Analysis: Bush's 'surge' on Iraq's oil

By BEN LANDO, UPI Energy Correspondent

WASHINGTON, Jan. 16 (UPI) -- It is unknown if President Bush's last-ditch effort to turn around the downward spiral that is today's Iraq will have any affect on its struggling oil sector. But the oil sector, like Iraq, suffers from factional and sectarian fighting and an overall dangerous security situation. Oil revenue funds 96 percent of Iraq's budget, a vital factor for the country with the world's third-largest oil reserves.

Bush's plan is for about 21,000 more troops to target growing violence in and around Baghdad and Anbar Province.


In the north, where a quarter of Iraq's oil is produced, Sunni militia attacks have shutdown the export infrastructure and hindered refining. None of Bush's "surge" plan will address that, directly or indirectly.

And while no one in the south of the country -- which produces the bulk of Iraq's 2 million barrels a day and is the sole exporter -- is officially a target, those in Baghdad with the bulls-eye on them could send the south into flames.


The Shiite south has seen relative stability.

In and around Basra, specifically, much of the population is someway involved in producing oil and shipping out most of Iraq's 1.5 million barrels of daily exports -- either as legitimate parts of the oil sector or in the growing oil smuggling trade.

While Bush's plan is to target people or organizations in the Baghdad area, those who have followers in the south ready to rise up could pose a problem for security in the country and send shockwaves through global oil markets.

"What I could imagine is that an offensive that took on Shiite militias and really infuriated them such that it created problems in the Shiite-majority areas of the south might lead to some increase in attacks on southern oil infrastructure," said Charles Esser, energy analyst at the Brussels-based International Crisis Group.

That is unlikely, though, Esser said, since Prime Minister Nouri al-Maliki's government is to have a role in the "surge" and "the Shiite militias in the south are financially connected to the petroleum trade."

The future depends on the tack of addressing the ongoing and escalating violence between Shiites and Sunnis in Baghdad. Moqtada al-Sadr, a Shiite cleric whose power grows daily and who was recently folded into the political process, could be in the crosshairs.


"If they target Moqtada himself, all hell will break loose," said Juan Cole, professor of Middle East and South Asian history at University of Michigan and an Iraq expert.

Douglass Macgregor, a retired U.S. Army colonel and now a defense and foreign policy consultant, says Sunni militias will just "melt away" when confronted head on. They'll then regroup to successfully target U.S.-led coalition forces at a weaker point.

"I don't think the Shiite militias will simply run away," he said. "I think there are still numbers of people who still harbor resentment and going after Sadr and Shiite militias" could backfire, since Shiites now control the Iraqi government, thus Baghdad.

"You risk mobilizing the whole Shiite population against you," Macgregor said. With hatred of the occupation high in central Iraq, "it could spread all over southern Iraq," since Shiites are by far the majority.

Sadr's main support base still isn't commanding in the chief oil centers, but the extent of Sadr's reach isn't known. But, Cole says, the 500,000-strong Marsh Arabs, who have deep roots in Basra, have now aligned with Sadr and his Mahdi Army.

"I've been told that the whole south is going Sadrist," Cole said. "People are declaring for Moqtada in large numbers."


Sadr is now a key backer of Maliki, an alliance that has kept the prime minister in power. Sadr followers control four ministries and fill 30 of Iraq's 275 parliament seats.

With Maliki's blessing, Sadr City, a poor Baghdad neighborhood of 2 million residents, has been off limits to coalition troops -- though the "surge" could end that, with unclear results.

The "surge" may not focus on Sadr's attacks on Sunnis. It could focus on other Shiite militias, perhaps even splinter groups formerly aligned with Sadr who have a strong presence in Basra and are causing havoc in Baghdad.

"The largest concern would be operational disruption," said Greg Priddy, an energy analyst for the Eurasia Group, a global political risk advisory and consulting firm.

If violence escalates in the south, especially in and around Basra, the largest port, and Iraq's largest oil fields, the already hurting industry might be inoperable, Priddy said.

"The most likely point at which petroleum becomes involved in this would be possibly Mahdi Army attacks on U.S. military fuel convoys bringing fuel up from Kuwait and Basra to U.S. bases up north," Cole said. "If that happened, that would be pretty serious, of course. You can't run tanks and helicopter gunships without fuel."


Sadr is not likely to order this, Cole said, unless he feels directly threatened in the upcoming "surge."

"If things got out of hand between the U.S. and the Sadr movement those fuel convoys could be targeted," he said.


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