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Iranian Drones

Rich Galen

Monday September 16, 2019

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  • Someone launched an attack that, according to the New York Times, damaged "facilities [in Saudi Arabia] that process the vast majority of the country's crude output and raising the risk of a disruption in world oil supplies.

  • As I write this, on Sunday night, it is not clear (a) from where the drones were launched or (b) which country is, at bottom, responsible.

  • The smart money is on Iran.

  • The facilities process more than five percent of the world's oil. The world uses about 100 million barrels of oil per day, so this represents a disruption, according to the Saudis, of 5.7 million barrels of oil per day.

  • The targets were two facilities, the Abqaiq processing plant and the Khurais oilfield in the eastern portion of Saudi Arabia, not far from Bahrain in the Arabian Sea.

  • Oil is a commodity and commodity prices are supposed to be set by supply and demand. Even though only five percent of oil production has been (at least temporarily) lost, last night Brent Crude settled at an increase of about 13 percent. West Texas Intermediate was similarly up about 12 percent as of 8 PM Sunday night.

  • If you didn't fill up over the weekend, expect to pay more at the pump as we move through the work week.

    SIDEBAR

    Brent Crude and WTI are the two major benchmarks for oil pricing.

    Brent Crude is generally oil produced in the North Sea and is the benchmark for non-US oil. West Texas Intermediate (normally known by its abbreviation, WTI) is the benchmark for the lighter oil produced in the U.S.

    Other benchmarks are Dubai crude, Oman crude, Urals oil, and the OPEC reference basket.

    END SIDEBAR

  • Secretary of State Mike Pompeo, without providing any evidence, quickly blamed Iran - perhaps having provided the weapons to Yemen, a charge that Iran denied.

  • Donald Trump was less specific, Tweeting at about 7 PM Sunday night:
    "Saudi Arabia oil supply was attacked. There is reason to believe that we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the Kingdom as to who they believe was the cause of this attack, and under what terms we would proceed!"

  • Trump also Tweeted that he had authorized the release of oil from America's Strategic Petroleum Reserve to help stabilize prices and "I have also informed all appropriate agencies to expedite approvals of the oil pipelines currently in the permitting process in Texas and various other States."

  • According to the Wall Street Journal, the Saudis have said it will take about two weeks to bring those facilities back on line and return to full capacity, which is probably faster than the U.S. can build pipelines.

  • The U.S. government released a photo of the damage that government experts, again via the NY Times:
    "said were at least 17 points of impact at several Saudi energy facilities from strikes they said came from the north or northwest. That would be consistent with an attack coming from the direction of Iran or Iraq rather than from Yemen, where the Iranian-backed Houthi faction claimed responsibility.

  • One official talking about whether the attacks were by drones or cruise missiles said "both and a lot of them."

  • Why would Iran do this?

  • Reuters reported earlier this month that,
    "Iran's crude oil exports were slashed by more than 80% due to re-imposed sanctions by the United States after President Donald Trump exited last year Iran's 2015 nuclear deal with world powers."

  • To that end, the Washington Post reported that "many within Israel's security community were ready to see Teheran's fingerprints on the sophisticated attack."
    "They are trying to prove what they have said in the past," said Amos Yadlin, a former chief of Israeli military intelligence. "That if they are not going to export oil, no one will export oil."

  • If John Bolton had not left his post as National Security Advisor last week there is every reason to believe he might have volunteered to reprise Slim Pickens' wild ride at the end of the 1964 movie, Dr. Strangelove.

  • On the Secret Decoder Ring page today: Links to the NY Times and Washington Post coverge of the Saudi Attack, a map of Saudi Arabia showing where the affected facilities are, and the clip of Slim Pickens' wild ride at the end of Dr. Strangelove.

    The Mullfoto is of a doctored sign outside a women's locker room.

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