Politics and oil market, an unraveling tale

Ghazal Poorhasan

The attacks on the oil processing plants of Saudi Arabia were not limited to the security of Saudi Arabia, but that of the whole world. An ambiguous situation with very little certainty, but has heavy and undeniable consequences over 5% of the global daily output in oil production, resulting in old fears over the security of oil supplies.

The dramatic rise on oil prices between Friday and Monday are only comparable with the period of Saddam Hussein’s invasion of Kuwait. Even though the price has been brought back under control and the world is not facing the lack of supply at the moment, the clear lack of security over the oil supplies and prices have shook the world deeply.

How is the world prepared to control oil prices? The United States is ready to utilize its emergency petroleum reserve. In the meantime, many other countries are planning to use their own storages to get the market back to normal; the market that not only affected the oil price but also increased the one of gold. Presumably the market will be under control until the full recovery of Saudi Arabia’s production, which might take weeks. But what about the guarantee over the energy security, not to be affected by further conflicts?

The energy crisis did not start by the events of Saturday, but by the attacks against the oil tanker traffic in the strait of Hormuz last June, also known as “the Gulf of Oman incident”. It has only been some months ago when Saudi Arabia conveyed its concerns over the security of oil supplies, while the assaults were being carried out against the oil tankers.

Saudi Arabia and Aramco have not given very exact figures regarding the damages or a timeline of resuming the full production from the damaged facilities. The presence of on-going war between the Saudi Arabian coalition and Yemen, the cold war between Iran and Saudi Arabia and the unsolved story of attacks on the tankers, illustrates the deep fragility in the energy-rich region.

As much as the Houthi rebels are claiming the responsibility over the attacks, the very first investigations indicate that the attack originated from a west-north-west direction, which is not Houthis territory. Iraq is not accepting the responsibility that the attacks came from its soil, yet the most recent reports accuse Iran directly due to the location from where the attacks came: south of Iran and northern end of Persian Gulf.

The very clear fact is that, in spite of Saudi Arabia’s high expenses over the military purchases, these attacks in some point questioned the security of Saudi Arabia in its most sensitive spot, its oil facilities. Even though according to the reports of Saudi air defense, the missiles were not stopped because the defense system was in charge of Yemen direction. However, it does not change any reality over vulnerability of Saudi Arabia.

The strong announcement from United States against Iran, even without intelligence proof, is taking the Middle East in a very new direction which can be highly dangerous for the world’s stability.

If the attacks were really done by Iran, what can be the objectives behind it?

As much as Iran is denying any involvement in any energy crisis from the Gulf of Oman’s incident to the more recent attacks on Saudi Arabian facilities, the fact that Iran is not anymore able to export its oil – which is the lifeline of Iranian economy – might lead Iran to try and create security challenges for any other regional exporter. In the meantime, the progression of Iranian missile technology should not be ignored, and this action can be a sign to posture its presence and project its power. Meanwhile, we can indicate the fact that Europe is also going to be affected by an oil crisis and that the attacks might have brought Iran closer to its objective of restarting the dialogue on the Joint Comprehensive Plan of Action (so called ”Iran Deal”), as has been already mentioned by German Chancellor Angela Merkel on Tuesday in a bid to return to the negotiation table and decrease the tensions in the region. Another objective can be initiating uncertainty in the oil supply market in an effort to increase the oil price and get back into the oil exporting line, even if it’s just for a short period of time to relieve Iran’s economy.

Now the main question is what can be the reaction if the claim that Iran is behind the attacks are true?

President Trump emphasized that the United States has no immediate need for the energy coming from the Middle East. At the same time, it should be taken into account that the oil supply security is a non-negotiable priority. Therefore, the United States has to show an initial supportive reaction to its ally, which seems highly vulnerable at the moment despite all its expensive military purchases; and from the other side, if such an act by Iran was left with no response, this might encourage Tehran to go for forth with more attacks. But is the United States willing to involve itself in a new conflict in the Middle East? In a region which is highly important for its energy sources, any conflict can affect the results of the coming election. The emphasis of president Trump on the independence of United States over the oil coming from the Middle East can be a sign that United States is not willing to become involved in any conflict.

In this case, getting closer to western allies can presumably be the best solution to sort out the ongoing crisis through diplomatic channels. The very European allies, that as long as they did condemn the attacks on Saudi Arabia, still kept their distance from United States in regard to the withdraw from Iran Deal.

Is the European Union able to convince the United States to reinforce the Iran Deal for securing stability? Is Russia going to play any role in this process, or is it only looking at the whole process as a gain to sell Russian-built weapons to Saudi Arabia? Is the Cold War between Iran and Saudi Arabia going to be a hot war? The happenings of the coming days will respond to all these questions.

(You can read the last article by Ghazal Poorhasan here)

Ufficio stampa e Comunicazione dell'Istituto per la Competitività (I-Com). Nata a Roma nel 1992, Giulia Palocci si è laureata con il voto di 110 e lode in Scienze Politiche e Relazioni Internazionali presso l’università Luiss Guido Carli con una tesi sul contrasto al finanziamento del terrorismo nei Paesi del Sud-est asiatico.

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