No Oil Means No Money And No Future For Saudi Arabia
The fighting in the Middle East has expanded during the last 10 days and the situation is getting out of hand. While Iran has continued hitting oil tankers and cargo ships, and threatening others to turn back from transiting the Strait of Hormuz, there are even more serious developments in Yemen.
The nation of Yemen has been broken into several areas of control over the last few years, with the Houthis controlling more than 70% of the population and the capital Sanaa. The rest of the nation is held by the Presidential Leadership Council which mostly controls the desert areas, the Southern Transition Council which controls Aden, and the rest of the country has tribal factions and warlords controlling largely unpopulated areas.
The Houthis have used ingenuity, drones and lightening attacks to take the city of Mocha and the entire Yemen coastline along the Red Sea, along with some important islands in the Bab al-Mandab Strait. The Houthis are continuing to attack inside Yemen, towards the cities of Marib and Taiz. Marib is an important area that is one of the few regions of Yemen that produces revenue via their oil producing fields.
As if that wasn't enough, the Houthis are attacking targets in Saudi Arabia, including oil tankers, oil pipelines and pumping stations, airports and infrastructure. Saudi Arabia is trying to bomb Yemen to slow the Houthis but those airstrikes have had little to no impact.
On top of the Houthis, there are Iranian-backed Shia fighters in Iraq that have launched drones that have hit important targets, mainly the petroleum pumping stations in Saudi Arabia. These fighters are a very diverse group of organizations, but most of them fall under the banner of the PMF (Popular Mobilization Forces) which are mostly loyal to Iran.
Saudi Arabia is being hammered on all fronts and by multiple enemies. Drone strikes from Iraq, drones and missile strikes from the south, and Iran not allowing commercial shipping to pass out of the Persian Gulf. Many of the fighters trying to hold back the Houthis in Yemen are proxy force hired by Saudi Arabia and from all reports those largely mercenary forces are not doing well. Many of them have been captured, killed, wounded, or forced to fall back from the advancing Houthis.
The biggest loss for Saudi Arabia isn't their fighters or their infrastructure, but the loss of income. The lifeblood of Saudi Arabia is their oil and gas exports, but with the Houthis controlling the Red Sea and the Iranians controlling the Persian Gulf, and with both of them blocking nearly all commercial shipping, it has Saudi Arabia in a true bind. And the longer this situation continues, the greater the danger the kingdom will find itself in.
The oil revenues pays for just about everything in Saudi Arabia. Whether it's the construction industry, the retail and hospitality elements, healthcare, government services, all of it leans heavily on the consistent flow of money from oil exports. Now without that oil money the question will quickly become how does the nation pay its bills? And there will be knock-on factors that cascade from the continued fighting and lack of petroleum sales.
One problem will be tourism which makes up about 5% of the Saudi economy. Not many people will want to travel to a country where the airports are being hit with drones. A larger problem will be finance, over the last few decades Saudi Arabia has become a major banking, finance and investment hub. But how many international investors will want to keep their money in a nation that's suffering new infrastructure damage, not to mention losing a proxy war on their doorstep and waiting for the looming potential of the Iran War sending hypersonic missiles to destroy more targets in the country?
Saudi Arabia was never meant to suffer through a siege. The kingdom was always good at spending money, building opulent buildings and mansions, buying fancy cars and jewelry, basically living a super luxury lifestyle. Their armed forces are weak, and they depend on low quality foreign fighters. The Iranians and Houthis are not weak and they are not happy about the House of Saud letting the US Military use the kingdom to help attack Iran.
How does the problem resolve? Not well. Especially if both Iran and the Houthis continue on their current path. Saudi Arabia will have to start liquidating assets to get money to pay for their daily operations and services. Does Saudi Arabia have enough food to feed the 35 million people living there? How well can the kingdom truck or fly in the food that's needed? What about spare parts, chemicals, medical supplies and consumer products? Seems like a dangerous spot to be in right now with few potential fixes besides somehow bringing the fighting to an abrupt end.
Is it too soon to begin talking about the viability of the House of Saud? Probably. They have built-up a lot over the last 50 years and it should be able to tolerate a decent setback. But it's a question of how much pain can the people of the kingdom take? They've lived very comfortable lives for a long time. Now they have entered into a time of suffering, fear and scarcity which will not be easy to handle. Depending on how hard the Houthis and Iranians turn the screws will probably determine the outcome.
In the modern era the Saudi family has ruled Saudi Arabia since September 23, 1932. That'll be 94 years in power in just a few days. It's an interesting thought to wonder what the nation will look like on Sept. 23, 2027 - the nation and the people there could be a dramatically different situation than they are today.