Attack on Saudi Arabia: Why Houthis undermine kingdom's oil industry?

Author : Georgiy Kuhaleyshvili

September 14, the Ansar Allah extremist organization, led by Yemeni Shiite Abdul-Malik al-Khusi, carried out a terrorist attack in Saudi Arabia. Extremists took responsibility for it on the same day
08:43, 17 September 2019

Open source

Ten drones attacked the refineries of the Aramco Company in the settlements of Abqaiq and Khurais. Thick clouds of black smoke covered the sky. Due to the fire, the company may lose 5 million barrels of oil. This is the second Houthis attack on the kingdom’s oil industry this year. In May, the Houthi rebels blew up the East-West pipeline in Saudi Arabia using drones. We did not mention the systematic rocket attacks from the territory of Yemen against Arabian settlements, including the suburbs of the capital of Riyadh. The attack goes beyond the confrontation between the Houthis and Saudi Arabia in an armed conflict on the territory of Yemen and meets the interests of Iran. The United States has already announced this.

The tool of Iran

The Houthis called the attack "a natural response" to the ongoing aggression of Saudi Arabia and the blockade of Yemen. Saudi Arabia has been conducting a military operation against the Yemen Houthis since March 2015. Islamic extremists tried to overthrow the secular government in the Arab Republic and create an Iran-oriented theocratic state. Iran is perceived by the royal dynasty of Saudi Arabia and other secular regimes of the Persian Gulf as a threat to their existence and a competitor in the world oil market. US Secretary of State Mike Pompeo blamed Iran for the terrorist attack, not the Houthis. The leaders of Iran and the Houthi rebels deny their relationship. Iranian Foreign Ministry spokesman Abu Mousavi called the American accusations pointless.

However, last year the UN Security Council proposed to adopt a resolution condemning Iran’s complicity in the Houthis provocations, which Russia blocked. According to unofficial information, Iran supplies weapons to the rebels smuggling it across the border with Oman, and about a hundred Iranian advisers are engaged in extremist combat training. In March 2016, a ship was detained in the Arabian Sea with a batch of Kalashnikov assault rifles, grenade launchers, machine guns, which, according to the assumptions of the American intelligence services, were coming from Iran to Yemen. According to the UN, the design of the drones used by Ansar Allah resembles the Qasef-1 Iranian drones. The Houthis serve as Iran’s tool for provocations in the Gulf region.

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Pressure on the White House

The attack on oil refineries in Saudi Arabia occurred three days before the 74th session of the UN General Assembly on September 17, at which negotiations between US President Donald Trump and his Iranian counterpart Hassan Rouhani were planned. The ayatollah regime could specifically command the Houthis to bomb Aramco's refineries in order to play on the Americans’ nerves and make Trump more compliant in the upcoming talks. Collaboration with Aramco is of strategic importance to the United States, as it is the second-largest oil supplier to the US industry. Since 2017, Aramco has bought a refinery in the Texas city of Port Arthur, which receives about 30% of imported oil from Saudi Arabia (about 900 thousand barrels per day).

Iranian authorities are demanding not only to lift US sanctions but also to provide a loan of $ 15 billion to the Islamic Republic in exchange for a return to the terms of the nuclear deal. After the United States withdrew from the Joint Comprehensive Action Plan, Iran increased the percentage of uranium enrichment and restarted the nuclear program. Trump believes that the prospect of lifting sanctions and providing money to Iran will depend on the outcome of the negotiations. According to John Bolton, a former adviser to the President of the United States on national security, the administration is ready to ease sanctions to facilitate the negotiation process. Trump wants from Rouhani to agree to conclude a new deal and dismantle nuclear facilities in Iran, abandon ballistic missiles, withdraw the Islamic Revolutionary Guard Corps units from Syria and stop sponsoring Shiite armed groups, including Ansar Allah in Yemen.

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The Houthis attack on the territory of the US Middle East ally is a warning to Trump before negotiations with Rouhani. Tehran makes it clear to Washington that it will continue to undermine the oil industry in Saudi Arabia and create obstacles to oil supplies to the United States, EU countries, South Korea and Japan until the sanctions are lifted. Iran complied with the terms of the nuclear deal until the United States itself refused to participate in it. Attacks on Aramco refineries are a protest against the latest package of sanctions, which provide for restrictive measures against countries hosting Iranian oil tankers. Iranians want the US not to interfere with its expansion in the Middle East. States support Saudi Arabia in armed conflict with Yemeni Houthis, intelligence reports.

