Monday, November 12, 2007

Iraq: Kurds Push Ahead With Oil Contracts

By Kathleen Ridolfo

November 12, 2007 (RFE/RL) -- Iraq's Kurdistan regional government (KRG) continues to award contracts for oil exploration and development to foreign oil companies despite allegations by the central Oil Ministry that the contracts are not valid due to the absence of an oil law. The KRG has ignored the criticism and contends that the contracts are legal.

The KRG has awarded 12 new contracts to international firms over the past two weeks. On November 12, it said it approved five production-sharing contracts with European, U.S., and Korean companies. The contracts are for the exploration and development of fields in the region's Irbil, Al-Sulaymaniyah, and Dahuk governorates.

"In Kurdistan, we are setting the example: this is only the first post-Saddam framework for oil investment in Iraq that follows the democratic, federal, and free-market principles mandated by the Iraqi Constitution," regional Oil Minister Ashti Hawrami said regarding the contracts.

"It is the first and only constitutionally based legal framework to attract investments to Iraq, which is designed for Iraq-wide revenue sharing, an essential element of future stability in Iraq that the constitution also rightly mandates," Hawrami added, and that the KRG hopes a similar framework will be adopted throughout Iraq.

The KRG announced on November 6 that it has approved seven new production-sharing contracts (PSC) with foreign firms. It also awarded PSCs to the Kurdistan Exploration and Production Company, which is owned by the KRG, and awarded an integrated project to the Kurdistan National Oil Company, a government-owned development company, to build a refinery for the Khurmala oil field.

At the time, the KRG said another 24 blocks in the region were the "subject of intense interest from international companies."

Baghdad Says No

There was little reaction from Baghdad to the announcement. Iraqi Oil Minister Husayn al-Shahristani has repeatedly said that previous contracts concluded between the KRG and outside investors are illegal. Al-Shahristani contends that the KRG must wait for the central government to ratify a draft oil law.

Moreover, as Oil Ministry spokesman Assam Jihad has said, the federal draft oil law stipulates that all development agreements be awarded through an open and transparent public bidding process, and not through bilateral agreements, with final approval by Baghdad.

The draft federal law was approved by Prime Minister Nuri al-Maliki's cabinet and sent to parliament for ratification months ago, but the Council of Representatives has yet to hold a vote, and the draft appears to be tied up in the parliament's Oil Committee.

The Kurdistan regional parliament passed its own gas law in August, which the Kurds say is in line with the draft federal oil law. According to the KRG's November 6 announcement, the regional government's share of oil revenues will be 17 percent, while the remaining 83 percent will be redistributed throughout the country through the central government in Baghdad.

Following the KRG's decision to award three PSCs to foreign firms in October, al-Shahristani threatened to blacklist any foreign companies working with the KRG. Al-Shahristani said he would work to prevent those firms from doing business in Iraq in the future. "The federal government's position toward these new deals is that any contract signed without its approval isn't considered a contract," al-Shahristani told Dow Jones Newswires on October 5. "We warn these companies and hold them responsible for the consequences of signing such deals."

He added that under both the Hussein-era hydrocarbon law and the current draft law, the only Iraqi body authorized to export Iraqi crude oil and gas is the State Oil Marketing Organization. Any other exports would be considered "smuggled" by the central government.

Kirkuk As Bargaining Chip

According to media reports, one of the most controversial contracts awarded by the KRG is to U.S.-based Hunt Oil, because the territory under exploration falls outside the Kurdistan region, in the historically Kurdish-populated northern Ninawah Governorate -- an area the KRG hopes will eventually join the region, along with nearby, oil-rich Kirkuk Governorate. Baghdad will likely challenge the legality of the KRG-awarded contract for exploration outside its region.

Also at stake is the Kurdish claim to Kirkuk Governorate. The government was to hold a referendum on the status of Kirkuk next month, but it remains unclear whether the vote will go ahead. Under the constitution, revenues from existing fields such as those in Kirkuk, belong to the central government. Newly developed fields would fall under Kurdish control, but as the constitution stipulates, the revenues must be shared with Baghdad.

