Who Needs the Gulf, Anyway?

By Murray Gart/Washington

The hazardous race being run by U.S. convoys through the Persian Gulf coincides with a less publicized development in the Middle East: a rush to expand pipelines as an alternative means of exporting oil.

The region's producers, worried about the vulnerability of tankers, are doubling their capacity this year, creating a network of pipelines that will be able to carry almost half of all gulf oil to Mediterranean and Red Sea ports without a drop of it passing through troubled waters.

Last week Iraqi oil flowed into new lines through Turkey to the Mediterranean port of Iskenderun, boosting export capacity from 1 million bbl. of oil a day to 1.5 million bbl. In April, Saudi Arabia increased the volume of Petroline, its four-year-old link between Saudi and Iraqi oil fields and the Red Sea port of Yanbu, from 1.8 million bbl. to 3.2 million bbl. In addition, plans are under way for a $2 billion Iraqi line, called IPSA-2, capable of carrying 1.6 million bbl. to Yanbu.

On the other side of the war, Iran is seeking ways of bypassing its / embattled terminal at Kharg Island. Despite the project's estimated cost of $2 billion, Tehran says it is building a 1.5 million-bbl. line from its oil fields in southern Iran to the port of Jask, outside the Strait of Hormuz. Iran also announced last week a tentative agreement with the Soviet Union to ship oil to the Black Sea through a converted gas pipeline that has not been in use since 1980.

Most experts regard the lines as too costly to fully replace tankers, which are the cheapest way to move gulf oil despite the high insurance rates that must be paid by the ships' owners. Moreover, the pipes can suddenly be shut down by war, especially if the routes cross national borders. Saudi Arabia's route through Lebanon has been closed since 1983, and Baghdad's pipe to the Syrian coast was shut down soon after the Iran-Iraq conflict began in 1980. In addition, pipelines remain vulnerable to sabotage and attack by planes or missiles.

These disadvantages are offset, however, by the devastation of the tanker war. "In a normal world, pipelines make no sense at all," says James Akins, former U.S. Ambassador to Saudi Arabia. "But who would be so foolish as to say that anything is normal these days in the gulf?" Thomas McNaugher, a senior analyst with the Massachusetts-based Cambridge Energy Research Associates, agrees. Says he: "Pipelines are no final answer for anyone. Yet it makes sense to diversify, to provide an alternative to being held at gunpoint."

Without pipelines, Iraq might have been knocked out of the war by now. Soon after the fighting broke out, the country's ports were closed and its credit dwindled. Baghdad adopted a strategy of expanding its lines while at the same time attacking tankers carrying Iranian oil. By increasing its exports through Turkey and Saudi Arabia, Iraq earned enough foreign exchange to buy much needed arms.

Though Saudi Arabia's Petroline cost as much as $5 billion, the network equips the kingdom with the best hedge that money can buy against a possible closing of the gulf. With pipeline access to the Red Sea for shipping its oil, Saudi Arabia can avoid an export shutdown caused by the tanker war and is better equipped to withstand any pressure to fall in line with policies pushed by Iran -- or the U.S.

Kuwait, a strong supporter of Iraq and thus Iran's bitter enemy, has thought about building pipelines, including a $1 billion project that would run through Saudi Arabia to the Indian Ocean. The plan has reportedly been rejected by the Kuwaiti Cabinet, however, as too expensive and likely to stir up bickering between the Kuwaiti and Saudi ruling families. Besides, why should they spend the money when the Reagan Administration is willing to brave the gulf waterways to protect Kuwaiti tankers?