Oil prices will sour after attacks on Saudi facilities

Last week, Saudi Arabia’s oil production facilities were attacked by drones and possibly by cruise missiles.

Houthi rebels in Yemen have claimed responsibility. The Houthi insurgency is a military rebellion fighting the Yemeni government, which has escalated into a full-scale civil war.

However, the US and Saudi Arabia have consistently accused Iran of being responsible; that Houthi rebels lack the capability of possessing drones.

Though there’s zero evidence that attacks came from Yemen or Iran, the US finger-points Iran as behind the attacks.

To that end, the US has so far released satellite imagery showing immense smoke clouds, suggesting the attacks were from Iran.

However, the EU countries have not made a hasty conclusion of who is responsible, rather requested for the investigation.

And these attacks constitute a wanton violation of international law. Regardless of who is responsible, the attacks are unlawful for a variety of reasons.

Under international law, however, Saudi Arabia has an inherent right to use military force to defend itself unquestionably.

However, it would depend on the fact that they’re able to establish credible evidence of who is responsible. Though the use of force is prohibited under international law, there’re exceptions to that: when it’s authorized by the UN Security Council, acting under Chapter VII of the UN Charter and in case of self-defense.

However, there’s a grey area under international law whether an aggrieved country can use military force, in a sense of self-defense, against a non-state actor [e.g. Houthi rebels] who are not the government in effective control of Yemen.

To get to the bottom of the matter, the UN has sent its experts to Saudi Arabia to investigate the attacks on the Saudi Aramco oil refineries. It is considered that international investigation of the attacks is a positive step towards establishing the aggressor, and perhaps to take necessary action.

A question is how the attacks are likely to impact global oil prices. The drone attacks hit the world’s biggest petroleum-processing facility as well as a nearby oil field, both of which are operated by energy giant Aramco. Saudi Arabia’s state-owned company Aramco is the world’s biggest oil producer, generating 10% of the world’s oil, but it is also one of the world’s most profitable businesses.

The Saudi kingdom is the world’s biggest oil exporter, shipping more than seven million barrels daily. According to energy consultancy the Rapidan Energy Group, for example, by June this year, the Saudi government had around 188 million barrels of oil in reserves. But, because of attacks, oil production has plunged by 5.7 million barrels a day.

Together the oil productions account for about 50 percent of Saudi Arabia’s oil output. It could take weeks before the facilities are fully back on line. As is widely reported, the damage to facilities at Abqaiq and Khurais appears to be extensive, and it may be weeks before oil supplies are normalized.

Judging from experts’ analyses, the direct impact of the attacks could be short-lived. The fact that fixing these oil refineries may take longer than expected, the global fuel prices are likely to increase astronomically. Obviously, consumers around the world will face up to it. 

How should the world react if Iran is found responsible?

Already, Iran is facing a web of crushing US sanctions, targeting especially its oil industry. In any event, if the USA and perhaps its allies launch military strikes on Iran, there’s the likelihood of imminent catastrophic war in the region. It may trigger an all-out war in the Gulf region—one of the most volatile regions in the world. Any military confrontation would, in all probability, cause oil prices to go into freefall, as well as jeopardizing global peace and security.

What about Iran’s sovereign right to defend itself? 

First, regardless of ongoing war rhetoric, Saudi Arabia would need clear and convincing evidence establishing the elements of attribution in the law of responsibility before concluding that Iran has committed an act of aggression. Any Saudi military action against Iran would be lawful. 

However, Iran would, equally, have the right to strike back, hence a possibly full-blown war. Such a war would trigger the involvement of other countries, which would make matters extremely worse.

In case of convincing evidence that Iran was responsible, Saudi Arabia may use military force to defend its territory within its territory, air space, and territorial sea. It may also use counter-measures as set out in the law of state responsibility.

Furthermore, countermeasures are a violation of a right in response to a prior violation, so long as the countermeasure aims at inducing compliance, is necessary and proportional to the prior wrong and does not involve certain prohibited measures such as the use of force in violation of Article 2(4) of the UN Charter.

A wider conventional war as the result of tit-for-tat escalation is a nightmare scenario. The only way forward is to rebuild respect for a robust rule of law, which requires knowledge of the law on the use of force, countermeasures, and the peaceful settlement of disputes, within states and beyond. That would be a lawful, rational, non-escalator alternative.

The writer is a law expert.

The views expressed in this article are of the author.

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