[op-ed snap] The fires of Arabia

Context

The drone attacks on major Saudi hydrocarbon facilities have led to a spike in world oil prices. 

Facts of the issue

• The attacks are claimed by Yemen’s Houthi rebels.
• It has knocked out more than half of Saudi crude output and5% of the global oil supplies. 
• Oil industry experts say the damage is serious and Saudi Arabia will not be able to quickly make up for the shortfall in production close to 5.7 million barrels a day. 

Marginal global impact

• Global oil production expanded in recent years and there is the emergence of new major exporters like the US.
• The world could possibly absorb the new oil shock without too much pain.

Challenges remain

• Drone attacks have exposed the massive vulnerability of Saudi oil production 
• Houthis have promised to attack again if Saudi Arabia continues its four-year-old war against them
• The other is the danger of escalation in the tension between Saudi Arabia and Iran that has enveloped the region in proxy wars. 
• If Saudi Arabia has supported the government in Yemen in the tragic civil war, Iran has been the main backer of the Houthi rebels. 
• Iran has backed the Houthi right to self-defense against Saudi Arabia. 
• The US decision to blame Iran after the attack appeared to push the region to the brink of a new war. 
• In the last couple of years, Iran has seen most of its oil exports vanish due to the American sanctions. 
• Though Iran can hurt Saudi oil production, a military confrontation with the US could set Tehran back by decades. 

Way ahead

• The recent developments offer an opportunity for all sides to step back. 
• The US and Saudi Arabia have miscalculated that Iran would cave under the current campaign to put “maximum pressure”.
• The current lose-lose situation should open the door for sensible compromises all around. 
• India, which is friends with all the actors in the Middle East, can easily do more than being a passive observer. 
• Like Japan and Europe, which are trying to calm the waters, India too must step in to nudge the region towards military restraint and political engagement.