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Saudi siege fallout threatens oil prices

The Guardian: Saudi siege fallout threatens oil prices


Heather Stewart and Ewen MacAskill

Tuesday June 1, 2004


Oil traders are braced for big price rises when the markets reopen in London and New York this morning in the aftermath of the deadly attack by armed militants at Khobar, the Saudi oil producing region.


In Japan, where the market was open yesterday, prices of crude rose by more than 2%.


The economic fallout from the weekend siege, which killed 22 people, including a British businessman, was being gauged as a survivor claimed that the Saudi government had done a deal to allow three of the four attackers to escape. They fled in a car, using hostages as shields, the Saudi press agency said.


The security services began the hunt for them yesterday and set up checkpoints throughout the kingdom.


The fourth attacker was injured and is in custody.


The attack comes at a crucial moment for the oil markets, which have been closed since Friday.


Opec, the oil producers’ cartel, is to meet in Beirut on Thursday under strong political pressure to turn on the taps and ease the pain of soaring prices for the global economy.


The Saudi state-owned giant Aramco promised yesterday to keep the supplies flowing smoothly to avert a further hike in prices.


In a sign of nervousness in the oil industry, Shell was among the first to say that it was planning to repatriate the families of its workers.

“Our staff will remain in the kingdom, and their dependants will be offered a voluntary repatriation programme for a limited period,” a spokesman said. “We remain committed to ensuring the safe continuation of our operations there.”


Thirteen people died in the initial attack on Saturday on the Al-Khobar Petroleum Centre building and the Oasis residential compound used by oil workers. The others were killed during a 25-hour siege that ended with a raid by Saudi commandos.


Al-Qaida, which claimed responsibility, has attacked the oil industry over the past month in an attempt to destabilise the international economy.


The issue of how the three attackers managed to escape from a compound surrounded by the Saudi security services was raised by a member of the staff at Oasis. He claimed that the government had allowed them to escape after they had threatened to blow up one of the buildings, killing themselves and the hostages.


He said he had heard the gunmen shout that they would release their captives if the security forces let them go.


“The security forces refused at the beginning, but then apparently relented,” he said. “There was a kind of a deal reached to let the hostages go free, though some hostages had already been killed.”


The interior ministry said the man in custody was on the kingdom’s most wanted list.


It said the dead were a Briton, Michael Hamilton, plus eight Indians, three Filipinos, three Saudis, two Sri Lankans, an American, a 10-year-old Egyptian, an Italian, a South African and a Swede.


A total of 41 people had been held hostage and a further 201 were trapped inside the compound. The rescued hostages insisted that none of the dead had been killed by the security forces.


Kevin Rosser, an analyst with the Control Risks Group, said yesterday that Saudi oil supplies were still relatively secure. “The facilities are vast and heavily guarded,” he said. “The sensitive installations – large processing units, refineries, export terminals – are con sidered strategic assets, and security has been redoubled after recent violence.”


Nevertheless, the perception of rising political tension could compound the effect of a surging demand for oil from the US and China, and lift prices towards recent highs of more than $40a barrel.


“The fundamentals will keep exerting upward pressure on prices, whatever happens in Saudi Arabia and Iraq,” Mr Rosser predicted.


The US state department reiterated its warning that its citizens should leave, and the Foreign Office has advised people not to visit the kingdom unless it is essential.,3604,1228682,00.html

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