Tensions Between Saudia Arabia And Iran Are At An All-Time High

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Saudi Arabia and Iran have struggled for decades over hegemony in the region. Their volatile situation had just become even more dangerous following Saudi Arabia’s decision to behead the Shia cleric Nimr al-Nimr.

Roughly 20 percent of the global oil supply runs through the Strait of Hormuz. The promise by the Iranian National Guard to avenge this execution has seen Brent crude jump to a 3-week high to $38.91 as traders are trying to price in the additional political risk. Many analysts say most investors don’t yet see the full risk. “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,” according to Helima Croft, from RBC Capital Markets.

Ali al-Ahmed, director of the Institute for Gulf Affairs in Washington, went even further in his assessment of the risk when he said that this beheading would likely trigger a civil war that won’t end until the Saudi monarchy ceases to exist. Nimr al-Nimr’s hometown of Qatif is part of a greater area in the Eastern Province of Saudi Arabia where a Shia minority lives, making up 15 percent of the population, and sits on top of giant oil fields. Qatif itself is also a nerve-center of the Saudi oil industry with 12 pipelines coming together to supply the huge oil terminals at Dharan and Ras Taruna.

In fact, most of Saudi Arabia oil output passes through Shia land making it very vulnerable to attack in a region that is now boiling with anger. Any disruption of this output could cause oil prices to spike violently according to some analysts, possibly triggering a global crisis. There have been instances of tension between Iran and Saudi Arabia, including periods where diplomatic ties were severed from 1989 to 1992. It was, however, a totally different era where the US was at the height of its power and the Middle East wasn’t already reeling by four wars. On top of that Saudi Arabia is more vulnerable than it has been for decades as low oil prices have ushered in a period of austerity that has the cradle-to-grave welfare net crumbling. This is what has kept dissent in check for decades and could very well fan the flames ignited by the recent execution.

Both the US and the EU repeatedly warned they considered an execution a big mistake and the Shia world warned it would be seen as an act of war. However, the execution happened regardless and was seen as the maneuverings of Mohammad bin Salman, the deputy crown prince who controls most power and is beholden to nobody in the Kingdom.

The Saudis have a great security blanket, with a force of 30,000 guarding the oil infrastructure. But there is a high risk of infiltration by terrorist groups of various stripes. One suicide bomber caught in a pipeline attack in 2006 turned out to be a close relative of the head of the Wahhabi religious police. It is estimated that 6,000 Saudis have been recruited by al-Qaeda. At least 3,000 Saudis have fought with ISIS, which is waging its own war on the Saudi royal dynasty. On top of that, there is the local Shia population now more enraged who has already suffered decades of discrimination.

Meanwhile, Iran tends to work through proxies, and intelligence experts are probably pursuing a strategy of attrition. They are already bleeding the Saudis dry in Yemen where the stalemate is costing the Saudis $200 million per day and is considered by some to become the Kingdom’s own ‘Vietnam War.’ Iran also has the technical prowess to severely damage Saudi Arabia’s infrastructure. James Woolsey, former CIA head, said they have Electromagnetic Pulse (EMP) weaponry that can knock out the electricity grid. General Keith Alexander, former NSA chief says Iran has one of the top cyber-warfare teams in the world. Still, a serious attack on Saudi Arabia would be a dangerous move by Iran as it is trying to make closer ties with the West to end all sanctions.

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