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Exclusive: In Saudi Arabia, criticism of Crown Prince grows after attack

By Reuters staff reporters

(Reuters) – Some members of Saudi Arabia’s ruling family and business elite have expressed frustration with the leadership of Crown Prince Mohammed bin Salman following the largest-ever attack on the kingdom’s oil infrastructure last month.

It has sparked concern among several prominent branches of the ruling Al Saud family, which numbers around 10,000 members, about the crown prince’s ability to defend and lead the world’s largest oil exporter, according to a senior foreign diplomat and five sources with ties to the royals and business elite. All spoke on condition of anonymity.

The attack has also fanned discontent among some in elite circles who believe the crown prince, known in the West by the initials MbS, has sought too tight a grip on power, the sources said. Some of these people said the event has also fueled criticism among those who believe he has pursued an overly aggressive stance towards Iran.

“There is a lot of resentment” about the crown prince’s leadership, said one of the sources, a member of the Saudi elite with royal connections. “How were they not able to detect the attack?”

This person added that some people in elite circles are saying they have “no confidence” in the crown prince, an assertion echoed by the four other sources and the senior diplomat.

The crown prince nonetheless has staunch supporters. A Saudi source within circles loyal to the crown prince said: “The latest events won’t affect him personally as a potential ruler because he is trying to stop the Iranian expansion in the region. This is a patriotic issue, and so he won’t be in danger, at least as long as the father lives.”

A second senior foreign diplomat said ordinary Saudis still want to unite behind MbS as a strong, decisive, dynamic leader.

The Saudi government media office did not respond to detailed questions from Reuters for this article.

The crown prince, during a television interview aired Sunday by U.S. broadcaster CBS, said that defending Saudi Arabia was difficult because of the kingdom’s large size and the scale of threats it faces. “It’s challenging to cover all of this fully,” he said. He also called for “strong and firm” global action to deter Iran but said he preferred a “peaceful solution” to a military one.

FUELING RESENTMENT

At stake is political stability in the world’s largest oil exporter, a key ally of the United States in the Middle East. The crown prince is officially next in line to the throne to his 83-year-old father, King Salman, and is de facto ruler of the country. He has vowed to transform the kingdom into a modern state.

The 34-year-old crown prince, who is popular among young Saudis, has received praise at home for easing social restrictions in the conservative Muslim kingdom, granting women more rights and pledging to diversify Saudi Arabia’s oil-dependent economy. But state control of the media and a crackdown on dissent in the kingdom make it difficult to gauge levels of genuine enthusiasm domestically.

The September 14 attack set ablaze two of state oil giant Saudi Aramco’s plants, initially knocking out half of the kingdom’s oil production — 5% of global oil output. Saudi Arabia has said Iran was responsible, an assessment that U.S. officials share. Iranian officials have denied involvement.

“The magnitude of these attacks is not lost on the population, nor is the fact that he (the crown prince) is the minister of defense and his brother is deputy defense minister, and yet arguably the country has suffered its largest attack ever and on the crown jewels,” said Neil Quilliam, a senior research fellow at Chatham House, a London-based international affairs think tank.

“There’s diminishing confidence in his ability to secure the country – and that’s a consequence of his policies,” said Quilliam, a specialist on Saudi Arabia and the Gulf. MbS oversees foreign, security and defense policy.

The attack has fueled resentment that has simmered since the crown prince came to power two years ago, sweeping aside rivals to the throne and arresting hundreds of the kingdom’s most prominent figures on corruption allegations.

MbS has seen his reputation overseas suffer from a costly war in Yemen against the Iran-aligned Houthi group that has killed tens of thousands of people and triggered a humanitarian crisis. He also came under international criticism over the murder a year ago of journalist Jamal Khashoggi in the kingdom’s Istanbul consulate, which the U.S. Central Intelligence Agency has said the crown prince ordered.

The crown prince, during the CBS interview, denied ordering the killing of Khashoggi but said he ultimately bears “full responsibility” as the kingdom’s de facto leader.

Khashoggi was murdered by agents of the Saudi government without authorization or permission, said Saudi Arabia’s minister of state for foreign affairs, Adel al-Jubeir, during a moderated discussion hosted by the Council on Foreign Relations think tank in New York on September 24.

