08-06-06

The death of Iraq's al-Qaeda leader will not bring more security to the vital oil sector in the country, where political instability and violence will continue to hamper exports and investment, analysts said. Oil prices fell more than a dollar after Iraq announced that al-Zarqawi had been killed.
Iraq's failure to return oil exports to pre-war levels, due to violence and mismanagement, has fuelled crude's price rally.

"The end of Zarqawi will not be the end of threats to oil exports in Iraq," said Mustafa Alani, an Iraqi expert at the Gulf Research Council in Dubai.
"Yes, al-Qaeda attacked oil installations but they were not the only actors and they were not the main actors," he said. "There is also a new factor political parties that are using threats against oil to gain leverage."

Insurgents in Iraq have waged a bloody campaign against US-led forces and the Iraqi Government, repeatedly sabotaging oil infrastructure in the north to hamper efforts to boost crude oil exports, the main source of government revenue.
Iraq, which sits on the world's third largest oil reserves, has been struggling to produce 2 mm bpd, down from nearly 3 mm before the US-led invasion in 2003. Its exports in May were around 1.5 mm bpd, according to shipping sources.

But Iraqi oil officials say they cannot increase output alone, and most foreign companies are holding back from investing until security improves and there is a proper legal framework.
One Iraqi oil official voiced hope that Zarqawi's death and the formation of a permanent government would boost stability.

Some analysts cautioned against exaggerating the effect that Zarqawi's death would have on security in the country, which has been plagued by guerrilla and sectarian violence.
"There is total chaos and I don't think Zarqawi's death will change anything. It is more complicated than that," said Saadallah al-Fathi, a former senior Iraqi oil official. "Tomorrow there will be another person (to take his place), or another group trying to push a certain agenda," he added.