At the moment, it appears the central government can do little to prevent the contracts from being carried out, though Kirkuk could end up being the government's leverage issue. Some observers have also speculated that Baghdad could block export routes, a threat also voiced by Turkish leaders seeking to place an economic embargo on the Kurdistan region in retaliation for the KRG's failure to expel Kurdistan Workers Party (PKK) militants from Iraqi territory.

Should that happen, the KRG could theoretically sell the oil through smuggling routes to Iran and Syria, but such a move would be unlikely to sit well with their international investors.

Regardless, there is little chance the KRG will halt or even slow its development of the oil industry. Investors have flooded the region in recent months, and the KRG intends to benefit from the boom.

Tuesday, November 13, 2007

Iraq: Smuggling, Mismanagement Plaguing Oil Industry

By Kathleen Ridolfo

November 13, 2007 (RFE/RL) -- Even as Iraq's Kurds sign production-sharing contracts with foreign firms, oil production south of the Kurdistan region appears handicapped by a lack of government control and continued smuggling.

Iraqi Oil Minister Husayn al-Shahristani said recently that production increased in October, but it remains unclear whether the current output levels can be maintained or increased. Meanwhile, Sunni leaders have begun calling on international firms to begin prospecting for oil and gas in the once-volatile Al-Anbar Governorate.

But government infighting, corruption, and smuggling continue to hold back exploration and development, and a national oil law on distributing the revenues remains held up in a parliamentary committee.

Officials Complicit In Smuggling

According to media reports in recent months, the export of oil from the south -- apparently carried out by militias connected to political parties -- is on the rise, and costing the federal government about $40 million a month.

Abd al-Basit Turki, the head of Iraq's Supreme Audit Board, said last month that at least 15,000 barrels of crude oil are smuggled everyday from Iraq's southern fields to Iran and the Persian Gulf states. In reality, the figure may be significantly higher. U.S.-based petroleum expert Jerry Kiser told the BBC in January that up to 300,000 barrels per day are smuggled from Al-Basrah to Iran through smuggling routes established by Saddam Hussein when Iraq was under sanctions in the 1990s.

Turki told Dow Jones Newswires that smugglers siphon oil from pipelines and load it onto trucks, which carry the oil to small boats in the Persian Gulf. He said, "organized gangs who are more strong and influential than the government and political officials" in Al-Basrah are responsible for the smuggling.

The Iraqi daily "Al-Zaman" reported on October 25 that government officials in Al-Basrah were even assisting the smugglers. Customs chief Khalaf Badran told the daily that the officials issue certificates to tanker drivers who smuggle the oil. "They use these permits to pass through checkpoints and security controls on their way to unload their cargo onto special boats along the shores of the Shatt Al-Arab Waterway," Badran said. He said it is impossible to know which tankers are official and which are smuggling, because the permits are official.

Political parties and militias are also controlling filling stations throughout the country, the daily reported on November 3. The groups use the revenues to finance their operations. Former Oil Minister Ibrahim Bahr al-Ulum has confirmed the practice, and says that political parties also used their clout and presence in the government to grab lucrative export deals from the State Oil Marketing Organization. Thamir al-Ghadban, a former oil minister and currently an energy adviser to Prime Minister al-Maliki, also confirmed the practice, saying that the groups in question imposed "levies on fuel products sold to the public."

Iraqi Vice President Barham Salih told "Al-Sharq al-Awsat" in October that the government has been working to eradicate widespread smuggling operations in Al-Basrah, as well as at the Bayji refinery, north of Baghdad.

Salih said the government "liberated" the Bayji refinery earlier this year after discovering terrorist groups had siphoned off $1.5 billion worth of oil and oil derivatives between 2005 and 2006. Regarding Al-Basrah, he said: "We are working to confront this situation, but we need time because the financial and administrative corruption has reached some important decision-making centers in the Iraqi political arena."

