We posted this eight years ago when Sunni - Shia animosity was running a bit hot.
January 5, 2016
From The Telegraph:
Saudi showdown with Iran nears danger point for world oil markets
The Persian Gulf has become a strategic tinderbox.
Saudi Arabia’s drastic decision to behead the Shia cleric Nimr al-Nimr marks a point of no return in the bitter Sunni-Shia conflict engulfing the region. It is a dangerous escalation in the Kingdom's struggle with Iran for regional hegemony.Iran’s Revolutionary Guard has vowed swift and harsh revenge, promising to bring down the Saudi dynasty in short order to avenge this “medieval act of savagery”.
Brent crude jumped to a three-week high of $38.91 a barrel as traders began to price in the first flickers of political risk. Roughly a fifth of global oil supply passes through the Strait of Hormuz, where tankers would in extremis have to run the gauntlet past Iranian warships.
Helima Croft, from RBC Capital Markets, said investors have yet to wake up to the full danger. “If we’d had scenes five years ago of the Saudi embassy in flames in Tehran there would have been a big move in the price, but right now there is so much over-supply and people just seem to think this is all noise. They have yet to get their heads around what can go wrong,” she said.
'It will likely trigger a civil war that won’t end until the Saudi monarchy ceases to exist'Ali al-Ahmed, director of the Institute for Gulf Affairs in Washington
The risk for the Saudis is that the execution of Sheikh Nimr for what is essentially peaceful political protest ignites a long-simmering revolt by an aggrieved Shia minority, who make up 15pc of the population and are sitting on top of the giant Saudi oil fields in the Eastern Province. There were violent protests in the Sheikh’s home-town of Qatif on Monday, with at least one protestor shot dead by police.
Ali al-Ahmed, director of the Institute for Gulf Affairs in Washington, said Qatif is the nerve-centre of the Saudi petroleum industry, the so-called “Grand Central Station” where 12 pipelines come close together to supply the huge oil terminals at Ras Tanura and Dharan.
These pipelines are close to major roads and towns, making them hard to police against “hit and run” attacks.
Most of Saudi Arabia’s 10.3m barrels a day (b/d) of output passes through the Shia heartland, now seething with fury. While global crude stocks are at record levels, there is no spare capacity outside Saudi Arabia. A disruption lasting more than a few days could cause oil prices to spike violently – possibly to $200 or more – triggering a worldwide economic crisis.
Mr al-Ahmed said the mass executions have set in motion a fateful chain of events that nobody can now control. “It will likely trigger a bloody civil war that won’t end until the Saudi monarchy ceases to exist. This cycle of violence will not spare anyone or anything, including the coveted oil installations,” he said.
Bahrain and Sudan have already followed Saudi Arabia’s move to cut off diplomatic relations with Iran, and the United Arab Emirates has recalled its ambassador. The lines of cleavage are painfully clear in a Middle East already convulsed by four wars, and sliding closer to all-out conflagration.
Iran and Saudi Arabia severed ties from 1989 to 1992 but that was another era, when the US was at the height of its power, and willing to use it after the huge military build-up of the Reagan administration. There was then no civil war in Syria or Yemen....MORE
