspian Sea development is Azerbaijan and it is instructive perhaps to recall that its capital, Baku, was once the capital of the world's oil exports. That was back in the early 20th Century. Baku became an international city, with grand villas built by locals who had got rich and foreigners who came to get rich. The city even put up an ornate opera house to mark its prestige.
The new black gold
Baku's oil was a target for the German army in World War I and the city was briefly occupied by a British contingent. It was then taken by the Soviets, equally keen on getting at the black gold. Hitler aimed for it again in World War II and predicted that if Germany did not get oil from the Caucus Mountains it would lose the war. Looking even further ahead to when the oil runs out or at least significantly runs down, it may be that the world turns again to nuclear power. In which case those countries with uranium deposits would become among the most attractive. The top ten are: Australia, Kazakhstan, Canada, South Africa, Namibia, Brazil, Russia, USA, Uzbekistan and China."

Security Companies: Shadow Soldiers in Iraq. By David Barstow. New York Times, April 19, 2004. " They have come from all corners of the world. Former Navy Seal commandos from North Carolina. Gurkas from Nepal. Soldiers from South Africa's old apartheid government. They have come by the thousands, drawn to the dozens of private security companies that have set up shop in Baghdad. The most prized were plucked from the world's elite special forces units. Others may have been recruited from the local SWAT team... Far more than in any other conflict in United States history, the Pentagon is relying on private security companies to perform crucial jobs once entrusted to the military... But more and more, they give the appearance of private, for-profit militias - by several estimates, a force of roughly 20,000 on top of an American military presence of 130,000... The price of this partnership is soaring. By some recent government estimates, security costs could claim up to 25 percent of the $18 billion budgeted for reconstruction, a huge and mostly unanticipated expense that could delay or force the cancellation of billions of dollars worth of projects to rebuild schools, water treatment plants, electric lines and oil refineries... With mounting casualties has come the exponential growth of the little-known industry of private security companies that work in the world's hot spots. In Iraq, almost all of them are on the United States payroll, either directly through contracts with government agencies or indirectly through subcontracts with companies hired to rebuild Iraq... Global Risk Strategies... The Steele Foundation... Special Operations Consulting-Security Management Group... Hart, a British security company... Blackwater USA... Custer Battles..."

Deaths of scores of mercenaries not reported. By Robert Fisk and Patrick Cockburn. The Star (New Zealand), April 13, 2004. "At least 80 foreign mercenaries - security guards recruited from the United States, Europe and South Africa and working for American companies - have been killed in the past eight days in Iraq. Lieutenant-General Mark Kimmitt admitted on Tuesday that "about 70" American and other Western troops had died during the Iraqi insurgency since April 1 but he made no mention of the mercenaries, apparently fearful that the full total of Western dead would have serious political fallout. He did not give a figure for Iraqi dead, which, across the country may be as high as 900. At least 18 000 mercenaries, many of them tasked to protect US troops and personnel, are now believed to be in Iraq, some of them earning $1 000 (about R6 300) a day. But their companies rarely acknowledge their losses unless - like the four American murdered and mutilated in Fallujah three weeks ago - their deaths are already public knowledge. The presence of such large numbers of mercenaries, first publicised in The Independent two weeks ago, was bound to lead to further casualties. But although many of the heavily armed Western security men are working for the US Department of Defence - and most of them are former Special Forces soldiers - they are not listed as serving military personnel. Their losses can therefore be hidden from public view. The US authorities in Iraq, however, are aware that more Western mercenaries lost their lives in the past week than occupation soldiers over the past 14 days. The coalition has sought to rely on foreign contract workers to reduce the number of soldiers it uses as drivers, guards and in other jobs normally carried out by uniformed soldiers. Often the foreign contract workers are highly paid former soldiers who are armed with automatic weapons, leading to Iraqis viewing all foreign workers as possible mercenaries or spies."

