Why is Saudi halting oil shipments through the Red Sea?

FILE PHOTO: General view of Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018. Picture taken May 21, 2018. REUTERS/Ahmed Jadallah/File Photo

By Stephen Kalin and Rania El Gamal

RIYADH/DUBAI (Reuters) – Saudi Arabia announced last week it was suspending oil shipments through the Red Sea’s Bab al-Mandeb strait after Yemen’s Iran-aligned Houthis attacked two ships in the waterway.

To date, no other exporters have followed suit. A full blockage of the strategic waterway would virtually halt shipment to Europe and the United States of about 4.8 million barrels per day of crude oil and refined petroleum products.

Western allies backing a Saudi-led coalition fighting the Houthis in Yemen expressed concern about the attacks, but have not indicated they would take action to secure the strait. That would risk deeper involvement in a war seen as a proxy battle for regional supremacy between Saudi Arabia and Iran.

THE YEMEN WAR

The threat to shipping in Bab al-Mandeb has been building for some time, with the Houthis targeting Saudi tankers in at least two other attacks this year. It is not unusual to reevaluate security after such an incident, but Riyadh’s announcement also carries a political dimension.

Analysts say Saudi Arabia is trying to encourage its Western allies to take more seriously the danger posed by the Houthis and step up support for its war in Yemen, where thousands of air strikes and a limited ground operation have produced only modest results while deepening the world’s worst humanitarian crisis.

“Rather than allowing these hostile maneuvers to go unnoticed in the eyes of the world, the Saudi (energy) minister has placed Iran’s subversions of the whole global economy under the spotlight for everyone to see,” said energy consultant Sadad al-Husseini, a former senior executive at Saudi Aramco. “The capture of the port of Hodeidah will go a long way towards putting an end to these disruptions.”

Hodeidah, Yemen’s main port, is the target of a coalition offensive launched on June 12 in a bid to cut off the Houthis’ primary supply line. After failing to make major gains, the coalition halted operations on July 1 to give the United Nations a chance to resolve the situation, though some fighting has continued.

The suspension of Saudi shipments – with the implied threat of higher oil prices – may also be aimed at pressuring European allies, who have continued to support the nuclear deal with Iran following the U.S. withdrawal in May, to take a stronger stance against Tehran’s ballistic missiles program and support for armed groups across the region.

There was no official confirmation that the move was coordinated with Washington but one analyst said it would be astonishing if it were not, given the strategic alliance between the two countries.

FILE PHOTO: Saudi soldiers walk by oil tanker trucks delivered by Saudi authorities to support charities and NGOs in Marib, Yemen January 26, 2018. Picture taken January 26, 2018. REUTERS/Faisal Al Nasser /File Photo

FILE PHOTO: Saudi soldiers walk by oil tanker trucks delivered by Saudi authorities to support charities and NGOs in Marib, Yemen January 26, 2018. Picture taken January 26, 2018. REUTERS/Faisal Al Nasser /File Photo

RAISE THE STAKES

No party has much appetite for an all-out conflict, but the situation can easily deteriorate. Both the Saudis and the Houthis appear to want to raise the stakes – with different goals in mind.

“The Houthis are trying to provoke a situation where there’s a great effort to negotiate an end to the war in Yemen,” said James Dorsey, senior fellow at Singapore’s S. Rajaratnam School of International Studies.

“The Saudis are trying to create a situation in which the U.S. would in one form or another significantly step up support … so that they can claim military victory.”

The risk is that one side miscalculates, eliciting a response that is stronger than anticipated.

“We’re just one missile away somewhere from getting into a more direct confrontation,” said Helima Croft, global head of commodity strategy at RBC Capital Markets.

OPTIONS FOR SAUDI OIL

Saudi Arabia announced it was halting oil shipments through the Red Sea “until the situation becomes clearer and maritime transition through Bab al-Mandeb is safe”.

It is unclear when that will be. But there may not be a big rush as the world’s top oil exporter has other ways to supply European and U.S. markets.

Redirecting ships around the southern tip of Africa would cost a lot more in time and money, making it an unlikely alternative.

Instead, Saudi Arabia will probably use the Petroline, or East-West Pipeline, through which it transports crude from fields in its Eastern Province to the Red Sea port of Yanbu for export to Europe and North America.

It could also charter non-Saudi ships to carry its oil through Bab al-Mandeb, as it does with Asian customers using different routes, industry and trading sources say.

POLITICAL SOLUTION NEEDED

Even before last week’s attack, shipping companies had taken extra precautions, including armed guards, more lookouts at sea, sailing faster and increased contact with international navies.

A January United Nations report said existing measures would not protect ships against attacks involving waterborne improvised explosive devices, anti-ship missiles, land based anti-tank guided missiles or sea mines.

Experts say the United States and other partners could provide naval escorts to tankers and take more steps to reduce the Houthis’ capacity to target shipping, including arms supplies and help with logistics, intelligence and targeting.

Increased naval patrols helped curb pirate attacks in the nearby Gulf of Aden a decade ago, but Western allies are less likely to get directly involved this time to avoid being dragged into the Yemen war.

While a military approach might deal with the threat to shipping, Elizabeth Dickinson at the International Crisis Group says the only real solution is a settlement to the war in Yemen, which remains elusive.

