This weekend, the Houthi rebels in Yemen engaged in their favorite pastime of attacking Saudi Arabian oil and natural gas infrastructure. For the record, the Houthis are stooges of the Iranian regime and, like the Iranians, hate their Sunni Arab neighbors in Saudi Arabia (meanwhile, Saudi Arabia uses its immense arsenal of American weapons to slaughter the Yemenis with impunity in the ongoing civil war raging in that country).
This time, according to a Houthi spokesman, the attack “involved 10 drones” and was directed against sensitive targets in Saudi Arabia’s Eastern Province. This attack indicates not only a continuing escalation in Iranian-backed Houthi attacks against sensitive Saudi oil infrastructure but also a growing complexity in the Houthis’ potent drone-strike capabilities.
As the Wall Street Journal reports, “This attack appeared to be the most effective, starting large fires at Hijra Khurais, one of Saudi Arabia’s largest oil fields, and at Abqaiq, the world’s biggest crude stabilization facility. Khurais produces 1.5 million barrels a day while Abqaiq helps produce up to 7 million barrels a day.”
In response, the Saudi Arabian government is cutting its oil production by half, which is a loss of around 5 million barrels of oil per day, or 5 percent of the world’s daily oil production. Usually, the attack on such critical infrastructure for the world’s daily oil production would have sent prices rocketing upward.
Yet the market’s response to these attacks is likely to be muted for two reasons: first, because Saudi Arabia’s authorities have thus far contained the fires at the oil facilities. Second, because markets are presently less concerned about supply than demand, a situation that, according to energy analyst Richard Mallinson, is the result of “slower global economic growth and the ongoing trade war between the U.S. and China.”
Oil Wars Cometh
This is but one of countless attacks, going back years, that Iran has orchestrated against its Saudi rivals. Shortly after Israel and the United States launched the successful Stuxnet computer virus in 2010 as a non-kinetic way of stunting Iran’s growing nuclear weapons program, the Iranians retaliated against Saudi Aramco’s vulnerable computer networks, causing widespread disruption in the Saudi state-owned oil enterprise’s critical day-to-day operations.
For decades, Iran has threatened to use force to close off the Strait of Hormuz, one of the world’s critical oil chokepoints, to civilian transportation. Such a move, Iran believes, would precipitate a rapid and uncontrolled increase in the global price of oil — possibly shooting the global price to more than $200 per barrel — causing massive pain to energy consumers worldwide.
The Iranian strategy is predicated on the assumption that while the West possesses far superior military and economic capabilities than Iran does, Westerners will not countenance uncontrolled spikes in their cost of living, thanks to Iranian geopolitical moves against the global oil supply chain. Plus, as a major oil-producing state itself, Iran would benefit from a spike in the world’s oil price — U.S. sanctions against their oil trade notwithstanding. The point of this Iranian strategy is to ultimately force Western leaders to negotiate with Iran over their nuclear weapons program and their recent moves in the Mideast to become the regional hegemon rather than allowing the American strategy of containment against Iran to continue.
Iran’s strategy, though, is doomed to fail at present.
First, the Iranian gambit was developed in the early 1980s, when the world’s oil supply was nowhere near as diversified as it is today. Second, as noted above, today’s world markets are not concerned with supply as much as they are with demand. Even if things changed, the global price of oil is relatively low, meaning that Iran would not benefit much from any increase in price. Under these conditions, Iran’s plan to increase the price of oil is nothing more than, if you’ll pardon the expression, a pipe dream. This is especially true in the face of America’s renaissance in domestic energy production and following Russia’s disastrous overproduction of oil last month.
The Iranian regime is desperate. Iran’s economy is collapsing. Its foreign policy is failing. Iran’s mounting failures are a further reflection of Tehran’s inability to circumvent the Trump administration’s onerous sanctions against Iran. Iran’s increasingly hostile actions (and those of its proxies throughout the region) have created a unique historical situation wherein the Sunni Arab states, as led by Saudi Arabia, and Israel may finally put aside their differences and work together in a U.S.-led regional military alliance aimed at containing Iran (as the West previously did to the Soviet Union).
America’s sanctions have precipitated all of these events.
U.S. Strategy Going Forward
Going forward, the Trump administration should officially create a NATO-like organization between Israel and the Sunni Arab states, which are directly threatened by Iranian revanchism. The White House should then increase U.S. Navy forces in the region to better protect shipping while facilitating the expansion of Saudi Arabia’s defense of its oil and natural gas resources. At the same time, the White House must encourage American oil and natural gas producers to expand their fracking operations in the United States to offset the potential of rising oil prices in the face of continued Iranian aggression.
Only after Iran ceases its unacceptable behavior can President Trump sit with its leaders, as recent news reports suggest he wants to do. And Trump can negotiate with Iran only after Israel and the Sunni Arab states have fortified themselves against it. What’s more, only after Iran makes tangible concessions to the United States over its nuclear weapons program can the Trump administration even consider loosening sanctions.
Peace, even with Iran, is possible. But, true peace will only be accomplished through strength and a reliable regional multilateral alliance consisting of Israel, the United States, and the Sunni Arab states. So, prepare for more of the Little Cold War against Iran.
Source: Iran Keeps Asking for It