PowerSwitch

Saudi Arabia’s escalating intervention in Yemen is a high-stakes gamble that risks back-firing in a series of complex ways, ultimately endangering Saudi oil infrastructure and the security of global energy supply.


Military analysts say there is little chance that air strikes by a Saudi-led coalition of Sunni countries will subjugate the Iranian-backed Houthi forces in Yemen. It may require a full-blown invasion by land forces to secure control. Large concentrations of Saudi armour and artillery are already massing near the border, though this may simply be a negotiating ploy.


The longer the conflict goes on, the greater the risks that it will stir up internal hatred in a country that has traditionally been relatively free of sectarian violence. Adam Baron, from the European Council on Foreign Relations, said the inflammatory comments about the Sunni-Shia struggle by politicians across the region are becoming “self-fulfilling prophecies”.


Al-Qaeda in the Arabian Peninsular (AQAP) – thought to be the most lethal of the jihadi franchises, and a redoubt for Saudi jihadis – already controls a swathe of central Yemen and is the chief beneficiary of the power vacuum.


AQAP can plan terrorist strikes against Saudi targets from a deepening strategic hinterland with increasing impunity. All US military advisers have been withdrawn from Yemen, and much of the country’s counter-terror apparatus is disintegrating. It is becoming harder to harry al-Qaeda cells or carry out drone strikes with precision.


The great unknown is whether a protracted Saudi war against Shia forces in Yemen – and possibly a “Vietnam-style” quagmire – might tug at the delicate political fabric within Saudi Arabia itself. The kingdom’s giant Ghawar oil field lies in the Eastern Province, home to an aggrieved Shia minority.

“If the Saudis continue this war – and if they keep killing civilians – this is going to create internal instability in Saudi Arabia itself,” said Ali al-Ahmed, from the Institute for Gulf Affairs in Washington.

Pictures of bombs exploding in the Yemen were the big market movers this week in a sign that turmoil in the Middle East has emerged as the main risk to the global financial system this year.


The world has spent the last six months basking in the glow of lower oil prices, which have effectively delivered a $1.3 trillion tax cut to developed economies in Europe and North America. However, the growing signs that a full-blown sectarian war between Sunni and Shia Muslim factions has broken out could easily shatter perceptions that the world has been freed from the yoke of $100 oil.


Saudi Arabia and a clutch of Gulf sheikdoms which control a fifth of the world’s oil supplies are now effectively under siege on the Arabian Peninsula.


In Yemen, thousands of people have been killed in Saudi-led airstrikes and potentially hundreds of thousands more displaced. These attacks have failed. Although, the Houti rebels who are supported by Shia-Muslim Iran have been pushed back with many of their weapons destroyed they remain intact in the country’s impenetrable mountains and ready to strike again once resupplied by Tehran.


Yemen, which has little oil of its own but controls a strategic passage way for oil tankers queuing up to enter the Strait of Hormuz through which around 17m barrels per day of crude is shipped, is effectively in a state of anarchy. The government has collapsed and Saudi Arabia and its Sunni allies appear to have no viable plan to restore the deposed president Abdu Rabbu Mansour Hadi.


The conflict has led to the resurgence of Al Qaeda on the Arabian Peninsula (AQAP), which has strengthened its position in Yemen’s interior amid the chaos caused by Saudi coalition strikes against the Houthis. Now the only thing separating AQAP from infiltrating the kingdom is the historically impenetrable barrier of the Rub al-Kali desert, also known as the Empty Quarter. In the summer, this vast expanse of sand where dunes tower over 100 feet high cannot be normally crossed but AQAP fighters are already thought to be gaining footholds there.

The danger for Saudi Arabia and potentially world markets is that they cross the sands and launch attacks in the kingdom, which is the world’s largest exporter of crude. Earlier this week Saudi’s interior ministry warned of the possibility that oil installations and shopping malls may be attacked by terrorists, while the last few weeks has seen a spate of shootings around the capital Riyadh.

Were terrorists to succeed in a major assault on Saudi Arabia’s well-protected oil infrastructure the price of a barrel of crude would skyrocket back to $100 in a heartbeat. Despite America becoming increasingly confident in its own shale oil industry it cannot be considered a global swing producer as it does not posses any spare capacity to immediately adjust production. Only Saudi Arabia has the reserves to be able to increase output to as much as 12.5m barrels per day if required. Even with an apparent 1.5m to 2m barrels of excess supply that has been the real reason behind lower oil prices the world cannot compensate for a prolonged outage in supplies of crude from the kingdom.