HOW MIGHT IRAN RESPOND?

After withdrawing from a 2015 nuclear agreement between Iran and world powers, Washington is now pushing countries to end imports of Iranian oil from November. Tehran has warned of counter-measures and threatened to block Gulf oil exports if its own exports are halted.

Despite exchanging bellicose threats with President Donald Trump, Iranian officials consider the possibility of a military confrontation with the United States “very low”. Some still believe in the possibility of direct negotiations, but several contacted by Reuters warned that Tehran’s response to a U.S.-initiated war would be costly.

“Our military power might not be equal to America’s but Iran’s non-conventional capabilities can and will be a blow to Americans, which will drag them into another quagmire in the region,” said a senior official who asked not to be named.

Besides disrupting the flow of oil in the Gulf, insiders say that in a direct confrontation, Iran could target U.S. interests from Jordan to Afghanistan, including troops in Syria and Iraq.

TANKER WAR UNLIKELY

During the “tanker war” of the mid-1980s, Gulf waters were mined as Iran and Iraq attacked oil shipments. U.S., British and other foreign forces escorted other nations’ tankers – with some Kuwaiti ships reflagging with the U.S. banner – and conducted limited strikes on Iranian maritime targets.

While the Saudis could fly different flags now to try to avoid Houthi attacks, analysts say that would undermine their efforts to project power in the region.

(For a graphic on ‘Oil transit chokepoints’ click https://tmsnrt.rs/2K3HPVf)

(Additional reporting by Jonathan Saul in London, Parisa Hafezi in Ankara and Yara Bayoumy in Washington; Writing by Stephen Kalin)

‘My life is in danger,’ North Korean leader’s half-brother quoted as saying months before poisoning

FILE PHOTO - Kim Jong Nam arrives at Beijing airport in Beijing, China, in this photo taken by Kyodo February 11, 2007. Picture taken February 11, 2007. Mandatory credit Kyodo/via REUTERS/File Picture.

KUALA LUMPUR (Reuters) – Kim Jong Nam, the poisoned half-brother of North Korean leader Kim Jong Un, told a friend in Malaysia his life was in danger six months before he was killed, a police official told a court on Tuesday.

Two women, Indonesian Siti Aisyah and Vietnamese Doan Thi Huong, have been charged with murdering Kim by smearing his face with VX, a banned chemical poison, at Kuala Lumpur airport on Feb. 13 last year.

Four North Korean fugitives have also been charged with murder.

Defence lawyers say the women thought they were playing a prank for a reality show, as they had been paid to do elsewhere at airports and shopping malls, and did not know they were poisoning Kim. They face the death penalty if convicted.

Kim arrived in Malaysia on Feb. 6 last year and was picked up at the airport by the driver of friend Tomie Yoshio, lead police investigator Wan Azirul Nizam Che Wan Aziz said.

The driver was instructed to take Kim to his lodgings and other places he wanted to go after Kim told Yoshio his “life was in danger” during a prior visit to Malaysia.

“Six months before the incident on Feb. 13, Kim Jong Nam said ‘I am scared for my life and I want a driver’,” Wan Azirul said, citing police interviews with Yoshio.

He did not give any other details about Yoshio or his whereabouts.

Gooi Soon Seng, Siti Aisyah’s lawyer, has argued the killing was politically motivated, with key suspects linked to the North Korean embassy in Kuala Lumpur, suggesting his client was being made a scapegoat.

Kim had criticized his family’s dynastic rule of North Korea, some South Korean officials have said.

Under questioning, Wan Azirul agreed with Gooi that the two accused women had no motive for the killing, but denied accusations that the police investigation had been “lop-sided”.

Gooi had earlier asked about Hong Song Hac, a North Korean who had paid Siti Aisyah to act on a prank show and was caught on airport video recordings fleeing the country on the day of the killing.

Hong, one of the four North Koreans charged with the murder, was an official with the North Korean embassy in Indonesia from 2016 to 2017, Gooi told the court, citing records obtained from Indonesia’s foreign ministry.

Wan Azirul could not confirm Gooi’s assertion, admitting he had not looked into Hong’s background despite naming Hong as a suspect.

The trial resumes on Mar. 14.

(Reporting by Rozanna Latiff; Editing by Nick Macfie)

Hundreds Forced To Flee California Wildfires

Wildfires in California have forced over a thousand residents to flee their homes and have put hundreds of homes in danger.

A blaze near a lakeside resort town has burned almost two-dozen buildings.  The California Department of Forestry and Fire Protection says the fire near Bass Lake in Central California hit one neighborhood especially hard and destroyed several homes.

The fire started in a road near Oakhurst just south of a Yosemite National Park entrance.  The fires quickly progressed to Bass Lake because of strong winds.  The fire burned over 320 acres according to CalFire.

Over 400 homes are considered to be in danger form the flames.

Another fire burning about 60 miles outside of Sacramento has forced 133 homes to be evacuated.  CalFire spokesman Daniel Berlant said that the fire has burned 4.7 square miles and is 10 percent contained.  He attributed the fire’s rapid growth to a canyon full of thick, dry brush.

Fire officials say a heat wave in the area is making the conditions to fight the flames almost unbearable.  At least six firefighters have been wounded in fighting the flames.