On September 16, we have seen the highest one-day oil price jump within last 30 years. The reason for such a violent market reaction was a terrorist attack on refineries located in Saudi Arabia. 17 strikes with drones damaged installations belonging to Aramco - the largest oil supply company in the world. The attacks reduced production by 5.7 million barrels per day, reducing the global supply of this commodity by almost 6%.

An attack on such a large scale could not remain unanswered by Saudi Arabia and its allies (United Arab Emirates and United States). Of course, all three countries have jointly and severally ruled that Iran is guilty, trying to destabilize global oil supplies in response to sanctions.

Iran denies everything and has good reasons for doing so.

 

Yemen

The attack was claimed by Houthi from Yemen, who in 2015 took over headquarters of the authorities and defacto gained control of the state. Military operations in Yemen have already claimed several thousand of victims. The humanitarian disaster caused by Saudi Arabia's and U.S. embrago killed over 50,000 people.

Food in Yemen is mainly imported. The country cultivates only 5% of the wheat it consumes. The coalition, led by Saudi Arabia, disrupted the supply of food and energy flowing into Yemen. Imposing a sea blockade reduced food imports by around 80 percent. Assistance provided to starving civilians by humanitarian organizations was either stolen or unfit for consumption.

Yemen has been hit by the worst cholera epidemic ever recorded in this region. Over 1.2 million people fell ill and around 2,500 people died. Cholera causing severe diarrhea which spreads due to poor sanitation and lack of clean water. The embargo on fuels sent to Yemen reduced the activity of sewage treatment plants and thus deprived civilians of drinking water. The infection is usually easily fought by replacing lost fluids, but in the current situation it is impossible.

The extent to which Yemen's needs are to provide civilians with basic living conditions is illustrated in the graphic below:

source: Worldwide Threat Assessment 2019/Office of the Director of National Intelligence

In almost 30 million country, 22 million people need humanitarian assistance, and 16 million have limited access to drinking water and proper sanitation. Over 15 million people (50% of the population) are starving. Most people know nothing about this because Yemen is not an ally of the U.S.. Their suffering is not publicized. Imagine if the media would react if 500 Israelis died as a result of Iran, Russia or China. Only 1% of what is in Yemen.

Yemen definitely had the motive to attack refineries. Not only that, Houthi have already announced further attacks in the UAE. The United States doesn't seem to notice it.

Secretary of State in the Trump administration - Mike Pompeo: "Amid all the calls for de-escalation, Iran has now launched an unprecedented attack on the world's energy supply. There is no evidence the attacks came from Yemen."

Why is the United States directly accusing Iran of helping to carry out the attacks, even though Yemen is admitting it? This is what their Middle Eastern alliance and "national interest" require.

 

Saudi Arabia and the UAE

The port blockade that led to the humanitarian disaster in Yemen has been declared illegal, yet the U.S. continues to support militarily both Saudi Arabia and the United Arab Emirates.

According to the UN convention, port blockades are unlawful if their impact on civilians is disproportionate to military benefits. UN investigators reported that a search of Yemeni ports did not reveal any compelling reasons justifying further blockade. No smuggling of weapons or other hazardous materials have been detected there.

At the beginning of 2018, Germany suspended arms exports to Saudi Arabia and its ally - the United Arab Emirates. Norway has ceased exporting arms to the United Kingdom, which also supports the Sauds militarily. Unfortunately, U.S. shipments are intact.

Saudi Arabia is a major U.S. arms buyer. United Arab Emirates is in the 3rd place.

Saudi Arabia is like a country in the Middle Ages, where people are publicly slaughtered in stadiums just for showing disobedience to the royal family. The Saudis could not rule if they would not maintain a strong army. Saudi Arabia is the only country in the world that spends more than 8% of its GDP on armaments (!). For comparison, 2nd in the ranking Israel spends just over 4%.

It is in the interest of the United States to support its allies not only for political reasons and control over the region, but also for purely economic reasons. On the other hand, the more often Saudi Arabia, the UAE and Israel are involved in armed conflicts, the better for the U.S..

Saudi Arabia and the United Arab Emirates are also key countries because of the oil price control. The U.S. has recently become the largest producer of oil in the world (see chart), but it is not able to control its prices on its own.

To this end, they use the countries associated in the OPEC oil cartel, mainly Saudi Arabia and the UAE. In fact, the high price of crude oil in the U.S. is currently in their favor because it gives them an advantage over countries without this commodity. It is because of oil that Saudi Arabia and the UAE remain a strategic partner for the U.S.. Iran, which does not agree oil prices with Washington, is not.

