Article: The Shia-Sunni Battle for Oil

By Swaminathan S. Anklesaria Aiyar
October 1, 2006

Some conspiracy theorists will have you believe that everything in the Middle East is about oil, including the US invasion of Iraq. But the fact is that, three years after the invasion, the Americans have not acquired any Iraqi oilfield.

Yet, in one sense the hundreds of weekly killings in Iraq are indeed about oil. This relates not to the US occupation but the Sunni-Shia struggle for controlling oil.

Iraq's population consists roughly of 60% Shia Arabs, 20% Kurds and 12% Sunni Arabs (the balance being small minorities). Iraq has for centuries been ruled by Sunnis. Democracy has now empowered the Shia majority, and Sunnis fear the consequences.

The biggest oilfields in the country are in the Shia south, and the rest are in the northern Kurdish region. There is no oil in the Sunni triangle in the middle of the country.

The new Constitution of Iraq was long delayed because of heated debates on sharing oil revenue. One constitutional provision says that oil belongs to the people of Iraq in all regions. Yet, the Constitution also gives autonomy to the three regions Shia, Sunni and Kurd. This fuels Sunni fears that the other two regions will ultimately hog all the oil.

You cannot attribute the murderous battles between Sunni and Shia militia to oil alone. The strife is also caused by religious and regional tensions, the Baathist backlash, and the belief of some Sunnis that the Shia-Kurd majority is an American poodle. Yet, overlying all these causes is tension over oil.

The tension is not limited to Iraq: it pervades the whole Gulf. Muslims in the region oppose the US occupation, yet all Arab governments desperately want US troops to stay on. Why?
Because they fear that US withdrawal will encourage Iran to foment Shia insurrections in every Sunni-ruled state in the Gulf. The Shia population is substantial and sometimes dominant along the Gulf shoreline.

The entire shoreline was part of the Persian Sassanid Empire in the 7th century. That is why the body of water was called the Persian Gulf. The Sassanid Empire was Zoroastrian. Soon after, Arab Islam swept through the Middle East.

But it split along Shia-Sunni lines. The Shias dominated Iran, Iraq and some other parts of the Gulf shoreline. The Sunnis controlled most other regions, including the holy cities of Mecca and Medina.

The Middle East was ruled by the Ottoman Empire from the 13th century onwards. The Empire collapsed after World War I, and the British ushered in the rule of assorted Sunni kings and sheikhs.

Oil transformed the region. Saudi Arabia discovered the biggest oilfields in the world. But 70% of its oil lay in the Shia-majority region on the Gulf shore. This made the Saudi royal family paranoid about the possibility that these Shias, abetted by Iran (and now Iraq), would secede and take the oilfields with them.

Baqir Solagh, former interior minister and now finance minister of Iraq, last year accused Saudi Arabia of violating the civil rights of Shias in its eastern region, and called for justice.

This caused consternation in Riyadh. Shortly after, the minister's brother was kidnapped, and he attributed this to Saudi revenge. Whether true or not, it highlighted how high Sunni-Shia tensions run over oil.

Events in Lebanon have further worried the Saudis. Hezbollah, the Shia party of Lebanon, has gained de facto control of the southern part of the country. It has been armed by Iran and is too powerful for the Lebanese government to disarm.

Hezbollah battled Israel in July and August and was widely seen to have won, simply because it was the first time that Israeli forces failed to win. Hezbollah's rockets killed over 100 Israelis, and it claims to have 20,000 rockets still in reserve.

Hezbollah has become a hero to Muslims throughout the Middle East, even Sunnis. This makes Sunni rulers uneasy. The have long relied on Sunni-Shia antagonism to keep Iranian machinations at bay. But if Iran and Hezbollah attain heroic status among all Muslims in the Gulf, Sunni rulers fear loss of authority, and maybe of their oilfields too.

Many geologists feel that global oil production is close to a historical peak, after which it will decline and send prices spiralling. But one American academic, Amy Jaffe of the Baker Institute, theorises that Saudi Arabia may seek to discomfit Iran by sharply increasing oil production to deliberately cause a price crash.

Saudi Arabia has a huge trade surplus and can shrug off a lower oil price. But a low oil price will convert Iran's trade surplus into a deficit, creating problems for a country already facing international financial and banking curbs.

I personally doubt that Saudi paranoia about Iran will go to this extreme. But the very fact that academics are speculating on the impact of Shia-Sunni tensions on oil shows that the future of oil prices will be decided by geopolitics no less than geology.