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Analysis: Basra fight hurts oil exports

disclaimer: image is for illustration purposes only
by Ben Lando
Washington (UPI) Mar 27, 2008
Oil flow will be affected by the Iraqi army's crackdown in the oil capital Basra after all, following a pipeline bombing and dangerous conditions for workers.

A pipeline sending crude from key oil fields in Iraq's south to export terminals was bombed Thursday, and the price of oil jumped by $1 to $105 per barrel.

On Tuesday, when the Iraq military action in Basra began, a pipeline feeding a refinery there was also bombed. The Oil Ministry had and still insists oil flow is OK.

The death toll is unclear but is nearing 100 with injuries much higher.

The extent of damage on either of the lines is not known, but United Press International understands exports could be cut from 1.6 million barrels per day to between 800,000 and 1.1 million bpd, and that the Basra Oil Terminal's pumping rates have been reduced.

Workers in Iraq's South Oil Co., typically working eight-hour shifts, have been unable to leave or get to work, said Shawna Bader-Blau, Middle East senior program officer for the Solidarity Center, an AFL-CIO affiliate that coordinates directly with Iraq's workers.

"We're extremely concerned about the safety of workers, working constantly since Tuesday without any reprieve," Bader-Blau said, and the "safety of families and co-workers stuck at home, in the crossfire between the army and militias."

Iraqis also face curfews and reported total outage of electricity and water and dwindling food supplies.

If the fighting continues, she added, "that's a big problem in the South Oil Co. because people can't get to work. How are they going to be able to produce and export oil?"

Meanwhile, Iraq's Oil Ministry is negotiating oil contracts with the world's largest oil companies for five fields, some in the southern Iraq firestorm now.

"The long-term game is still intact with Iraq, it's just continuing to move past some of these short-term speed bumps," said Bob Fryklund, vice president of industry relations for the energy consultancy IHS. "The companies will clearly adjust their short-term game plan around any security issues or operational issues."

Companies themselves were reluctant to discuss the issue but echoed Fryklund's assessment.

"Security is a matter of utmost concern. We continue to monitor the situation closely," said Shell spokesman Adam Newton. He wouldn't comment on contract talks. Shell has also submitted a plan to develop Iraq's natural gas resources, including those in the Basra area.

Most of Iraq's oil reserves, production and exports center around Basra. Prime Minister Nouri al-Maliki said he's sent the military in to target the armed gangs and militias.

"Iraqi security forces are waging a tough battle against militia fighters and criminals in Basra -- many of whom have received arms and training and funding from Iran," President Bush said Thursday in Dayton, Ohio. He said Maliki's "bold decision to go after the illegal groups in Basra shows his leadership, and his commitment to enforce the law in an evenhanded manner."

Such a move isn't necessarily clean cut, considering the scope of gang activity -- especially oil and fuel smuggling -- from which everyone's hands are considered dirty. The three largest militias operating there are cleric Moqtada Sadr's Mahdi Army, the Badr Corps of the Islamic Supreme Council of Iraq and, to a lesser extent, the Fadhila Party. All three represent Iraqi Shiite populations. Iran is supporting to some extent all factions in Basra, a strategic and potentially lucrative Iraqi province along its Persian Gulf border. The Badr Corps specifically was formed and trained in Iran while ISCI's leaders were exiled there.

ISCI is perhaps the strongest of political parties in Iraq, a partner with Maliki's Dawa Party in the governing coalition from which Sadr and Fadhila both withdrew last year.

While Maliki said the action was aimed at criminals, gangs and militias in general -- of which there are plenty from across the political spectrum -- it appears only the Mahdi Army is being targeted.

"The Mahdi Army, they're not the only bad guys in Basra, at all," said Reidar Visser, author of "Basra: The Failed Gulf State."

The Mahdi Army is accused of openly operating and Fadhila of controlling key operations and security in the Basra oil sector; the Badr Corps has by and large infiltrated Iraq's army and other security forces.

"They would have targeted the Fadhila allies in the oil protection force and the Badr Corps and Tharallah," which is also affiliated with ISCI and are criticized for links to Iran, said Visser, who is also Middle East expert at the Norwegian Institute of International Affairs and editor of the Web site "If this had been an evenhanded operation Maliki would have done something about all of this."

All of the major parties have infiltrated "to some extent in the police" in Basra, Visser said. UPI is told by sources a shootout at a police checkpoint took place around the same time and vicinity as the Thursday pipeline bombing.

The longer the fighting goes on, the likelihood of incidental or direct harm to the oil sector increases. But how it will end is not clear. There are rumors of both failed and rejected cease-fires ahead of Friday's deadline by Maliki for militias to lay down arms.

Sadr had already condemned the military action, and now the Fadhila Party has called for it to end.

Maliki now only has support from ISCI and some independents among the Shiite parties, and support may weaken as the military action goes on.

"It's becoming gradually clearer," Visser said. "Maliki does not have that much backing within the Shiite community to go after Sadr as he would have been hoping for.

"Many of the underlying problems in Basra politics will just remain there," said Visser. "You still have the competition of the governorship, still have the competition of federalism, and still have the competition for resources in the area."


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