by Robert Baer
On an average day, about 4.3 million barrels of oil leave Saudi Arabia via the Ju’aymah terminal. Destroy the surface-metering equipment and control platform, inflict significant damage to half the mooring buoys and moderate damage to the onshore tank form, and loading capacity at Ju’aymah would be reduced from those 4.3 million barrels to somewhere between 1.7 and 2.6 million barrels two months out. Restoring full capacity might take as long as seven months.
A commando boat attack would do the job. Then and now, the waters surrounding the arid Arabian peninsula remain, vessel for vessel, one of the most dangerous navigable sites on earth, a place where even case-hardened destroyers like the U.S.S. Cole can be sunk by a Zodiac, a couple hundred kilos of plastique, and a crewman resolved to meet his maker.
Ras Tanura pumps slightly more oil than Ju’aymah - 4.5 million barrels of sustainable daily export - and it offers a wider variety of targets and more avenues of attack. Ras Tanura’s Sea Island facility, 1.5 kilometers east of the north pier in the Gulf, handles nearly all the terminal’s export oil; Platform Four handles half of that and is the only one of the four to have its own surge tanks and metering equipment, in the latter case under the platform. (The others use equipment and surge tanks onshore.) As with Ju’aymah’s metering platform, a commando attack on Platform Four by surface boat or a Kilo-class submarine - anything is for sale in the global arms bazaar - would be devastating.
Sea Island is fed by a complex of tanks, pipelines, and pumps that is further connected by pipe to Ju’aymah for added flexibility. This onshore complex is vulnerable to terrorist attack by ground and air: Ras Tanura sits about a hundred kilometers from the northern tip of Qatar, a hotbed of Islamic fundamentalists.
Yanbu, on the Red Sea, is more immune to attack, the engineers concluded, but happily there’s no need to go after it. (I’m thinking like a saboteur here, just as the CIA trained me to do. One of the benefits of having spent a career as an agency case officer in some of the world’s most volatile regions was a thorough education in how to destroy things.) You need only interdict the roughly nine hundred thousand barrels of Arabian light and superlight crude that are pumped daily to Yanbu to put the terminal out of business, and to do that, you simply take out Pump Station One, the closest to Abqaiq. Why? Because Pump Station One sends the oil uphill, into the al-Aramah mountain range, so it can begin its long journey across the peninsula. Without a working pump behind it, the oil flows in the wrong direction.
Even the short pipe run from Abqaiq to the Gulf terminals is not without opportunity. At Qatif Junction, a few kilometers inland from the coast, a manifold complex directs the flow of oil to Ras Tanura or Ju’aymah, or to the dormant Trans-Arabian pipeline. Inflict heavy damage on the complex and you’ll stop the oil in its tracks for months. Unlike the off-the-shelf pipes that connect the terminals and processing facilities, the manifolds and pipe junctions at Qatif Junction would require custom fabrication to replace.
The assessments by the disaster planners were downplayed, for fear of rocking global oil markets, but you can bet they are not the only people to have calculated how much damage could be done to the Saudi petroleum chain - or the global money chain - by an expedient as relatively simple as blowing one of Abqaiq’s stabilizing towers, or Ras Tanura’s Platform Four, or the East-West pipeline’s Pump Station One to smithereens. (Or, of course, all three.) A single jumbo jet with a suicide bomber at the controls, hijacked during takeoff from Dubai and crashed into the heart of Ras Tanura, would be enough to bring the world’s oil-addicted economies to their knees, America’s along with them. Indeed, such an attack would be more economically damaging than a dirty nuclear bomb set off in midtown Manhattan or across from the White House in Lafayette Square.
PROMOTERS OF ALASKAN, Mexican Gulf, Caspian, and Siberian oil sound like a broken record when they point out that the United States has been weaning itself from Saudi oil. They argue that Saudi Arabia accounts for only roughly 8 percent of U.S. crude oil consumption. They also argue that three of our four main oil suppliers are in the Western Hemisphere: Canada, Venezuela, and Mexico. True enough. But what they forget to mention is that Saudi Arabia sits on 25 percent of the world’s proven reserves, maybe barrel per barrel the cheapest oil in the world to extract. More important, the Saudis own half the world’s surplus production capacity - two to three million barrels a day. Take the Saudi surplus out of play, and the market loses its stability and liquidity. It may not seem like much oil, but the surplus capacity is what keeps the world’s oil markets from going on a facedown roller-coaster ride during periods of crisis. In other words, no matter what country you buy your oil from, Saudi Arabia determines world price by how much oil it chooses to produce.
