Saudi Arabia and the oil market seem to have absorbed a 5.7-million-b/d blow to production and supply with barely a wobble. The price of Brent crude rose after Sept. 14 aerial attacks against the Abqaiq processing center and Khurais oil field without blowing out. The market partly relaxed after assurances that oil would be available as needed from emergency inventories and predictions from the Saudi government that lost output would be restored by month’s end.
The Brent price reached $68.42/bbl on Sept. 16 and subsided to $64.66/bbl a week later. By then, disclosures had emerged that might lead to impeachment of US President Donald Trump. And an event that once would have inspired lasting panic about global recession quickly lost prominence in the news.
A miscalculation
Still, peril hasn’t left the incendiary Middle East. The sophisticated attacks against Saudi oil facilities seem, for the moment, to have been a miscalculation by Iran, the suspected perpetrator. The Islamic Republic must have hoped for response more dramatic than what occurred. Oil prices high enough to pressure European governments into appealing to the US to ease sanctions, perhaps? Or hasty retaliation by Riyadh and Washington provoking a backlash of international scorn? Whatever its motive, the tactic didn’t work.
Yet Saudi Arabia finds itself in a multifront conflict with potentially drastic consequences. It has been fighting Houthi rebels supported by Iran in Yemen since 2015. The Houthis, in fact, claimed responsibility for the attacks on Abqaiq and Khurais, which they could not have executed. But they have attacked targets in Saudi Arabia frequently, trapping the kingdom in a low-grade war that has become a quagmire devastating to Yemenis not in the fight.
The horrors of war are bad enough. But Saudi Arabia also receives most blame from abroad for Yemen’s humanitarian crisis. Whether or not the disfavor applies in proportion to all misbehavior ravaging Yemen, it limits help the kingdom can expect from allies, including the US. Even after the Sept. 14 attacks, lawmakers have proposed to make further US arms sales contingent on the kingdom’s ending attacks it sees as defensive on targets to its south. And antipathy lingers over the murder of Saudi journalist Jamal Khashoggi a year ago in the Saudi consulate in Istanbul. Speaker of the House Nancy Pelosi (D-Calif.) reflected the mood starkly in comments about a recent meeting between Sec. of State Mike Pompeo and Saudi Crown Prince Mohammed bin Salman. “They’re sitting across from the person who chopped up a reporter and dissolved his remains in chemicals,” she said while discussing the possibility of US help with a retaliatory strike against Iran. “I don’t see any responsibility for us to protect and defend Saudi Arabia.”
Amid all this, connections with oil markets on which the Saudi economy depends have come under heightened threat. Iran regularly threatens to close the Strait of Hormuz, the sole shipping route away from the Persian Gulf. As sanctions lower its oil exports, Iran’s economic interest in unfettered traffic through the strait diminishes. Less noticed in news reports but important to Saudi Arabia is jeopardy to the strait between the Red Sea and Gulf of Aden, Bab al Mandab. Saudi Arabia lowers dependence on the Strait of Hormuz by moving crude westward by pipeline to Red Sea terminals for loading onto tankers headed south to the Bab Al Mandab or north to the Suez Canal and Suez-Mediterranean Pipeline. Houthis occupying Hodeidah on Yemen’s western coast have menaced Saudi tankers using the southern Red Sea exit.
Danger lingers
While outright war between Saudi Arabia and Iran has been averted, therefore, danger lingers. The Iranian theocracy has demonstrated its ability, with help from proxies, to inflict damage on a heretofore well-defended foe, its denials of responsibility notwithstanding. It reels from sanctions. And it still wants to dominate the Persian Gulf region. It probably will strike again.
The world’s most important oil-producing region remains shaken and in jeopardy.
