Attacks on Saudi Arabia’s petroleum facilities last weekend knocked out more than half the country’s oil output. Houthi rebels claimed responsibility for the assault, although the United States charged that Iran was behind the incident. The attacks are a reminder of the centrality of Saudi Arabia to global energy production and the potential for disruption that results from that role. It also underscores how Riyadh’s foreign policy has effects well beyond the Persian Gulf.
Houthi rebels, supported by Iran, have been fighting for control of Yemen since 2014. After the insurgents took control of the country, Saudi Arabia joined with the United Arab Emirates in 2015 to forge a military coalition to restore the former government to power. The result has been a bloody struggle that is considered to be one of the world’s worst humanitarian disasters, claiming nearly 100,000 lives in a savage fight.
A cease-fire was brokered last year but it has proven ineffective. The Houthis have turned their focus to Saudi Arabia, attacking pipelines and other parts of its oil infrastructure, along with ships in the Gulf of Hormuz. In August, the rebels used drones to attack an oil field near the Saudi border with the UAE; it had limited effect. Last week’s attack on the Abqaiq facilities by numerous drones demonstrates both shrewd targeting and increasing capability, as the facilities are more than 800 km from Houthi-controlled areas of Yemen.
Aramco, the national conglomerate that runs the facilities, said the attacks forced the suspension of production of 5.7 million barrels of crude oil, more than half the country’s daily output capacity and about 6 percent of global oil supply. It is not without reason that experts call the oil field the most important production facility in the world; some call it the “crown jewel of the Saudi Kingdom.”
While the Houthis have claimed responsibility, and are known to possess drone technology, some doubt that assertion. The structures that were damaged did not face south, as would be expected of an attack that came from Yemen. U.S. Secretary of State Mike Pompeo charged that Iran was responsible, tweeting that Tehran perpetrated an “unprecedented attack on the world’s energy supply,” but he provided no evidence. Curiously, Saudi Arabia has not backed that accusation.
The Houthi statement did not say the attacks originated in Yemen, fueling speculation that the group launched them from Iraq — where a previous attack originated — or from inside Saudi Arabia itself. There is no disputing, however, that Tehran is backing the Houthi rebels, along with military forces throughout the Middle East to counter Riyadh’s influence in the region and advance Iran’s own.
The proliferation of drone technologies should worry Riyadh; Saudi Arabia ranked third in military purchases in 2018, but drones cost just $15,000 apiece to build and proved capable of penetrating the country’s defenses.
Prices spiked on news of the attack, jumping 20 percent on the spot market. The International Energy Agency, which monitors global energy supplies and controls the release of emergency oil stocks, cautioned that “For now, markets are well supplied with ample commercial stocks.” U.S. President Donald Trump spoke to Saudi Arabian Crown Prince Mohammed bin Salman and, according to the Saudi report on their call, offered support for the country and promised to stabilize the U.S. and global economy. Trump later authorized the release of oil from the Strategic Petroleum Reserve.
Given Houthi determination to take the fight to Saudi Arabia and Iran’s belief that it is the rightful leader of the region, violence will continue and instability will grow. Japan, Saudi Arabia’s second-biggest source of foreign capital and its third-largest business partner, will be affected. Tokyo must also brace for international supply chain disruptions. Two years ago, Japan got over 35 percent of its crude oil from Saudi Arabia (and another 24.5 percent from the UAE); 86 percent of its crude oil imports originate in the Middle East. Japanese companies are also increasingly dependent on Middle East-produced materials in non-energy industries.
The region produces a growing share of petrochemicals used for plastics, ether and ethylene, and ammonia, a raw material in chemical fertilizers. Japanese imports of aluminum bullion from the region have tripled over the last 10 years and now total 17 percent of the nation’s total.
Prime Minister Shinzo Abe’s offer to mediate between Iran and the U.S. also inserts this country into regional developments. While any option that increases prospects for peace is to be pursued — and Trump has indicated a willingness to talk to Iranian leaders — Tokyo must be prepared for frustration and blowback if factions in Iran opposed to negotiations want to deter its involvement. Sadly, the logic of violence is increasingly prevalent in the region.