Oil Threw the Arabs under Iran’s Attacks

Nikolai Kozhanov discusses the vulnerabilities of the monarchies in the Persian Gulf region

The killing of Iranian scientist Mohsen Fakhrizadeh, which Iran has blamed on Israel, poses a lot of questions. The main question is how Tehran is going to respond to the assassination of one of the key figures in the country’s nuclear program. Doomsday preachers are predicting apocalyptic rocket attacks on Israel. Yet, in the asymmetrical confrontation between Iran and the United States (the Islamic Republic perceives Israel mainly as a tool in American politics), it is not only Israel which may suffer from Iranian revenge. Israel might target any U.S. ally or partner. The members of the Cooperation Council for the Arab States of the Gulf is in the most vulnerable position right now. It is no coincidence that the United Arab Emirates, despite the positive dynamics of its relations with Israel, immediately condemned the assassination of the Iranian scientist, and distanced itself from both Israel and the U.S. behind it.

The US Is Far and Iran Is Near

The UAE has reasons to be cautious. Since the beginning of summer, Iran has resumed its attacks via its neighbors in the Persian Gulf region on the objects of the economic infrastructure of Saudi Arabia, its closest neighbor. Two major oil installations were hit. In November alone, Iran launched three attacks: on Nov. 11, Yemen-based Houthi rebels damaged the oil refinery infrastructure in Jizan, on Nov. 23, a cruise missile hit an oil facility in Jidda, and on Nov. 25, Iran hit the tanker (possibly with an air mine) transporting fuel in the port of al-Shuqaiq.

Despite a relatively minor loss, these actions were supposed to serve as warning shots, demonstrating the capabilities of the Houthi rebels to hit targets in the depths of the Arab Peninsula with the support of Iran.

All these actions were supposed to remind the world of the strike on the Saudi Arabian Oil Co. facilities at Abqaiq and Khurais. As a result, Al-Riyadh had to cut its oil production by as much as 5.7 barrels per day. The timing was not coincidental – the attacks intensified amid the contacts between Saudi Arabia and Israel and the U.S., and speculation about possible anti-Iran measures coming from the departing Trump administration.

By employing such methods, Tehran is trying to force Saudi Arabia and other members of the Gulf Cooperation Council to stop supporting U.S. and Israeli measures against Iran (which it partially succeeded in doing). Apart from that, Iran is trying to demonstrate to the U.S. that it can pressure its partners. It is notable that Iran has started using its “infrastructural terrorism” tactic relatively recently. Since the end of the Iran-Iraq war and almost up until 2019, Iran had only threatened to disrupt oil exports from the region (mainly by closing the Strait of Hormuz). At that time, Iran was not willing to either follow through with its threats or attack its neighbors (even via proxies). First, Iran exported its oil via the Strait of Hormuz. Besides, there were many actors interested in the sustainable export of hydrocarbons from the Persian Gulf, including the U.S., which has been a major importer and protector of the GCC members since the 1980s. Iran was cautious that its provocations could cause a full scale conflict in the region.

The Echo of the Shale Revolution

The important changes that allowed us to reevaluate the state of play did not take place overnight or even within the region. The era of shell oil that started in the 2000s not only made the U.S. one of the energy exporters but also led to the stable, overabundant supply of this raw material on the international markets.

These factors made Washington reassess its commitments in the Persian Gulf, while oil importers were less vulnerable to political crises in the region.

By 2018, oil consumers stopped panicking amid oil production shocks caused by political risks in the region in the Persian Gulf, the Middle East and beyond. Notably, in 2018-2019, neither the disruptions in production in Libya nor the fact that Iran and Venezuela essentially vanished from the market affected oil prices in the long term. (These events might have prevented a rapid drop in prices at most.) Even the attacks on Saudi infrastructure facilities had no long-term influence on the market, even though it lost more oil than it had since 1973.

It is significant that after the attacks on oil installations of Saudi Aramco, the U.S. not only abstained from retaliating (other than deciding to send extra troops) but also tried to encourage oil producers to seize the opportunity and fill in the gap in the market left by Saudi Arabia. On Sept. 20, 2019, Gen. Joseph F. Dunford Jr., chairman of the Joint Chiefs of Staff, stated that no number of defensive forces in the Middle East and “no single system is going to be able to defend against a threat like that.” He made it clear that Al-Riyadh is going to be the one responsible for protecting its oil infrastructure. After Washington’s moderate response, members of the GCC took it hard when the Iranian major general in the Islamic Revolutionary Guard Corps, Qassem Soleimani, commander of the Quds Force, was killed by a U.S. airstrike in Baghdad. They clearly interpreted this event as revenge by the U.S. for the death of a U.S. civilian contractor in a rocket attack on the K-1 air base in Kirkuk launched by Iran’s proxies. The U.S. demonstrated that this was a “red line” that Iran should not have crossed. This “red line” represents the life of an American citizen, but not the Saudis or any others in the region.

In other words, the U.S.’ aggressive stance against Iran does not necessarily mean that it is ready to protect the GCC countries from Tehran’s ambitions.

The approach of the U.S. untied Iran’s hands in its interactions with Arab monarchies, allowing it to manipulate and threaten them. The abundance of oil, exacerbated by decreasing demand due to the COVID-19 pandemic, led to plunging profits for the GCC countries. This dynamic is forcing them to fight for their market share amid decreasing worldwide interest in maintaining the security of oil exports from the region. In this situation, Arab countries react to threats to their oil infrastructure quite acutely because those threats might affect their main source of income. So far, Tehran has been in a more beneficial position. It had been building its infrastructure up until 2020, which allowed it to export oil bypassing the Strait of Hormuz. It was nearly completely cut off from the oil market because of the sanctions. Iran has also demonstrated its ability to threaten the GCC infrastructure via proxies in the Red Sea, among other regions.

As a result, Tehran is fully capable of pressuring Arab monarchies into containing or at least not supporting U.S. actions against Iran. At the same time, Iran has to act within certain boundaries, otherwise, the U.S. is going to interfere.