Iraqi Prime Minister Iyad Allawi (center) speaks in front of the al-Doura oil refinery in Baghdad, Iraq, on Tuesday, June 8, 2004. On the far right is Iraqi Oil Minister Thamir Ghadbhan. Allawi and Ghadbhan declared that the Iraqi interim government had now assumed full control of the country's oil sector. (Photo: Halid Mohammed/EPA/AP Wide World)

July 2004—Months of war and explosive fighting have left Iraq's economy bruised and battered. The country's recovery, however, won't depend on a potent left hook or a quick right jab. As Iraq struggles to get back on its feet, it will rely on a far more powerful weapon—oil.

Iraq is the Middle East's fifth-largest oil-producing country, supplying roughly 2.5 percent of the world's oil. According to the United States Congressional Budget Office, the country could generate $69 billion in oil revenues from now through 2007.

Iraq's ability to pump its oil will not only depend on restoring pipelines, but also on beefing up security. Attacks on pipelines last month dropped production levels to an all-time low. Production went from 1.6 million barrels a day in May to a seven-month low of 1.49 million barrels a day in June.

Iraq's new Prime Minister, Iyad Allawi, recently revealed that repeated assaults on Iraqi pipelines have already cost the country $200 million in lost profits—a troubling figure since unrest among insurgents continues to spread.

At sea, a fleet of American, British, and Australian warships is patrolling two oil terminals, located 15 miles offshore. Since the terminals reopened in March of last year, nearly 300 oil tankers have been filled there, generating $12 billion in revenues.

But the terminals have been the targets of attacks. In April, suicide bombers aboard three boats attempted to strike the rusted depots. Fortunately, they did not cause major damage. A strike against either terminal would be devastating to the Iraq oil industry, say American military officials.

"In the grand scheme of things, there may be no other place where our armed forces are deployed that has a greater strategic importance," says Captain Kurt Tidd, commander of the Fifth Fleet task force, which is guarding the terminals. "We can't win the war here, but we can lose it in a flash."

Tidd relies on state-of-the-art surveillance equipment, as well as an armada of 20 ships and 2,000 sailors to guard the waters surrounding the terminals.

"We kind of form a band of steel right around the exclusion zone," says Commander Steven A. Mucklow, who works aboard the American destroyer Cushing.

While some 200 Iraqis have received training for the newly formed Iraqi Coastal Defense Force, the Iraqi Navy essentially consists of just five patrol boats. For now, the responsibility of protecting Iraq's oil terminals rests on Captain Tidd and his fellow crew members. It's a high-stakes job, admits Tidd.

"This is the Iraqi future trying to get on its feet," he says.