The Oil and the Glory

The day of Saudi collapse is not near

As turmoil has engulfed the Middle East and North Africa, much attention has focused on Saudi Arabia — if trouble spread there, traders have worried, the global economy could dive into a far more serious recession than the 2008 financial collapse. Nawaf Obaid, a senior fellow at the King Faisal Center for Research and Islamic Studies ...

AFP/Getty Images
AFP/Getty Images

As turmoil has engulfed the Middle East and North Africa, much attention has focused on Saudi Arabia — if trouble spread there, traders have worried, the global economy could dive into a far more serious recession than the 2008 financial collapse. Nawaf Obaid, a senior fellow at the King Faisal Center for Research and Islamic Studies and a doctoral candidate at King’s College London’s Department of War Studies on the subject of the rise of Saudi nationalism, thinks the fears are overblown. He kindly agreed to write a guest column, which follows.

Reports in recent weeks have suggested that the mass protests occurring in Arab nations will soon spread to Saudi Arabia. There has been coverage of Facebook pages established by activists calling for a "day of rage," and a "day of revolution." Large, front page articles, illustrated with pictures and charts, have asserted that it is only a matter of time before massive upheavals will bring down the Saudi monarchy. The BBC has reported that the Saudi downfall is inevitable, and weighing heavily on global energy markets, where a fear premium had added 15 percent to the price of oil.

These assertions have been grossly exaggerated:  17,000 Facebook fans or "protesters" do not necessarily translate into 17,000 Saudi rioters, because at the very least it is impossible to verify how many of them actually lived in theKingdom.  One cannot forecast events based on a count of virtual fans at a social network.

In this case, the outcome is a dangerous, long-term yet illusory perception: the vulnerability of Saudi Arabia’s energy infrastructure.

The logic of this narrative is there:  Saudi Arabia holds 25 percent of the world’s proven oil reserves, is the largest exporter of oil, is the only nation with significant spare capacity (almost 4 million barrels of oil a day), and is the leading power and sole swing producer in OPEC.  A disruption in Saudi oil exports would create what can best be described as a global economic catastrophe. Unlike in the case of the disruption of Libyan exports, in which Plan B is for Saudi Arabia to increase its exports to steady the markets, there is no Plan B if Saudi Arabia goes off line. Because the kingdom possesses about 75 percent of the world’s spare capacity — all of which would now vanish — oil would probably soar to $200-$300 per barrel in such a scenario. The effects this would have on economies around the world would be devastating. Stock markets would crash as mega non-energy multinational companies would see their energy costs soar, and their market cap valuations drop.  The entire transportation sector would go bankrupt. Wall Street would be the most affected — it would require federal government bailouts that would dwarf those made just a few years ago. The nascent U.S. recovery would grind to a halt, as every extra cent paid at the pump would pull about $1 billion from motorists’ pockets per year. The sudden, exorbitant rise in the cost of practically every commodity would cripple global trade.

But this nightmare scenario is extremely unlikely. No system as vast as the Saudi oil complex — with its scores of rigs, refineries,export terminals and pipelines — is perfectly protected. But the risks aremuch less serious than widely disseminated.

The first layer of security in the Saudi energy infrastructure is simply its design and construction. Two failed attacks overthe years show this well.

In 2004, terrorists attacked the Yanbu petrochemical plant, but Saudi security agents were able to quickly cordon off its industrial portions, and isolate and neutralize the attackers. Several people were killed, but the complex itself was never in danger. In February 2006, al Qaeda terrorists attacked the Abqaiq oil processing facility, the world’s largest and the "nerve center" of the Saudi distribution system. They breached the outer perimeter and overran the guards. But they never made it to the plant’s operational areas. They were trapped in a "no-man’s land," a large area designed as a moat, and forced to detonate their car bomb there. Although people tragically lost their lives at the first gate and the exterior portions of the center suffered some damage, at no time was the facility or its ability to process oil under serious threat.

Thousands of sensors, cameras, sophisticated computersand world-class surveillance protect the sprawling energy facilities. It is worth pointing out that the elements most difficult to protect, such as the thousands of miles of pipeline, are also the easiest to repair and quickly get back on line. Saudi authorities estimate that in a worst- case scenario — in which an entire section of pipeline is destroyed — repair teams could bringthe line back to normal operation within days. The key processing points and bottlenecks in the system are, by their centralized nature, much easier to defend.

Since the 2006 attack, the Saudi government has invested an additional $10 billion to further improve Abqaiq’s energy security. A key element has been the creation of a 35,000-strong "Facilities Security Force." These troops come from across the kingdom and receive extensive training through a U.S. technical assistance program. They have exclusive responsibility for guarding energy installations against both internal and external threats. Also, the Saudi government has stockpiled considerable volumes of oil through its Foreign Reserve Initiative. A sizable portion is in floating containment facilities near the kingdom’s main export markets and canbe released in emergencies — volumes were in fact released to compensate for lost Libya volumes.

Another mistaken impression is that the kingdom’s oil resources lay in a region inhabited by a restive Shiite majority. Setting aside that in the many decades of Saudi oil production, there have been no serious Shiite attempts to sabotage the kingdom’s oil facilities, they in fact are not the majority in the oil-rich Eastern Province, but roughly 30 percent of the population (around 1.1 million out of about 3.9 million people), and about half are concentrated in villages in the coastal Governorship of Qatif. At one time, the Eastern Province was predominantly Shiite, but in the past several decades, more than 1.3 million foreign workers and almost 1.5 million Saudis from other parts of the kingdom have migrated there in search of economic opportunities.

None of this is to say that Shiites have no legitimate grievances: The community lacks full religious freedom, encounters obstacles within the Sunni-dominated legal code, and has suffered economic discrimination. But since assuming the throne in 2005, King Abdullah has worked to provide Shiites equal economic and social benefits with the majority Sunnis, to increase employment opportunities in the public sector, and offer equal access to fully paid foreign scholarships. So it is a serious exaggeration to characterize the native Shiites as a "Fifth Column" representing a threat to the kingdom’s oil infrastructure.

Fears about Saudi stability verge on the irrational. The oil markets are skittish about Saudi Arabia, but for spurious reasons. The kingdom has long been, and will probably long remain, the most stable and secure provider of energy in the world.

Nawaf Obaid was a visiting fellow from 2012 to 2018 at Harvard University, where he conducted research for, among other things, a book on the failure of the Muslim Brotherhood in the Arab world. The book, Bad Faith, will be published next spring by Cambridge University Press. From 2004 to 2015, Obaid held various advisory positions with the Saudi government.

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