Basra Attacks Will Drive Up Insurance and Freight Rates

Two U.S. sailors died on Saturday in a series of attempted boat bomb attacks on the key oil facility at Khawr al-Amaya and on four docked oil tankers at the main Basra terminals.

Three dhows pulled near the Khawr al-Amaya and Al-Basra oil terminals in the Gulf waters off Iraq?s port of Umm Qasr. The dhows exploded when approached by U.S. Navy teams sent to intercept them. The dhow near Khawr al-Amaya flipped over a U.S. Navy intercept boat, killing the sailors and wounding five others.

?The attacks are a fearsome development,? said a senior Kuwaiti oil official. ?They are a nightmare for both consumers and producers. The market is already tense and volatile, because of security events around the world,? he added.

Even though the attacks appear to be part of the Iraqi domestic fighting, the similarities with Al Qaeda?s attacks on the French oil tanker ?Limberg? off of Yemen in 2002 and the attack on the U.S. destroyer ?Cole? in 2000 have escaped no one's attention associated with maritime security.

The six Gulf Cooperation Councils countries of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates collectively produce 15 million barrels of oil per day. The disruption of this oil production could have a severe impact on the economies that desperately require Middle East crude oil.