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Stopping Smuggling
By: Seb Walker
Published date: 17/8/2003
BASRA –– Four months into the occupation of Iraq, national oil output is still less than half of pre-war levels. The International Energy Agency estimates that Iraq produced about 2.5 million barrels per day in March of this year, but there is little to indicate this level will be achieved even by the end of the year.
“Ongoing problems with the restoration of Iraqi production and exports has contributed to recent price strength,” said David Fyfe, an analyst of global oil supply at the International Energy Agency. “OPEC and the rest of the market will be watching closely to see whether exports via the line to Ceyhan (in Turkey) can rise and be sustained.”
Incidents such as the explosion on the Kirkuk-Ceyhan pipeline at the beginning of this month illustrate just how crucial the recovery and stability of Iraq’s oil industry is to the international market. Prices immediately surged as the news broke, only to stabilize later as administration officials confirmed that there was no permanent damage to the pipeline.
According to the Coalition Provisional Authority, reconstruction efforts are being seriously hampered by acts of sabotage and also the theft of oil and oil derivatives which are smuggled abroad through the south of the country, into Kuwait, Iran and other Gulf states.
Attacks on pipelines are being blamed on organized attempts to destabilize the coalition administration, while the smugglers are acting for personal profit. But there are reports that the latter activity also has a degree of regularization.
“There was illegal export of oil before the war through the Shatt Al-Arab channel,” said a CPA spokesman. “This has started up again using the same system.”
One of the ways Saddam Hussein circumvented the “oil-for-food” program was to siphon off oil which was then covertly transported through the port of Umm Qasr for sale abroad at a lucrative price. The importance of this moneymaking scheme to the regime is underlined by the fact that Saddam’s son, Uday, was in charge of the operation.
Abd Al-Amier Majoad has worked for 15 years as a boat-fitter in a repair yard on the banks of the Shatt al-Arab outside Basra.
“The system started after sanctions were imposed in 1991,” he said. “We started converting barges to smuggle all different types of oil.
And if the government needed a piece of heavy machinery, they would exchange it with merchants in return for black market oil.”
Majoad explains how the boats are modified through a process of “multilayering” the hold, the last layer containing illicit fuel. The biggest difference these days is that there used to be a certain quota for the black market traders –– now there are no limits.
“There has been some kind of reduction recently,” said Majoad. “But I for one hope it continues since we make a good profit from this trade.”
“These are not amateur smugglers, they are professional,” said Maj. Charlie Mayo, spokesman for British army operations in Basra. He emphasizes the huge area the forces have to patrol to illustrate the size of the task of combating smuggling. Another problem is that there is no obligatory paperwork to be done when the drivers of tankers come to pick up supplies of fuel from the refinery. This means some of their stock can be kept back to sell on the black market.
But the coalition is cracking down. At the Shaiba refinery, British troops have resorted to escorting every single tanker to its destination –– a long-overdue policy, according to the plant’s director, Thamir Ibrahim.
“This should have been happening from the start,” he said.
The river town of Abu Khassib is one of the major points the smugglers use to load oil onto the converted barges. From here there are various routes along the Shatt Al-Arab down to Umm Qasr or across to Iran. But activity here has all but dried up in recent weeks according to a worker in one of the shipyards used by the smugglers.
“The British army has been clamping down on us,” said the man, who wished to remain anonymous. There used to be constant traffic of smuggled oil passing through the town, but it seems coalition efforts are remedying the problem. “The only time you’ll glimpse any smuggling now is at night.”
Aug. 9 saw the biggest seizure of stolen fuel so far as the British Royal Navy impounded a Panamanian-registered ship carrying 1,100 tons of contraband diesel near Umm Qasr. Along the routes through the desert to Kuwait and Iran, 74 trucks have been intercepted recently. And the CPA estimates that now only one barge a day is getting through the routes along the Shatt Al-Arab.
But although the anti-smuggling operation is going well, national production in a country with the world’s second-largest oil reserves continues to remain low. Reconstruction contracts were handed out to all the usual suspects –– KBR (formerly Kellogg Brown and Root), a subsidiary of US-based Halliburton, has the honor of looking after the repair of the southern oilfields.
“Our target is 1.2 million barrels per day by the end of this year –– or the first quarter of next,” said Saad Abdul Razzaq, director of the Southern Oil Company which handles oil production in the south of the country, and reports each week to KBR executives.
“The process does need to be accelerated but we are not behind,” Razzaq said, claiming that the southern oilfields are now at 70 percent of their pre-war output. “We had to start from scratch, and we face serious problems with the sabotage and thefts.”
Razzaq insists everything is on schedule, but unless there is speedy progress in the coming months there will be anxious eyes from around the world on the recovery program for the Iraqi oil industry.
Published date: 17/8/2003
Author: Seb Walker
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