It was Saudi Arabia that broke the back of the 1973 OPEC embargo (though not before it enriched itself by tens of billions of dollars). As the Iranian revolution segued into Iran’s protracted war with Iraq, the Saudis again used their surplus capacity to keep the oil flowing to the industrialized West. By 1979-80, the Ju’aymah terminal on the Persian Gulf was shipping about nine million barrels of oil daily, twice its normal output.
The same thing occurred during the 1990-91 Gulf War. The Saudis, backed by a couple of other Gulf states, produced an extra five million barrels a day, making up for the loss of Iraqi and Kuwaiti oil. Without its surplus capacity, the price of a barrel of oil likely would have soared to over a hundred dollars.
On September 12, 2001, less than 24 hours after the attacks on the World Trade Center and the Pentagon, the Saudis put on the market an extra nine million barrels of oil, going mostly to the United States. As a result, oil prices stayed low, and U.S. inflation spiked marginally in spite of the single most devastating terrorist attack in history. Take that same liquidity out of play with twenty pounds of plastique, and all bets would be off.
A DECEMBER 2000 study by the International Monetary Fund looked at the effect of a hypothetical five-dollar-per-barrel rise in the price of oil. Gross domestic product in the United States and most European countries would decline .3 percent on an annual basis. Financial markets would fall, but not to disastrous depths. Nations with a net export of crude oil would grow in wealth; those with a net import would fall. The Far East would suffer particularly because it produces so little oil of its own.
But all that was calculated on what would have been a then roughly 20 percent rise in the price of crude, a mild bump as economic catastrophes go. The terrorist attack on the Abqaiq oil facility envisioned by the Reagan-era scenarists would remove as many as 5.8 million barrels of crude a day from world markets, double the three million barrels a day taken out of production during the OPEC oil embargo, almost double the daily amount lost to the revolution in Iran and the subsequent Iran-Iraq war, and almost one-fourth the current average daily consumption.
What does history tell us about the effects of such a loss? Well, Americans saw double-digit annual inflation only ten times in the last century, four if you exclude the effects of the two world wars: in 1974, in the wake of the OPEC embargo, when inflation soared to 11 percent; and in 1979-81, when inflation topped out at 13.5 percent. By 1981 the price of a barrel of crude had hit $53.39, and regular gasoline was selling at U.S. service stations for over $2 a gallon.
The OPEC embargo sent the stock market plummeting. By the time the Standard & Poor 500 bottomed out in September 1974, it had lost 47.7 percent of its value in twenty-one months, almost exactly equal to the 47.8 percent lost in the twenty-eight months beginning in March 2000 as the dot-com bubble burst. Between 1980 and 1982, the index gave up another 27.1 percent of its value as the unrest in Iran and Iraq rocketed oil to staggering highs.
Inflicting selectively heavy damage on the Abqaiq oil-processing center would almost certainly duplicate those inflation figures and send stock indices plunging again. A coordinated attack on Abqaiq, Ras Tanura’s Platform Four, and the East-West pipeline’s Pump Station One, just to pick and choose from dozens of potential targets, would increase both effe
cts exponentially while leaching the last bit of elasticity from the global oil-supply chain. The U.S. Strategic Petroleum Reserve would only help prop up international markets for several months. Unless alternative sources of oil quickly kicked in after that, we’d be in virgin territory - a kind of economic equivalent of the postnuclear-holocaust world of Nevil Shute’s 1957 bestseller, On the Beach.
So what exactly would happen to the price of oil? I’ve surveyed contacts in the oil industry, but no one could come up with even an approximate figure. Apparently, good econometric forecasts on this kind of scenario don’t exist. They tell me, though, that initially we could count on seeing oil hit $80 or $90 a barrel, based on supply and demand. But this does not factor in the panic that would ensue - wild speculative buying. And then there is the wild card of run-of-the-mill disruptions occurring at the same time, like in Nigeria or Venezuela. Now we have oil selling at way over $100 a barrel. But what if chaos in Saudi Arabia slopped over the border into the other Arab sheikhdoms that collectively own 60 percent of the world’s oil reserves? My contacts won’t even touch that one, but my guess is that we’d see oil at $150 a barrel or a lot higher. It wouldn’t take long for everything else to follow suit: economic collapse, world political instability, and a level of personal despair not seen since the Great Depression.