Mismanagement, Corruption Rife

Indeed, the government faces a daunting challenge when it comes to dealing with corruption. Parliamentarian Sabah al-Sa'idi, who heads the Integrity Commission at the Council of Representatives, is someone who has taken aim at the smuggling issue, but may himself have ties to illicit activities. Al-Sa'idi, who hails from the influential Shi'ite political party Al-Fadilah, last week accused Oil Minister al-Shahristani of corruption and called for his resignation.

Al-Shahristani fired back in an interview with Al-Sharqiyah television, indicating that al-Sa'idi and his brothers may be involved in the corruption. "We prevented [al-Sa'idi and his brothers] from intervening in many affairs concerning the ministry," al-Shahristani said, noting the former director-general of the State Oil Marketing Organization was collaborating with al-Sa'idi in an illicit oil-buying scheme. Al-Sa'idi "represents a group which sees that it has lost much after being denied contracts they were [once] benefiting from," the minister said.

Al-Shahristani also refuted reports by the Supreme Audit Board that Iraq is losing at least 15,000 barrels per day to smuggling. He said he has heard nothing from the board on this matter, and argued that such a loss could have come from pipeline explosions.

Meanwhile, exports via the northern pipeline are up to 300,000 barrels per day now that tribal leaders in north-central Iraq have decided to side with the government. Regarding the southern terminals, al-Shahristani said they are completely under his ministry's control, and the ministry has installed meters to track oil exports.

Former Oil Minister Thamir al-Ghadban told an audience at Stanford University last week that countrywide production currently stands at 2.5 million barrels per day, which is slightly less than preinvasion production levels. Exports currently stand at 1.7 million barrels per day. Al-Ghadban said the government's aim is 6 million barrels per day by 2015.

Before it can reach that goal, the government must contend with smuggling, as well as issues of terrorism and sabotage. Last week, some 200 tribesmen from villages surrounding the Majnun oil field in Al-Basrah stormed the field's facilities and rioted, demanding jobs for the local population. It appears that the majority of workers at the field were brought in from other areas. The tribesmen inflicted damage on several structures, including the facility's water tanks, which resulted in flooding. The attack was the third of its kind by tribesmen in recent months, the state-run "Al-Sabah" newspaper reported.

Many Hurdles Remain

Meanwhile, Iraq's center remains far behind. Once believed barren of oil, recent studies suggest western Iraq may be sitting atop a trillion cubic feet of natural gas, "The New York Times" reported in February. The amount of natural gas that could theoretically be extracted from Al-Anbar's Akkas field would be the energy equivalent of around 100,000 barrels of oil a day, one official speculated.

The recent studies have prompted leaders from Iraq's Sunni Arab-populated governorates to seek a ticket on the oil train. A delegation from the Al-Anbar Salvation Council visiting Washington earlier this month called for private U.S. investment to develop Al-Anbar's oil and natural-gas reserves. The council is a body established by tribesmen who aligned with the government to fight Al-Qaeda in Iraq.

Now that security has been established in Al-Anbar, previously Iraq's most volatile governorate following the U.S.-led invasion, leaders are keen on bringing in new business. The governorate has long been known for its cement and phosphate industries. With the possibility of significant oil and gas reserves, leaders say an economic revival is just around the corner. "It's just sitting there waiting for somebody to make use of it," Al-Anbar Governor Ma'mun Sami Rashid al-Alwani told reporters in Washington.

Corruption and mismanagement could have a significant impact on international investment in Iraq's oil industry, although with surging oil prices and high demand, investors would likely overlook reports of illicit activity so long as security, output, and delivery could be guaranteed.

For now, the lack of a national oil law remains the key obstruction to development. But if the security situation in the north-central region continues to remain stable, investment could be right behind it. In the south, the situation is more in flux, though the government announced this week that it has signed an agreement with Iran to build two pipelines. One will carry oil byproducts from Iran to Al-Basrah, while the other will transport Iraqi crude to Iranian ports. The oil will be sold at international market prices.