New anti-terror law may disrupt OPEC's exports. Indian Express Newspapers, March 18, 2004. "OPEC oil producers have done little to prepare for a new maritime anti-terror law coming into force on July 1 and face serious disruption to exports if they miss the deadline, maritime security sources said. Tough new UN security requirements for merchant ships and ports that engage in international trade, known as the International Ship and Port Facility Security code (ISPS) will take effect soon.
The rules are mandatory for all shipping firms, ports and oil terminals, but many OPEC producers, including Saudi Arabia, Nigeria, Kuwait and Indonesia, are nowhere near ready, the sources said.
The US Coast Guard has told the industry that merchant ships, including oil tankers and gas carriers, that are not security-certified could be turned away.
''As far as we know none of the governments that we are advising are compliant with the security code though some have had their ship security officers trained and plans accepted,'' one source, who advises governments in the Middle East and Africa on the comprehensive set of measures told. The US pushed the new rules through the International Maritime Organisation in the wake of the September 11 attacks, fearful that Al Qaeda could deliver a ''dirty bomb'' or other weapon of mass destruction through one of its ports.
The ISPS code requires the training of on-board ship and company security officers, emergency procedures aimed at dealing with a terror attack, and a raft of other measures in ports and at coastal terminals that tightens security. The Madrid train bombings that killed 201 people will only add extra impetus to enforcing the new maritime measures, which were approved by the United Nations in December 2002, experts said.
US crude prices are already sizzling at post-Iraq war highs over $ 37 a barrel, and OPEC is set to implement a fresh round of supply cuts in April that could propel prices even higher this summer if supply is stifled to the United States, the world's largest oil consumer.
Saudi Arabia, the world's largest crude oil exporter, has trained security officers for its state-owned oil tanker fleet but has not addressed aspects of Port security compliance, the security source said. Kuwait had discussed port plans with security advisers but done little else, while the United Arab Emirates was in the process of drawing up port security plans, he said.
Nigeria, whose high-quality crude supplies are vital for US refineries to make gasoline for peak summer holiday demand, is especially far behind, the source said.
''The Nigerians are very worried. They've started on the road and are well aware of the deadline but there is still an awful long way to go,'' he said, adding that nothing had been done at Nigeria's ports and oil terminals.
''Indonesia has done nothing,'' said another security source, responsible for advising Southeast Asian nations on the requirements.
Little was known about readiness of other OPEC nations like Iran, Algeria, Iraq and Venezuela and major non-OPEC producers like Mexico though industry expertsand observers said they were unlikely to be on schedule."

Soldiers Put Iraq 'War Trophies' on eBay. By Matt Smith, CNN, March 18, 2004. "A year after the U.S.-led invasion toppled Saddam Hussein's government in Iraq, items touted as having come from Saddam's palaces have turned up for sale on the auction Web site eBay. The seller of one secondhand rug lists the previous owner of the roughly 6-by-9-foot piece of carpet as ousted Iraqi leader Saddam Hussein. Customers can also bid on silverware embossed with the Iraqi army's crest and a copy of the Koran, the Muslim holy book, which is purported to be from a Baghdad compound. A spokesman for U.S. Central Command told CNN that U.S. troops should have been prohibited from bringing such items home from Iraq. But the men selling the items say they had no trouble bringing them back. Spc. Adam Dearinger, who is asking a minimum of $850 for the rug, is among those who brought home war trophies with no problems. "We didn't think we were going to be able to get them home, but they said we could take 10 items," Dearinger said. Dearinger, 21, was part of the 3rd Forward Support Battalion -- part of the Army's 3rd Infantry Division, which led the advance on the Iraqi capital from the west. "We went through about 15 or 20 different palaces," he said. In one, "There were 15 rugs there, and every one of us grabbed one and we took them."... Both Cramer and Dearinger said the items they're now selling were declared and cleared by U.S. Customs upon their return home. "They didn't say anything bad about taking the rugs home, or artifacts. They considered them war trophies," Dearinger said. But Cmdr. Dan Gage, a spokesman for U.S. Central Command, said soldiers are not allowed to bring back "war trophies" -- only legally purchased souvenirs. "Would this fall under that? I don't know," Gage said...