Incidentally, Osama bin Laden has a more modest price expectation for Saudi oil: $144 a barrel. Take that multiple over the current market price, carry it back fifty years or so to the time when the West became dependent on Arab oil, and work forward from there - and you would have a wealth transfer on the order of $76 trillion from the industrial economies to the Muslim world, about $1.5 trillion a year. It wasn’t until 1985 that the accumulated debt of the United States exceeded $1.5 trillion; 1985 was the first time the U.S. government budget topped the $1.5 trillion mark.
FOR THE REAGAN-ERA disaster planners who assessed the vulnerability of the Saudi oil infrastructure, Iran was the obvious threat. Another decade and the shifting winds of geopolitics would bring new worries: chaos in Iraq, for instance, spilling across the border into Saudi Arabia. The given, though, was that any threat to Saudi Arabia’s petroleum production would come from outside the kingdom. Saudi Arabia was America’s anchor in the Arab Middle East. It banked our oil under its sand. Losing it would be like losing the Federal Reserve. Even if the Saudis did turn anti-American, said the argument, they would never stop pumping oil, because doing so only would end up cutting their own throats. Or at least this was the assumption.
But all that was before the morning of September 11, 2001. Before fifteen Saudi citizens and four other Arabs commandeered four commercial airliners and flew them and their passengers into the buildings of New York and Washington and the farmland of Shanksville, Pennsylvania. Before Osama bin Laden became the most popular Saudi in history. Before USA Today discovered that, during the summer of 2002, nearly four in five hits on a clandestine al Qaeda website came from inside Saudi Arabia. Before it became known the Saudi ambassador’s wife in Washington had been sending money, no doubt unintentionally, to the hijackers. The equations have changed. One report sent to the United Nations Security Council indicated that Saudi Arabia transferred half a billion dollars to al Qaeda in the ten years beginning 1992. Old assumptions are off the table. And the new realities are far from comforting.
Five extended, dysfunctional families own about 60 percent of the world’s oil reserves, but the Al Sa’ud of Saudi Arabia control more than a third of that: potentially one in every five barrels the world consumes. This is the fulcrum that the global economy teeters on. Meanwhile, the mosques of Saudi Arabia preach a hatred of the West and the non-Islamic world that is as vitriolic as anything heard in Iran at the height of the ayatollahs. The kingdom’s mosque schools have become hothouses of militant Islam, the breeding grounds of Sunni terrorism. Bali, Kenya, Bosnia, Chechnya, and Lower Manhattan all point back to these schools, to the Saudi state.
Terrified that the fanatics will one day come after them, the Al Sa’ud shovel out protection money as fast as they can withdraw it from their Swiss bank accounts. Never forget that it is the Al Sa’ud who ultimately sign the checks for these mosque schools. They fund militant Islamic movements in the Middle East, Africa, Central Asia, and Asia for the same reason. It’s hush money to divert Muslims’ attention from the money the Al Sa’ud are stealing against the day when they will have to flee the desert for their palaces strung out along the Riviera; their penthouses glowing against the night skies of Paris, London, and New York; their mountain aeries bathed by the cool evening breezes of Morocco. The House of Sa’ud, after all, knows what the West is beginning to learn: Horrors are out there waiting worse than Osama bin Laden; worse even than Khalid Sheikh Muhammad, the purported mastermind of September 11, who was finally grabbed in Pakistan in early March 2003. The Al Sa’ud know one other thing as well: They are hanging on by a thread, presiding over a kingdom deeply torn between past and present, and dangerously at war with itself.
That’s why the disaster scenarios created during the Reagan years still matter. That’s why we in the West - Washington, D.C., in particular - have to face up to our part in cultivating the virus that has infected Saudi Arabia. And that is why we must consider putting to sleep the host, the House of Sa’ud, if it can’t or won’t cure itself. At the very least, we will have to consider seizing the oil fields.
Will it come to that? I don’t know. No one does. The future is never certain. Maybe the talk out of Riyadh about democratic reforms is more than cover fire. Maybe the U.S. war on Iraq will undermine all the old assumptions once more. All bets are off if Islam rises up en masse against the West and its infidel agents. But I’ve spent enough years in the Middle East to know that in a place like Saudi Arabia, things flow naturally toward their most combustible mix.
