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Don't blame the Arabs: Oil faces new threats beyond the Gulf

BEIRUT: The United States' drive for energy security, one of the dominant elements in its tough-guy foreign policy, is running into trouble around the globe, making US control of Iraq's oil wealth ever more necessary. And that is sure to stir up more trouble, unsettling a market that has become volatile and unpredictable.

In an effort to reduce dependence on Middle Eastern oil, the Americans have been encouraging the quest for new sources of oil and gas for some time, but this has often led oilmen into regions that were unstable, or are made so by their presence and the greed their product instills among the political elites. These days, the New York Times commented recently, "the discovery of oil is itself almost a guarantee of conflict."

In short, the world's main oil-producing regions are becoming political quagmires that threaten global supply, and this is likely to keep oil prices high for some considerable time no matter what happens in Iraq and Saudi Arabia. Major convulsions in those countries, which seem unavoidable, will only worsen an already bad situation.

The violence in Iraq and Saudi Arabia has kept the concerns of oil-importing countries like the US focused on the Middle East. But in recent months there have been internal problems in key oil producers like Venezuela, Nigeria and Norway that have either reduced oil production or threaten to do so. None of this will bring any comfort to the Middle East.

With production by the Organization of Petroleum Exporting Countries stretched and global oil demand expected to keep rising due to strong economic growth in industrialized countries and population giants China and India, a major disruption by a top producer such as Venezuela, the world's fifth largest exporter with the western hemisphere's largest reserves, could trigger a global crisis.

Most of Venezuela's oil exports go north to the United States. In late 2002 and early 2003 these were paralyzed for months by a general strike. The left-wing populist president, Hugo Chavez, managed to take control of the oil industry, but the country remains highly unstable. Chavez, a former army officer elected in 1992 and who survived a 2002 coup, faces mounting internal opposition. Polls show he will probably be defeated in a recall vote scheduled for Aug. 15 and that could unleash trouble.

Chavez accuses the Americans of backing his opponents, while Washington accuses him of being "unwilling or unable" to curb Colombian guerrillas (the Americans call them "terrorists") from using Venezuela as a safe haven in their 40-year-old war against Bogota. There have been repeated clashes between the Colombian paramilitaries and Venezuelan troops. Colombia and Venezuela have long had a stormy relationship and in May 100 right-wing Colombian paramilitaries were arrested in Venezuela amid what authorities claimed was a coup plot against Chavez.

Given the worsening relations between Caracas and Washington, Chavez may be tempted to cut back exports to the US to undermine US President George W. Bush's chances of re-election.

Worsening religious violence in Nigeria, Africa's leading producer which provides about one-fifth of US oil imports, has so far not threatened the oil-producing region in the south, but ethnic conflict has. Attacks on oil companies and their installations have forced cutbacks in production in recent months and there is little sign of this easing despite intervention by the Nigerian military.

Trouble is brewing in Georgia, through which a $2.5-billion pipeline from Azerbaijan's oilfields on the Caspian Sea, the next energy El Dorado, to Turkey's Mediterranean terminal at Ceyhan, is scheduled to start pumping in early 2005. Renewed conflict in Georgia, wracked by years of separatist wars, runaway corruption and economic calamity, could shut down what will be the main US-backed energy artery from the Caspian to the West. Breakaway ethnic enclaves in Abkhazia and South Ossetia, backed by a bizarre mix of Russians and Chechens, refuse to bow down to Georgian domination, so new conflicts loom.

The ruling elites in several of the Central Asian states sitting on these vast deposits of oil and gas are as totalitarian as the Soviets who were their masters until the collapse of communism nearly 15 years ago. Political upheaval could erupt in the not-too-distant future as these elites, enriched by the oil profits and courted by the US for their energy resources and their strategic military value, establish dynasties through which they will maintain their grip on power.

Islamic extremists fighting the Russians in nearby Chechnya could find the pipeline a tempting target. As it is, the Caspian region lacks investment and suffers serious export bottlenecks, so it cannot be counted on to compensate for any loss in production in Iraq, Saudi Arabia or anywhere else.

Georgia could also be a collision point between Russia and the US, which backed the Baku-Tbilisi-Ceyhan pipeline as a way to cut into Moscow's traditional monopoly of Caspian energy resources. The Russians, alarmed at US encroachment into Central Asia, especially since Sept. 11, 2001, are now making determined efforts to recover their influence - along with access to Caspian oil and to military bases - in the former Soviet republics of Kazakhstan, Uzbekistan, Kyrgyzstan and Azerbaijan. The Americans cannot afford to have Georgia plunged into turmoil again.

In recent weeks there have been coup attempts in Sao Tome, Equatorial Guinea, Chad and Mauritania in West Africa, a region which is expected within five years to be producing 15 percent of the United States' oil imports. The oilfields, mainly offshore in the Atlantic Ocean, can supply oil to the US East Coast far faster than the Gulf - 10 days against up to two months - which gives them added strategic value.

But the oil wealth that US and European oil companies are racing to develop in the region seems to be the cause of a chain reaction of unrest as political rivals squabble over the riches that are suddenly descending on these countries, some of the poorest in the world, and in several cases ruled by dictators just as brutal in their way as Saddam Hussein. These, too, are now supported by the US.

Oil and gas production in two of Norway's North Sea fields were slashed by 10 percent in a strike by the oil workers' union OFS on June 19-24. The union had threatened to widen the strike to other fields, but the Oil Industry Association declared a lockout that would have halted all production. Norway's coalition government intervened, saying the consequences of a shutdown would be too grave. The union problems remain unresolved and more trouble probably lies ahead for Norway, the world's third biggest oil exporter after Saudi Arabia and Russia. It pumps 200 million cubic meters of gas per day to continental Europe and Britain.

Russia, which now rivals Saudi Arabia as the world's top producer, can no longer pick up any slack in global output. Its crude oil exports have hit a ceiling after several years of growth and Moscow cannot raise shipments unless new pipelines are built.

US relations with Saudi Arabia and other key producers, such as Russia and Venezuela, have deteriorated and this growing antagonism will keep the issue of oil supplies on a knife-edge for months to come, possibly longer. With the Gulf facing growing turmoil and Asia's demand for oil increasing, prices are likely to be pushed back above $40 a barrel, despite recent dips.

Ed Blanche, a member of the International Institute for Strategic Studies in London, is a Beirut-based journalist who has covered Middle Eastern affairs for three decades. He is a regular contributor to THE DAILY STAR

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