SHAFAQNA – The Kingdom of Saudi Arabia—the long-time dictator of crude oil prices for the world—is struggling on all fronts. Risen a regional superpower, and somewhat of an international Leviathan on account its deep pockets have allowed for foreign powers to bow to its political will, is now facing a bit of an economic, diplomatic and political shake-down.
As it happens the infamous House of Saud is not sitting as pretty as its Royals would like everyone to believe, especially now, that Iran has reclaimed its place among nations.
“The Saudis are losing their proxy wars in both Syria and Yemen; their OPEC leadership is under threat; they are not winning the crude oil price war; and its long-running alliance with the West is in question. From Saudi Arabia’s perspective, Iran seems to be gaining ground everywhere. Saudi Arabia has several weaknesses that help explain the current anxiety emanating from Riyadh,” wrote Tom Kool for OilPrice.com.
Indeed just as the kingdom was catapulted to the forefront of the international community in its glorious hour of oil supremacy, it is now fast tumbling down the abyss.
OPEC? What OPEC leadership?
For decades Saudi Arabia has been the default leader of OPEC. This now has been challenged … rather dramatically one might add, as the combined power and political clout of both Iran and Russia has shaken the House of Saud. Despite Saudi insistence to the contrary, the US shale boom, increased Russian oil production, and a very resolute Iran are challenging this leadership.
The result is that Saudi Arabia now finds itself powerless in supporting oil prices. Instead of the much-needed production cuts, during the 4 December 2015 meeting, the OPEC nations refused to adhere to any ceiling, which has been the practice for years.
2. Burning through reserves—fast
Iran is waiting for the lifting of sanctions, expected sometime in 2016, to pump more oil to improve its economy, whereas the Saudi’s are losing they are burning through their cash reserves quickly. The above chart speaks for itself, depicting the kind of damage low oil prices are inflicting on Saudi reserves. By the most optimistic opinion, Saudi Arabia can survive low oil prices only for four years.
Add to that a very expensive war in Yemen, and the compounded cost of diplomatic friendships: Somalia, Egypt, Sudan … Riyadh theocratic oligarchy might soon run out of cash, and ultimately support. Accustomed to buying people off, the kingdom will face a reality check, few Royals have likely provisioned for.
Iran and the rise of Tehran as THE superpower
Unlike Saudi Arabia which has backed, propped and championed the spread of Wahhabisn in the MENA region – an ascetic and violent dogma which claims itself of Islam – Iran has systematically supported political self-determination and nation’s sovereign rights, thus positioning itself as a benevolent political influence.
From Lebanon to Syria, Iraq, Bahrain and Yemen, Iran has forged many great popular alliances, siding not necessarily with governments but those factions which carry popular legitimacy.
More importantly, Iran is a much larger nation than Saudi Arabia by population and has held its own in numerous long wars. By comparison, the Saudis have an army that is inexperienced, led by loyalists of the Royal family who occupy plum postings. These are not the war-hardened generals of Iran.
While Saudi Arabia has a nice arsenal with the latest weaponry, the kingdom is heavily dependent on the West for its use and maintenance. Its indecisive and ineffective handling of three conflict fronts—Iraq, Syria, and Yemen— would lead to assume that it would fail miserably before Iran’s military might, and resolve.
Beyond that Saudi Arabia stands alone in its paranoiac hatred of Iran; the United States for example will NOT go to war with the Islamic Republic on account the kingdom wishes to smite an enemy.
“The painfully misguided wars in Iraq and Afghanistan are enough to deter the current US administration from entering into full-fledged war in the Syrian and Yemen theaters. Washington’s non-committal stance, along with efforts to broker a deal with Iran, should serve as very loud signals to Saudi Arabia.
The message to the kingdom is this: Don’t go to war with the hope that that U.S. will support you. And without the West, Saudi Arabia knows it stands no chance of winning a war against Iran. The royal family will probably not take the risk of losing power by indulging in such a war.
These relationships are anything but clear, and everything about balance. So the US will continue to sell weapons to Saudi Arabia to allow it to maintain a bit of balance—with the latest deal approved in October—and Washington and Tehran will continue to play cat and mouse as they near a nuclear deal and a removal of sanctions,” wrote Kool.
The Saudis are in a state of panic all around—from its OPEC status and dwindling reserves to its proxy wars that absolutely cannot turn into full-fledged wars and its growing friendlessness. The fact that oil fell briefly below $30 a barrel on Tuesday for the first time in 12 years won’t have helped.
At the end of the day, Saudi Arabia has overextended itself, and overestimated its prowess and it does not have the clout that it once had to be able to do this effectively.
By Catherine Shakdam for Shafaqna