The February 27th Wild West-style dawn shootout at an Al Qaeda redoubt in East Riyadh was an appropriately dramatic coda to what was arguably the most significant terrorist act since 9/11. While the amount of blood spilled at Saudi Arabia's Abqaiq refinery was small -- two guards killed, eight workers wounded -- and the amount of oil spilled even less, the strike was at least as significant as the 2003 and 2004 public transit attacks in Madrid and London.
This is because the foiled attack poked large holes into two theories often floated out by the Saudis and optimistic oil analysts to assuage concerns over infrastructure security in the world's "Central Bank of Oil."
The first theory is that Al Qaeda would never attempt to destroy the pillars of the Saudi oil industry because it plans to take the country over one day and use petro-profits to fund global Jihad. The second is that Saudi oil facilities are completely secure -- better guarded than the Kingdom's Royal Palaces, we are told -- and hence any attempt on them would be futile. This latter theory, already weak for ignoring both airborne and WMD threats, took a blow when last week's attackers sailed through Abqaiq's first checkpoint and were able to detonate both payloads, good sized car-bombs, at the facility's gate.
That prices soon recovered from a $2 spike following news of the attack doesn't mean that Al Qaeda's imprint has disappeared from the cost of a barrel of light sweet crude, as of this writing hovering at $61. Since mid-2003, analysts have estimated that $8 - $10 of the cost of a barrel reflects a "terror premium," the result of oil sabotage in Iraq and threats by Osama bin Laden that Saudi Arabia could expect the same. Now that an Al Qaeda campaign against Saudi oil has apparently begun, that premium can be expected to rise.
Meanwhile, it may not get the headlines triggered by attacks in the Gulf, but pipeline sabotage in Iraq continues, offering a sobering lesson about what a determined few can accomplish wherever there are unprotected supply lines, which is every oil producing country in the world.
There have been 14 reported attacks on Iraq's oil infrastructure so far in 2006, bringing the total since the U.S.-led invasion to almost 300. And these are just the ones big enough for us to know about. Though one-third of Iraq's security forces and some 14,000 mercenaries now patrol Iraqi refineries and 5,000 miles of pipelines, attacks (and threats of attacks) continue to hamstring exports and punish reconstruction efforts with chronic domestic fuel shortages. The oil-rich country is bleeding its wealth into the sand along with its blood.
As goes Iraq, so may go the developed world. With surging global demand gaining on global supplies and Saudi spare capacity -- now at less than one percent of daily global demand -- quickly shrinking to nothing, the pain caused by future acts of pipeline and refinery sabotage (both in the Kingdom and elsewhere) will only sharpen.
"This is a new situation," says Gal Luft, an energy expert at the Institute of the Analysis for Global Security in Rockville, MD. "What has changed in the last year or so is that, because of the rise of China and India, the world oil market lacks liquidity and spare capacity, so any attacks on supply, any barrel of oil removed from market due to sabotage, immediately effects the market prices."
"There is a clear understanding [on the part of Islamist groups] that if you want to hit America or the West, you go after oil, which is right in their backyard," says Luft. "They don't have to go all the way to New York and deal with the INS and FBI."
That the pipeline attacks have undermined more than just the U.S. occupation in Iraq was first recognized by Osama bin Laden in an audiotape released Dec. of 2004. In the tape he called upon his followers to "focus your operations on the oil, especially in Iraq and in the Gulf, as this would mean [the West's] death."
Within 24 hours of the tape's release, five attacks were carried out on Iraqi oil facilities, with similar attacks reported in Pakistan, Sudan and Nigeria. Jihadist message boards lit up in enthusiastic agreement with the call to go for the oil jugular.
"O horses of Allah, go for a ride," reads one post translated by the Washington-based SITE Institute. "There is nothing that terrifies the Infidels more than attacking the oil sources."
Another post notes: "A small operation on an oil tanker will make the Infidels of London, Paris, Washington and Tel Aviv shake with fear."
Here these anonymous mujahadeen would seem to be correct. A growing number of analysts are admitting chills at the prospect that the kind of oil infrastructure attacks seen in Iraq will begin occurring in the Gulf with greater frequency and success. Should this happen, some say the effect would be an economic "sum of all fears."
"A handful of small attacks made against Saudi infrastructure could push oil well over $100 a barrel," says John Robb, an independent analyst and author of the forthcoming book Global Guerrillas. "Twenty or so a month will keep it there. We are about to see the rise of a shadow OPEC. The control of oil doesn't rest in the hands of the governments. It is in the hands of the guerrillas that can stop the flow."
Stopping this flow is easier than many think. As last week's news reports of the Abqaiq attack reminded us, more than half of Saudi oil reserves are found in just eight fields, nearly two-thirds of which is processed at the mega-facility in Abqaiq, near the Gulf of Bahrain. From here, the oil is shipped through two primary terminals. The larger of the two, Ras Tanura, processes a tenth of the world's oil supply daily; the other, Yanbu, is connected to Abqaiq by an unprotected 750-mile umbilical pipeline. Were a terrorist cell to hijack a few planes in Kuwait and crash them into one or more of these facilities -- soft targets all -- it could take up to 50 percent of Saudi oil off the market for at least six months, says Gal Luft.
"The nature of the Saudi oil industry is like our airport system," explains Luft. "If you take out one of the major hubs processing three to five million barrels a day, you send oil prices to an unprecedented level. Even taking one million barrels off the market would be catastrophic."
Saudi assurances about the security of their facilities sound emptier with every passing year. Al Qaeda attacks in the Kingdom have been on the rise since the invasion of Iraq, beginning with a series of May 2003 Riyadh bombings and continuing with December 2004's daring attack on the U.S. Consulate compound in Jeddah. Last week's attempted blow against Abqaiq is the logical and terrifying advance of a thick trend-line.
Even if it is possible to secure the Gulf's major fields, processing and shipping facilities, there is no way to secure the thousands of miles of aboveground pipelines that traverse Saudi Arabia as well as every major oil producing country, from Venezuela to Uzbekistan to Nigeria. The aortic imagery often found in jihadist communiques about oil -- "The artery of the life of the crusader's nation!" -- is both a strategic insight for jihad and a fair description of oil's physical role in the global economy. If the Saudi mega-refinery in Abqaiq is a giant exposed beating heart, then the world's pipelines are vast networks of soft, external veins, easily sliced with the military equivalent of a razor from the local pharmacy.
"Systems sabotage is amazingly effective," says analyst John Robb. "Small attacks that cost less than $2,000 have caused billions in damages, a return on investment of 100,000 times. Most 'inside the beltway' analysts don't understand systems theory. So they focus on large scale attacks on major facilities, but these aren't necessary. As we have seen in Iraq, protecting major facilities doesn't matter if you sever the connections between them."
Not everyone agrees, of course. Kevin Rosser of Control Risks Group often plays Dr. Pangloss to the pessimists in articles about the threat to Saudi oil flow. In 2004, Rosser assured the Economist that "the golden goose is not a sitting duck." Because of the many redundancies built into the vast Saudi network, he believes any single attack could be easily absorbed without seriously disrupting the global economy.
But should Al Qaeda manage to pull off a large-scale strike at Abqaiq or Ras Tanura, there is clearly no duplicate ready to keep the oil flowing into an ever-tightening world oil market. Not even close.
Whether or not George W. Bush actually meant what he said in February's State of the Union about weaning the U.S. off foreign oil may not matter. If Al Qaeda has anything to say about it, the choice may not be ours to make, after all.
