Tuesday, January 5, 2016

Saudi Arabia and Iran: a very dangerous situation

Some years ago I wrote about the febrile situation in the Middle East.  I noted:

It's about as certain as it can be that, in so unstable a region, one kind of conflict will inevitably spill over into other kinds of conflict as well. The entire Middle East and Persian Gulf region is a giant tinderbox of religious, cultural, ethnic and political sensitivities right now. One spark, and...

Many of the conflicts I predicted in that post have since come to pass.  I fear another is looming, this time between Saudi Arabia and Iran.  They've been fighting a proxy war in Yemen for the past year or more.  Now that looks to be mutating into direct conflict.  The Telegraph reports:

Saudi Arabia’s drastic decision to behead the Shia cleric Nimr al-Nimr marks a point of no return in the bitter Sunni-Shia conflict engulfing the region. It is a dangerous escalation in the Kingdom's struggle with Iran for regional hegemony.

Iran’s Revolutionary Guard has vowed swift and harsh revenge, promising to bring down the Saudi dynasty in short order to avenge this “medieval act of savagery”.

. . .

Helima Croft, from RBC Capital Markets, said investors have yet to wake up to the full danger. “If we’d had scenes five years ago of the Saudi embassy in flames in Tehran there would have been a big move in the price, but right now there is so much over-supply and people just seem to think this is all noise. They have yet to get their heads around what can go wrong,” she said.

The risk for the Saudis is that the execution of Sheikh Nimr for what is essentially peaceful political protest ignites a long-simmering revolt by an aggrieved Shia minority, who make up 15pc of the population and are sitting on top of the giant Saudi oil fields in the Eastern Province. There were violent protests in the Sheikh’s home-town of Qatif on Monday, with at least one protestor shot dead by police.

Ali al-Ahmed, director of the Institute for Gulf Affairs in Washington, said Qatif is the nerve-centre of the Saudi petroleum industry, the so-called “Grand Central Station” where 12 pipelines come close together to supply the huge oil terminals at Ras Tanura and Dharan.

These pipelines are close to major roads and towns, making them hard to police against “hit and run” attacks.

Most of Saudi Arabia’s 10.3m barrels a day (b/d) of output passes through the Shia heartland, now seething with fury. While global crude stocks are at record levels, there is no spare capacity outside Saudi Arabia. A disruption lasting more than a few days could cause oil prices to spike violently – possibly to $200 or more – triggering a worldwide economic crisis.

Mr al-Ahmed said the mass executions have set in motion a fateful chain of events that nobody can now control. “It will likely trigger a bloody civil war that won’t end until the Saudi monarchy ceases to exist. This cycle of violence will not spare anyone or anything, including the coveted oil installations,” he said.

Bahrain and Sudan have already followed Saudi Arabia’s move to cut off diplomatic relations with Iran, and the United Arab Emirates has recalled its ambassador. The lines of cleavage are painfully clear in a Middle East already convulsed by four wars, and sliding closer to all-out conflagration.

. . .

A serious attack on Saudi Arabia would be a dangerous gambit for Iran, spelling the certain end to its rapprochement with the West and to its hopes for an end to sanctions.

Yet it cannot be ruled out. There are powerful factions within the Iranian Revolutionary Guard that would welcome any chance to sabotage the nuclear deal. Saudi Arabia has just given them the perfect pretext.

There's more at the link.

The Persian Gulf is so vital and strategic a region of the globe that its importance can't be understated.  Much of China's oil comes from Gulf states.  Russia is a major supplier to and diplomatic ally of Iran.  The USA and Europe are dependent on the flow of cheap Saudi oil to keep the rest of OPEC under control (and fuel their economies at the same time).  All of those powers would be drawn into the confrontation if Saudi Arabia and Iran come to blows.

Keep your eye on this situation, friends.  It could go anywhere.



Sam said...

If they haven't already, watch Saudi Arabia buy nukes from Pakistan.

Jonathan H said...

