Amidst cold war conditions between Saudi Arabia and Iran, oil prices continue to fall for the world’s biggest oil producer.
Saudi Arabia continues to battle to adapt to a crude oil price drop of 70 percent since June 2014, according to the Wall Street Journal. Furthermore, CNBC reported on Wednesday that at this rate, Saudi Arabia could be bankrupt within years, and perhaps as early as 2018.
On Tuesday, the Kingdom’s petroleum minister, Ali al-Naimi, said that producers may meet next month to discuss an output freeze, but that he refused to cut production. At a speech at the IHS CERAWeek Oil Conference in Houston, Naimi said that “most of the countries that count will freeze.”
He added that this would include their rival in the Middle East, Iran, whose oil minister has already openly mocked Saudi Arabia’s suggestion of a freeze. Oil prices dove a further five percent to $31.75 a barrel following these remarks.
The decline in oil prices are the latest development in a tension-fuel few months between Saudi Arabia and Iran. At the beginning of the year, Iranian protesters attacked a Saudi embassy in Tehran, which prompted Saudi Arabia to sever diplomatic relations with Iran on January 3. The attack was motivated by outrage following the Saudi execution of 47 “terrorists,” including Nimr al-Nimr, a Saudi Arabian cleric from the Shia minority.
As an anti-Saudi Government symbol and leader for the religious minority, Nimr’s arrest in 2012 had escalated tensions between the two Middle Eastern nations. However, Max Fisher from Vox World points out that the rivalry is much less about Sunni-Shia religious conflict than it is about securing dominance in the Middle East.
This struggle for regional influence increases both nations’ stakes in the wars in nearby Syria and Yemen. The Independent reported earlier this month that Saudi Arabia intends to supply troops and aircraft to Turkey for a ground mission, which are now in use by the US Air Force. Again, this mission is believed to be concerned with supporting Sunni rebels rather than fighting ISIS.
A report published in The Guardian on Tuesday showed Saudi Arabia to be one of the world’s biggest importers of weaponry, buying 5.6 billion pounds worth of arms from the UK in the past five years. If current predictions are to be believed, however, plunging oil prices can send Saudi Arabia into financial strife and further regional conflict.
Oil minister Ali al-Naimi believes the industry can recover, claiming that the Kingdom can profit from oil at prices as low as $20 a barrel. “We don’t want to, but if we have to, we will,” concluded Naimi.