Who benefits from Africa's oil? by Antony Goldman, Africa Analyst, Clearwater Research Services. BBC News, March 9, 2004.
"There are five countries in sub-Saharan Africa that produce substantial quantities of oil: Nigeria, Angola, Gabon, Equatorial Guinea and Congo-Brazzaville. While Angola and Congo are now slowly emerging from devastating civil wars, Nigeria is regularly ranked in the top two most corrupt countries in the world. Despite earning over $100m a day from oil exports, Nigeria and Angola are ranked among the 30 poorest countries in the world. Oil has rarely helped promote peace, progress or prosperity in Africa. Debate rages as to why this should be so and what should be different. It is a debate that is set to sharpen. Oil companies for many years were reluctant openly to join the debate. They maintained that their obligations were governed by the terms of their contracts and the interests of their shareholders. Their responsibility was to produce oil as effectively as possible. It was up to governments to govern. It is a position that has shifted quite sharply over the past decade. Royal Dutch/Shell, the Anglo-Dutch multinational, was at the centre of the storm following the execution of Nigerian writer and minority rights activist, Ken Saro-Wiwa, in 1995 by a military regime anxious to stem mounting anger in oil producing areas over perceived marginalisation. The company now invests heavily in community relations and environmental projects, part of a policy of working to promote stability in the local operating environment. In Sao Tome, aspiring partners are preparing health and education programmes as part of a broad-based corporate social responsibility initiative. Critics maintain the process is still far too modest, with companies devoting only a tiny portion of their profits towards development - in a region where taxes and royalties are far less than the Middle East or South America. But an equally valid question to ask is where the money the producing countries have received has gone. Nigeria has earned around $400bn from oil since 1970. A Nigerian friend returning home after 15 years abroad asked where the war had been - so run down and dilapidated had the country become. And yet Nigerians own some of the finest properties in the world's best cities, and swell some of the world's biggest bank accounts. An ongoing criminal investigation in the US shows that even in Equatorial Guinea, where oil was only discovered in 1991, the president has $700m in a US bank account. In countries as different as Norway and Brunei, oil has proved the foundation not only for great individual wealth, but also for tremendous social gains. Gabon has made some progress in this direction - but the oil there is running out, and little has been invested in helping to create a diversified post-oil economy. Elsewhere, where oil has been of benefit mostly to members of a tiny elite and the companies that have worked with them, the challenge remains to find a system and form of partnership in which wealth is better shared - not only more broadly within the population, but with future generations."

Rebuilding Contracts Flow Into Iraq: U.S. to Award $5 Billion in Reconstruction Deals in March. Reuters, CNN.com, March 7, 2004. "The U.S. agency managing reconstruction funds in postwar Iraq will award $5 billion in management and construction contracts this month, a senior U.S. administration official said on Sunday. The deals will mark the first funds spent under the $18.4 billion appropriated by the U.S. Congress for the reconstruction of infrastructure in postwar Iraq. They are supervised by the Iraqi Program Management Office (PMO). Management contracts are likely to be awarded this week, to be followed by construction deals during the rest of the month, the official said in a news briefing. He did not elaborate on the expected deals. The United States approves a list of companies that can bid for the major deals and then those firms are free to choose subcontractors, the official said. The PMO is expected to spend $12.6 billion on construction over the next few years in oil-rich Iraq, which has been devastated by wars and economic sanctions and needs billions of dollars in foreign investment to rescue its economy. The PMO will also award contracts in the oil, electricity, public works and water sectors, as well as for security, justice, transportation, communications, buildings, education and health."

