GULF: Attacks on Foreign Workers Pressure Oil Price

By IPS Correspondents Reprint | | Print |

Peyman Pejman

DUBAI, Jun 1 2004 (IPS) - A bloody hostage crisis in Saudi Arabia’s petroleum-producing hinterland, just weeks after an attack on foreign oil workers, has stoked fears of further destabilisation of the world’s largest oil producer.

A bloody hostage crisis in Saudi Arabia’s petroleum-producing hinterland, just weeks after an attack on foreign oil workers, has stoked fears of further destabilisation of the world’s largest oil producer.

With oil prices above 40 U.S. dollars a barrel, any further upsurge, because of worries that petroleum production could be disrupted, would have a devastating effect on world markets, say analysts.

On May 30, Saudi commandos stormed a residential complex in Khobar, north-east of the capital Riyadh, to rescue dozens of foreigners held hostage by suspected al-Qaeda militants who also killed as many as 17 people in an assault on the country’s vital oil industry.

In the rescue attempt, 22 western and Arab residents lost their lives, but the commandos freed some 50 hostages and evacuated about 200 others to safety.

The Khobar attack was the second in a month on foreign oil workers.

That attack prompted a number of foreigners working in the Saudi oil sector to make plans to leave, though there has not been a mass exodus yet.

”The question is not how safe they (the oil facilities) are now. The question is whether this is the beginning of a trend,” Youssef Ibrahim, a respected oil and energy analyst, told IPS.

”Are we going to see more of these attacks?” he asked.

Added Ibrahim: ”Their purpose really is to shake off confidence in Saudi Arabia’s ability to supply oil and that purpose has clearly been accomplished.”

Increasing fears of terrorist activity in the world’s most important oil producer will not help calm current world jitters about petroleum supplies.

The hostage crisis comes at an awkward moment for the international oil market, with the Organisation of Petroleum Exporting Countries (OPEC) due to meet in Beirut Thursday to raise production quotas in an effort to push down prices.

But in a sign of a nervous market, U.S. light crude was at 39.88 U.S. dollars early Tuesday.

Saudi Arabia, which accounts for more than a quarter of the world’s oil reserves, could be in trouble of meeting its production quotas if it loses its foreign workers, according to Ibrahim.

”Much of Saudi’s oil installations and facilities are either old or, by the nature of the business, need constant upgrade or maintenance, and tens of thousands of western workers have for decades been involved in the country’s oil projects,” explained the oil analyst.

”They (Saudis) can continue to pump oil but there is more to it (running the installations) than pumping oil. There is the refining industry; there is the petrochemical industry; there is the kind of upkeep that must be going on all the time,” added Ibrahim. ”If everybody left, it would be a very serious problem.”

While the jury is still out on the question of the safety of Saudi oil installations, the kingdom, however, is not taking any chances.

Various Saudi officials in Washington and Riyadh have been on hand to give interviews to international journalists.

”The intent (of this attack) was to cripple the world economy by sending the message that foreigners are not safe in Saudi Arabia,” said Nail al-Jubeir, the Saudi embassy spokesman in Washington.

”It does not take much to come into a building with a rifle and shoot innocent people,” he added.

The state-run Saudi Aramco oil giant, too, issued an immediate statement after the Khobar mayhem.

”No Saudi Aramco facilities or personnel were affected by the incident and normal operations continue at all of the company’s installations ,” the company said in a press release sent to IPS.

”The company is committed to carrying out the Saudi Arabian government’s policy of providing a reliable supply of oil to meet world energy demand,” added the statement.

In damage-control mode, Saudi officials said too much had been made of the potential danger to the country’s oil installations.

”Oil facilities in the kingdom are extremely safe. They have been safe since the 1970s when the country faced terrorism from the Palestinians coming here from Lebanon,” a ranking Saudi official in Riyadh told IPS.

”People forget that we have had terrorism in this country for decades but never has an oil facility been successfully targeted,” said the official.

But he admitted the Saudi government had been slow in combating religious fundamentalism in the country and perceiving terror threats.

”When it comes to obvious targets, the leadership has always been good. It is the unexpected that they have missed,” said the Saudi official.

Oil analyst Youssef Ibrahim cautioned that Saudi officials needed to look into the possibility of penetration within their security apparatus.

”You have to look at the whole security structure up and down. In at least one case, in Yanbu – although we don’t know all the facts yet – those who launched the attack may have been working in the complex,” he said.

”And in both Yanbu and Khobar, these people seem to know the oil facilities well enough to find their way around,” Ibrahim pointed out.

Both the United States and Britain repeated warnings to their nationals to leave Saudi Arabia. Some 30,000 U.S. citizens are believed to be resident in Saudi Arabia, mostly connected with the oil sector.