November 13, 2007
In Old Quarter, Sectarian Ties Stave Off War

By SABRINA TAVERNISE and KARIM HILMI
BAGHDAD — At its oldest spot, a small dusty strip of dirt road near a mosque, the neighborhood of Bab al Sheik — a maze of snaking streets too narrow for cars — dates from a time, more than a thousand years ago, when Baghdad ruled the Islamic world.

At that time, orchards and palaces of Abbasid princes unfolded in stately splendor not far away.

Ten centuries later, Bab al Sheik is less grand, but still extraordinary: it has been spared the sectarian killing that has gutted other neighborhoods, and Sunnis, Shiites, Kurds and Christians live together here with unusual ease. It has been battered by bombings around its edges, but the war has been kept from its heart, largely because of its ancient, shared past, bound by trust and generations of intermarriage.

“All of these people grew up here together,” said Monther, a suitcase seller here. “From the time of our grandfathers, same place, same food, same everything.”

Much of today’s Baghdad sprang into existence in the 1970s, when oil nationalization drew Iraqis from all over the country to work. The city’s population more than tripled over the course of 20 years, and new neighborhoods sprawled east and west. The war and civil conflict have seemed to take a heavier toll in those areas than in some of the older neighborhoods. No one knows this better that Waleed, a rail-thin Bab al Sheik native who 10 years ago moved his family to Dora, a newly built middle-class neighborhood in southern Baghdad.

In Dora, residents were from all over. That never seemed to matter until the basic rules of society fell away after the American occupation began. The only bulwark left against complete chaos was trust between families, and in Dora there was not enough.

“We didn’t know each other’s backgrounds,” said Waleed, sitting recently with Monther in a barbershop in Bab al Sheik, rain spitting on the street outside. Neither man wanted to be identified by their last names out of concern for their safety.

“Here, he can’t lie to me,” he said, jabbing a finger in Monther’s direction. “He can’t say, ‘I’m this, I’m that,’ because I know it’s not true.”

In Dora, he said, he did not have those powers of discernment. And he paid the price: his son was shot to death on Oct. 9, 2006, while trying to get a copy of his high school diploma. Waleed moved his family out of the area immediately.

“My first thought was this neighborhood,” he said. “My grandfather is from here. I always felt safe here.”

So did two reporters, who made six visits to the area over two months. It was safe enough, in fact, to walk through the warren of narrow streets, nod at elderly women sitting at street-level windows, linger in a barbershop and make long visits to Sunni, Shiite and Kurdish homes.

On a recent Friday, a large Kurdish extended family relaxed at home. The living room was dark and cool, tucked in an alley away from the afternoon sun. Abu Nawal, the father, recounted how a group of men from the office of the Shiite cleric Moktada al-Sadr came to a local cafe, proposing to set up shop in the area. The cafe owner pointed to a sign, which stated in dark script that all discussions of politics and religion were prohibited. The men were then asked to leave.

“The guys in the neighborhood said, ‘If you try to make an office here, we will explode it,’” said Abu Nawal, a shoemaker, whose family has lived in the neighborhood for four generations.

Some time later, Sunni Arab political party members came and were similarly rebuffed.

“They wanted to put their foot in this neighborhood, but they couldn’t,” said Abu Nawal, who asked to be identified by his nickname for the safety of his family.

He said he despised the poisonous mix of religion and politics that was strangling Iraqi society, and he enjoyed cracking wry jokes at politicians’ expense. Playing off the names for extremist militias, which in Iraq call themselves names like the Islamic Army, he refers to his group of friends as the Arak Army, righteous defenders of an anise-flavored alcoholic drink.

The neighborhood has another rare asset: moderate religious men. Sheik Muhammad Wehiab, a 30-year-old Shiite imam whose family has lived in Bab al Sheik for seven generations, was jailed for 14 months under Saddam Hussein, a biographical fact that should have opened doors for him in the new Shiite-dominated power hierarchy. But his moderate views were unpopular in elite circles, and he has remained in the neighborhood.

He feels connected. So much so that while talking on the phone one night this fall, he walked out into the tiny alley outside his door, lay down and watched the stars in the night sky.

