Oil official is assassinated as guerrillas blow up last Iraq pipeline

Insurgents stopped all oil exports from Iraq yesterday by blowing up the one remaining pipeline to the Gulf, and assassinated the head of security for Iraqi oilfields in the north.

Insurgents stopped all oil exports from Iraq yesterday by blowing up the one remaining pipeline to the Gulf, and assassinated the head of security for Iraqi oilfields in the north.

A bomb blast early yesterday morning destroyed a pipeline in the desolate Fao peninsula south of Basra, where saboteurs had struck the previous day. Crude oil gushing from the broken pipe formed deep black ponds in the sand. All crude oil exports from terminals in Basra and Khor al-Amaya have been stopped.

The attacks show that anti-government guerrillas now have the skill and the organisation to cripple permanently Iraq's oil exports. This will seriously damage the prospects of the new Iraqi interim government, which is badly in need of high oil revenues in order to restore the economy and create an army.

Three gunmen assassinated Ghazi Talabani, the top security official for the state-run Northern Oil Company, yesterday when his car stopped in a crowded market in Kirkuk. He was the third senior Iraqi official to be murdered since Saturday. The export pipeline from Iraq's northern oilfields through Turkey to the Mediterranean was blown up on 25 May.

An escalation in bombings and assassinations was expected by the US before the so-called handover of power to an Iraqi interim government on 30 June. But the attacks on the oil industry and the electric power supply have been more sophisticated and effective than had been expected.

The international price of oil did not rise significantly after sabotage stopped Iraqi oil exports but this may change if, as appears likely, the saboteurs can sustain their attacks. Iraq had been hoping to raise its output to 2.5 million barrels a day in the near future.

Iyad Allawi, the new Iraqi Prime Minister, is hoping to restore security by getting senior officers from the old Iraqi army, disbanded by the US last May, to reconstitute their units. This is very different from the American plan to allow carefully vetted officers and men from Saddam Hussein's army to join a freshly raised military force on an individual basis. Iraqi officials estimate the cost of this new army will be between $3bn (£1.6bn) and $4bn.

The US may have difficulty, however, in stomaching an Iraqi military force consisting of the same military units that it triumphantly defeated 14 months ago. Officials here suspect that the US would prefer to create an army in Iraq which would be like Latin American security forces, easily influenced by Washington and independent of the civil government.

Although the US has said for a year that it is trying to build up an Iraqi army it has provided no budget for communications, ensuring that all messages will have to be passed through the US military forces.

The one piece of good news for the US in Iraq yesterday was that Muqtada Sadr, the radical Shia cleric, has ordered his militiamen to leave the holy cities of Kufa and Najaf. They have been fighting US troops there for over two months.

But even the defusing of the crisis with Sadr is a sign of how far the US has failed to achieve its political aims in Iraq. At the end of March, Paul Bremer, the US viceroy in Iraq, started a confrontation with Sadr, seeking to arrest him and close down his Army of Mehdi militia. A month later US commanders were saying they would "kill or capture him". In the event they have so far managed to do neither.

There is a growing sense of anarchy in Baghdad. Foreign contractors driving around in their distinctive four-wheel-drive vehicles are being regularly killed in the heart of the capital. When five foreigners were blown up on Monday, a crowd spontaneously danced around one of the charred bodies chanting: "America is the enemy of God."

Many Iraqis hope that the interim Iraqi government to which power is supposedly to be transferred on 30 June will be an improvement on the occupation. But the new government will depend on the US for armed force and, given the repeated sabotage of the oil pipelines, it will have to rely on American money as well.