Saudis seek US help to thwart rising attacks on oil sites

A damaged silo at the Saudi Aramco oil facility in Jeddah on Nov 24, 2020. PHOTO: AFP

RIYADH (BLOOMBERG) - Saudi Arabia is seeking more help from the United States to defend its oil facilities, underscoring the kingdom's concern about recent missile and drone strikes that it has linked to arch-rival Iran.

The requests have been put to President Joe Biden's administration since January, according to a Saudi official, who asked not to be named as the matter is private. Saudi Arabia is also asking other allies for support to thwart almost-daily attacks on cities and towns, the official said.

On Sunday (March 21), the Saudi navy began drills in the Persian Gulf to enhance the security of "vital installations" and oil fields, and secure freedom of navigation in the region's waters, the official Saudi Press Agency (SPA) said. Saudi Aramco, the state oil company, will take part, according to SPA.

The military exercises follow three attacks on Aramco sites this month alone. On Friday (March 19), Yemen's Houthi rebels, who are backed by Iran, said they were responsible for drones and missiles that targeted a 120,000-barrel-a-day refinery in Riyadh, the Saudi capital. They also claimed strikes on the world's biggest oil-export terminal of Ras Tanura and on a fuel depot in Jeddah.

Intercepted Saudi officials said their air-defence systems and fighter jets intercepted the projectiles used in all the attacks, preventing them from causing substantial damage. Aramco chief executive Amin Nasser said the incidents have not impacted the company and that it will continue to supply petroleum to customers around the world "under any scenario". Still, oil analysts have said the risk of a major crisis in the Gulf is rising.

"We are one incident away from a major conflagration," said RBC Capital Markets head of commodity strategy Helima Croft. "If one of these drone or ballistic-missile attacks results in significant civilian casualties, it could potentially lead to a more direct confrontation between the Saudis and the Iranians."

A Saudi-led coalition has been fighting a grinding war against the Houthis since 2015 in an effort to restore Yemen's United Nations-recognised government. The conflict has created what the UN has called the world's worst humanitarian disaster and pushed the Yemeni population to the brink of famine.

Peace efforts

Since coming to power, Mr Biden has rescinded a decision by his predecessor Donald Trump to designate the Houthis as a terrorist organisation, and stepped up efforts to secure a ceasefire. He has also halted the sale of offensive weapons to the coalition, though his administration has pledged to continue providing Saudi Arabia with equipment to defend its territory.

Saudi Arabia has welcomed the prospect of peace talks, despite the increase in Houthi attacks that analysts and diplomats say are intended to increase the group's leverage. The danger, they say, is that a successful strike on Saudi oil installations could force the kingdom into an escalation it does not want.

Coalition planes pounded Houthi bases over the weekend in retaliation for the refinery attack.

The Saudi government on Monday (March 22) proposed a series of steps to end the war in Yemen, though the Houthis appeared to reject the plan.

Riyadh says the missiles and drones used to target its infrastructure are Iranian manufactured or supplied, a view shared by the UN. That has led to claims that Iran is using the Houthis to pressure the US as the two nations tussle over how to revive nuclear diplomacy and remove American sanctions on the Islamic Republic.

Abqaiq attacks

The most prominent attack claimed by the Houthis came in September 2019, when explosive-laden drones swarmed Aramco's Abqaiq oil-processing plant and Khurais field. They temporarily knocked out about half of Saudi Arabia's production capacity and caused crude prices to spike.

Oil markets have taken comfort from the recent attacks not being anywhere near as damaging, according to Mr Bob McNally, president of consultant Rapidan Energy Group and a former White House official. Moreover, unlike in 2019, there is plenty of spare capacity around the world, owing to deep supply cuts that the Organisation of Petroleum Exporting Countries and allies such as Russia started last year.

While Brent crude prices have risen 24 per cent this year to around US$64 a barrel, they have dropped this month, mostly due to concerns about a third coronavirus wave.

Still, "the increase in the frequency of airborne attacks and the focus on energy infrastructure will mean some risk premium remains in oil prices", said Mr Bill Farren-Price, a director at research firm Enverus.

"The situation demands a diplomatic push to reduce tensions."

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