Writing in the Australian paper The National, Roger Stern and Bernard Haykel see the current situation in Iran as similar to the twilight of the Soviet Union:
Next, the kingdom should reprise its greatest peacemaking performance: the 1986 oil price collapse. Saudi Arabia has been given little credit for this effort, which secured western victory over the Soviet Union in the Cold War. Here’s the story: while some other Opec members cheated on their quotas by overproducing in the early 1980s, Saudi Arabia cut its production to defend the price of oil. In 1985, after years of sacrifice, the Saudis reversed course and opened the taps to regain market share. The consequent price collapse bankrupted the Soviet Union, which relied on oil for its only hard-currency earnings.
Iran’s situation now is like the Soviet Union’s then. If it does notcomply immediately with international demands for transparency onweapons development, Saudi Arabia could force a drastic reduction ofIran’s revenue by producing some or all of its four million barrels aday of spare capacity. Iran’s Opec production quota violations haveapproached historic highs, so there is a strong precedent for such aSaudi production increase.
Of course, Saudi Arabia relies on oil earnings just as Iran does,but it has nearly half a trillion dollars of currency reserves, morethan enough to defend its budget even if revenues decline for a while.Most Gulf states enjoy comparable finances. Iran, by contrast, spendsalmost all its revenue trying to buy off dissent. Any revenue declineis a threat to the emerging Iranian police state.
Subscribe by Email
2 Comments
You however are ignoring the fact that the key Saudi Oil Fields (Ghawar and Qatif) and Refineries (Ras Tanura) are literally visible with the naked eye from Iran’s Persian Gulf coast. They are easy targets for Iran’s conventional short-range missiles which, if knocked out, would send the price of petrol soaring to unbelievable unseen heights.But heck, Iran doesn’t really need to launch a missile strike, incurring the wrath of the west and creating global economic turmoil. The overwhelming majority of Saudi Arabia’s oil production and refining is located around الشرقية (The Eastern) province. Over 75% of the population belong to Saudi Arabia’s significant Shia minority and are close to Iran. They can do the job as a proxy themselves.Guess the Soviet Union didn’t have that advantage in 1986.
A glance at global oil production stars at the time shows that the Saudis didn’t increase production much at all. The big driver was the rapid exploitation of North Sea oil by the Brits. They exported lots of oil at $10/barrel. Of course, the North Sea peaked for the Brits in 1999, and net imports began for the Brits in 2004.Now they get to import oil at $60+ a barrel.Pretty dumb of Maggie Thatcher to do that. Now the Brits are well and truly screwed, economically.