Abqaiq attack raises more awkward questions about regional alliances and balance of power

The missile strike on Saudi Arabia’s most important oil facility has the impact to ignite a new wave of regional instability with unforetold consequences. It also pitches the Saudi leadership into a new crisis that could impact on its domestic standing. With everything from potentially hot conflict with Iran to the fate of the Saudi Aramco IPO in question, much depends on how much trust Riyadh feels it can place in the United States to protect its interests and how far the leadership in Tehran wants to push this dangerous new phase in the regional cold war

The massive attack launched on the critical Saudi Aramco oil processing facilities at Khurais and Abqaiq early on 14 September was not just another drone strike by the Houthis – as the Yemeni movement claimed – but in all likelihood was launched from Iran, reflecting the extent that the Islamic Republic has emerged as a significant military power. As well as placing unexpected new pressures on the global oil market, it pitched Crown Prince Mohammed Bin Salman (MBS) and the Saudi leadership into yet another crisis – of how to respond against an enemy that has shown it has the commitment and wherewithal to do great damage – and US President Donald Trump, who newly shorn of his hawkish national security advisor (NSA) John Bolton must articulate a credible response.

Twelve hours after the attacks, major fires were still burning at Abqaiq, which was also targeted by less sophisticated militants on several occasions in February-March 2006 (GSN 779/3778/5). The comparison with the jihadist attacks a decade ago is striking. Then, bombings had little real impact but unsettled markets and allies. This time, the world’s largest oil processing facility was hit with great precision, potentially making a real impact on global markets.

The initial impact on oil markets was limited – there was a spike in prices on the Monday following the incident, when Brent hit a four-month high of almost $72 a barrel before settling back down to around $65/bbl – but the longer-term geopolitical consequences are much harder to predict and likely to be much more serious in a number of ways.

In Yemen, Houthi rebels quickly claimed responsibility; spokesman Major General Yahya Sari claimed Houthi forces had sent “tens of drones” across the border. Initial statements from the Saudi Ministry of Interior (MoI) also referred to drones. (The MoI is in charge of protecting sites like Abqaiq, rather than the Royal Saudi Air Defence Forces or Saudi Arabia National Guard.) However, as more evidence emerged it quickly became apparent that cruise missiles had been used.

Saudi Arabia, aware of the risks of open conflict with Iran, has been careful in its official statements. Spokesman for the Saudi-led coalition fighting in Yemen Colonel Turki Al-Malki told a 16 September press conference that “the terrorist attack was not launched from Yemeni territory as the Houthi militias claimed”. The Saudi Ministry of Foreign Affairs (MFA) issued a statement on the same day saying the attack used Iranian weapons; it called for the United Nations to join its investigation. The MFA said it would then take “appropriate measures based on the results of the investigation”, adding that it had the resolve to “forcefully respond to these aggressions”.

A key question for Riyadh – which remained unanswered as GSN was going to press – is what Trump will do. There have been plenty of voices in Washington calling for retaliatory strikes against Iran, but one of the few consistent elements of Trump’s time in office has been his reticence to get involved in another overseas war, particularly in the Middle East. Bolton’s dismissal – ironically shortly before an Abqaiq attack that would have confirmed his long-held views on the threat of Iranian hegemony in the region – was driven in part by Trump’s reluctance to heed his NSA’s more hawkish advice.

With one eye on next year’s re-election campaign and the other on how far he can go, Trump is taking his time to calibrate a position. An official Saudi Press Agency (SPA) statement said that in a 14 September phone call Trump assured MBS that the US was ready to co-operate with the kingdom “to maintain its security and stability”. Trump tweeted on 15 September that the US was “locked and loaded”, but there was no decisive action until three days later he ordered “substantially” increased sanctions against Iran.

Meanwhile, US officials have been briefing media that the White House sees a role for the UN Security Council (UNSC). It is widely thought that Russia and China will veto any strong measures against Tehran proposed to the UNSC. The US may be able to present at ;east a convincing forensic dossier to be debated.

Hawkish secretary of state Mike Pompeo was quicker to publicly point the finger at Iran, tweeting on the day of the attack: “Iran has now launched an unprecedented attack on the world’s energy supply. There is no evidence the attacks came from Yemen.” Pompeo then travelled to Saudi Arabia and the UAE for discussions. But if the US is not prepared to actively support military action against Iran, there is little chance that Saudi Arabia will do so either. Covert or proxy attacks are more likely, but Riyadh will feel a need to be seen to do something if only to dissuade Iran from launching any further operations.

In line with the policy of ratcheting up pressure through the actions of Islamic Revolutionary Guard Corps (IRGC) and its affiliates, but publicly denying responsibility, the Iranian MFA spokesman Abbas Mousavi has dismissed the allegations of Iranian responsibility as “incomprehensible”. Although the evidence of direct Iranian involvement is mounting, there may still be just enough room for Tehran to maintain a position of plausible deniability, as it was able to with the attacks on tankers in the Gulf of Oman earlier in the summer (GSN 1,083/1).

Despite the rhetoric from Trump’s White House over the past few years, the strategy of ‘maximum pressure’ has not caused Iran to become quiescent. Trump has made some moves to set up talks with President Hassan Rouhani – a piece of theatre that would seem to appeal to the US president’s political pathology -- but the opportunity to reset relations with Tehran appears slim to non-existent. From Rahbar (Supreme Leader) Grand Ayatollah Sayyid Ali Khamanei down through the velayat-e faqih system, senior figures in Tehran say they will not countenance any talks with Washington while the sanctions that are strangling Iran’s economy remain in place.

Saudi quandry

The attack raises uncomfortable questions for Saudi Arabia’s expensively assembled military forces, who were unable to prevent the Abqaiq strike. Of deep concern is the idea that Iran has developed a successful attack method and probably has the ingenuity to execute similar operations in the future, modified to take account of the lessons the Saudi forces will have learnt from this episode. That has implications for Saudi internal security and the credibility of MBS, a key architect of the anti-Iranian strategy. In an interview with Al Arabiya TV in May 2017, the crown prince said he wanted to take Riyadh’s dispute with Tehran onto Iranian soil: “We will not wait until the battle is in Saudi Arabia but we will work so the battle is there in Iran.”

There are clear implications for other actors in the region. The UAE is acutely aware that even a small attack on, say, Dubai International Airport would massively disrupt global air transport and cripple the local economy. Iran still has a range of cheap but devastating systems which can challenge traditional military thinking and preparedness, for example the capacity to launch ground attack cruise missiles from submerged submarines – a potent capacity which could be employed well away from Iran itself.

The attacks also have clear impacts for the kingdom’s Vision 2030 agenda. After promising signs that the Saudi Arabian Oil Company (Aramco) initial public offering (IPO) was back high on the agenda (GSN 1,087/10), the Abqaiq attack has led many foreign investors to assume another long delay will ensue. The authorities may decide to further promote a staged local listing on the Saudi Stock Exchange (Tadawul), to lead out a protracted IPO process. That would expose local institutional investors – and potentially an exuberant domestic retail investors – to a potentially bumpy and expensive ride.

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