Using Proxies, Iran Appears to Be Hitting Back in the Fight Over Oil

Experts believe Tehran is behind recent attacks on Saudi oil installations and vessels.

The Saudi tanker Amjad was one of two damaged by sabotage attacks near the Emirati port of Fujairah, part of an apparent pattern of Iranian retaliation for U.S. pressure, on May 13.
The Saudi tanker Amjad was one of two damaged by sabotage attacks near the Emirati port of Fujairah, part of an apparent pattern of Iranian retaliation for U.S. pressure, on May 13. Karim Sahib/AFP/Getty Images

With two suspicious attacks in three days on Saudi oil installations, Iran appears to be signalling that the U.S. maximum pressure campaign to choke off its oil exports and strangle its economy will come at a price.

On Tuesday, an apparent Houthi drone strike damaged a pair of pumping stations on a crucial Saudi oil pipeline, the East-West pipeline that sends Saudi crude across the desert from the shores of the Persian Gulf to the Red Sea, far from Iran and the vulnerable Strait of Hormuz. Saudi officials said damage was minor, but they did temporarily halt the pipeline, which can ship as much as 5 million barrels a day. Riyadh blamed Iran-backed Houthi rebels in Yemen for the attack.

Those strikes came just days after a still-unexplained attack on four vessels off a key oil-export port in the United Arab Emirates, including two Saudi oil tankers. While regional governments have yet to point the finger at Iran for that attack, a U.S. official told The Wall Street Journal that it believes Iran was behind the sabotage.

“The Iranians are signalling–if you keep pushing, this is the kind of world you’re going to be living in,” said Michael Knights, a Persian Gulf expert at the Washington Institute for Near East Policy.

If the ship attacks are still unexplained, the drone strike seems to have a clearer authorship, according to Saudi oil officials. Saudi Arabia for years has battled Iran-backed Houthis in a desperate war for control of Yemen, and Houthis have in the past targeted Saudi tankers passing near the Yemeni coast.

Knights, who has studied Houthi rebels for more than a decade, said he doubted such a long-range drone attack was their doing alone. “It’s not within Houthi capability, nor do they have the intention.”

Indeed, from a Houthi point of view, the timing is odd. The rebels are trying to keep their end of a U.N.-brokered deal to move their forces out of the Yemeni port of Hodeidah. On Tuesday, the same day as the drone attack, U.N. officials verified the first phase of the redeployment of Houthi forces away from Hodeidah and a pair of other important ports.

“To throw an attack into the Saudi oil sector in the midst of the [Red Sea peace process] is not in the Houthi strategic interest. They are trying to show they are not delaying peace on the Red Sea,” Knights said. He speculated that Houthis may have received direction from Iran to carry out the attack.

Other experts see an even clearer sign of Iranian involvement, since Iran has watched its lifeline of oil exports shrivel from more than 1 million barrels a day shrink to almost nothing due to tougher U.S. sanctions that went into effect at the beginning of the month. At the time, Iran vowed to retaliate in some fashion.

“This has Iranian fingerprints all over it. The timing, the tactics, the targets all suggest Iran has a hand in these attacks,” said Matthew Reed, vice president at energy consultancy Foreign Reports. “It should surprise no one when Iran is feeling the squeeze of sanctions more than ever and oil export volumes are cratering.”

The two locations attacked thus far could not have been chosen at random. On Sunday, tankers and other vessels were sabotaged near the Emirati port of Fujairah, an important oil-export terminal that sits just outside the Strait of Hormuz. On Tuesday, drones hit the East-West pipeline, which is Saudi Arabia’s only real alternative to shipping tankers through the narrow Strait of Hormuz under the threat of Iranian attacks.

“Both attacks are targeting the facilities that support oil flows bypassing the Strait of Hormuz,” said Sara Vakhshouri, a former employee at Iran’s national oil company and now president of SVB Energy International, an energy consultancy. “Sabotage in Fujairah increases the vulnerability of the alternative” to Hormuz.

What does Iran hope to gain from the so-far pinprick attacks? In the short term, even minor threats of disruption to oil flows from the region could rattle oil markets and send the price of crude oil higher. That would be bad news for U.S. President Donald Trump, who cajoles OPEC and other big oil producers to help keep gas prices conveniently low for American drivers. And it would help Iran a little bit, by making the few barrels of oil that it manages to sell that much more valuable.

“The point is more about sending a signal, not about disrupting the flow of oil right now. You don’t actually have to knock significant amounts of oil off the market to make the needle move,” Knights said.

So far, the attacks have nudged oil upward, but barely. Crude prices rose a little more than 1% Tuesday, to about $71 a barrel. But with the United States sending additional forces to the Persian Gulf region–including a carrier strike group, an amphibious ship, missile defenses, and a bomber group–markets may not stay so complacent.

“The risk of a conflict is rising. Sooner or later, oil prices will adjust to reflect that reality,” said Reed.

Iran might have another goal in mind, if in fact it is behind the attacks: To make clear that the country cannot be pushed around indefinitely with no price to pay. In the United States, Saudi Arabia, and the UAE, Knights said, “there is some soul searching going on. Iran wants to change the debate from ‘we can keep kicking them around endlessly,’ to, ‘okay, they are taking some risks to signal we can’t keep kicking them around, so what do we do?’”

But there are plenty of Iran hawks in the U.S. administration, including national security adviser John Bolton and Secretary of State Mike Pompeo, who have been hankering for a confrontation. Though the United states and its regional allies have been restrained so far, that could change with clear evidence of Iranian involvement, or more serious attacks.

“Now the question is, how soon do we see conclusive proof of Iranian involvement and how severe will the U.S. response be?” said Reed. “This debate could turn on a dime if future attacks result in casualties or serious disruptions.”

Keith Johnson is a senior staff writer at Foreign Policy. Twitter: @KFJ_FP

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