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Iran Just Knocked Out Half Of Saudi Arabia’s Oil Production

The attack by an Iranian proxy will likely increase oil prices and could ignite a regional war.

Drone attacks have temporarily destroyed half of Saudi Arabia’s oil capacity. Houthi rebels in Yemen have claimed responsibility for the two attacks which left Saudi oil facilities in flames and knocked out production of 5.7 million barrels of oil and natural gas per day. The loss of production is equivalent to five percent of the world’s oil capacity.

Per CNN, Houthis said that they attacked two facilities of Aramco, the Saudi state-owned oil company, at  Abqaiq and Khurais. The attacks reportedly involved 10 drones and left the oil facilities in flames. The Saudis said that the fires were under control. It is not known how long oil production will be affected by the attacks.

Oil prices will probably rise when markets open next week. “Abqaiq is perhaps the most critical facility in the world for oil supply. Oil prices will jump on this attack,” Jason Bordoff, founding director of the Center on Global Energy Policy at Columbia University, said in a statement.

“Sanctioned Iran supplies are another source of potential additional oil,” Bordoff said. “But [US President Donald] Trump has already shown he is willing to pursue a maximum pressure campaign even when oil prices spike. If anything, the risk of tit-for-tat regional escalation that pushes oil prices even higher has gone up significantly.”

US Secretary of State Mike Pompeo blamed the attacks on Iran in a tweet, saying, “Amid all the calls for de-escalation, Iran has now launched an unprecedented attack on the world’s energy supply.  There is no evidence the attacks came from Yemen.”

While Pompeo did not cite evidence that Iran was behind the attacks, Iran has long used the Houthis as a proxy in their cold war with the Saudis. The cold war turned hot in 2015 when Saudi Arabia intervened on behalf of the government in the Yemeni civil war. The Houthi rebels, who are predominantly Shia Muslims, are backed by Iran and were in danger of taking over the country which borders Saudi Arabia at the southern tip of the Arabian Peninsula. The Saudis, who are Sunni Muslims, led a multinational coalition to aid the Yemeni government. At the time, the Saudis predicted that the fighting would only last a few months, but the war is still ongoing four years later.

The new unrest in the Middle East could affect the US in a couple of ways. First, the blow to global oil supplies is likely to drive up oil prices. Uncertainty about the future of Middle East oil production could also cause prices to go higher. With signs that the US and global economies are already slowing, higher energy costs could further slow growth.

If the attacks can be firmly linked to Iran, Saudi Arabia and the US may reciprocate with reprisals. In June, President Trump approved and then canceled an attack on Iran after the Iranians attacked several ships in the Persian Gulf.

There seem to be few options for a response to the attack. Iran seems determined to cause a confrontation. Their past behavior indicates that if the Saudis and the US do not take action then the Iranians will ratchet up their aggressive behavior.

After President Trump’s abortive attack and recent revelations that he may be considering extending a $15 billion credit line to Iran if the nation comes back into compliance with President Obama’s nuclear deal, which President Trump canceled in 2018, the Iranians almost certainly view Trump as a weak and indecisive leader and are seeking to find out how far they can push him. Since the rise of the Ayatollah Khomeini in 1979, Iran has had little love for Americans and Trump’s rejection of the nuclear deal was like a slap in the face.

The attack on Saudi oil production is one of those stories that is easy to overlook amid concerns about whether Beto O’Rourke’s threat to confiscate AR-15s and the culture wars about gender and abortion, but it may ultimately be of much greater importance than most topics being discussed. The event could impact the US and the world in much the same way as Saddam Hussein’s 1990 invasion of a small Middle Eastern country that most Americans had never heard of.

President Trump does not want war with Iran. The president is essentially an isolationist who wants to bring American soldiers home rather than dispatching them to a new front. War with Iran, if it did not reach a rapid and successful conclusion, would also complicate President Trump’s reelection campaign. The problem for Trump is that the Iranians sense that he does not want war and realize that this gives them an opportunity to run amok.

Taking military action against Iran runs the risk of igniting the Middle East in a regional war that could end up as another Iraq or Afghanistan. Not taking action is also risky, however. If Iran is allowed to act with impunity, the rogue nation will only be encouraged to continue its aggression.

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