The Fuse

Oil & Terrorism: Why Now Is Worse Than After 9/11

by Matt Piotrowski | December 15, 2015

Between terror attacks on soft targets around the world, the struggle against ISIS, Syria’s civil war, and broader instability throughout the Middle East, the situation today is, in many ways, worse than post-9/11.

In the immediate aftermath of September 11, a pervasive fear loomed over the entire United States. The attacks were spectacular in nature and they took the country, the world’s only superpower, by surprise. The U.S. was shaken to its core, and knocked out of its complacency. The end of history that was supposed to come with the crumbling of the Berlin Wall would never be realized.

Nothing like the 2001 attacks have occurred on U.S. soil since then, but between terror attacks on soft targets around the world, the struggle against ISIS, Syria’s civil war, and broader instability throughout the Middle East, the situation today is, in many ways, worse than post-9/11.

In 2001, the country’s strategic goal was initially clear, and there was overwhelming support from both political parties and the general public. The perpetrators of the attacks were based in Afghanistan, and the U.S., along with international allies, stormed the country to break up the base of the al-Qaeda terrorist network. At that time, the fight was confined to just Afghanistan, and the military quickly disrupted the Afghani rulers of the Taliban and al-Qaeda—although long-term stability for the country has been difficult to achieve.

The circumstances are entirely different today. In the U.S., there is no political unity despite a constant and growing threat from the Islamic State in Iraq and Syria (ISIS). The U.S. is part of a coalition that is taking action with stepped-up air strikes against ISIS infrastructure, but Congress and the executive branch are divided and the 2016 campaign has made the fight against terrorism a divisive issue. Policy makers on Capitol Hill and candidates in the upcoming election have taken numerous shots at President Obama’s strategy. By contrast, President Bush enjoyed a 90 percent approval rating in the wake of 9/11.

Fear of terrorism spreading

There’s also the nature of the terrorist group. While al-Qaeda carried out large attacks on political and economic targets to convey its anti-Western and ultra-conservative Islamic message, ISIS is going after softer targets and executing vicious acts with more frequency, which include not only the Paris attacks on November 13 but also violence throughout the year in Egypt, Turkey, Tunisia, Yemen, Libya and Lebanon, among other countries. The group has also provided inspiration for freelance terrorists such as the shooters in San Bernardino in the U.S., and has attracted the allegiance of other extremist groups around the world, such as Boko Haram in Africa. ISIS is a borderless beast that recruits through social media and motivates its member to travel back and forth between the battlefields of Iraq and Syria and Western capitals such as Brussels and Paris.

The world, in just a decade and a half, is moving at a much faster pace while becoming much smaller—the fear, in turn, is greater.

The world, in just a decade and a half, is moving at a much faster pace while becoming much smaller—the fear, in turn, is greater. “The terrorist attacks in San Bernardino and Paris have altered how Americans view the problems facing the U.S.,” polling firm Gallup said. Terrorism is now cited as the number one problem for the U.S., based on Gallup’s numbers, and almost 50 percent of Americans are “very/somewhat” worried a family member will become a victim of terrorism. Although this is still below the number right after 9/11, it is continuing to rise.

gallup

Oil at the nexus of terrorism and geopolitics

While the fighting took place in just one country after 9/11, now instability has spread throughout the entire Middle East and North Africa region, home to roughly 60 percent of the world’s oil reserves. Iraq has been volatile since the U.S.’ invasion in 2003, while the rest of the region has experienced an upsurge in violence since the Arab Spring and the growth of ISIS. Besides deteriorating conditions in Iraq and Syria, ongoing conflict simmers throughout Libya and Yemen, where Saudi Arabia, the de-facto leader of OPEC, has led an extended military campaign and the humanitarian crisis continues to worsen.

While the fighting took place in just one country after 9/11, now instability has spread throughout the entire Middle East and North Africa region, home to roughly 60 percent of the world’s oil reserves.

Oil sits at the nexus of terrorism and geopolitics. It did so at the time of 9/11, too—after all, a majority of the perpetrators of the attacks came from Saudi Arabia, the world’s swing producer at more than 10 percent of supply. But the relative calm of the MENA region at that time, coupled with 15 years of low prices, kept oil mostly in the background. Now, it is at the forefront. From the Iraq War until last year’s price collapse, the oil market served as a barometer of geopolitical tensions. Even though the U.S. shale boom has cushioned the global oil market and pushed prices back the $30 range, the U.S. and global economy is and will remain vulnerable to geopolitical risk in the MENA region. It was just last year that oil prices shot up to $115 per barrel when ISIS made rapid advances into central Iraq. Outages in OPEC countries exceed 2.5 million barrels per day (mbd) (see below), while the amount of supply offline in other turbulent countries such as Syria, Yemen and the Sudans totals another 0.6 mbd (see below). Russia, which produces some 10.77 mbd, is under U.S. and EU sanctions and is a key player in the Syrian civil war. Without the U.S. shale boom, these supply outages and global tensions would have caused sharp price spikes—in other words, when the market tightens again, geopolitical turbulence will matter.

eiaoutages

Direct links between terrorism and oil

It’s not only economic vulnerability from instability that matters. Oil funds a good portion of ISIS’ activities, a direct example of how oil resources are used to fuel terrorism. Oil is the second biggest revenue source for the terrorist group. According to Treasury Department estimates during the middle of the year, ISIS was making an astonishing $40 million per month from oil sales to fuel its operations.

Beyond that, there are other links between terrorism and oil. “While ISIS is the first terrorist group to effectively operate its own ongoing oil industry, there is a long and dispiriting history of linkages between terrorist organizations and the global oil industry,” Peter E. Harrell, a senior adjunct fellow at the Energy, Economics, and Security Program at the Center for a New American Security, told the U.S. Senate Committee on Energy and Natural Resources last week. It’s important to note that terrorism also persists in oil producing countries outside of MENA, with Nigeria being a prime example, and threatens key transportation chokepoints such as the Suez Canal and the Strait of Hormuz.

“While ISIS is the first terrorist group to effectively operate its own ongoing oil industry, there is a long and dispiriting history of linkages between terrorist organizations and the global oil industry.”

Kidnapping for ransom of oil workers is widespread and prevalent. Oil industry workers have been targeted in producer countries such as Nigeria, Algeria, Libya, and Colombia. Terrorists also take violent measures against oil infrastructure installations to cause economic harm to both producers and consumers. “Key oil infrastructure has long been a potential target for terrorist groups, either to prevent governments or rival groups from generating revenue or to disrupt markets,” Harrell told the committee.

oil and terror

There’s also the issue of state sponsors of terrorism. Iran, Syria and Sudan are the only countries labeled as sponsors of terrorism by the U.S. State Department, and all three are oil producers. Iran is the most notable on this list, as its oil and gas industries will be key for the country’s economic recovery after sanctions against Tehran are lifted next year.

The direct links between oil and terrorism, the volatile MENA region, and the long list of geopolitical outages mean energy security measures on both the supply and the demand sides are vital to implement even though oil prices are low.

The direct links between oil and terrorism, the volatile MENA region, and the long list of geopolitical outages mean energy security measures on both the supply and the demand sides are vital to implement even though oil prices are low and consumers are reaping windfalls from seeing the weakest market in years.

“Global energy security depends on diversity of supplies from different countries, but what happens to the oil from the largest reserves still matters,” said Senator Maria Cantwell (D-Washington) at last week’s hearing. In other words, as long as the global economy depends on oil from the Middle East, the U.S. and its allies will unwillingly be involved in fighting terrorism and dealing with regional strife.