“I think Maliki right now is envying me,” he said to himself. “No bodyguards. Just free. This is the blessing.”

He has radical views. One of them is that Muslims have behaved terribly toward one another in the war here and have given Islam a bad name in using it to gain power.

“I don’t blame those guys who drew the cartoons,” he said, referring to the Danish cartoons depicting the Prophet Muhammad that sparked riots and protests across the Islamic world last year.

“Muslims are the ones to be blamed,” he said, sitting in an armchair in his quiet living room. “They have given them this picture.” An ice cream seller walked past his window, hawking in a loud voice.

Sheik Wehiab’s friend, a Sunni cleric, holds a similar view.

“The greatest jihad is the jihad of yourself,” said the cleric, whose smooth voice echoes through the neighborhood as he calls worshipers to prayer every day at Qailani Mosque, the neighborhood’s anchor.

The cleric, who asked that his name not be published out of concern for his safety, because of the high profile of the mosque, lovingly ticks off qualities of the 12th-century Sufi sheik Abdel Qadr Qailani, who gave the mosque its name: Intellectual. Scholar. Moral teacher.

But moderate religion is not drawing an audience on a national scale, and the mosque, one of Baghdad’s most important Sunni institutions, has fallen on hard times. Donations are down. Its long-running soup kitchen serves one meal a day instead of three. Sufi clerics cannot perform their rituals. A bomb sheared off part of a minaret in February.

“Please, please, write as much as you can that we don’t want war,” the cleric said. At afternoon prayer, a trickle of worshipers walked over marble floors in sock feet.

War has come hard to the edges of Bab al Sheik. Bombings in its outer market areas have killed dozens. But deep inside the neighborhood, residents still feel free to poke fun.

In the barbershop, Waleed and Monther listen to the barber’s stories. A favorite, about the death of a man named Abdul al-Majeed, begins one night in 1977 when he demanded that the barber, Abu Zeinab, an elfin man, put on some music for a card game outside.

Abu Zeinab grudgingly obliged. The song was famous, but Mr. Majeed found its refrain — “you, who are buried under the sand” — morose. Angrily, he told a different shop owner nearby to put on some music to drown it out. By coincidence, that man put on the same song.

Then came the funny part. Mr. Majeed, at that very moment, keeled over dead.

“The song was a message for him,” said Abu Zeinab, waving his arms for emphasis, his tiny shop throbbing with his audience’s laughter.

Even in death, Mr. Majeed was unlucky. He died on the eve of the census, when traffic all over the city was stopped. Large amounts of arak were consumed. By the time the pallbearers made it to the cemetery they were swaying in an undignified manner.

“Even the gravedigger was drunk,” Abu Zainab said. The man dug the grave on the same spot where Mr. Majeed’s son was buried and said, “They’ll hug each other down there.”

Outside it was almost dark. Cheeks felt tight from laughing.

A small boy entered the shop, carrying a battered aluminum tray. Lentils, rice, tomatoes and cabbage in bowls of chipped green glass. Abu Zainab made room on the counter, putting aside a pair of scissors and a tiny potted plastic plant that looked like a child’s toy.

He placed a cassette tape into his battered boombox. Prayers came out in a melody.

Then he sat, and invited his guests to share his dinner.

Johan Spanner contributed reporting.

One Day in the Life of Amir Abbas Fakhravar

By Jacob Laksin
FrontPageMagazine.com | 11/12/2007

[Editor's Note: the following profile is on Amir Abbas Fakhravar, the Annie Taylor Award recipient at this year's Restoration Weekend, Nov. 15-18].

As a teenaged high-school student in Iran, Amir Abbas Fakhravar was required to participate in the daily morning ritual of marching atop American flags. The idea was to express complete contempt for the country that the late Ayatollah Ruhollah Khomeini had famously cursed as the “Great Satan,” but Fakhravar, an avid student of history from an early age, had his doubts. “It was that flag that had been put on the moon, that flag that symbolized progress for the human race, so why were we stepping on it?” he wondered.