 

Iran

The country of proud Persians have over 80 million population. Since 1978, that is since the Iranian Revolution, it has been portrayed in the Western media as the source of all evil. Accused of supporting terrorism and causing armed conflict. In fact, Iran in over 200 years has not invaded another country. For comparison, the U.S. after World War II has been involved in 27 armed conflicts, of which in most cases served as an aggressor.

Mainstream media accuses Iran of supporting terrorism and secretly developing a nuclear program. These are officially the main reasons why sanctions are imposed on Iran. However, the real ones are not mentioned. Iran is financially independent. It operates in isolation from central banks controlled by the BIS from Basel. In addition, Western corporations do not profit from the sale of Iranian oil, and it may turn out that Iran will significantly impede their operation.

Iran is able to control the Strait of Hormuz, through which most oil tankers from the Middle East flow. It is estimated that on average 15 tankers a day pass through the strait, transporting about 17 million barrels of oil. It is 40% of the commodity sea transport and 20% of all oil transport in the world. This is the only waterway that allows oil transport from the Persian Gulf. The blockade of the strait even for a few days would completely shake the oil market and the global economy, which is currently still driven mainly by hydrocarbons. Iran is capable of such a blockade.

The U.S. and Saudis know this and they don't like it. Currently, Iran is surrounded by 40 bases where U.S. troops are stationed. They are accused of trying to obtain nuclear weapons (which is not proven, as was the case of Iraq) and harassed by sanctions. Currency attacks have generated over 40% inflation. It is not surprising that Iran feels threatened.

Persians, however, are not the same as Iraq or Libya. They proved this during the 5-year conflict caused by Saddam Hussein. Iran did not even give a square meter of its land, despite the fact that victims on both sides were estimated in hundreds of thousands. Iran has already announced that any interference by foreign forces on its territory will end in a total war. In practice, this means the blockade of the Strait of Hormuz and an attack on allied forces from the U.S., including Israel. It should also be taken into account that Russia and China will be on Iran's side, perhaps also Turkey.

 

Israel

When comparing the military involvement of different countries, it is also worth mentioning Israel's infamous position. It falls only slightly "worse" than the U.S.. From 1945, Israel participated in 15 armed conflicts. The main battles were with Palestine, which the Jewish State practically wiped off the face of the earth. What the partition of territory between Israel and Palestine looked like from 1946 is shown in the graphic below (green is Palestine, white Israel):

source:https://socialistorganizer.com/

The MSNBC broadcasting station in the U.S. had to apologize for publishing a similar map, because according to Israel, the Palestine state did not exist in 1946. It turns out that the Jews fought with themselves.

Israel is one of five nations in the world that refuse to sign the "Treaty on the Non-Proliferation of Nuclear Weapons". SIPRI - an independent organization overseeing the trade and proliferation of nuclear weapons, has recently published a report showing that Israel has almost a hundred nuclear warheads, far more than previously anticipated. According to the report, the Jewish State has 30 gravity bombs carried by fighters, 50 warheads supplied by land based ballistic missiles and an unknown number of self-guided missiles launched from the sea.

The map below shows all countries with a nuclear arsenal. It shows that in addition to the obvious powers like U.S. or Russia, 2 European countries (United Kingdom and France), but also China, India, Pakistan, and recently also North Korea have nuclear weapons.

Israel, like North Korea, has consistently refused to provide any information about the state of its arsenal. This policy, which has been implemented years ago, does not arouse opposition from both the U.S. and the UN. Meanwhile, Iran (which does not have nuclear weapons) is sanctioned on any pretext.

During a speech in August 2018, Israeli Prime Minister Benjamin Netanyahu has threatened to use nuclear weapons to "wipe out" Israel's enemies. At the same time, Netanyahu and its allies in the U.S. are accusing Iran of developing a nuclear program. Israel's perversity have no bounds.

 

Summary

Israel is next to Saudi Arabia, the strongest U.S. ally in the Middle East and has been threatening Iran with invasion for years. If this really happened and Israel would use nuclear weapons, it would not take long for a response from China and Russia. No power will allow itself to do so near its own borders. It looks like Trump and his administration have gone too far this time. Of course, you can doubt whether a real conflict will actually occur, but you need to consider this possibility.

We do not want to scare anyone, but only show how small, in fact, the event in the form of a drone attack on the refinery can have the snowball effect. Lead to a situation where oil prices, investments or trade cease to matter.

 

Independent Trader Team