Halliburton Refunding $27 Million for Meals. Reuters, Feb 9, 2004. "Halliburton Co., under close scrutiny for its work in Iraq, has promised to pay $27.4 million to the U.S. military to cover potential overbilling for meals served to troops, the Pentagon said on Tuesday. The planned reimbursement followed a refund to the Army by the Texas-based company last month for $6.3 million after Halliburton admitted its employees took kickbacks from a Kuwaiti subcontractor..." Halliburton says "War-Time Conditions Make Meal Planning Difficult"

A Look at U.S. Military Deaths in Iraq, Associated Press, ABC News, Feb 1, 2004. As of Friday, Jan. 30, 519 U.S. service members have died since the beginning of military operations in Iraq, according to the Department of Defense. Of those, 361 died as a result of hostile action and 158 died of non-hostile causes... The British military has reported 57 deaths; Italy, 17; Spain, eight; Bulgaria, five; Thailand, two; Denmark, Ukraine and Poland have reported one each. Since May 1, when President Bush declared that major combat operations in Iraq had ended, 381 U.S. soldiers have died 246 as a result of hostile action and 135 of non-hostile causes, according to the military. Since the start of military operations, 2,562 U.S. service members have been injured as a result of hostile action, according to the Defense Department's figures as of Friday. Non-hostile injured numbered 400..."

US-Led Group Wins Iraq Security Contract, Reuters, January 31, 2004. "Nour USA, a privately held U.S.-led consortium, has won a $327 million contract to supply Iraq's new armed forces and the Iraqi Civil Defense Corps with equipment, the U.S. military said on Saturday. "Nour USA...is being awarded a $327,485,798 firm fixed price indefinite-delivery/indefinite-quantity contract to procure equipment for the Iraqi Armed Forces and the Iraqi Civil Defense Corps," the military said in an email announcing the deal. "At this time, $39 million of the funds has been obligated. Work is expected to be completed by February 2005," it said. Nour, based in Vienna, Virginia, was set up specifically to bid for business in postwar Iraq and has previously won an $18 million contract to provide security in the country. Nour's partners include HAIFinance, a private equity group based in the United States, and Jordan-based conglomerate Munir Sukhtian Group. The statement said bids for the contract were sought in November last year and 19 consortia presented bids to the Coalition Provisional Authority, the U.S.-led administration in Iraq."

U.S. Troops to Blow Up Saddam's Palaces, Fox News, Jan 28, 2004. "U.S. authorities on Wednesday prepared to demolish Saddam Hussein's five palatial homes in the village where he was born, having stripped them of expensive marbles, tiles and valuable furniture..."

Afghans: U.S. Air Raid Kills 11 Villagers, By Noor Khan, The Guardian (UK), Jan 20, 2004. "A U.S. air raid in southern Afghanistan killed 11 villagers, including four children, Afghan officials said Monday. The U.S. military said it killed five militants in the weekend raid in insurgency-plagued Uruzgan province... On Dec. 5, six children died when a wall fell on them during a nighttime assault on a complex in eastern Paktia province where the U.S. military seized hidden weapons caches. The next day, nine children were found dead in a field after an attack by an A-10 ground attack on a village in neighboring Ghazni province. Both attacks were aimed at wanted militants, but neither target was killed or detained. American commanders had vowed to review their procedures after the raids. The attack also brought to more than 50 the death toll in violence since the ratification of a post-Taliban constitution Jan. 4, most of them civilians..."

Canada Can Bid on Next Round of Iraq Contracts, Bush Says, By Elisabeth Bumiller, New York Times, Jan 13, 2004. "President Bush reversed his administration's policy today and said Canada would be allowed to bid on billions of dollars in American-financed Iraqi reconstruction projects, bringing to an end a bitter dispute with a major ally... which gives Canada the right to bid on a second round of contracts worth some $4.5 billion. The first round, which excluded Canada, amounted to $5 billion... Bush administration officials would not say today if France, Germany and Russia, which more actively opposed the war, would also be eligible for contracts in the future. But they left open the possibility that a major commitment of money and manpower would work in their favor."

