Thursday, June 03, 2004

Got Faith?

Some -- both on the right and the left -- thought that the invasion of Iraq is "about oil." What is happening now is indeed many oil wars, but each driven by its own national and international logic, not of the sort that some hawks and doves in the United States expected. After all, Washington isn't the only player whose action can impact the oil market. Anthony H. Cordesman, a senior fellow at the Center for Strategic and International Studies, writes:
Al Qaeda carried out its most successful attack since 9/11 last weekend, and much of that success was a result of the American reaction. It was the second time in a month that the terrorists struck at a soft target in Saudi Arabia's petroleum industry. Twenty-two people —- Saudis, an American and other foreigners —- lost their lives, and this is truly tragic. But in the grand scheme of things, it was a small-scale attack, and should not have been treated as more. The terrorists did not strike at the Saudi petroleum industry; not a barrel of export capacity was lost.

The real target was the willingness of foreigners to stay in the country —- a direct blow at the economic underpinnings of Saudi Arabia and its ability to attract the investment it needs for reform. Al Qaeda was simultaneously attacking the Saudi regime and its efforts to modernize the country and rebuild ties to the United States.

Unfortunately, the official American reaction was to panic —- just as it was in early May when five Western contractors were killed. The United States did not call for new Saudi security efforts, offer aid in counterterrorism, or try to fight back. Instead, the American Embassy in Riyadh decided to forget about American investment and trade by calling for all Americans to leave the country.

This comes at a time of record high oil prices, in a country whose oil production is critical to the American and global economies and to every American business, and in a region with 60 percent of the world's proven oil reserves. All Persian Gulf countries have their own Islamist extremist cells. If Saudi Arabia proves vulnerable, they are next. Is it any wonder oil prices soared further this week —- if the Americans are going to cut and run whenever things get messy, why should oil traders have any faith in the continued supply? ("Al Qaeda's Small Victories Add Up," New York Times, June 3, 2004)
If it is "faith in the continued supply" of oil that matters more than oil reserves themselves, Washington is in trouble -- it has no way of restoring the faith easily and quickly.

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