TCS Daily

The Political Economy of Terror

By Ariel Cohen - November 11, 2003 12:00 AM

Al Qaeda's second massive attack in Riyadh, Saudi Arabia since May, and the closure of the U.S. Embassy have boosted the ultimate goal of Usama bin Laden to drive the "infidels" from the Land of Two Mosques and topple the monarchy. As a result, Western oil supply is at risk.


Three devastating scenarios may endanger the flow of oil: Faltering of the Saudi regime; a catastrophic attack on the Kingdom's vast oil infrastructure; or a prolonged civil war between the status quo supporters and Islamist revolutionaries. In any such event, oil prices are likely to skyrocket.


Bin Laden and his henchmen understand well the political economy of terror. They aim for maximum ripple effect: banking and insurance losses for the 9/11 attack have exceeded $55-60 billion. Bin Laden has proclaimed that if he takes over his native land, the oil price will hit $125 a barrel, while his deputy, Ayman Al Zawahiri stated that U.S. economic targets are high on the Al Qaeda's hit list.


In October 2002, the Limbourg, a French super-tanker, was hit by a suicide Zodiac boat in the Persian Gulf -- just like USS Cole was in 2000. Four incidents of "pirates" taking over large tankers and piloting them for four hours have been reported in South East Asia. Tim Spicer, the British terrorism expert, has called this a maritime equivalent of a pre-9/11 flight school. Blown up tankers can paralyze vital waterways, such as the Panama and Suez canal, or the Bosphorus Straits. A tanker full of Liquefied Natural Gas (LNG) blown up at port, can devastate an oil terminal in the Gulf.


Bin Laden's engineering and managerial skills and his familiarity with his country's infrastructure will serve him well to stage a mega-attack on the Kingdom's oil fields and terminals. For example a radiological weapon (dirty nuke) could paralyze vital nodes of the Gulf oil infrastructure. Such an attack may neutralize the Saudi's two million barrel a day surplus oil producing capacity vital for price stability. If this occurs, gas prices may hit $6 a gallon for several months, and a deep economic recession will be then triggered by expensive energy, which may be worse than the 1973 and 1979 oil embargoes.


Since May 2003, the Saudi government has improved its anti-terrorism efforts. However, according to Secretary of State Colin Powell, it must do more to fight terrorism and halt funding to Al Qaeda and other terrorists. Many in Washington remain critical of the 1996 investigation of the Khobar Towers attack on U.S. soldiers, which was stalled by the Saudi Interior Ministry.

In May 2003, Saudis ignored pleas for additional security before the first attack from Deputy National Security Advisor Stephen J. Hadley and U.S. Ambassador's Robert W. Jordan.


Oil is a highly emotional and political issue in the Middle East. In many monarchies, transparency and accountability are lacking. Opulent lifestyles of rulers are becoming unsustainable as the population explodes. Today, the Jihadi chickens are coming home to roost.


It is only the matter of time when the blow against the oil fields' Saudi royal guardians - or the fields themselves -- may come. As the oil is endangered, the U.S. needs to prepare comprehensive energy and security responses.


It is important to diversify U.S. supply, bringing more oil from such sources as West Africa and Eurasia. The energy basket must be more diverse, to include methanol/ethanol blended fuels, more domestic oil and gas, such as from Arctic National Wildlife Refuge (ANWR) and continental shelf, as well as coal and LNG.


Japan, China, U.S. and Western Europe should expand their Strategic Petroleum Reserves (SPRs). Today, the U.S. has 700 million barrels of oil, or 90 days worth of supply. Europeans have less, and China's barely exists. Industrial economies should build up their supplies to last about six months.


It is vital to "get Iraq right." Iraq has reserves second to those of Saudi Arabia -- and a great need to rebuild after Saddam's misrule. It needs security, law and order, and a rapid economic reform, including privatization and foreign investment.


The U.S. military must have contingency plans to rapidly secure the Gulf oil infrastructure if Al Qaeda attempts to severely disrupt it. Top U.S. policy makers must ensure that the intelligence community and law enforcement receive full cooperation with their Saudi colleagues.


Finally, Saudi Arabia must become a force for peace in the Middle East, cutting funding to any and all Jihadi organizations around the world. The Kingdom must further dismantle its vast Jihadi infrastructure, cut off anti-American clergy, Islamic academies (madrassahs), and those parts of the state-run media that breed terror. The threat today has moved far beyond just America and the West.


Ariel Cohen, Ph.D. is a Research Fellow at The Heritage Foundation. His expertise includes international energy security.


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