When the House of Saud, the royal family ruling Saudi Arabia, appointed Mohammad Bin Salman as the Crown Prince, the heir apparent promised to revolutionise the Kingdom of Saudi Arabia (KSA) through an ambitious and sustained reform campaign. While the ambitious reform agenda talked in lengths about bettering life of Saudi citizens, specially through curtailing the oppression of women, it also outlined one of the most ambitious economic reforms the oil rich country had undergone since its establishment in 1932.
At the heart of this ambitious reforms was a limited privatisation of various state-held companies to encourage foreign investment in the KSA. At the heart of the Crown Prince’s agenda to drive in investment from abroad was to open stakes in the Saudi Aramco company, which for years has earned fortunes for KSA.
Crown Prince Mohammed Bin Salman or MbS, as he is famously known, has valiantly pushed for Aramco’s IPO with leading MNCs and even foreign Governments on world stage. By the beginning of the new year (2019), the Kingdom had succeeded in raking up interests for the oil company across the globe by commissioning IPO valuation process. The company eventually was termed ‘the most valuable company’ in the globe and Crown Prince MbS himself announced that Aramco’s IPO was valued at a staggering $2 Trillion.
Even as the Kingdom was dotting the I’s and crossing the T’s in preparation for the announcement of the world’s largest IPO offering, the plans were brought to a screeching halt when major fire engulfed Aramco’s oil refinery facilities in Abqaiq and Khurais on September 14, 2019. Saudi’s security establishment, within hours of the massive fires that lit up the night skies, established that the fires were a result of a sophisticated and precisely targeted attack against the oil facilities with the means of cruise missiles and unmanned aerial systems (UAS).
The ghastly attack on two of Saudi’s biggest oil refineries meant that the Kingdom’s daily oil output capacity was limited to a great extent. Aramco eventually revealed that the attacks had forced it to halt at least 50% of its daily oil output capacity. Disruption in the production capacity of Aramco, the world’s largest oil producer, meant that at least 5% of the global production capacity was wiped out within hours.
The Kingdom eventually announced that there was disruption in the production of at least 5 million barrels of oil per day. This massive and unprecedented disruption in the global production capacity rattled the world financial market to a great extent. Brent crude oil prices surged by over 20% within hours of the attack, marking one of the biggest surges the oil market had witnessed in at least two decades.
While emergency teams worked around the clock to contain the ragging fires in the refineries and to save the oil and gas stored across the attacked facilities, Aramco and top functionaries of the KSA were busy at containing the immediate fallout of the attacks. The massive state-of-the-art Abqaiq facility, situated in Eastern Saudi province, is considered to be the nerve centre of Aramco’s production activity and with an estimated capacity to refine over 7 million barrel of crude oil per day, it is the world’s largest oil processing facility. The Khurais facility, with an estimated capacity to stabilise and store 1.5 million barrels, is said to form the core of Aramco’s supply line. The attacks and eventual disruption meant that Aramco’s IPO prospectus were now at dire danger.
Further, the attacks on two crucial and strategic facilities in the region marked a new high in the already simmering tensions that have engulfed the Middle East over the past months. As Saudi’s security establishment and the global community took stock of the situation, Yemenis Houthi rebels took full responsibility for the attacks. Thus marking a new high in the Yemen-Saudi conflict and also in the overall geopolitical tensions of the Middle East.
Tensions in the Middle East have been at a historic high since US’ pullout of the Iran nuclear deal and the following economic sanctions on Iran, as part of President Trump’s maximum pressure campaign. While Trump through this aims to bring Iran eventually back to the negotiating table, with the regime on its knees, Iran has treaded a differently entire path by only ramming up its support for non-state proxy actors in the region.
The region has been on a hair trigger since May, when first of the attacks targeting oil installations was reported from Saudi Arabia, disturbing the short-lived peace in the Middle East. While in May Houthis claimed to have struck a major oil pipeline in Southern Saudi Arabia, a far more deadlier series of attack targeting multiple oil tankers in the Gulf of Oman unfolded in May and June. These attacks incapacitated at least six oil tankers, all of them carrying oil out of the Middle East.
