Saudi Arabia oil minister Khalid Al Falih on Tuesday called on the international community to stand up to Iran’s threats to global energy security.
The Saudi official told CNN that the kingdom has ample spare capacity to offset Iranian barrels sidelined by US sanctions, but the bigger risk comes from potential conflict in the region.
“I am concerned though about the security of oil supplies from threats from state and non-state actors that we’ve seen,” Al Falih told CNN Business’ John Defterios from the sidelines of the OPEC meeting in Vienna.
He cited recent attacks on oil tankers and pipelines blamed on Iran as well as drone attacks from militias that are agents of Iran.
“That’s putting the global energy supply at risk,” said Al Falih, who leads energy policy in Saudi Arabia, the world’s largest oil exporter and the de facto leader of OPEC.
Saudi Arabia and Iran have been political enemies for decades. Iran is funding Houthi rebels in Yemen, with whom Saudi Arabia is at war.
Rising tensions in the Middle East between Iran and the United States have raised fears of a clash near the Strait of Hormuz, the most important chokepoint for oil transit in the entire world. Nearly one-quarter of daily global oil production goes through the Strait of Hormuz.
“We are going to do all that is necessary to defend our territory, our assets, our shipping lanes and make sure that the energy security of the world is not taken hostage by any regime,” the Saudi oil minister told CNN.
Iran has vehemently denied any involvement in the tanker attacks, which Tehran has called “suspicious.”
Oil could be above $100
Al Falih said that Saudi Arabia has successfully defended “hundreds of attempts” to target the kingdom’s energy infrastructure. It’s unclear who Saudi Arabia believes was behind those dozens of attempted attacks. Nonetheless, al Falih urged collective action to protect vital energy supplies.
“The world has to take note of what is going on and join us in condemning and defending the world’s energy supplies. The kingdom cannot do it alone,” Al Falih said.
Although oil prices have climbed in recent weeks in response to the tensions in the Middle East, the crude rally has been modest.
In fact, OPEC and its allies led by Russia agreed this week to extend production cuts put in place to support prices. US oil prices plunged 4.8% on Tuesday to $56.25 a barrel.
Asked why prices haven’t spiked more, Al Falih said it signals a “vote of confidence in Saudi Arabia” and the kingdom’s ability to defend itself. He also credited Saudi Arabia’s statements to “calm the market.”
“If we didn’t take the measures we took, oil would be in the triple digits, easily,” Al Falih said.
The Saudi official expressed hope that war with Iran can be avoided. He noted that while “everybody loses” in a conflict, “certainly the Iranians would [have] the most to lose.”
Saudi Arabia: We’re not eliminating OPEC
In addition to extending its production cuts, OPEC on Monday moved towards making permanent its alliance with Russia and other non-OPEC nations. After five hours of wrangling, OPEC agreed in principle to formalize a charter for cooperation with non-member producers.
Al Falih acknowledged that the meeting was delayed by disagreement over the charter, though he stressed that the cooperation does not diminish OPEC.
“We look at this as simply broadening the envelope and not eliminating OPEC,” he said. “OPEC remains at the center.”
Iran has taken issue with the enormous sway that Russia and Saudi Arabia have over OPEC’s decision making. Unilateral decision making is “threatening the existence of OPEC,” Iranian oil minister Bijan Zanganeh warned on Monday.
“OPEC might die,” Zanganeh told reporters, according to the Financial Times.
OPEC’s decision to bring Russia into the fold reflects the oil cartel’s shrinking market share.
The United States is now the world’s leading oil producer, making it more challenging for OPEC to manage distortions in supply and demand. Powered by the shale revolution, Texas will soon pump more oil than any OPEC member besides Saudi Arabia.
Al Falih signaled there is room for US production, which he credited with offsetting declines in Venezuela and elsewhere.
“We’ve been able to accommodate it, while trying to make sure that we have an optimum economic environment for all producers to be healthy and to grow,” he said.