That was when Fakhravar first began to question the Iranian regime. When he received no answers, the questions became more “aggressive.” At last, he realized that “regime change was the only option” for Iran.

Bold words. But Fakhravar, 32, now an opposition activist living in exile in Washington D.C., has earned the right to speak them. For his role in leading Iran’s pro-democracy student movement, Fakhravar spent a total of five years and three months in Iranian prisons, including Evin Prison, sadistically run by Iran’s Revolutionary Guard, suffering countless beatings and tortures along the way. His close relatives -- including his two sisters and a brother-in-law -- have also served jail time for their political views; his close friend Arjang Davoodi, beaten so fiercely by prison interrogators that he has lost his eyesight and his hearing in one ear, remains behind bars. So when Fakhravar calls for the end of the Iranian regime, you get the sense that it is not only out of a desire to see the Iranian people freed from nearly thirty years of stifling, theocratic rule. Its personal.

Fakhravar delivered his first major political speech in 1993, while only a senior in high school. Taking aim at Ayatollah Akbar Hashemi Rafsanjani, the young upstart offered some fresh advice for the then-president. “Instead of telling people what they need, why not ask them want they want?” Fakhravar declared. His parents, mindful of the Islamic Republic’s tolerance for dissent, appealed for him to steer clear of politics. But Fakhravar was undeterred.

He was back at it in December of 1994. While attending medical school in Iran’s Orumiya province, Fakhravar gave a speech lambasting the lack of freedom in the country. The repercussions were swift and severe. Enforcers from the government’s ministry of intelligence burst into the classroom, handcuffed him and, as despairing students looked on, dragged him away in a blindfold. It was an unsubtle message to stay silent. Fakhravar refused. As punishment, in 1996, he was sentenced to a three-year jail term (later partially suspended).

If authorities thought that they would hear no more from the student activist, they miscalculated. By 1999, Fakhravar had returned to the battleground of politics, working to organize student support for the reformist candidate for president, Mohammad Khatami. Although it was unclear that Khatami represented a genuine alternative to mullah rule, the students thought that he could nevertheless spur reform within the system.

That was their miscalculation. In July of 1999, Iranian police launched violent raids on student dormitories, following them up with brutal crackdowns on student demonstrations. Khatami, the great hope of the opposition, failed to seriously challenge the hard-liners; the students, Fakhravar among them, came to the conclusion that the system was beyond repair. “That was when the movement became focused on regime change,” Fakhravar said in a recent interview, speaking through a translator.

Fakhravar was not always a dissident. Before joining the student movement, he had been a doctrinaire leftist. Like many Iranians, he read and believed the books and lectures of Ali Shariati, the Iranian sociologist best known for his fusion of revolutionary Marxism and Islamism. For the young Fakhravar, Shariati’s vision of a “god-fearing Marxist” had a certain resonance.

Fakhravar could not sustain his Marxist faith for long. A dedicated reader of politics and history, he soon discovered fatal contradictions in Marxist theory. It was not the only contradiction that his studies exposed. Even as his teachers assured him that the United States had to be eliminated -- “getting rid of Americans and Israelis was a good deed,” he remembers being taught -- Fakhravar’s study led him to the opposite conclusion. “I read how America rescued Europe in World War II, and I decided that it was actually a very generous nation,” he says. Information on Israel was more difficult to come by; indeed, to call the Jewish state anything other than “the occupying regime” was to risk reprisal from the authorities. But that fact alone convinced Fakhravar to reject the anti-Israel indoctrination of his teachers. “It’s not that I knew about Israel. But so long as the Iranian government opposed Israel, I supported it.”

Fakhravar has paid terribly for his heresies. Sentenced to eight years in prison in 2001 for his involvement in the student movement, Fakhravar served four consecutive years, including eight months in solitary confinement when he was subjected to “white torture,” a form of sensory deprivation in which he was locked in a windowless cell, denied all human contact, and was surrounded by white (including white walls, white clothes and even white rice for food).

