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Monday, August 01, 2005

OPI UPDATE: AL QAEDA, SAUDI ARABIA, AND THE DEATH OF A KING

Reeling already from a spate of refinery shut-downs in the U.S. and Europe over the weekend, the last thing the oil markets needed was a shot of geopolitical instability. But that is just what it got with the death of King Fahd of Saudi Arabia on Monday. Although the King long has been ailing and his successor Abdullah long determined, no Saudi succession is without its share of risk and intrigue, and this risk and intrigue has already sent the price of oil to a record high over $62 per barrel. While it is unlikely that any serious instability –whether through risk or intrigue—will ensue, the oil markets will spend a nervous few days watching the headlines out of the Middle East.

On the risk side –the side of most immediate concern to the oil markets—the question is whether or not al Qaeda will be able to muster a reaction to the passing of the king. There is no question they would like to. The hallmark of al Qaeda’s attacks has been their coordinated, symbolic character, and times of government succession –especially in monarchies—are times of both weakness and symbolism. In addition, Saudi Arabia is second only to the U.S. in terms of importance as a target for attack. It is the land of the two holy cities, a lynch-pin in the world economy, and an ally of the west. Osama bin Laden and the al Qaeda leadership dream, no doubt, of one day taking control of Saudi Arabia and its vast oil wealth.

Indeed, al Qaeda has worked hard since September 11 to destabilize the government there. Scores of Saudi’s and over a hundred foreigners have been killed in the country in sporadic attacks and abductions since 2003. During the spring of 2004 there were gun battles on an almost daily basis between militants and Saudi Security forces, briefly forcing many foreign companies there to rethink there work in and for the Kingdom. There are still thousands of al Qaeda sympathizers sprinkled throughout the population with the potential to create serious instability should al Qaeda be able to create momentum with a successful attack on the government or infrastructure.

While al Qaeda never quite has been able to galvanize the population, they have not stopped trying. Al Jazeera broadcast a videotape June 17 in which, Ayman al-Zawahiri, al Qaeda’s second in command condemned the recent push for democratic reform in the Middle East, singling out the governments of Egypt, Pakistan, and Saudi Arabia and their recent democratic reforms. The terror attacks which killed dozens in Egypt in July testify to the seriousness of that threat. And al Qaeda desperately needs another big win to keep its recent momentum going. The attacks in London and in Egypt are likely a last gasp effort of sorts to regain credibility in its flagging struggle against the West.

If there is going to be an attack in Saudi Arabia we should know very soon. A coordinated, symbolic attack would be triggered by the King’s death. Either the cell and plan are in place, or they are not. If they are and the plan is successful, we can expect oil prices to jump to the mid $60 range. If in the very unlikely event that an attack seriously damaged the oil infrastructure, the price would obviously go much higher.

So, until this risk has subsided with a few weeks time the markets will be jittery. But what about intrigue? Is there any palace intrigue that could shake the oil markets as well? Much less likely so. The line of succession is clear. There are no sharp disagreements within the government. In the coming months and years, however, there will be tension as the Sudeiri clan –the direct descendants of the country’s founder—seek to ensure that line of succession stays with them, even though the King Abdullah is only the half-brother of King Fahd. This clan includes current Interior Minister Prince Nayef and his younger brother Prince Salman, along with Crown Prince Sultan.

But internecine intrigue such as this, as enthralling as it may be to the world’s Saudi watchers, will not impact oil markets nearly so much as the fear of attack in the weeks to come.

2 Comments:

At 1:12 PM, Blogger David Amulet said...

Nice analysis! I wonder if al-Qaeda of other terrorists have ever timed any strikes to the period right after transfers of power. Sure, we have the Spanish case of an attack right before an election ... but I don't recall any big attacks worldwide actually timed to take advantage of the chaos AFTER political transitions. Would be interesting if they did -- and if they had an impact on the markets! -- David Amulet at DavidAmulet.blogspot.com

 
At 5:05 PM, Anonymous androstenone said...

where can i get more info?

 

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