Tensions rise in the Persian Gulf


Early on 14 September 2019 two of Saudi Arabia’s most significant oil facilities, the Abqaiq plant and the Khurais oilfield, came under coordinated attack, causing the largest-ever disruption to global oil supply and raising concerns about a further escalation of tensions in the Persian Gulf. As assessment of the global fallout continues, this is what we know so far.

Background

Saudi Arabia is the world’s largest exporter of crude oil, accounting for around 8.6 million barrels per day (mbpd) or 12 per cent of global trade. The Abqaiq processing facility is the world’s largest ‘crude oil stabilisation’ plant, processing more than ten mbpd (around seven per cent of global supply), while Khurais produces an estimated one per cent of the world’s oil. Together, they form an important part of Saudi Arabia’s critical oil infrastructure, located in the country’s oil-rich Eastern Province, an area which has seen brutal crackdowns on the Kingdom’s Shia minority.

Uninhabited aerial vehicles (UAVs) were reportedly used in the attack, causing fires that disrupted the processing of 5.7 million barrels of oil. This is about half of Saudi Arabia’s daily production, and ‘six percent of the world’s normal daily oil supply’. Speculation that supply shortages might lead to the release of strategic stockpiles prompted the International Energy Agency (IEA) to state that ‘for now, markets are well supplied with ample commercial stocks’ and that it is monitoring the situation.

Saudi officials initially predicted production would ‘return to normal’ a few days later, but other reports suggested it may take weeks or possibly even months. Oil prices surged after the attack, with Bloomberg reporting the jump in prices on the first day of trading following the attack was the biggest ‘one-day percentage gain’ on record. The price surge will likely influence the price of petroleum imported into Australia. The extent of the price moves will be determined by how much inventory is released by Saudi Arabia, the amount of alternative supply sourced from the US and Middle Eastern producers, and the duration of the Abqaiq outage.

Responsibility for the attack

Yemen’s Houthi rebels quickly claimed responsibility for what they termed a ‘Second Deterrent Balance Operation’, which involved ten UAVs. The rebels claimed the attack was carried out with ‘honourable cooperation’ from inside Saudi Arabia and threatened more strikes against the Kingdom if it did not ‘stop the aggression and siege on our country’.

The current conflict in Yemen began in 2014, when civil war broke out and Houthi rebels gained control of Sana’a, subsequently ousting the President in January 2015. The conflict intensified in March 2015 when Saudi Arabia and its allies intervened with the goal of restoring Yemen’s President to power. The conflict pits a Saudi-led and backed coalition of forces against Houthi rebels supported by Iran, in a war-by-proxy that has seen more than 90,000 Yemenis killed and caused what some have called the world’s worst humanitarian crisis. Several Western countries have provided logistical support or armaments to the Saudi-led coalition, and a recent UN report suggests that these countries, along with Iran, which supports the Houthis in a similar fashion, may be complicit in war crimes. Iran’s support for the Houthis was cited as one reason the US withdrew from the Joint Comprehensive Plan of Action (JCPOA) with Iran, with US President Donald Trump continuing to staunchly back the Saudi coalition.

Despite the Houthi claim of responsibility, US Secretary of State Mike Pompeo has alleged Iran was directly responsible for the strike, saying shortly afterwards:

Tehran is behind nearly 100 attacks on Saudi Arabia while Rouhani and Zarif pretend to engage in diplomacy. Amid all the calls for de-escalation, Iran has now launched an unprecedented attack on the world’s energy supply. There is no evidence the attacks came from Yemen.

Reuters reported that ‘The State Department declined to provide any evidence to bolster Pompeo’s claim’ while Voice of America (VOA) reported it was not yet known where the UAVs had originated. The US has since provided imagery in support of its claim, and contended that cruise missiles were also used. However, as with the Gulf of Oman maritime sabotage incidents earlier this year, claims of Iranian responsibility and the conclusiveness of the imagery the US presented as evidence has been doubted.

Houthi rebels have previously used UAVs to attack targets in Saudi territory. On 14 May explosives-laden UAVs damaged the east-west pipeline. Amid scepticism about the Houthis’ ability to strike from Yemen, it was speculated that the UAVs may have been launched from inside Iraq. Similar speculation has again emerged about their ability to reach so far into Saudi Arabia. As Cordesman notes:

Khurais is the site closest to the Yemeni border and it is 770 kilometers (480 miles) from the border and more than 805 kilometers (500 miles) from a suitable the [sic] Houthi-controlled launch zones in Yemen. Abqaiq is some 200 kilometers (125 miles) further on.

While Houthi rebels reportedly possess UAVs with a range of up to 1,500 km, Cordesman comments that ‘Iran may not have technically executed the attacks, but it is extremely doubtful that the Houthi could have executed them without Iranian assistance’.

Implications

As The Economist’s Middle East correspondent noted, the ‘question of where and from who [sic] the attack originated is immaterial. It doesn’t change the underlying issue: Saudi Arabia and America both see Tehran as the address for this attack’. The attack is likely to heighten tensions in the region, which could result in retaliatory strikes against Iran, and potentially ‘new Iranian attacks on Saudi and Gulf petroleum facilities’ and other critical infrastructure. It could also lead to a maritime escalation in the Gulf, where an International Maritime Security Construct (IMSC), which Australia has joined, is already in place to protect commercial shipping.

The targeting of the Aramco-owned facilities has revealed certain vulnerabilities. Following terrorist attacks against oil infrastructure in the late 2000s, including the Abqaiq plant, the defences of many oil facilities were enhanced against the threat of vehicle-borne improvised explosive devices (VBIEDs). Although Saudi Arabia has modernised its air defences, the attack has raised questions about the Kingdom’s preparedness and the suitability and capabilities of the systems it has acquired.  

While recent international attention has focused on protecting shipping in the Strait of Hormuz, widely considered to be the world’s most important oil transit chokepoint, the UAV attack has underscored that other chokepoints exist in production and supply chains vital to global energy markets and are similarly vulnerable. One such example is the Kingdom’s export terminals, which store significant portions of its reserves.

As Henry Farrell, author of Weaponized Interdependence, noted, the return on investment is significant: ‘a 20 percent spike in oil prices – for a tiny outlay’, as well as a significant disruption to global oil supply. The attack will likely encourage other state and non-state actors in the region to pursue similar asymmetrical capability development and to focus on building capacity in areas related to UAVs, as well as missiles.

In the meantime, while the IMSC may help protect shipping in the event of a further escalation of tensions in the Gulf, it is less clear what can be done to prevent further targeting of critical infrastructure. Closer to home, the attack has reignited concerns about Australia’s liquid fuel security.

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