In the battle to control the oil markets, Saudi comes out on top
We may not have noticed that we are actually in the heart of an international battle whose political, security and military implications cannot be predicted.
The Arab, American and Iranian military forces have been put on maximum alert in the Gulf region. War against Iran’s oil exports has already started.
It seems that the first round in the series of the ferocious battles between Iran and Saudi Arabia, the two giant oil-exporting countries, was settled in favor of the latter.
The Kingdom continued to produce oil regardless of the Iranian threats warning the Kingdom against filling the shortage in oil supplies that might result from the absence of Iran in the market. Iran, however, did not dare to close down the Strait of Hormuz nor did it attack the GCC oil installations, as it had threatened.
About a week ago, the Western embargo on Iran’s oil began. The oil prices did not rise to $200 a barrel, as the Iranians had been speculating. The Iranian leadership was counting on the price rise to force the world to give up the idea of banning its oil exports as a weapon against it. The opposite actually happened. Before the ban was imposed on Iran’s oil exports, prices dropped by about $10 to reach $90 a barrel. Although it increased later, it never reached the levels Iran was hoping for.
It is not a secret that the oil prices would not have stabilized had it not been for the determination of the big producers to fill the empty Iranian barrels. Despite the repeated threats of the Iranian officials to Saudi Arabia — the major oil producer — and to the entire world about creating an oil chaos, a surplus in international oil supplies was made.
The oil market remained stable, and the production was not interrupted in any of the major oil fields. Iraq did not stop exporting its oil from Basra seaport and instead resumed it exports on Monday with a shipment of 1.5 million barrels.
The ongoing oil battle proved two things. The first is the ability of the GCC countries to stand against Iran’s hegemony and not to heed its threats. The second is that Iran has become a paper tiger in the eyes of the world. For more than a year, Iran has been threatening to close the Strait of Hormuz if it was prevented from exporting its oil, and that it would destroy the oil market on the heads of all. Nothing of the sort has happened. Iran did not only back off from its threats but issued an official statement to the whole world announcing that it had no intention of closing the strait. Iran knows very well that if it does, it will be militarily crushed.
Instead, Iran resorted to using Saddam Hussein’s tricks to overcome the siege. It announced that it would buy its own oil tankers to sell its oil directly to the world.
The international oil tankers stopped carrying Iran’s oil after the insurance companies refused to insure any tanker carrying Iranian oil. Even this ploy did not succeed. Countries were reluctant to make direct oil purchases from Iran. Kenya, for instance, announced it had backed off from a deal to buy 80,000 barrels from Iran after it had been warned by the EU that it might face economic sanctions if it did.
Before that, the American Central bank and its European counterpart had announced the prevention of the use of the dollar and the euro in any Iranian purchases. This has made it difficult for Iran to trade with the world including India and China.
We are in the middle of a unique battle, in which the weapons are the dollar, euro, insurance companies, the US naval forces in front of the Iranian shores, and Iran, whose oil exports dropped by more than a million barrels a day. Iran’s exports have dropped by more than a third of those before the ban. They will further decrease and so its financial income. The Iran regime may therefore shake from inside.
This may turn Iran either into a moderate country or an aggressive one. Iran may resort to its last weapons, which is launching a war against its neighbors. For this reason, I said at the beginning that we have finished with the first round, but the battles are continuing. It is difficult to predict what the generals of Sayyid Ali Khamenei may do when they become hungry.