Saudi Arabia paid for most of Pakistan's nuclear program in the 1970's and 1980's - and were extremely ticked that Pakistan WOULDN'T provide them any, even for extra money. Officially, that has not changed ... unofficially, I wouldn't be surprised if SA couldn't find leverage (or corruption) sufficient to make it happen.
But I'm not sure how much help that will be; they (nuclear weapons) are not the be-all and end-all of warfare. Iran could really hurt Saudi Arabia if they shut down the Strait of Hormuz; even lobbing the occasional fly by or harassment of tankers would hit them hard.

Anonymous said...

Mr al-Ahmed said the mass executions have set in motion a fateful chain of events that nobody can now control. “It will likely trigger a bloody civil war that won’t end until the Saudi monarchy ceases to exist.

I'd be very surprised if that were to happen.

richard mcenroe said...

Reasons the Third World keeps finishing third Number...?

Fred said...

For the entire known history of mankind the middle east has been at war with itself. Why don't we just leave and let them go back to killing each other. We got all the oil we need here. We are entangled with EVERY nation on earth and most of them are as sick of it as we are.

LCB said...

Call me cynical, and yes, I know the Shia and Sunni hate each other...but it wouldn't surprise me if the regimes in the two countries got together and decided to do this to cause oil prices to rise. The Saud's need the price of oil to be up in the 70 to 80 dollar range to keep money from draining out of their surplus. Yes, they wanted it to drop to hurt US Oil producers, but it's gone much further down than they expected. And Iran would also benefit from higher oil prices.

Fred, yes we have enough oil. But if China collapses who are we going to buy our toys from??? If Europe collapses, who is going to buy the grain we grow in abundance. Like it or not, the world's economy is wrapped together like a ball of rubber bands.

GRY said...

We need to let political evolution take place and the Sunni-Shia showdown has been brewing for centuries. All civilizations pass through stages of evolution from savagery to civilized behavior. There are no shortcuts and is a necessary stage for all societies.
There is a very good reason why we in the West tend to characterize Islamic based nations as 14th century in the level of their political and social/religious development.

Recall that the Europeans went through the same 'fire' back in the Middle Ages, with the rise of Protestant congregations and the resulting reactions of the Catholic church and their aristocratic puppets. The many religious wars in Europe before the 19th century were a necessary part of the political and social evolution of European civilization.

Something very similar happened in China during the Warring States period of feudalism and also prior to the establishment of the Roman Empire.

IMO, it's not a bad thing that the Middle eastern countries "have it out", they would've done this had not the Western nations like the UK and other European powers intervened and carved the place up into artificial "nations" which did not exist prior to their intervention.

Also although this will cause severe economic disruptions to some parts of the world, in the end it would be a good thing for the West. European and North American economies need to be weaned from cheap oil and the temptation of cheap oil to interfere with local social and political forces.

The fact that the Saudis and OPEC started a price war to try and put North American shale oil/gas out of business shows just how worried those elites in power in the Middle East are of the West eventually outgrowing our need for them.

China and the other East Asian/South Asian economies also know that reliance on M.E. oil is not a good thing at all. It's why they're trying to diversify their energy sources and also quietly investing in alternative energy research.
Too bad many in North America don't support their local energy industry, instead they cheer and demand it's demise, all the while playing into the hands of an ultra-wealthy minority in the Persian Gulf part of the Middle East.

Mike said...

That comment about Saudi being the only place in the world with spare oil production capacity is false. There's quite a bit of mothballed capacity here in the US that could be brought back online if the price rose enough to make it profitable. Also, in response to LCB - Saudi engineered the low oil prices to try to hurt the US oil industry (among others). They are the ones currently overruling protests at OPEC that want to slow production to let oil prices rise. They want the low prices and are sacrificing a lot of money and political capital to keep them there.

Fred said...

LCB and All,
The original design of our .gov was no income tax but, to tax imports to fund the .fed - resulting in 2 things; higher cost for imports and domestic self reliance nationally causing full employment, therefore self reliance individually. Simple yet, brilliant economics, from the framers. And I say as a fellow freedom lover, that you are mistaken. If we cut all ties and threw the Federal Register on the compost heap, it would be mere months before the largest economic boom in the history of mankind was well underway. You discount your neighbors and you make a strategic mistake my friends.