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Terror's Big Prize
By Gal Luft
The New York Sun, April 30, 2004.

The coordinated suicide attack on oil terminals off the coast of the southern Iraqi city of Basra is another sign that terrorists have singled out oil as their biggest prize. Over the past year, saboteurs have attacked Iraqıs 4000-mile pipeline system no fewer than 100 times.

The attacks denied the Iraqi economy its only source of income, without which the country's reconstruction would be impossible. They also incited resentment among Iraqis toward America for failing to provide essentials such as electricity and transportation fuels. While pipeline attacks impeded oil exports via land, last weekıs attack aimed to shut the last remaining outlet for Iraqıs oil, the Persian Gulf.

Had the terrorists succeeded in destroying the Basra terminal the damage would have echoed far beyond Iraq. With global oil consumption at 80 million barrels a day and spare production capacity gradually eroding, the oil market has little wiggle room. Mere weeks after OPEC's million bpd production cut sent oil prices to a historical high, the removal of almost two million bpd of Iraqi crude from the oil market would veritably guarantee an oil crisis.

This might indeed have been the perpetrators' intent. After all oil is, in the words of Al Qaeda, "the provision line and the feeding to the artery of the life of the crusader nation." Since September 11, pipelines, tankers, refineries and oil terminals have been attacked frequently. In October 2001 Tamil Tigers separatists carried out a coordinated suicide attack involving five boats on an oil tanker off the coast of northern Sri Lanka killing seven people. A year later, Al Qaeda attackers badly holed the French supertanker Limburg off the coast of Yemen, killing a sailor. Except for a sharp increase in maritime insurance premiums in these regions these attacks had marginal strategic consequences. But in at least two cases oil terrorism could have rattled the world.

In the summer of 2002, a group of Saudis was arrested for plotting to sabotage Ras Tanura, the worldıs largest offshore oil loading facility, through which a tenth of global oil supply flows daily. A successful attack on Ras Tanura could have taken up to half of Saudi oil off the market for a significant period of time and with it most of the world's spare capacity, sending oil prices through the ceiling.

"Such an attack would be more economically damaging than a dirty nuclear bomb set off in midtown Manhattan or across from the White House in Lafayette Square," wrote former CIA Middle East field officer Robert Baer. This "would be enough to bring the worldıs oil-addicted economies to their knees, Americaıs along with them."

In May of the same year, a bomb was attached to a tanker-truckıs underside in Israelıs central fuel and gas depot in Tel Aviv. Though the bomb exploded, the fuel was fortunately slow to ignite and the flames did not spread to the fuel drums. Had the attack succeeded, turning north Tel Aviv into an inferno and killing thousands of Israeli civilians, it would surely have changed the landscape of the Middle East.

Many terror experts have expressed concern that terrorists might seize a ship or a boat or even a one-man submarine and crash it into a supertanker in one of the worldıs narrow maritime throughways, like the Strait of Hormuz, the Bosporus or the Strait of Malacca, through which most trade to Asia passes. The explosion and resulting spreading puddle of burning oil could shut down these chokepoints for weeks, with severe impact on global markets.

Despite the fact that only 28% of American oil was imported during the 1973 Arab Oil Embargo, the supply cutıs effect on the American economy was profound. Oil prices quadrupled in a matter of weeks, unemployment doubled, and the national product declined 6%. Today, with over half of American oil imported, if a chunk of global oil production is disabled by an attack on a major oil installation or chokepoint, the consequences will likely be worse.

The Bush administrationıs decision to fill up the strategic petroleum reserve, despite criticism by some that the extra demand would keep oil prices up, reflects an understanding of the threat. But the SPR alone is not enough. Even at capacity, the SPR would only suffice for two months of imports, hardly enough to offset the loss in case of an energy Pearl Harbor.

Furthermore, since oil is a fungible commodity and its prices and supply levels are determined by the international markets, America cannot insulate itself from the adverse effects of oil terrorism on its major trading partners, none of which are as well protected.

Dependence on foreign oil is Americaıs Achilles heel. By hitting oil targets overseas, terrorists can hit us here at home, achieving the same destabilizing effect as an attack on American soil. To defend against such attacks there is no escape but to reduce our demand for oil through improved efficiency and the introduction of made in America next generation fuels that are not based on oil. This should be part and parcel of our collective response to the fight against terrorism.

Gal Luft is executive director of the Institute for the Analysis of Global Security.

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