IRAQ - The Pipeline Through Saudi Arabia.

In the 1980s Iraq built a 1.65m b/d crude oil pipeline from its southern fields to the Saudi Red Sea coast, where it had a terminal built at Al-Mu'ajiz, north of the Saudi terminal of Yanbu'. Saudi Arabia closed the line after Iraq invaded Kuwait in August 1999. In June 2001 Riyadh expropriated the pipeline and terminal.

As Saddam protested, the Saudi Second Deputy PM and Defence Minister Prince Sultan told reporters: "The pipeline, as you know and as everybody knows, basically belongs to Saudi Arabia... The pipeline and the land are Saudi. Therefore Iraq has no right to protest against anything". In response, an Iraqi Foreign Ministry spokesman was then quoted by the Iraqi News Agency as saying: "This statement is a sheer allegation and an exposed lie which has no ground and the Saudi defence minister, undoubtedly, knows the reality of this lie. Saudi Arabia has no right to seize the ownership of the whole pipeline".

INA said the pipeline and terminal, which went on stream in 1989 for the export of Basra Light, were built in accordance with agreements signed by the governments of Iraq and Saudi Arabia. A Saudi statement later said: "The just compensation due to the government of Iraq" would be deducted from Saudi Arabia's claims against Baghdad for damages incurred as a result of Iraq's August 1990 invasion of Kuwait. In May 2002, as relations between Baghdad and Riyadh improved following an Arab summit conference in Beirut in late March, Iraq revived its claim to the pipeline and terminal. An Iraqi official was then quoted by INA as saying that the southern Iraqi section of the pipeline had been rehabili-tated and Iraq needed to do similar work along the section running through Saudi territory and at the terminal. But on Dec. 8, 2003, Saudi Oil Minister Ali Al-Naimi was quoted as telling Argues the pipeline had been converted to carry Saudi gas and will never again be available for use to outside parties.

It is still speculated that if all these outlets are rehabilitated and expanded - including a return of the pipeline to Al-Mu'ajiz for Iraqi use and reopening of Banias and Iraq's Gulf terminal of Fao - Iraq's oil export capacity would be over 7m b/d. This can be reached within 24 months of work on fast-track basis. But the US will have to find a solution to the Saudi line and terminal (see Vol. 60, OMT No. 19).