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The sweeping implications of the attacks on Saudi Aramco

The sweeping implications of the attacks on Saudi Arabia's oil infrastructure
5 min read
22 September, 2019
The attacks on Saudi Arabia, the world's largest oil producer, show there are circumstances under which an energy-dominant country can lose its supposed dominance fast.
Drone and missile barrage hit Saudi Aramco on September 14 [Getty]
The airborne attacks on Saudi Arabia's largest petroleum processing facility and one of its oil fields on September 14 were a defining moment in global energy geopolitics.

It marked the first time that someone has tried to disrupt international energy markets by targeting a producer's infrastructure. And, it worked.

The question of whether the attackers were the Houthi rebels in Yemen, as the Houthis claim, or the Iranian regime, as the US claims, is important, of course. But more important is the now-proven notion that you can roil world geopolitics and energy markets with such attacks, which prompted oil prices to skyrocket.     

What are some other lessons of the strikes on the Abigaig processing unit, which handles five percent of Saudi Arabia's oil products, and the Khussair oil field?

The first is that energy facilities worldwide have become subject to precision attacks from drones or missiles, not just saboteurs on the ground.

The Houthis claimed they used drones in the attacks, while the US contends the weapons were long-range Iranian missiles.

Read also: Aramco strikes have deep
repercussions for Saudi Arabia's economy

Another lesson is how interdependent global energy geopolitics have become.

The Trump administration has liked to paint a black-and-white picture of some countries being energy-dominant and others energy-dependent.

But the attacks on Saudi Arabia, the world's largest oil producer, show there are circumstances under which an energy-dominant country can lose its supposed dominance fast – in the short run, at least.

The strikes also called into question Saudi Arabia's reputation as the arbiter of global oil prices – a reputation it had bolstered by persuading Russia to cooperate with OPEC in keeping prices stable by forming the OPEC+ alliance.  

In addition, the attacks undermined the United States' depiction of Saudi Arabia as its strongest and most dependable anti-terrorism partner in the region. The question that sceptics are asking is if Saudi Arabia failed to protect its critical infrastructure from terrorist attacks, how can it help protect others in the region?

The attacks also showed that the United States cannot prevent aerial attacks on energy infrastructure in the Middle East and has no coherent plan for responding to them militarily, geopolitically or economically.

The Trump administration has been trying to isolate Iran to force it to renegotiate a nuclear deal that President Donald Trump thinks would be better for the United States than the one that President Barack Obama negotiated and Trump scrapped. But Iran came out of the Saudi-attacks crisis stronger geopolitically because much of the rest of the world concluded that it wasn't afraid to take on the Saudis or the US.   

Despite the Trump administration's hawkish rhetoric toward Iran after the attacks, Washington has signalled that it is not contemplating a military strike against the country.

A new Middle East conflict would make it harder for Trump to win re-election in 2020. It would not only put American soldiers in harm's way but send oil prices soaring. Iran is well aware of that. 

Ten days after the Saudi-infrastructure attacks, it is still unclear who was behind them, but most Middle East experts think it was Iran.

Why? To start with, lobbing unmarked missiles from long distances onto infrastructure would be a way of bloodying the noses of both Saudi Arabia, Iran's Middle East arch-rival, and the United States, its hated Big Power adversary while limiting the chance of a counter-strike.

Another way Iran could gain from the attacks geopolitically would be to come out of the crisis with a proven, low-cost formula to use against its enemies in the future. If the Saudis and Americans fail to respond militarily to what they maintain was an Iranian provocation, then why shouldn't Tehran try the approach again?

Read also: Aramco attacks expose Saudi
vulnerability and shaky GCC security

The timing of the strikes would certainly suggest that Iran was behind them. They occurred as US-Iranian tension was increasing, just after Saudi Arabia had replaced its energy minister and Saudi Aramco's chair, and after a spate of news reports suggesting that a Saudi Aramco initial public offering is getting closer.

The attacks also came less than a week after Trump ousted the Iran hawk John Bolton as National Security Adviser. One can wonder what the geopolitical ramifications of the attacks would be if he had remained in the post.

Another reason to believe that Iran was behind the attacks is that any increase in oil prices arising from damage to the Saudis' oil infrastructure would benefit Iran's economy, which has been pinched since the Trump administration imposed sanctions on it in 2018.

The strikes prompted prices to surge to their highest levels in more than two decades. The attacks' long-term impact on prices remains to be seen, of course. But by shaking Saudi Arabia's reputation as a pillar of oil-infrastructure stability, the strikes have made global energy players wary.

Because the attacks led to a plunge in Saudi Arabia's stock market, they also generated concern about the IPO. The key questions are whether the offering will be delayed further – investors have been waiting for it for years – or whether the price of the stock will open lower than would have been the case before the strikes.

Questions about the transparency of Saudi Aramco's operations and other concerns are already swirling around the IPO.

The temporary closure of almost half of Saudi oil production from the aerial attacks will add another layer of complexity to the stock offering. One certainty is that Saudi Arabia's failure to prevent the attacks will make potential IPO investors think harder about whether to acquire the stock.

Rauf Mammadov is resident scholar on energy policy at The Middle East Institute and senior adviser at the Gulf State Analytics. He focuses on issues of energy security, global energy industry trends, as well as energy relations between the Middle East, Central Asia and South Caucasus.

Follow him on Twitter: @RaufNMammadov