Why oil makes Gulf countries vulnerable to Iran
The US shale oil boom has removed protecting Gulf oil from Washington’s list of top priorities.
The brazen attack that led to the death of Iranian scientist Mohsen Fakhrizadeh has undoubtedly angered Tehran. The Iranian authorities blamed Israel for the killing and vowed to swiftly retaliate. There have been calls within the country to attack the Israeli port of Haifa, but that is unlikely.
In its asymmetric confrontation with Israel and its foremost ally, the United States, Iran is well aware that hitting Israeli or American targets would result in an all-out war. But there are other US allies in the region who have become easier targets in recent years.
Due to certain changes in the oil market and US foreign policy priorities, Arab countries in the Gulf find themselves in a more vulnerable position today. It is for this reason that the United Arab Emirates – which recently made its alignment with Israel official – hastened to condemn the murder of the Iranian nuclear scientist.
Indeed, the UAE has a reason to fear. At the beginning of summer, the Houthis, Iran’s proxies in Yemen, resumed their attacks on infrastructure in Saudi Arabia, Abu Dhabi’s close ally. In June and July, they used missiles and drones to attack military installations in Riyadh and various targets in the southern provinces of Jizan, Asir and Najran.
In November, at least three attacks were carried out. On November 11, the Houthis caused minor damage to oil facilities in the Saudi Read Sea port of Jizan. On November 23, they launched a missile attack on an oil distribution facility in Jeddah. Two days later, a tanker delivering fuel to the port of Shuqaiq was hit by a mine.
These attacks on Red Sea ports were most likely intended to demonstrate the Houthis’ ability to hit targets across the Arabian Peninsula, far from the territories they control. They were a warning and a reminder of the September 2019 strikes on Aramco oil infrastructure in Abqaiq and Khurais in Eastern Saudi Arabia, which temporarily reduced Saudi oil output by about 5.7 million barrels per day (bpd).
The timing was also not accidental – the Houthi attacks intensified amid heightened diplomatic activity between Riyadh, Tel Aviv and Washington. They also coincided with the speculations of a possible “farewell” moves against Iran by the outgoing Trump administration.
It is important to note that Iran has started using these “infrastructure terror” tactics since relatively recently. Up until a few years ago, the Iranian go-to retaliatory threat was closing the Strait of Hormuz to disrupt oil exports from the Gulf – something Tehran was actually neither willing nor able to do.
Given that more than 20 percent of global oil exports used to pass through the strait – including Iran’s own – powerful buyers, like the US, had taken steps to secure the Gulf and prevent any major disruption of oil vessel transit. Any hostile action by Iran in the Strait of Hormuz would have risked triggering a war, which the Iranians authorities would like to avoid.
The echo of the shale revolution
But in the past couple of years, the situation changed. First, with the events of the Arab Spring and the Houthi takeover of Sanaa in 2014, Iran gained an important foothold in Yemen, which gave it even more leverage over Gulf states. Second, by the second half of the 2010s, the US shale oil boom had not only turned the US into one of the largest hydrocarbon exporters but also led to a fairly stable oil oversupply at the global market.
As a result, political crises in the Middle East started to worry oil consumers less and less, while Washington began to reconsider its obligations to its Gulf partners. It is important to note that in 2018-2019, neither the instability of oil production in Libya nor the practical disappearance of Iran and Venezuela from the market had a lasting impact on prices. At best, these events only prevented a further decline in prices.
Even the September 2019 attacks on Saudi oil facilities had only a short-term effect, although the size of oil production loss in the market was unprecedented.
In their aftermath, the US refrained from any major response to Iran’s aggressive activity. Then US Joint Chiefs of Staff chairman, General Joseph Dunford, made it clear that even an increase in the number of US troops in the Middle East and the provision of new weapons to Saudi Arabia would not fully ensure the security of its oil infrastructure.
Thus the Gulf countries not only felt they were left almost alone to fend for themselves and protect their oil production, but they also had to deal with attempts by US oil producers to take advantage of the situation and increase US market share at their expense.
Three months later, when an American contractor was killed in an attack on an Iraqi base staged by Iranian proxies, the US did not stay put. In early January 2020, a US drone strike killed Qassem Suleimani, a top commander of Iran’s Islamic Revolutionary Guard Corps, near Baghdad.
This demonstrated to the Gulf that the US has “red lines” which it will not allow the Iranians to cross, but they concern the lives of American troops, not the oil infrastructure of any of its allies. In other words, an aggressive US approach to Iran does not necessarily mean US readiness to protect the Gulf countries from Tehran’s retaliation.
Washington’s unwillingness to expend significant military resources to protect Gulf oil has granted Tehran a certain freedom of action. This development comes at a particularly difficult time for regional oil producers.
The current oil glut linked to the 2010s shale boom and compounded by the coronavirus pandemic has significantly reduced the revenues of Gulf monarchies, forcing them to fight for market share. In this context, any disruption of oil production is particularly painful for Gulf states as it threatens an already dwindling revenue stream.
Tehran, on the other hand, is in a better position. In June, the Iranian government launched the construction of the 1,100km (620-mile) Goureh-Jask pipeline, which will allow it to bypass the Strait of Hormuz. The US sanctions also cut it off from the formal oil market which further made it immune to disruptions of oil transit in the Gulf.
Meanwhile, encouraged by Tehran, the Houthis have demonstrated their capacity to strike oil facilities and transit routes in the Red Sea. This means that even if Riyadh invests in developing oil infrastructure that will not depend on the Strait of Hormuz, this would still not make its oil exports secure.
This in effect means that the US shale boom has inadvertently given Iran the upper hand in the Gulf and undermined US and Israeli efforts to create an Arab axis against it. Today, Tehran is quite capable of exerting pressure on Arab monarchies to restrain or, at least, not to support the Americans in anti-Iranian activity. It seems the Trump administration’s maximum pressure strategy against Iran has to a certain extent failed.
The views expressed in this article are the author’s own and do not necessarily reflect Al Jazeera’s editorial stance.