January 3, 2016

Coming soon to a battlefield near you, Saudi Arabia vs. Iran.

Saudi Arabia recently executed a high profile Shiite cleric.  In response, Iranians stormed the Saudi embassy in Tehran. In response to that, Saudi Arabia has cut relations with Iran.  That's what's known in strategic circles as escalating tension.  But could this all actually be about oil?

If Saudi Arabia even suspected that this would cause problems for them, why proceed with the execution?  Why not drag out the proceedings for as long as possible to avoid an escalation?  Maybe Saudi Arabia wanted an escalation of tensions with Iran.

Consider:

  • Oil prices have plummeted over the last year or so, in large part due to Saudi Arabia's refusal to implement production quotas in order to lower supply and artificially bolster the market price.
  • Iranian oil thanks to president Obama's weak-tea deal with Iran, will soon be coming on line and into the marketplace, thus creating an even greater production glut, and putting further downward pressure on the commodity's price.  That's not good for any oil producing nation, including Saudi Arabia.
  • Iran poses a growing threat to Saudi Arabia as the regional power player
If I'm the Saudi King, I'm looking for ways to weaken Iran.  Clearly holding no clout with Obama on the Iran deal I have to think of another way to manage Iran.  Escalating tensions is a way to do that.  Iran may be weaker now than they will be in five years because as the oil money flows into Iran, rebuilding an effective fighting force becomes possible.  So for Saudi Arabia time is also of the essence.

Given those factors, forcing an all out shooting war with Iran allows Saudi Arabia a couple of advantages.
  • They may be able to take the opportunity to take out Iran's oil production capabilities before they come on line.
  • They may be able to force America's hand into participating in a war in defense of a nominal regional ally.
  • They may garner Israeli support and action against Iran as well, since they can be seen as a common enemy.
  • With Russia focused on Syria, and Crimea, risk of Russian involvement is decreased.
  • With Iraq in turmoil due to ISIS activities, and the nation the middle ground between Iran and Saudi Arabia, it provides an opportunity to take action against ISIS (again, potentially forcing America's hand).
  • Would a war inflate oil prices? Undoubtedly.  The only questions are: by how much and for how long, and will it benefit Saudi Arabia in the short and/or long run?
Was that execution in Saudi Arabia done deliberately to provoke a hot war with Iran?  There's a good case for YES. And if indeed that's the thinking, it may be inevitable.
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