Government Awards Bechtel Iraq Contract. Reuters, New York Times, January 6, 2004. The U.S. Agency for International Development on Tuesday announced it had awarded a second lucrative contract to rebuild Iraq's infrastructure to engineering company Bechtel, this one worth $1.8 billion. The contract will fund projects over the next two years in Iraq ranging from repairing power facilities, water and sanitation systems, to the continued rehabilitation of airport facilities and additional work at the seaport of Umm Qasr. The contract follows a deal the privately held, San Francisco-based Bechtel signed with USAID last April to rebuild Iraq's shattered infrastructure. So far that contract has clocked up about $1 billion and will run until December. For the most recent contract, the company said it had teamed up with Parsons Corp. of Pasadena, Calif., as well as Horne Engineering Services of Fairfax, Virginia... Outlining details of the deal, Beans said about $1 billion would go to the power sector, which is one of the crucial components for stabilizing Iraq and rebuilding its economy. About $210 million would be spent on water and sanitation, while $109 million will go into improving surface transportation, according to USAID... The $1.8 billion comes from $18.6 billion in reconstruction funding appropriated by Congress last year for Iraq...."

Army OKs Halliburton Waiver for Oil Deal, By Sue Pleming, ABC News, Jan. 6, 2004. "The U.S. Army said on Tuesday it had granted Halliburton a special waiver to bring fuel into Iraq under a no-bid deal with a Kuwaiti supplier despite a draft Pentagon audit that found evidence of overcharging for fuel... Bringing in fuel to Iraq is part of a larger no-bid contract KBR won in March to rebuild Iraq's oil industry. So far, the company has clocked up more than $2 billion of business under that deal and billions more under a separate logistics contract with the U.S. military. That contract is set to be replaced by two competitively bid deals, one for the north and the other for the south of Iraq, which are due to be announced by Jan. 17. KBR has bid on that work." 



"War had been literally continuous, though strictly speaking it had not always been the same war...The enemy of the moment always represented absolute evil." -- George Orwell, 1984

"The liberation of Iraq is a crucial advance in the campaign against terror." -- U.S. Pres Bush, May 1, 2003

"We need to err on the side of being strong. And if people want to say we're an imperial power, fine." -- William Kristol, on Fox News

"We must become the owners, or at any rate the controllers at the source, of at least a proportion of the oil which we require." -- British Royal Commission, in 1913, on Churchill's Iraq policy

"If war aims are stated which seem to be solely concerned with Anglo-American imperialism, they will offer little to people in the rest of the world. The interests of other peoples should be stressed.
This would have a better propaganda effect." -- Council of Foreign Relations, 1941 memo to U.S. State Dept

"The government says it was necessary to bid out much of the postwar rebuilding work in secret because open bidding would have hampered the process at the expense of Iraqi economic and political stability."
-- Boston Globe, April 18, 2003

"If they turn on the radars we're going to blow up their goddamn SAMs [surface-to-air missiles]. They know we own their country. We own their airspace... We dictate the way they live and talk. And that's what's great about America right now. It's a good thing, especially when there's a lot of oil out there we need."
-- U.S. Brigadier General William Looney, Washington Post, August 30, 1999

"George Bush was not elected by a majority of the voters in the United States. He was appointed by God." -- U.S. Army Lt. General William G. "Jerry" Boykin, Deputy Undersecretary of Defense for Intelligence, and veteran of Iran, Grenada, Panama, Colombia, Somalia, and Waco. "We're a Christian nation and the enemy is a guy named Satan."


Perfection, of a kind, was what he was after,
And the poetry he invented was easy to understand;
He knew human folly like the back of his hand,
And was greatly interested in armies and fleets;
When he laughed, respectable senators burst with laughter,
And when he cried the little children died in the streets.

--W.H. Auden, Epitaph On A Tyrant


An Iraqi woman soothes her 12-year-old wounded daughter Hajer Ayid in a Baghdad hospital April 24, 2004. Ayid was injured overnight in an incident involving U.S. troops and forces of cleric Moqtada al-Sadr in the Baghdad suburb of Al Sadr City. Three sisters were burned when their house, which was in the area of a firefight, caught fire. Photo by Faleh Kheiber/Reuters





"Highway of Death" from Kuwait to Iraq after bombing by U.S. in 1991.







Dead child in Basra.




Bush in Qatar.