Saudi Arabia is once again using its “oil weapon” — as it did during the 1973 oil embargo — to pressure its political rivals. But instead of driving up prices and cutting supply, the Saudis are doing the reverse. In the face of a global slide in oil prices since June, the kingdom has refused to cut its production to drive prices back up. At the last Organization of Petroleum Exporting Countries (OPEC) meeting on Nov. 27, the Saudis led the charge to prevent the cartel from cutting production.
The House of Saud’s oil policy is even more opaque than its foreign policy. But the kingdom has two targets in its latest oil war: It is trying to squeeze US shale oil — which requires higher prices to remain competitive with conventional production — out of the market. The Saudis are also punishing two rivals, Russia and Iran, for their support of Bashar al-Assad’s regime in the Syrian civil war. Since the Syrian uprising began in 2011, regional and world powers have played out a series of proxy battles there. As Saudi Arabia and Qatar armed many of the Syrian rebels, the Iranian regime — and to a lesser extent, Russia — have provided the weapons and funding to keep Assad in power.
The consequences of Saudi policy are impossible to ignore. After two years of stable prices at around $105 to $110 a barrel, Brent blend, the international benchmark, fell from $112 a barrel in June to around $65 today. “What is the reason for the United States and some US allies wanting to drive down the price of oil?” Venezuelan President Nicolas Maduro asked rhetorically in October. His answer? “To harm Russia.”
Russia and Iran are highly dependent on stable oil prices. By many estimates, Russia needs prices at around $100 a barrel to meet its budget commitments. Iran, facing Western sanctions and economic isolation, needs even higher prices. Already Iran has taken an economic hit from the Saudis’ actions. On Nov. 30, as a result of OPEC’s decision not to increase production, the Iranian rial dropped nearly 6 percent against the dollar.
The kingdom believes it can protect itself from the impact of the price drops. It can always increase oil production to make up for falling prices, or soften the blow of lower profits by accessing some of its $750 billion stashed in foreign reserves.
Still, Saudi Arabia is playing a dangerous game by using its oil weapon — there is little evidence that authoritarian regimes like Russia and Iran will change their behavior because of economic pressure. The Saudi policy could backfire, making Russia and especially Iran more intransigent in countering Saudi influence in the Middle East.
Since the US invasion of Iraq in 2003, the traditional centers of power in the Arab world — Egypt, Saudi Arabia and other Gulf States — have been nervous about the growing influence of Iran: its nuclear ambitions, its sway over the Iraqi government, its support for the militant groups Hezbollah and Hamas, and its alliance with Syria.
When popular protests swept the Arab world in early 2011, Assad was confident that he had nothing to fear because he had continued his father’s foreign policy: He did not depend on US tutelage like the leaders of Tunisia, Egypt, Bahrain and Yemen. Assad and his allies in the “axis of resistance” boasted that they were the true representatives of the majority of people in the Arab and Muslim worlds, who for decades had been stifled under regimes that “sold out” to the United States.
Soon after the peaceful demonstrations in Syria turned violent, in response to Assad’s ruthless crackdown, the leader of the “axis of accommodation,” Saudi Arabia, began sending money and weapons to the rebels.
The Syrian conflict is now part of a full-blown proxy war between Iran and Saudi Arabia which is playing out across the region. Both sides increasingly see their rivalry as a winner-take-all conflict: If the Shiite Hezbollah gains an upper hand in Lebanon, then the Sunnis of Lebanon — and by extension, their Saudi patrons — lose a round to Iran. If a Shiite-led government solidifies its control of Iraq, then Iran will have won another round. So the House of Saud rushes to shore up its allies in Bahrain, Yemen, Syria and wherever else it fears Iran’s nefarious influence.
Today, with ongoing proxy wars in Syria and Iraq, Saudi Arabia risks instigating an oil war with Russia and Iran — a war that the kingdom can perhaps win in the short term. But like sectarian conflict, Saudi actions threaten to spark a conflagration that can spin out of everyone’s control.
Mohamad Bazzi is an associate professor in the department of journalism at New York University.
This article first appeared in Today’s Zaman, a leading daily newspaper of Turkey. Click here to go to the original.