Iran Oil Wars

The Houthis attack on Aramco facilities is Iran’s spit in the face of the new Saudi Minister of Energy  - Prince Abdulaziz bin Salman. At the last meeting of OPEC + (participating countries and Russia), he agreed with Russian Energy Minister Alexander Novak to reduce oil production in order to help increase world oil prices. Abdulaziz bin Salman aims to resolve disagreements with other OPEC members, including neighboring Kuwait, the UAE, and Oman. With the growing government spending of the kingdom, rising oil prices are in the interest of Riyadh. It is not surprising why the Saudi king put one of his sons on a responsible post instead of Khalid al-Falih, with whom Saudi Arabia reduced production to 500 000 barrels per day, which was not enough.

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Unable to compete freely with Saudi Arabia in the oil market due to sanctions, Iran acts like a dog in the manger. With the help of a terrorist attack, it expects to provoke a sharp jump in world oil prices and affect the reduction in procurement against this background. Bob McNelly, an employee of the Rapidan consultancy, believes that an excessive increase in oil prices can lead to negative consequences since it can take months to repair an oil refinery in Abqaiq. Aramco had to temporarily cut oil production by almost 6 million barrels per day until the enterprises were restored. The Houthis attack once again demonstrates the vulnerability of the world oil market from the provocations of Iran and the extremist groups sponsored by it.

The Houthis attack is designed to disrupt the Saudi government’s plans to sell a 5% stake in Aramco. To begin with, it was decided to sell 1% of the shares. According to Crown Prince Mohammed bin Salman, the value of Aramco is $ 2 trillion. It was expected that by 2021, thanks to the sale of shares in Aramco, Saudi Arabia could replenish the state budget by $ 50-100 billion. The Houthis clearly demonstrated what potential risks the investors might face. Owing to the risks posed by the Houthis, stock buyers may demand lower prices. Therefore, the Saudi government may not receive the expected economic benefits from the sale of a small number of Aramco shares. Iranians make it clear to Arab competitors that they will not let them work fruitfully as long as US sanctions are in effect and the troops of Saudi Arabia do not leave Yemen.

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Bolton's Legacy

It is not completely clear how the United States and Saudi Arabia are going to respond to Iran’s ongoing provocations and blackmail policies. Saudi Arabia's crown prince, Mohammed bin Salman, called Trump after the Houthis attack in hopes of help from his main military-political partner. However, the American president confined himself to a statement of readiness to cooperate with Saudi Arabia in the field of security and said that the activities of the Houthis harm the world economy and the United States. The owner of the Oval Office is unpredictable. In particular, after the recent terrorist attack in Kabul, which claimed the lives of 12 people, including the US military, Trump postponed negotiations with the Taliban for a peaceful settlement in Afghanistan and the withdrawal of the US armed forces. Based on Trump’s logic, the cancellation of the meeting with Rouhani on the sidelines of the UN General Assembly is not ruled out.

In this situation, Trump's restrained reaction looks like the president’s weakness and fear of taking risky military adventures. Trump behaves like an indecisive bureaucrat, ready to refuse to help the regional partner for fear of rising criticism and anti-war sentiment in American society on the eve of the presidential election in 2020. Trump even dismissed his national security adviser John Bolton on the eve of negotiations with the Iranian president. Bolton has repeatedly proposed conducting a military operation in Iran and destroying the nuclear facilities of the Islamic Republic in the course of missile and bomb strikes. As recent events have shown, there are supporters of a tough response to Iran in the US Congress. Republican Senator Lindsay Graham has proposed considering the option of bombing oil refineries in Iran if the ayatollah regime continues to provoke and increase uranium enrichment.

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The recent attack on Aramco refineries can be compared to the actions of the Iraqi military after the occupation of Kuwait in 1990. They fired artillery at oil tanks and set fire to local refineries. Unlike Trump, the administration of President George W. Bush acted more decisively, as evidenced by the military operations Desert Shield and Desert Storm, which resulted in the Iraqi troops being knocked out of Kuwait. The reciprocal airstrikes of the USA and Saudi Arabia on oil refineries in Iran, as well as on the positions of the Houthis in Yemen, could have a sobering effect on the ayatollah regime, making it clear that they would not achieve the desired concession by provocations - they will only increase the degree of tension in the Middle East.

In any case, this is how the Americans, along with the British and French, acted in Syria in April 2018. They launched bombing of chemical industry facilities in response to the use of prohibited chemical weapons against the Syrian opposition by the Bashar al-Assad troops. Fears that Iran and Shiite-controlled organizations in Middle Eastern countries will randomly launch missile attacks on nearby US bases and infrastructure may not be justified. Tehran is more likely to intimidate the international community with provocations of a local scale. However, this does not mean that it is ready for a long protracted war with the United States, Arab countries and Israel, which is not beneficial to anyone due to interruptions in oil supplies to the world market.

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