Amidst of the several major issues, the global economy is facing- be it the US and China trade war or the recession phase of a few developing economies like India; the recent phenomenal attack on Saudi Arabia deemed as ‘act of war’ has definitely taken the world to a shock. The last Saturday will remain a black day in Saudi Arabia’s and widely, in global history. As per the sources, Iran attacked Saudi energy giant, Aramco on September 14, 2019 which has brutally affected the country’s economy. It was concluded by the sources that 7 cruise missiles along with 18 drones were deployed in the attack that was alleged to devastate the Abqaiq refinery. A team of the US security experts has claimed Iran’s involvement in the attack after going through the investigation of weapons debris. However, the scenario took a U-turn when Yemen’s Iran-aligned Houthi rebels came into picture admitting their involvement behind. There were major pieces of evidence revealing that Yemen could not be the source, as reported by a spokesman from the Saudi-UAE coalition. In the meanwhile, the US Secretary of State, Mike Pompeo has already accused Iran of the attack irrespective of the claimed responsibility for the attack by Yemen. The statement has created more tension between the countries to which Iran denied the accusations. Foreign Ministry spokesman Seyyed Abbas Mousavi responded by calling it as false allegation in a diplomatic context.
As far as the oil production and the destruction in Saudi Arabian refinery are concerned, around 5% of the global oil supply was affected. Adding to this, Saudi Arabia has been a major exporter of crude oil to various countries including the US, China, Japan, India, Singapore, and South Korea among others which consequently has affected these economies as well. The outage has led to the production loss recorded at 5.7 million bpd (barrels per day) on Saturday which ignited a notable increase in oil prices. The incident resulted in one of the steepest hikes in oil prices of the decade (after 2008), which initially surged to 20% but slowed down to nearly 14.6%. In support of the victim country, Donald Trump, the president of the US, declared to further increase the sanctions on Iran which are anticipated to shut the doors for trade between the countries. However, Trump did not make any direct accusations on the country by stating that it would be apt to wait for Saudi Arabia’s approval in the context of the attack. However, the country has not revealed much about the attack and the loss details. Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman only informed that the drop in the production would be recovered through tapping huge storage facilities.
Consequences on Major Economies:
Despite the US Secretary of State claiming this as an ‘act of war’, the country has by now become the largest oil producer which will only affect the country’s economy positively. By the time, Saudi Arabia will recover from the loss, the US can grab the ‘opportunity cost’ and may strengthen its global position in the oil and refinery industries. Apart from the US, countries such as China, India, Japan, and South Korea may witness a sudden hike in the crude oil prices as their reliance on Saudi Arabia for oil import will fluctuate the demand-supply flow in these economies. Though the country has onset to recover and claiming so within a short span of time, what can turn upside down in the meanwhile is- what if Saudi Arabia dependent economies turn to the US!
