The Israeli offensive in Lebanon contributed to pushing oil prices rising above above $78 a barrel for the first time in the last week - just as demand for fuel is increasing with
the start of the U.S. holiday season. The US has given the green light to a massive Israeli offensive in order to hit the one element of what is perceived by the administration
as an emerging ‘Shi’a axis’ that it can without propelling the world into a total oil price meltdown. Having failed massively in its attempt to remodel the region to suit its own
hydrocarbon needs the US has instead unwittingly collapsed the Iraqi state and strengthened the position of Iran.

The Indepenent quoted today a senior Iraqi government official stating “Iraq as a political project is finished…The parties have moved to plan B.” He said that the Shia, Sunni
and Kurdish parties were now looking at ways to divide Iraq between them and to decide the future of Baghdad, where there is a mixed population. “There is serious talk of Baghdad being divided into [Shia] east and [Sunni] west,” he said.

The US is now presented with the nightmare of an oil rich Shia state emerging from the ruins of Iraq, which it is difficult to see could be anything other than a client of Iran.

The third most potent military force in the Middle East after Israel and Iran is the Shi’ite militia Hezbollah, client of both Iran and Syria and the only Arab force that has successfully challenged the Israeli military machine in its history. In the context of the failure of the Iraqi project neither Israel, the US nor indeed the House of Saud (whose enemies have ironically always been dispatched by the Israeli Defence Force) can afford to allow Hezbollah to remain intact - and the people of Lebanon, feted by the US only last year for their ‘Cedar Revolution,’ are paying the price.
It’s worth recalling just how much Israel had to gain from the neocon grand plan for the Middle East. While living in the oil-rich Middle East, Israelis is nevertheless forced to import from as far away as Mexico and the North Sea due to the lastin animostity of the Arab-Israeli conflict. Prior to the 1979 Iranian revolution, the Shah was on friendly terms with Israel, and provided its oil requirements. That arrangement ended abruptly with the revolution and today Israel is heavily dependent on oil supplies from Russia.
Reuters reported that the Pentagon notified Congress on Friday of plans to sell Israel jet fuel valued at up to $210 million (£114), in words straight from the Ministry of Truth, “to keep peace and security in the region.” From 1971 through 2005, U.S. aid to Israel has averaged more than $2 billion a year, two-thirds of which has been military assistance. This is a good example of the US’s peculiar ‘military Keynesianism’ which sees government money recycled back into the private end of the military industrial complex - deliveries of Israel’s latest order of US 102 F-16Is fighters are to be completed by the end of 2008 at a reported cost of $4.2 billion.

The Israeli daily Ha’aretz reported in April 2003 that Israel was seriously considering restarting a strategically important oil pipeline that once transferred oil from the Iraqi city of Mosul to Israel’s northern port of Haifa. As The Asian Times reported at the time:

“Given the Israeli claim of a positive US approach to the plan, the Israeli project provides grounds for a theory that the ongoing war against Iraq is in part a joint US, British and Israeli design for reshaping the Middle East to serve their particular interests, including their oil requirements.”

As acknowledged by then Israeli National Infrastructure Minister Yosef Paritzky, a prerequisite for the project was both a new regime in Baghdad with friendly ties with Israel and a new regime in Syria, no longer allied with Iran, to support and protect the pipeline crossing its territory. The alternative, longer, route for the pipeline through Jordan was not discussed suggesting that the Israelis were optimistic at this point about a regime change in Syria in the near future.

The US interest in the project would go far beyond providing their ally with secure supplies from a near neighbour - the pipeline would bring Iraqi oil directly to the Mediterranean via an Israeli port, bypassing the vulnerable bottleneck of the Straights of Hormuz and dependence on peaceful relations with the Iranians and a stable Saudi Arabia. An operational Mosul-Haifa pipeline could provide security of supply to Israel’ and the US at same time.

Facing the imminent collapse of the Iraqi project and an emergent Shi’a state on the border or Iran a massive attack on Hezbollah was perhaps inevitable. Neither Israel nor the US could afford to have such a well armed cleint of Iran sitting on Israel’s border. Potentially it also completes the removal of the Syrian presence in Lebanon that began with the Cedar Revolution - and how might this impact the Baathist regime in Syria? Dimished at very least. Northern Iraq is the most stable of the regions and a Kurdish state in all but name - would it not greatly benefit the new Kurdish state to see its oil flowing west to Israel across a changed Syria. Wouldn’t Israel be a necessary counterweight for a new Kurdish state against the might Iranian-Shi’a Arab alliance to its south and east.

As the US project to control Iraqi oil disintegrates before their eyes these calculations are surely being made. Perhaps the second act in the war for Middle Eastern oil has just began.