There’s already more than enough rage against the West and against the House of Sa’ud. It’s in the air in Riyadh and Jeddah’s bazaars: the conviction that all the oil money has corrupted the ruling family beyond redemption, that the Saudi leaders have defiled the faith by allowing U.S. troops into the kingdom. Getting rid of the American military presence might help, but the brief against the ruling family runs further than the United States. On the street, the Al Sa’ud are reviled for failing to protect fellow Muslims in Palestine and Iraq and for standing by helplessly as Islam is humiliated. At the beginning of a new millennium, many Saudis believe that their country would be better off and the faith purer if everyone went back to the desert and lived off of dates and camel’s milk.
The years I spent serving my country as a CIA officer in places like Lebanon, the Sudan, northern Iraq, and the Muslim states of Central Asia taught me something else. They showed me the human carnage and suffering that always seem to follow when America puts its head in the sand or when dollar signs blind us to what’s in front of its nose. Saudi Arabia is no abstraction. It’s a powder keg waiting to explode. If that happens, it could carry me and you, our savings and security, with it.
For a quarter of a century, I’ve been trying to understand the root causes of violence in the Middle East. I didn’t begin this search after September 11, and I certainly didn’t undertake it with an eye to Saudi Arabia and its crude oil. I wanted to know more about the Muslim Brothers: who they were, how they operated, why the U.S. had made common cause with the Brothers in such far-flung places as Yemen and Afghanistan. The harder I looked and the closer I got to answers, the more I realized that my search was leading me down two roads - to Riyadh and to Washington - and to the oil that connects them.
TO ME, the immediate issue is threefold:
• Can the Wahhabis, the Shi’as, the Muslim Brothers, and everyone else in Saudi Arabia who wants to bring down the Al Sa’ud lay their hands on enough firepower to do so? That might sound easy, but believe me, it isn’t.
• Is the House of Sa’ud beyond redemption or protection as a ruling authority?
• Does Washington have the capacity to se
e the Saudi kingdom for what it is? Or does it have its hand so deep in the Saudi wallet that it won’t see and won’t act?
Take the rage in the mosques and streets of Saudi Arabia; add weapons and a willingness to use them, not just against Western terrorist targets but against the House of Sa’ud and the petroleum infrastructure that supports it; continue to look the other way while it all happens; and we can take the last half century of oil-fired industrial prosperity and kiss it g-o-o-d-b-y-e.
But it all begins, as Part I of this book does, with firepower. That’s why I found myself on the Israeli Riviera one sunny day in the spring of 2001.
Part I
Speak No Evil
1. We Deliver Anywhere
Caesarea, Israel - April 7, 2001
THE MARBLE PALACE perched amid the olive trees above the sea looked like a lot of other posh resort hotels I’d seen around the Mediterranean. The shiny new Mercedes and canary yellow Ferrari parked out front fit right in. I knew that if I poked around a little, I’d find a casino somewhere on the premises.
It didn’t take me long, though, to notice that a couple things were out of place: the pack of little blond boys running around on the front lawn, shouting in Russian, and the young girls wearing identical bandeau bikinis, reading glossy Moscow weeklies by the pool. When the bellboy greeted me in Russian, I knew I had landed on one of those Russian beachheads I’d heard so much about. Since the collapse of the Soviet Union, the Russian mob, Russians fleeing the Russian mob, and just plain rich Russians had been setting up all along the Riviera, including Israel’s coastline. The fancier the place, the better. Money never seemed to be a problem. And they liked to keep to themselves.
I was actually in Caesarea to see a Russian, someone I’d known only by reputation. Yuri, as I will call him, was a merchant of death. He had made a colossal fortune in the early 1990s trading small arms for African oil. Over the last several years, with capital under his belt and the free run of Russia’s state-arms-trading firm, Rosvoorouzhenie, he’d branched out and started peddling arms everywhere. Supposedly, Yuri could put his hands on almost any piece of Russian hardware, from a MIG-31 to a T-80 main-battle tank. But he did have his professional ethics. When a competitor floated the rumor that Yuri was moving weapons-grade uranium, Yuri had him squashed like a Volga tick. It was one thing to earn an honest living fueling civil wars in West Africa, but something entirely different to deal in the nasty stuff.