theimage Kirkuk-Haifa pipeline, closed for 55 years, is back on the agenda

Circumventing sabotage of existing line is reason given for entertaining move, but Israels economic and energy dilemmas would also be solved

More sabotage strikes in recent weeks on Iraqs Kirkuk-Yumurtalik oil pipeline are prompting the US-led coalition authority to examine the possibility of reopening the long-defunct Kirkuk-Haifa export route.

Weve had a spike in these attacks over the last three weeks, Colonel Robert Nicholson, head of engineers for the 4th Infantry Division, was quoted as saying.
The little-noticed attacks in Iraqs main oil export route have slashed Iraqi exports to just over 500,000 barrels per day (bpd), from an expected 3 million bpd, and invalidated the progress made in boosting production. Every day the pipeline fails to function shaves another $7 million in lost revenue off Iraqs reconstruction budget.

With domestic dissent mounting in the US over the billions of tax dollars directed at Iraq, Bush administration officials eager to reach the oft-quoted 6 million bpd long-term export mark have been lobbying hard for the reopening of the Kirkuk-Haifa route.

The 20.3-centimeter diameter pipeline originates in the northern Iraqi oil-town and crosses Jordan en route to the Mediterranean, 1,000 kilometers further, at the Israeli port of Haifa. It has not functioned for 55 years, following sabotage attacks by Palestinian nationalists in the 1930s and the subsequent creation of Israel.
Should the proposal to resume the flow of oil to Haifa be successful, the pipelines low transport capacity would be boosted by substituting it with a 106.6-centimeter diameter line at an estimated cost of between $0.5 billion and $1.5 billion.

US intelligence sources have been quoted in various newspapers as confirming that the project is under discussion. One former CIA official said: It has long been a dream of a powerful section of the people now driving this administration and the war in Iraq to safeguard Israels energy supply as well as that of the United States.

Israeli Infrastructure Minister Joseph Paritzky announced on April 9 ­ even before the war had ended ­ that he had ordered a technical appraisal of the pipeline to be carried out. Paritzky was quoted as saying that the pipeline would cut Israels energy bill by up to 20 percent, give a boost to recession-struck Haifa and supply the citys refinery with high-quality Kirkuk crude. The project would also end Israels dependency on expensive oil imports from distant Russia.

Discussions over resurrecting the project have bypassed Iraqs provisional governing authority. When contacted by The Daily Star, the governor of Iraqs Central Bank stated the project was not even under consideration.
This is not true, no-one is even contemplating this, said Sinan al-Shabibi in a phone interview from Baghdad. Theres just talk about it. Iraq does not need to consider a pipeline through Haifa.

A former senior regional intelligence expert told UPI that no-one in Washington has discussed this project with the Iraqis, who are supposed to be in charge of their own oil industry.

Israels Haaretz newspaper reported in August that a senior Pentagon official sent a telegram to the head of the Economic section of the Israeli Foreign Ministry, asking him to examine the possibility of making the pipeline functional. Exporting Iraqi oil this way was the brainchild of Oscar Wyatt, an executive for Coast Petroleum.

However, Paritzkys visit to Washington in September yielded only low-level meetings, according to Middle East Economic Survey editor Walid Khadduri. Paritzky met with Commerce Secretary Don Evans who left open the possibility of visiting Israel in the future.

The State Department shot the plan down, said Khadduri. Officially, the Bush administration has not taken any position. And it doesnt make economic sense to do it because the pipeline goes through Fellujah and Ramadi (centers of resistance to the US occupation).

Pentagon favorite and Iraqi presidential candidate Ahmed Chalabi made a promise to Israeli officials, ahead of the war, that he would revive the pipeline between Mosul and Haifa as soon as he was in control in Iraq. Chalabi ­ a proponent of normalization with Israel ­ was said by Londons Observer newspaper to have sat in on meetings between US and Israeli officials.

(Feith and Perle) have wanted to do this for some time, said Nawaf Obaid, a Saudi oil analyst. Ahmed Chalabi made an initial promise that once the governing council was formed, the pipeline (to Israel) would be reopened. But the idea was immediately dropped on the Iraqi side. Its one of these grandiose schemes dreamed up by the same guys who thought they could sustain the peace in Iraq.

Chalabi is currently sidelined. His nephew, Sam Chalabi made headlines last month when it was announced that his partner in a new law practice venture he is opening in Baghdad is an Israeli settler lawyer called Marc Zell.

Still, the crescendo of attacks on the Kirkuk-Yumurtalik pipeline has severely disrupted the flow of oil and revenues meant to fund Iraqs reconstruction. Rehabilitating the Mosul-Haifa pipeline appears an increasingly welcome prospect and, despite a State Department denial that the project is to go ahead ­ issued a few days before Paritzkys visit ­ Israel appears to be waiting for a more opportune moment.

Iraqs economy is expected to contract by a further 7.5 percent in 2003 but could register up to 20 percent real GDP growth in 2004, assuming its oil export infrastructure is successfully rehabilitated. Recently, an attack in September shut down the pipeline for five weeks, incurring $2.5 billion of lost profits.

Oil from Iraq would give Israel a generous transit fee and bring it a step closer to solving its 25-year energy conundrum. In 1979, Khomeinis revolutionary government cut all ties with Tel Aviv, ending the oil trade that had flourished under the pro-Israeli shah. Israeli Prime Minister Ariel Sharon has been quoted by Haaretz as saying the Kirkuk-Haifa pipeline could be a bonus for Israels support of the US invasion of Iraq.

The Turkish government has made it clear to the Israeli Foreign Ministry and the Prime Ministers Office that it will interpret any further moves to divert Iraqi oil through Haifa as a mortal blow to bilateral relations. Turkey is the only Muslim country alongside Jordan to have openly stated that its companies will partner Israeli firms in Iraq. The Turkish port of Ceyhan is the current destination point for northern Iraqi oil. Scenting conspiracy, the Turkish press has questioned why the US Army has not taken effective action against the saboteurs of the Kirkuk-Yumurtalik pipeline.

Besides outraging Arabs and other opponents of the invasion of Iraq, international oil experts have labelled the project impractical.
It doesnt make economic sense, said Khadduri. You dont build a pipeline for a market that isnt there. Iraq needs to enhance its export facilities by rehabilitating the Basra oil terminal which has a capacity of 3.2 million bpd.

Cambridge Energy Research Associates director Daniel Yergin stated that international investors are unlikely to support such a project at the time being.
There cannot be any competition between Kirkuk-Haifa and Yumurtalik-Kirkuk, said Yergin. Kirkuk-Haifa is still a project and will take much time to realize.

Given the current security climate in Iraq, it seems unlikely that the project will progress in the near future. And while Israeli firms are already active in Iraq, a project of this magnitude would require full Iraqi government cooperation.

Israeli businesses in Iraq are private sector and acting secretly, says Obaid. Its much easier for Israelis to send goods from Israel covertly. But a major project like this would require government approval. If that happened, the popular reaction would be worse than were seeing now. All support would be lost for the governing council and the US ­ the little that remains.

This is the latest effort to revive the route. The last one was initiated by current US Defense Secretary and then-adviser to President Reagan, Donald Rumsfeld, in the mid-1980s.

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