Even worse than the torture was the mental anguish. “Day in an day out, the interrogators would say, ‘You will never see the blue sky again.’ ‘You will never see the moon again.’ ‘You will be buried here.’” At night, Fakhravar would have nightmares, his mind racing with images that the prison walls closing in, burying him. Terrified, he would awake in a cold sweat.

Most dispiriting, however, was what happened before he went to prison. Fakhravar recalls being beaten up and thrown in jail for three days. Finally, a judge finally came to see him. Fakhravar protested his detention, but the judge showed no interest in his case. “Remember,” he recalls the judge sneering at him, “those who cross the line deserve to die.” “When you hear that from a judge, you lose hope,” Fakhravar says. In the end, he was sentenced without trial, or even so much as an opportunity to plead his case. The official charge: “Insult to the Supreme Leader,” the Ayatollah Khamenei.

There was one good thing that came out of prison. In the course of serving his sentence, Fakhravar became friendly with a gang of “hard-core criminals.” On the outside, they arranged, for a fee, for him to get a passport. To keep the authorities off his trail, a customs officer at Tehran airport was bribed to keep his name off the list of passengers. In May of 2006, ten years after his first prison sentence, Fakhravar fled Iran for Dubai. Shortly thereafter, he arrived in the United States.

One day, Fakhravar would like to return to his home country. Presently, however, he has a lot of work to do. Prominent on his busy schedule is his position as the president of the Iranian Enterprise Institute. Inspired by the American Enterprise Institute, the non-profit organization was founded in September of 2006 and specializes in publishing bulletins (so far, only in Farsi) about Iranian politics and advocates support for Iran’s student opposition against the ruling regime. Although the institute is just getting off the ground, some leading American neo-conservatives are reported to be supporters. Fakhravar’s hope is that the institute will re-energize the Iranian opposition movement in the United States, which he fears is too riven by infighting to be effective and too out of touch with the concerns of today’s Iranian youth to provide meaningful assistance to their cause.

For his part, Fakhravar has no doubt about what needs to be accomplished. Asked what he would like to see in Iran’s future, Fakhravar replies without hesitation. He wants to see an Iran that’s free, secure, democratic, and prosperous; an Iran governed by laws and a constitution that will withstand attacks against it; an Iran that maintains a separation between church and state; that lives in peace with its neighbors; and that has no need for nuclear weapons. “I have a long list,” Fakhravar acknowledges. But then, he has never been one to shrink from a challenge.

Jacob Laksin is a senior editor for FrontPage Magazine. He is a 2007 Phillips Foundation Journalism Fellow. His e-mail is jlaksin@gmail.com

Strike on Iran Would Roil Oil Markets, Experts Say
Price Hits Record Close; U.S. Tightens Sanctions
By Steven Mufson
Washington Post Staff Writer
Friday, October 26, 2007; A01

A U.S. military strike against Iran would have dire consequences in petroleum markets, say a variety of oil industry experts, many of whom think the prospect of pandemonium in those markets makes U.S. military action unlikely despite escalating economic sanctions imposed by the Bush administration.

The small amount of excess oil production capacity worldwide would provide an insufficient cushion if armed conflict disrupted supplies, oil experts say, and petroleum prices would skyrocket. Moreover, a wounded or angry Iran could easily retaliate against oil facilities from southern Iraq to the Strait of Hormuz.

Oil prices closed at a record $90.46 a barrel in New York yesterday as the Bush administration tightened U.S. financial sanctions on Iran over its alleged support for terrorism and issued new warnings about Tehran's nuclear program. Tension between Turkey and Kurds in northern Iraq, and fresh doubts about OPEC output levels also helped drive the price of oil up $3.36 a barrel, or 3.8 percent.

Although the Bush administration is not openly threatening a military strike against Iran, the president recently spoke of needing to avoid "World War III," and Vice President Cheney said that the United States would "not stand by" while Iran continued its nuclear program. "We will not allow Iran to have a nuclear weapon," he said.

Oil traders said that even if the chances of military conflict with Iran were small, the huge run-up in oil prices that would result encourages some speculators and investment funds to bid up the price of oil, adding a premium of $3 to $15 a barrel.

