The Observer: Saudi horror sparks fears of oil crisis
· Militants hold 50 hostages · £4 gallon looms as battle rages
Nick Mathiason and Mark Townsend
Sunday May 30, 2004
Oil prices are set to surge after al-Qaeda gunmen killed at least 16 people, including a Briton, and seized 50 hostages yesterday during an indiscriminate rampage through the Saudi Arabian city of Khobar.
In a day that left the oil city, in the east of the country, littered with bodies and bullet-riddled buildings and cars, the terrorists attacked four compounds housing foreign workers, seized American and Italian hostages and fought running battles through the streets.
The body of the Briton, named locally as Michael Hamilton, an employee of the Middle East oil company Apicorp, was tied to a car and dragged more than a mile before being dumped near a bridge, according to witnesses.
Late last night an armed siege was developing, with suspected Islamic militants holding the hostages on the sixth floor of Oasis, a high-rise expatriate housing complex. Most of the captives were said to be Italian and the rest Americans and Arab Christians.
A Saudi policeman said the militants were using the hostages as human shields and officials were trying to negotiate. 'Security forces are worried about storming because the gunmen have grenades,' he said.
A statement purportedly from Saudi-born Osama bin Laden's al-Qaeda network was posted on Islamist internet sites claiming responsibility for the attack, the third on foreigners in less than a month
The attack sent shockwaves through a western world already facing high oil prices and now the prospect of worsening violence in a kingdom riven between its ruling royal family and jihadist groups determined to bring it down.
As Saudi security officials surveyed the horror, energy experts warned of the potential for a global fuel crisis triggered by instability in the country with the world's largest reserves.The situation in Saudi Arabia has already pushed prices to $40 per 25-gallon barrel.
'This is close to the nerve centre of the Saudi oil industry,' said Yasser Elguindi, an analyst with Medley Global Advisers in New York. 'It could have a devastating impact on the oil market when we reopen [on Tuesday] after the Memorial Day weekend.'
The US embassy advised all Americans to leave the increasingly troubled country, and the Foreign Office repeated its warning for Britons to avoid all but essential travel to Saudi Arabia.
A US embassy official said: 'I can confirm the death of at least one American. There may be more.'Among the dead was a 10-year-old Egyptian boy caught in the crossfire as he travelled on a school bus. Witnesses described pools of blood in hotel lobbies and bullet-riddled cars as foreigners tried to flee their attackers.
Oil analysts in London and Washington warned of severe repercussions. Economists called the attack their worst nightmare come true.
It could send oil prices above $42 a barrel, pushing the average price of petrol in Britain beyond the £4-a-gallon barrier. The rise would renew fears of a world energy crisis not seen since the early Seventies. Prices have already risen amid fears Saudi Arabia would be unable to defend its oil industry from terrorists.
Repeated attacks could push oil prices above the economically devastating $50 a barrel, City experts warn.
The attack came only days after a senior Saudi al-Qaeda leader, Abdulaziz al-Muqrin, unveiled a plan for an urban guerrilla war in the kingdom. Saudi security sources have admitted the destabilising influence of neighbouring Iraq, complaining of a steady traffic across the border in arms and other material to terrorist groups.
By yesterday al-Muqrin's orders had already been put into practice. Four gunmen in military style dress stormed the Oasis where employees of Shell and the giant US firms Honeywell and General Electric are understood to live. Two cars with military markings drove in and gunmen inside them opened fire indiscriminately at residents. Windows of homes were shot out. Soon afterwards, hundreds of police encircled the compound as helicopters hovered overhead.
A Lebanese family, taken hostage and used as human shields, were released. Saudi security sources said an American, a Briton, an Egyptian, two Filipinos, an Indian and a Pakistani died in the attacks along with two Saudi civilians and seven security force members.
Militants killed five foreigners earlier this month in a similarly brazen attack on a petrochemical site in the Red Sea town of Yanbu.