Via Scotiabank's Guy Haselmann,
Last week, the barbaric Islamic State (IS) seized the vitally important Mosul dam [6], dramatically impacting tactical options against them and potentially changing the future of the Middle East.
When the US coalition forces invaded Iraq in 2003, military intelligence developed invasion scenarios. One scenario included Iraqi forces placing detonation charges at the vitally important dam. If US forces were able to safely secure the dam, then they had a contingency plan to operate it and ensure critically important maintenance. The US quickly discovered the necessity for $27 million worth of frantically urgent repairs.
Since the dam was completed in the mid-1980’s it has required continuous (daily) maintenance, because it was built on top of gypsum, a soft mineral which dissolves when in contact with water. More than 50,000 tons of materials have been injected into the dam since 1986. The ‘sink hole’ type of cavities that constantly form have to be expeditiously plugged with “grout”, a liquefied mixture of cement and other additives.
A dam break does not require sabotage. Maintenance failure has the same result.
In December of 2006, the US Army Corp of Engineers (USACE) detailed a comprehensive report on the dam’s structure. The report called it, “the most dangerous dam in the world”, stating that even water pressure could buckle the flimsy foundation.
The Mosel dam is the fourth largest in terms of reservoir capacity in the Middle East with a capacity of 3 trillion gallons or 11.1 billion cubic meters. It is a key component of Iraq’s power grid and source of water for irrigation. It is located 31 miles north of the city of Mosul whose population is 1.7 million and 200 miles north of Bagdad. A dam collapse would release the 360 feet high waterline and reach Mosul in 2 hours.
A USACE official wrote a report in 2011 that was published in Water Power magazine estimating that dam failure could lead to as many as 500,000 civilian deaths.
In 2007, General Petraeus wrote a letter to the Iraqi PM warning of the safety concerns in the report and the consequences should the dam fail. In paraphrasing the USACE report, his letter said that “despite continuous grouting… the safety of the dam cannot be assured”. He went on to say that “…an instantaneous failure….could result in a flood wave 65 feet deep at the city of Mosul... and produce flooding all the way to Baghdad”.
President Obama recently authorized limited airstrikes in Iraq against IS. He said they were to prevent a humanitarian crisis and to protect American lives and assets in Erbil and Baghdad. He determined that there was risk of ‘genocide’ of the tens of thousands of Yazidis people trapped by IS in the mountains, as well as, risks to the consulate and American workers there, should Erbil be toppled. There is still hope on both fronts.
However, the greatest foreign policy failure to date in trying to prevent a potential ‘genocide’ is arguably allowing IS to take over the dam in the first place. The US has always known the importance of the dam. Furthermore, just as we had the ability to get Bin Laden at Tora Bora and failed to act, US officials knew that the IS leadership was assembled in one place and decided not to take them out.
David Kotok discussed some of the serious implications that the takeover of the dam has for the region and the significant strategic impact it will have on military options going forward. [7]The bottom line is as he states, “We confront a high probability of an adverse outcome regardless of the actions of the combatants on both sides. There is no easy (way) out”.
I wholeheartedly agree with Mr. Kotok and his concluding remark that “this is a situation fraught with danger and risk”. Market implications could potentially be great. This situation bears close watching.
Cash is king with optionality.
“Deep into that darkness peering, long I stood there, wondering, fearing, doubting, dreaming dreams no mortal ever dared to dream before.” – Edgar Allan Poe
