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Iraq's Oil Production at Post-Invasion Lows. Cui Bono?

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Last month Iraq's oil production touched a post invasion low of 1.1 million barrels. Back in 2003, U.S officials promised confidently that much of the costs of rebuilding Iraq would be paid for by ramping up production of Iraq's oil fields. That the pre-war output of 2.5 million barrels could be dramatically increased with the repair of the aging infrastructure, expanding production capability and getting the system moving. A doubling of prewar levels to 5 million barrels was well within the capabilities of Iraq's hitherto untapped reserves.

And if all that had happened, the added supply of oil from Iraq would have brought another boon to the world economy, easing the purported bottlenecks in oil production that have pushed prices into the stratosphere.

Instead, since this time in 2003 world crude oil prices have more than doubled by a staggering $30 a barrel, which when multiplied by a daily world consumption in excess of eighty million barrels a day represents history's most massive transfer of wealth to the oil patch, an exorbitant tax on the world economy, and on each and everyone of us (Sheikhs and oil barons excepted).

The reality has evolved tragically differently, for the Iraqis, for the allied expeditionary forces. As regards Iraq's oil industry every effort to upgrade Iraq's oil industry has been met with unrelenting sabotage by the insurgency. Wells and pipelines are blown up, new equipment is stolen or destroyed, entire oilfields are idled for days at a time while repairs are made. At a recent London oil conference, it was reported that plans to rehabilitate the industry have been scrapped, giving up any thought of 5 million barrels a day. Actual daily production has declined every year since the invasion, to 1.7 million barrels a day in 2005 -- and last month's basement low at just 1.1 million barrels a day.

In the shadows, the insurgents are clearly and murderously effective. Which raises a question: Who are they?

To answer that, start with another, more lawyerly question: Cui bono? Who stands to benefit if Iraq isn't producing as much oil as it could? One obvious answer is right across the border, in Saudi Arabia.

As noted here recently, the Saudis have been pumping oil at more than 9 million barrels a day in recent months, and at $60 a barrel and up, that means a gusher of money -- more than $1 billion every two days. But if the price is to be kept that high, supply must be tightly controlled. As the designated "swing" producer of the OPEC oil cartel, it is Saudi Arabia's "duty" to cut back production enough to offset any increase in world supply and thus keep the price up. If Iraq were producing another 3 million barrels a day, the Saudis would have to sacrifice income of fully $180 million every day. Would they like that?

This is a circumstantial case, of course, and it doesn't prove that the Saudis are sabotaging Iraqi wells and pipelines. But they do have a motive. Not least of which attains to Iraq's Shia majority, and its potential for conflict with Saudi Arabia's Sunni theocracy. It is worth noting again that in a little-noticed interview last June, Iraqi Prime Minister Ibrahim al-Jaafari told CNN's Wolf Blitzer that foreign insurgents, weapons, and funding were coming into Iraq not only from Syria, but across the 814-kilometer border with Saudi Arabia as well.

Our leaders, perhaps not uninfluenced by our executive branch's close personal and many layered ties to the Saudi
leadership, keep assuring us that the Saudis are our loyal friends and staunch allies. Why, then, do their state-supported Sunni Wahhabi mosques spew hatred of America and it is Saudi volunteers who had become the vast majority of the "foreign" suicide bombers in Iraq? (Why, for that matter, did 15 of the 19 September 11 hijackers come from Saudi Arabia?) In pondering the Iraqi quagmire, we must confront the likelihood that the insurgency, should this hypothesis be valid, is being fueled by limitless oil billions and an endless chain of imported terrorists, prolonging Iraq's chaos and destabilization and further bolstering the world price of oil. And if that turns out to be the case, we will never achieve our mission in Iraq unless we then deal with these realities, and finally begin to make objective and parochially unencumbered policy decisions, no matter how difficult that may be for this Administration.