"It will be chaos. . . . I can't really see it," said Abdulsamad al-Awadi, an oil trading consultant and former executive at Kuwait Petroleum. "Having been in the marketplace for almost 30 years, I can't see a scenario for it, or precautionary measures" that oil companies could take. "There are no precautionary measures."

"If war breaks out, anticipate that all hell will break loose in the oil markets," said Robin West, chairman of PFC Energy, a District oil consulting firm.

"If it's a clinical strike like the one that Israel carried out on the Syrian installations and no one admitted to doing it, you'd have a fierce reaction from Iran, but it would probably die down," said Leo Drollas, deputy executive director and chief economist of the Center for Global Energy Studies, a London think tank founded by former Saudi oil minister Ahmed Zaki Yamani. "If it were a botched job with lots of targets and civilians dying and Iranians retaliating . . . it could escalate and the price of oil could shoot up to God knows where."

Ominous warnings about oil prices have preceded other conflicts in the oil-rich Persian Gulf, and spikes in crude prices proved fleeting in the past.

But during earlier conflicts in the region -- the Iran-Iraq war in the 1980s, the Gulf War in 1991 and even the 2003 U.S.-led invasion of Iraq -- the world's oil-exporting countries had enough capacity to make up for the disruption in oil exports. Not so this time. Demand has grown, and output has fallen in many oil-producing countries.

Saudi Arabia, which accounts for about 8.7 million barrels a day, produces almost all of the world's excess oil and is capable of boosting output by about 2.5 million barrels a day, Drollas said. Iran produces about 4 million barrels a day and exports 2.5 million barrels a day.

Moreover, while some members of the Organization of the Petroleum Exporting Countries fear that high prices would hurt oil demand and undercut long-term revenue, others see no need to boost output. In a meeting with reporters in Caracas yesterday, Venezuelan energy minister Rafael Ramirez said that the market is "well supplied." Earlier, Venezuelan President Hugo Ch¿vez said he expected oil prices to climb higher.

"Can the world do without Iranian oil exports at the present time? The answer is: just," said a senior planning executive at a major European oil company who spoke on condition of anonymity because the company has a policy not to publicly discuss oil prices. "There is enough spare capacity to offset Iranian exports, but it would be very tight. If every spigot were open everywhere, including Saudi Arabia, that should just about cover it. But it's not comfortable."

"That's just arithmetic," he added, "but is it all as simple as that? The question is: What would the Iranians do in retaliation?"

He and others noted that Iran would not need to attack well-guarded facilities in places like Saudi Arabia or harass tankers in the U.S.-patrolled Strait of Hormuz, at the head of the Persian Gulf. It could simply collaborate with Shiite forces in southern Iraq to cut off Iraq's roughly 1.7 million barrels a day of production, further weakening its neighbor while driving up prices for its own exports.

"Certainly when you lose 2.5 million barrels a day of Iranian production, which is the most likely case scenario, that will literally just make the market go berserk," al-Awadi said. Asked whether the companies he worked with had contingency plans, he said, "The oil industry does not have contingency plans. We are not military people."

The senior executive from the European oil company said that his firm did not have contingency plans, either. "You come to a point where you say it's indefinable," he said. "You sit around and ask, 'What would we as a company do differently?' The answer is nothing. You deal with it at the time."

Most industrialized nations do have contingency plans; they have strategic petroleum reserves that could be tapped during an emergency. The U.S. Strategic Petroleum Reserve, which was tapped during Operation Desert Storm in 1991 and after Hurricane Katrina in 2005, has nearly 700 million barrels, enough to cover about 68 days of U.S. oil imports from all sources.

Yesterday, Secretary of State Condoleezza Rice said that Bush is "committed to a diplomatic course on Iran," but she added that U.S. patience is "not limitless, and allies need to know that."

"These crises have a habit of bursting on the scene and leading to unforeseen places," Drollas said. "Everyone wants it not to happen, but it's like a crash happening slowly. You can see the two cars coming toward each other. . . . There's an inevitability about it."

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