Protecting Iraq’s Oil

The expected withdrawal of British forces from southern Iraq highlights a critical but little discussed aspect of the conflict: The security of the southern oil sector, which is essential to Iraqi stability and important to the international oil market.

The central and northern regions of the country have been the scenes for most of the attacks on Iraq’s energy infrastructure by terrorists, insurgents, tribes and criminals, and they have drawn most of the press coverage on the subject. But it is the south that contains more vital energy facilities. Indeed, more than 80% of Iraq’s oil is produced in the south, and virtually all of its roughly 1.5 million barrels per day of oil exports goes through the south to offshore terminals.

Oil exports yielded $31 billion in 2006, and are on pace to surpass that in 2007, according to State Department data. Oil revenue represents 90%-95% of Iraq’s state revenue.

Security alone is not enough to boost production and exports — greater investment, improved operations, refurbished facilities, sound contract management and the like are also needed — but chaos is certain to endanger them.

A British pullback in the south will worsen an already chaotic situation, where criminal gangs, militias and factions fight for turf, which includes important oil and production facilities. This combustible mix has not yet led to significant damage to key oil production and export facilities, but it could. These forces understand the valuable assets they could control.

The vulnerable southern oil production and export facilities would also be a prime target for Iran, most likely through clandestine means, should tension between Tehran and Washington increase. From whatever source, attacks on certain key southern facilities could knock out exports for months.

This would wipe out the flow of Iraqi oil revenue, and could have a devastating psychological impact on Iraqis, whose oil sector has been a source of pride over the years and a contributor to their regional and global significance. A jolt to international oil prices, which reached a record high of $78.77 on Aug. 1, would be significant; Iraqi exports represent about half of total global unused production capacity, and would be difficult to make up.

The thrust of the Bush administration’s Iraqi oil policy in the past couple years has been unduly weighted toward pressing fractious, reluctant Iraqi politicians to pass an oil revenue-sharing law for the political goal of encouraging national reconciliation. The law has yet to reach parliament for consideration, and the Council of Ministers is still struggling with it.

Perhaps at some point this well-intentioned effort will yield results, along with necessary passage of other important related oil laws. But without security improvement, the benefits will be fleeting.

The Bush administration should focus its effort more on working with Iraqis to provide greater security to their key oil-production and exports facilities in the south.

The U.S. military has had many pressing priorities and limited resources, and it has mostly focused its efforts on energy infrastructure security to reacting — with Iraqi help — to attacks in the north and central parts of the country. The exception has been the U.S. Navy’s successful protection of the all-important southern offshore export terminals. But that left key land facilities in the south more vulnerable. Complicating matters has been bureaucratic confusion on the ground, and lack of a comprehensive plan and expert personnel.

International energy infrastructure security experts — preferably hired by Iraq’s government — should identify the resources, personnel and bureaucratic changes needed to meet this challenge. Any plan would likely require boosting the presence of security forces, increased surveillance, both ground and aerial, and a rapid response force.

Given strenuous U.S. military efforts in the rest of the country, the main burden will be borne by Iraqi forces and probably private security companies. Any such plan would not be easy to implement effectively, could further inflame the situation in the short-term, and would be very expensive. But the alternative — the current trend — appears far more dangerous.

The opportunity to build a stable Iraq afforded by progress in the surge should not be squandered by failure to plan ahead on what is necessary to rebuild Iraq.