Another damaging oil attack this week, the prospect of British troops handing over the oil city of Basra and virtual civil war have all but crushed hope for Iraqi officials battling to keep exports flowing to world markets.

"One thing is sure. The worst is yet to come," an Iraqi oil industry source said by telephone from Baghdad.

His task is made harder still by gross mismanagement at the oil ministry and chronic underinvestment in the vital sector -- already neglected for decades due to sanctions and wars.

"There is no line of authority at the oil ministry," said an oil official in the capital. "We are crippled. We have the resources and the finances and we are still failing."

With Baghdad in chaos, technocrats fear the oil producing regions in the Shi'ite south and in the north near Kurdistan may seize control of exports and effectively dismember the country that holds the world's third biggest oil reserves.