The Khobar attack and hostage crisis in Saudi Arabia on 29-30 May, in which twenty-two people died, is as important as any comparable events in the kingdom over the past eight years. It takes place against the background of equally significant longer-term trends in Iraq.
One of the most devastating paramilitary attacks of the decade was launched in June 1996 against the Khobar Towers, a high-rise barracks block at the United States air force (USAF) base at Dharhan, only a few kilometres from the scene of last weekends attack. In that incident, a sewage tanker packed with explosives was driven close to the perimeter of the barracks block and detonated, collapsing the whole of the front of the building. The blast killed nineteen Americans and injured around 500 people.
The Khobar Towers attack resulted in a fundamental rethink of US military security in Saudi Arabia. This involved the almost total abandonment of the Dharhan base by the USAF, and the building of a new facility, the Prince Sultan air base, at a secure and remote site in the heart of Saudi Arabia. The new base cost $500 million and housed around 4,000 personnel, with 400 of them devoted solely to base security. It continued to operate until 2003 when most American military forces were withdrawn from the country and the base was put on a standby basis.
By contrast, the latest attack was directed much more against expatriate workers in the Saudi oil industry, and follows a pattern developing over many months. In recent weeks this pattern has included an attack on the offices of an oil industry company, ABB Lummus Global Inc., in the port of Yanbu in western Saudi Arabia; and the killing of a German expatriate in Riyadh.
Such actions are often casually described as involving so-called soft targets. But they have included the killing of five Saudi security agents in Riyadh in January 2004, and a suicide bombing in April which severely damaged a police headquarters in Riyadh, killing five people including two senior police officers.
The oil factor
Yet even by the standards of violence of these earlier incidents, last weekends attack was remarkable in that it was intended to affect the whole expatriate community in Saudi Arabia. The incident started with an assault on two large office blocks in Khobar that housed many western companies with oil interests. People arriving for work at the al-Rushaid Petroleum Centre and the Arab Petroleum Investment Corporation were attacked, and the paramilitaries later moved on to the Oasis Residential Resorts complex, a large enclosed compound with villas and apartments occupied by expatriates.
Most of the attackers managed to escape the immediate aftermath of the operation. It is particularly significant that two large office complexes and a well-protected residential compound, all at the heart of the Saudi oil industry, could be assailed with near-impunity. While this in itself may have little if any impact on Saudi oil production, it will increase concerns about the stability of the kingdom, and inevitably cause speculation in the oil futures market and probable consequent price increases.
As mentioned in last weeks column in this series, the major western Gulf oil producers such as Saudi Arabia and Kuwait do not want prices to rise too far, not least because any resultant recession in the west would affect their investment income. They will therefore tend to increase oil output, so that any intention on the part of al-Qaida and its affiliates to influence oil prices will have to involve other actions.
Such groups are helped by the current tight balance between supply and demand, and also by the forthcoming summer peak of petrol usage in the United States. In this light, they have three main ways of having an effect. The first is to attack oil production and transport facilities; this has, in the past, included the bombing of the French oil tanker Limburg off the Yemeni coast in October 2002, and the more recent attempted attack on an oil distribution facility in Basra in April 2004. Such actions are not always practicable because of the levels of security and the dispersal of oil facilities across the Gulf states, but their considerable psychological impact makes some recurrence of them likely.
The second method is to attack expatriate oil workers, and this is now very much routine in Saudi Arabia. The third is to utilise the scope for much more sustained action in Iraq. Iraqi oil exports are not substantial at present, but any increase in unrest in the country, especially if it involves the disruption of oil supplies, will add to oil market uncertainties and force up prices. While western Gulf states may want to keep prices below $40 a barrel, this may prove difficult in a tight market with speculation rife.
A double prospect
In Iraq itself, there have been significant recent political and security developments, which indicate that the June-August period is going to be particularly fraught. Iyad Allawis nomination as prime minister on 28 May was followed by controversy concerning his remarkably close links with western intelligence agencies, confirming the view across the region that a client regime is now being established in Baghdad.
The subsequent formation of an interim government under the presidency of Ghazi Yawer, and the decision of the coalition-appointed Iraqi Governing Council (IGC) to dissolve itself, opens a new phase in Iraqs political timetable; the presidents inaugural statement expressed the wish for a united Iraqi nation, without murderers and criminals.
Alongside these political developments, the violence continues. The American military have effectively given up taking control of Najaf, detaining Muqtada al-Sadr and disarming his militia, in favour of an uneasy truce that may involve a diminishing of the radical Shia clerics influence but is a long way short of original intentions. Away from Najaf, there have been many further attacks on coalition military forces and also on civilians. These have included more American casualties, a car bomb in Baghdad on 2 June which killed five Iraqis and injured thirty-seven, and new clashes with Shia militia in Kufa.
This all takes place in the context of a wider problem of insecurity, graphically summarised in the Economist (13 May 2004), that is reducing the reconstruction of key aspects of the economy to near zero. During April, for example, ninety expatriates were kidnapped, and some of them subsequently killed. The US contractor Kellogg Brown & Root has had thirty-four of its staff killed; another US contractor, Bechtel, has pulled out half of its staff in Iraq and its thirty-three expatriates remaining in the country have each been assigned two bodyguards.
The extent of the insurgency is such that a whole range of planning objectives have not been achieved, most significantly in the areas of power supply and other public services. What is perhaps most worrying of all is a widespread suspicion that the assailants are sufficiently well-organised as to guarantee that there is worse to come, in the form of specifically targeted actions.
In particular, it is widely recognised that the insurgents have a much greater capacity to disrupt electricity supplies and oil distribution than they are actually demonstrating at present. If this line of argument is correct, the armed attackers may actually be waiting to intensify their campaign until the June-August period, when the most intense summer heat and the inauguration of the new client regime in Baghdad will coincide.
Here, the connection with events in Saudi Arabia is restored, in the likely double prospect of further attacks aimed at undermining western confidence in the House of Saud and of further disturbances in Iraq. In such circumstances the desire of major oil-producing states of the Persian Gulf to keep oil prices below $40 a barrel will be tested to the limit. If they fail, a surge in oil prices this summer might have a profound effect on the international economy. That could yet be one part of Americas war on terror with markedly unintended consequences.
