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Saudis seek more US help to thwart rising attacks on oil sites

By MATTHEW MARTIN AND SALMA EL WARDANY | Bloomberg | Published: March 22, 2021

Saudi Arabia is seeking more help from the U.S. to defend its oil facilities, underscoring the kingdom's concern about recent missile and drone strikes that it's linked to archrival Iran.

The requests were 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, 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 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, 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 Jiddah.

Saudi officials said their air-defense systems and fighter jets intercepted the projectiles used in all the attacks, preventing them from causing substantial damage. Aramco's chief executive officer, Amin Nasser, said Sunday the incidents haven't affected its business 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 Helima Croft, head of commodity strategy at RBC Capital Markets. "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-recognized government. The conflict's created what the UN has called the world's worst humanitarian crisis and pushed the population to the brink of famine.

Since coming to power, Biden has rescinded a decision by his predecessor, Donald Trump, to designate the Houthis as a terrorist organization, and stepped up efforts to secure a cease-fire. He's also halted the sale of offensive weapons to the coalition, though he's 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 Houthi strike on Saudi oil installations could force the kingdom into an escalation it doesn't want.

Coalition warplanes pounded the group's bases over the weekend in retaliation for the refinery attack.

Saudi Arabia says the missiles and drones used to attack its infrastructure are Iranian manufactured or supplied, a view shared by the UN. That's led to claims that Iran is using the Houthis to pressure the U.S. as the two nations tussle over how to revive the crumbling 2015 nuclear deal and remove American sanctions.

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, temporarily knocking out about half of Saudi Arabia's production capacity. The UN concluded those weapons were probably of Iranian origin.

Oil markets have taken comfort from the recent attacks not being anywhere near as damaging and because — unlike in 2019 — there's plenty of spare supply capacity around the world following deep cuts by OPEC+, according to Bob McNally, president of consultant Rapidan Energy Group and a former White House official.

While Brent crude prices have risen 24% this year to around $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 Bill Farren-Price, a director at research firm Enverus. "The situation demands a diplomatic push to reduce tensions."