So far, nobody knows how intense the American and Iranian crisis could get. The US insists that it possesses concrete proof and palpable confessions that Iran plotted to assassinate the Saudi minister to Washington. Iran nonetheless said that this is an old American joke.
Mr Soud Elfaisal foreign minister of Saudi Arabia said that his country will spare no effort to proportionally respond to the Iranian pressures, stressing that the US would not have made such accusations and spark an international campaign had it not had concrete and irrefutable evidences against Iran.
Iran and Saudi Arabia for decades have been rivals in the Muslim world, Iran as the protector of Shia Muslims, Saudi Arabia as the pre eminent Sunni power. Iran's regional clout has grown in recent years. But the Saudis have an advantage of their own, in the global oil market, where both countries are big players.
While Iran is producing all the oil it can and needs all the oil money it can earn, the Saudis have spare capacity. If they want to drive the price of oil down, they can increase production. A lower oil price would hurt Iran more than it would hurt the Saudis because Iran depends so much more on its oil income.
Mr Mohsen Milani an expert on Iran at the University of South Florida said that "The Iranian economy is indeed ailing, and it's vulnerable. If the Saudis can manage to bring down the price of oil significantly, they could hurt Iran. It would be nonviolent but effective retaliation for the alleged Iranian effort to assassinate one of Saudi Arabia's leading diplomats. In fact, if the Saudis were to increase their oil production to the maximum it could hurt Iran disproportionately.
Ms Reva Bhalla director of analysis at Stratfor, a private intelligence firm pointed out that Iran and Saudi Arabia compete directly selling to the same customers. Most of that Saudi output would be going to Asia which is Iran's primary market and would be of relatively similar grade, so the Saudis would be hitting both Iran's main customer base and its product type.
It's not clear whether Saudi Arabia really could punish Iran economically right now. The question is whether it could boost oil production enough to drive the price down to a point where Iran's oil revenues would be significantly affected. Many of the presently unused Saudi oil facilities have been out of commission for some time. And a long term effort would be needed.
Ms Bhalla said that "They would have to sustain that level of production for a while to make a significant dent in price and deal most importantly with the repercussions from Iran in that kind of trade war."
Among the possible repercussions Iran could threaten to close the Straits of Hormuz, through which 60% of Persian Gulf oil currently has to pass. In sum while Saudi Arabia is theoretically in position to use its oil capability against Iran, the practical issues around doing that are enormous.
Mr Daniel Yergin chairman of IHS Cambridge Energy Research Associates said that "It's a very blunt weapon, very uncertain in terms of its impact, how low the prices go, who else is affected. So this is not something that can be a fine-tuned policy."
(Sourced from www.albawaba.com)
