Attack On Saudi Arabian Oil Refineries – Brief

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TIC Analysis l

  1. Saudi Arabia’s crown prince has told US President Donald Trump the kingdom was “willing and able” to respond to the latest attacks claimed by Yemen’s Houthi rebels on its oil facilities, state media reported. “The kingdom is willing and able to confront and deal with this terrorist aggression,” Crown Prince Mohammed bin Salman ( MBS) told Trump during a phone call according to the official Saudi Press Agency. MBS was referring to drone attacks earlier in the day on two state-owned Saudi Aramco oil facilities, which triggered enormous fires and disrupted global energy supplies.
  2. On September 14th Yemen’s Ansarullah Coalition forces carried out a successful strike on two major oil installations in Saudi Arabia, marking the latest in a series of increasingly significant and far reaching attacks carried out using asymmetric assets. The attack was reportedly carried out using ten light drones, each costing under $20,000, and alongside its ballistic missiles capabilities demonstrated the growing reach of the coalition. The attacks caused fires at the facilities at Abqaiq, the world’s largest oil processing complex, and Khurais, a major oilfield. The attacks on the two facilities cut Saudi Arabia’s crude oil supply by around 5.7 million barrels per day(mb/d) or about 50 percent of its output.
  3. The Ansarullah Coalition is comprised of mainly the Houthi militias, which have been in conflict with Saudi Arabia and a number of its regional allies. While Saudi Arabia has had access to state of the art arms from a wide range of suppliers, and benefitted from both significant Western support and the presence of French and U.S. special forces which have operated against Ansarullah in Yemen, the asymmetric tactics used by coalition forces has allowed them to prevail and gradually strengthen their position against overwhelming odds.

Possible Scenarios of Oil Prices

  1. Bloomberg notes that this attack has resulted in the single-worst disruption in oil markets ever, surpassing the loss of Kuwaiti and Iraqi petroleum supply in August 1990, when Iraq invaded its southern neighbor. It also exceeds the loss of Iranian oil output in 1979 during the Islamic Revolution, according to data from the U.S. Department of Energy.”
  2. Oil prices have started to return to normal,Brent crude, the international benchmark, settled down 6.5% at $64.55. On Monday, oil prices had gone up by more than 14%. But investors remain cautious of potential tension in the Middle East after the United States said it believes the attacks that crippled Saudi Arabian oil facilities last weekend originated in southwestern Iran. Iran has denied involvement in the attacks.

Tensions in the Gulf

  1. Fears over an outbreak of fighting between Iranian and United States forces in the Gulf were revived after Washington accused Tehran of carrying out devastating drone attacks. US President Donald Trump said “there is reason to believe” that the White House knows the culprit of the attack, and that the military is “locked and loaded” to take action. He said the US is “waiting to hear” from Riyadh “as to who they believe was the cause of this attack, and under what terms we would proceed.” Earlier, US Secretary of State Mike Pompeo blamed Iran for the drone attacks and said there’s “no evidence the attacks came from Yemen”.
  2. Iran’s elite Revolutionary Guard force said on Sunday it was prepared for a “full-scale war”. The commander of the Islamic Revolutionary Guard Corps’ aerospace arm noted Iran’s missiles could hit US bases and ships within a range of 2,000km (1,240 miles). “Because of the tension and sensitive situation, our region is like a powder keg,” Brigadier-General Amir Ali Hajizadeh said.
  3. These attacks are a step towards a worse scenario in what has already become a dangerous confrontation, with the sabotage of merchant shipping in the Gulf and the severe breakdown of the situation in Yemen, as well as several aerial attacks on Shia militia camps in Iraq in recent months. No previous attack, since the Yemen conflict began four years ago, has interrupted oil supplies. How Saudi Arabia will respond in other ways, such as redoubling its military campaign against the Houthis in Yemen, is yet to be seen.
  4. India, the world’s third-largest oil importer, has a reason to worry as escalating geopolitical tensions in West Asia have raised the spectre of higher oil prices. Higher import bills can potentially exacerbate the recent slowdown in the Indian economy as it can increase India’s trade deficit.
  5. Pakistan has reiterated its full support and solidarity with the brotherly Kingdom of Saudi Arabia against any threat to its security and territorial integrity.The Foreign Office spokesperson in a statement on Saturday while strongly condemning the drone attack on Saudi oil processing facilities also said such acts to sabotage and disrupt commercial activities causing fear and terror cannot be condoned. The spokesperson added Pakistan hopes that such attacks will not be repeated given the potential damage they can cause to the existing peaceful environment in the region.
  6. The recent attacks in Saudi Arabia will exacerbate Pakistan’s diplomatic maneuvers in the Middle East such as its attempt to negotiate rapprochement between Saudi Arabia and Iran. There will also be added pressure from Saudi Arabia on Pakistan on the basis of defense pacts to increase its military footprint on Saudi soil in response to increased attacks.