Iranian-supported Houthi rebels targeted Saudi Arabia’s oil infrastructure on Saturday morning with drone attacks against a major oil-processing facility, and an oil field owned by ARAMCO. These attacks have caused substantial damage and appear set to have a major effect on oil markets. The Saudi government has announced it will be shutting down roughly half of its oil production for the moment. This translates to around 5 million barrels of crude oil a day, which is roughly 5% of daily global oil production. The attacks are an unprecedented effort against global energy supplies, and have revealed the vulnerability of Saudi Arabia, and other Gulf nations oil infrastructure.
Iran is undoubtedly behind this attack, using its Houthi rebel proxy as a viable front. The Saudis have endured dozens of drone attacks initiated by the Houthis in recent years. None have been as economically damaging as this one. For Tehran, this attack comes days after the European Union’s failure to ease US economic sanctions currently in place against Iran. Many reports have surfaced alluding to the possibility of President Trump easing sanctions. If true, this likely had something to do with the resignation of John Bolton, who is a fierce hawk on Iran.
This morning’s attacks achieve two goals: It degrades Saudi oil production and negatively affects the oil market. There will be a slight period of economic distress, however it will not linger. Geopolitically, decisions have to be made soon. This is a direct attack on Saudi territory, and its economic capabilities by Iran. Riyadh can see beyond the Houthi front. The question for Riyadh is: How to respond?
The United States will have a say in the matter as well. As the ‘Maxium Pressure’ campaign against Iran continues to bring success, Tehran is becoming increasingly desperate. A show of military force may be needed to deter Iran from going any farther in its efforts. Or, the Saudis could decide to strike Iranian oil producing facilities on their own in retaliation. With luck, the coming hours will reveal just what direction the Saudis, and United States are leaning in, with regards to a possible response.