While no non-state or state actor claimed responsibility for the attacks, the US, KSA and UAE all directly blamed Iran for the attacks. The following incident of downing of a US Navy surveillance drone by Iran had pushed the two countries to the brink of a war. US President Donald Trump had then claimed that he had aborted an aerial and naval-led military operation midway, thus saving the region from being engulfed in a full-blown conflict.
The recent attacks targeting strategic oil installation have however threatened to ti-off-the already fragile scale of balance being maintained in the region. While the Houthis did claim responsibility for the attacks, the KSA and USA, two of the most powerful and decisive players in the region, have held Iran responsible for the attacks.
The use of sophisticated cruise missiles, one of the first such incident, point to the role of a state actor in the attacks. While Saudi did claim to have recovered Iranian-origin components on missiles and drones, the Kingdom has cautiously come short of directly blaming Iran for the attacks. Even as Houthis deny that cruise missiles were used, the US administration has been vocal of levelling the blame directly against Iran.
While US President Trump has stated that the attack was in all likelihood perpetrated by Iran, Secretary of State Mike Pompeo has directly accused Iran for the attacks and termed it an unprecedented attack targeting the world’s energy supply.
While regional powers have come short of mounting any retaliatory strikes, the attacks and immediate fallout have only given solid ground for increased mobilisation of US troops to the region. US has decided to deploy an additional thousand troops and multiple batteries of air defence systems to the KSA. The attack on the Abqaiq facility, which is almost 800 kilometres away from Yemeni territory, has set off alarm bells in region, prompting regional countries such as Kuwait, Bahrain and the UAE to put their armed forces on high alert. While mediation efforts are underway to deescalate the simmering tensions, the global strategic circle is adopting a wait and watch policy to determine where the region’s conflict will head from here on.
For the KSA and Crown Prince MbS though, the stakes following the attacks have increased significantly. For the Kingdom, it marks a new low in its fight against terrorism and non-state actors. The Abqaiq facility is said to be one of the most guarded oil facilities in the world, with sources pointing to deployment of several independent air defence batteries surrounding the township. An attack in spite of these defensive measures raises the quintessential question of Saudi’s capabilities in defending its strategic interests in the region. These successful attacks, which have left several reinforced oil storage tanks completely crippled and charred beyond repair, is bound to embolden Houthis in their operations targeting Saudi installations. Satellite imagery have indicated to existence of at least 19 clean-bore holes in storage tanks, thus confirming the use of cruise missiles in the attacks. This will mark the beginning of a new episode in KSA’s fight with the Houthi rebels.
For Crown Prince MbS these attacks, which have struck at the heart of the Kingdom’s oil production capacity, have drastically reduced the wriggle space in his military campaign against the Houthis. Since the beginning of KSA’s military operations targeting Houthis-rebel faction in Yemen since 2015, which coincided with MbS’ appointment as the Kingdom’s Defence Minister, the Houthis have repeatedly struck Saudi military and civilian infrastructure with munitions and ballistic missiles. The Saudi-led military campaign – Operation Decisive Storm – has been riddled with limited success and costly collateral damages for the KSA.
While questions have been raised about the need and success of this operation within the Kingdom, Crown Prince MbS has maintained steadfast support to the operation. Even as the global community comes down heavily on the KSA, for what’s been termed as an unprecedented humanitarian crisis in Yemen because of Saudi’s unending war in the country, MbS remains non-committal to ending the armed conflict.
His campaign has already suffered a costly setback with the United Arab Emirates (UAE), co-partner in the Yemen fiasco, in July, 2019 announcing a rapid pullout of troops and military equipment from the Saudi-led coalition. This has meant that Saudi Arabia now remains to be the sole major financier and supplier of weaponry systems to the already waning campaign. How long can Saudi sustain the operations, even as attacks on homeland rises and dissent in the Kingdom increases is a question that remains unanswered. Will the attacks on Aramco’s facilities and its influence on the upcoming Saudi Aramco’s IPO and a failing military campaign eventually influence Crown Prince MbS’ rise to the throne is something that the Kingdom needs to ponder upon seriously!
