“Never the twain shall meet”, runs Kipling’s line about East and West. Saudi Arabia’s enemies have taken this literally and bombed the kingdom’s most important oil pipeline. A look at the price of petrol tells you we’re feeling the repercussions of this. They could get better; they could get worse.
Saudi Arabia’s East-West pipeline runs from its Persian Gulf coastline to the Red Sea port of Yanbu. From there tankers take oil north to Europe, or south to Asia via the Bab al-Mandeb Strait — ‘The Gate of Tears” in Arabic. The pipeline was built in the 1980s in case the Iranians tried to close the Strait of Hormuz, and this year it has been essential in keeping some oil flowing when tankers have halted near the strait.
Before the attack roughly 5 per cent of global oil passed through the pipeline. The closure sent the price of Brent crude above $100 a barrel. Fears of a prolonged rise increased as Yemen’s Houthi movement made rapid advances along the Red Sea coastline all the way down to the tip of the Arabian peninsula. Saudi-backed government forces fled as the Houthis seized control of Perim Island in the middle of the 20-mile-wide Bab al-Mandeb. They captured advanced US and Saudi-supplied weapons, increasing the potential to target shipping.
What happens next will determine the future of Yemen, and how much we pay for fuel and other goods this winter. A rapid repair of the pipeline, and easing of tensions, could see prices drop below $100 a barrel, more negative scenarios foresee rises up to $150.
Diesel costs around the world have risen faster than petrol and this drives inflation as diesel is used in farming, construction and long-distance haulage. In the USA it’s at a record $6 a gallon. Last week’s decision by the Federal Reserve to raise interest rates was partially driven by the situation in Yemen, and it will have an impact on the upcoming UK budget.
Saudi Aramco hopes to have half of the pipeline’s capacity back online this coming week, which would ease short-term supply risks. However, industry experts suggest full repairs could take six weeks, and even then there’s the danger that the pipeline could be attacked again. The Saudis have options — none are palatable, and all will have knock-on effects for us.
The situation is inextricably linked to the Strait of Hormuz. For several weeks the US navy has been escorting a limited number of tankers through the strait. This reduced Tehran’s ability to choke supplies of oil and left it still unable to export its own. This has gradually weakened its position vis-à-vis the USA. A new front was required, and the Houthis could provide it.
The Houthis are not a nailed-on Iranian proxy in the manner of Lebanon’s Hezbollah and some Iraqi militia, and despite being bankrolled by Tehran have considerable freedom to act as they choose. They are Zaydi Muslims, the branch of Shia Islam considered closest to Sunni Islam. They reject the concept of infallible religious leaders and of a “Hidden Imam”, which are tenets of “Twelver” Shia Islam as practised in Iran. However, they are opportunists and an opportunity had presented itself.
The Houthis want to rule all of Yemen, including the Sunni majority regions, and be recognised as the government. The Saudis, who do not want a Shia-led ally of Iran as a neighbour, oppose them. An insurgency exploded into a full-blown civil war in 2014, and the following year Saudi Arabia and the UAE intervened, sending small numbers of troops into the country and launching thousands of air strikes. They failed to turn the tide, the UAE vastly reduced its participation, but the Saudis and Houthis continued to exchange blows.
Over the past year the White House has made it clear that Riyadh must take up more of its defence burden. It also signalled to the Houthis that, short of them attacking shipping, they would not see a repeat of last year’s action against them by the US military, which ended in stalemate.
If timing is everything, everything fell into place. It’s likely Iran ordered its Iraqi proxy militia to bomb the pipeline, while the Houthis quietly assembled tens of thousands of fighters for last week’s assault — something Riyadh missed. When it came, Saudi Arabia asked for American intervention, but President Trump refused. Ahead of the US mid-term elections, and with US munitions depleted, he does not want to open a second front, and the Houthis know it. He coolly noted that the problem was limited to “one country” while the Houthis were at pains to point out that “maritime navigation is safe for all companies except for Saudi vessels”.
So, the Iranians have put the squeeze on Trump again with petrol and diesel prices fuelling inflation, and the Houthis have strengthened their position against Saudi Arabia. So far, it’s win-win for them, and a headache for Riyadh.
The Saudis have the option of escalation even as the Houthis dig in and build trenches in case of a counteroffensive. There’s been a flurry of Saudi airstrikes and an unconfirmed report of one of their F15 jets being shot down. Given their poor performance over the past decade, escalation would not guarantee success and would certainly invite more missile and drone strikes against their struggling energy industry. The Americans have sent a few dozen military advisers, but that is unlikely to change much — ditto the reported British offer of a handful of advisers. Riyadh could ask its new allies in the Mecca defence pact, Pakistan and Turkey, for help, but neither would be keen to send troops into Yemen and will probably content themselves with naval and intelligence support.
The Houthis want to use their recent success to force compromise. It’s thought they are demanding Riyadh lift restrictions on the airport in Sanaa and Hodeidah port, end support for government forces, and pay reparations. That would be a bitter pill for the Saudis to swallow and give the Houthis a strategic victory.
Escalation or compromise? Riyadh is exploring the options. Last week Crown Prince Mohammed bin Salman visited Cairo for talks with President Abdel Fattah el-Sisi. Egypt’s economy is partially dependent on revenues from the Suez Canal through which oil tankers pass and increased military co-operation between the two countries on Yemen might cause the Houthis to step back. However, while the Egyptians have a strong interest in stability in the Red Sea, they also have long memories.
In the 1960s President Nasser sent tens of thousands of Egyptian troops to intervene in Yemen’s civil war. At least 10,000 never came home and Egypt achieved nothing. It was their strategic trap, their Vietnam, and is behind the bland statement issued after the meeting that Cairo supports “efforts to reach a comprehensive and sustainable political solution to the Yemen crisis”. The key word being “political”.
The Egyptians failed in Yemen, the UAE failed in Yemen, the Americans failed in Yemen and so volunteers to help the Saudis fail again in Yemen will be scarce. This doesn’t necessarily rule out escalation, but it does focus minds.
East and West may never meet, but the Houthis could control both the north and south of Yemen, the Gate of Tears, and the price of oil.