CONSOLIDATE CONTROL

Some Saudi critics say MbS’s aggressive foreign policy towards Iran and involvement in the war in Yemen exposed the kingdom to attack, according to four of the sources with ties to the royals and business elite. They also express frustration that the crown prince was unable to prevent the attacks despite spending hundreds of billions of dollars on defense, according to the five sources and one of the senior diplomats.

Jubeir, the Saudi minister, in his recent remarks in New York, said the kingdom’s air defenses have stopped hundreds of ballistic missiles and dozens of drones coming into Saudi Arabia. He added that the failure to detect the September 14 attack was “being looked at,” but that “it’s very difficult to detect small objects that fly at three hundred feet of altitude.”

Some Saudi elite say the crown prince’s efforts to consolidate control have hurt the kingdom. One source close to government circles said MbS has installed officials who were generally less experienced than previously.

MbS ousted Mohammed bin Nayef as crown prince and interior minister two years ago. The former crown prince had nearly two decades of experience in senior roles in the ministry, which was responsible for domestic policing and intelligence. MbS named a 33-year-old cousin as a replacement, after placing key areas of intelligence and counter-terrorism under the royal court’s purview.

The crown prince also removed Prince Miteb bin Abdullah, who had overseen or effectively commanded the kingdom’s elite internal security force, the Saudi Arabian National Guard, since 1996. The prince was ultimately replaced at the end of last year by then-32-year-old Prince Abdullah bin Bandar bin Abdulaziz, who had been deputy governor of Mecca for less than two years and before that in private business.

The Saudi government media office did not immediately respond to a request for comment addressed to Prince Abdullah.

FAVORITE SON

Saudi insiders and Western diplomats say the family is unlikely to oppose MbS while the king remains alive, recognizing that the king is unlikely to turn against his favorite son. The monarch has delegated most responsibilities of rule to his son but still presides over weekly cabinet meetings and receives foreign dignitaries.

Regardless of the king’s future, the insiders and diplomats say, a challenge to MbS’s authority could be difficult given his hold on the internal security structure.

Some royals view 77-year-old Prince Ahmed bin Abdulaziz, King Salman’s only surviving full brother, as a possible alternative who would have support of family members, the security apparatus and some Western powers, said two of the five sources with ties to Saudi elite.

“They are all looking at Ahmed to see what he does. The family continues to think he is the only one who can save them,” said one prominent businessman.

There is no evidence Prince Ahmed is willing to play that role, according to Saudi watchers. Prince Ahmed has largely kept a low profile since returning to Riyadh in October 2018 after 2-1/2 months abroad. During the trip, he appeared to criticize the Saudi leadership while responding to protesters outside a London residence chanting for the downfall of the Al Saud dynasty.

Prince Ahmed was one of only three people on the Allegiance Council, made up of the ruling family’s senior members, who opposed MbS becoming crown prince in 2017, two Saudi sources said at the time.

Prince Ahmed couldn’t be reached for comment. One of the five sources with ties to Saudi elite said that Prince Ahmed’s position on whether he will challenge MbS is that he “will cross that bridge when we come to it.”

(Editing by Cassell Bryan-Low)

Iranian president says U.S. offered to remove all sanctions on Iran in exchange for talks

FILE PHOTO: Iranian President Hassan Rouhani gestures at the conclusion of his address to the 69th United Nations General Assembly at the United Nations Headquarters in New York, September 25, 2014. REUTERS/Mike Segar/File Photo

By Babak Dehghanpisheh

GENEVA (Reuters) – The United States offered to remove all sanctions on Iran in exchange for talks but Tehran has not yet accepted the offer due to the current “toxic atmosphere”, Iranian President Hassan Rouhani said on Friday.

Rouhani, speaking on his return from the United Nations General Assembly in New York, said he met there with U.S. officials at the insistence of Germany, Britain and France.

“It was up for debate what sanctions will be lifted and they (the United States) had said clearly that we will lift all sanctions,” Rouhani said, according to his official website.

Iran was ready for negotiations but not in an atmosphere of sanctions and pressure, the Iranian president said.

“This action wasn’t in a manner that was acceptable, meaning that in the atmosphere of sanctions and the existence of sanctions and the toxic atmosphere of maximum pressure, even if we want to negotiate with the Americans in the 5+1 framework, no one can predict what the end and result of this negotiation will be,” he said.

Crude slipped on the report, adding to earlier losses caused by a faster-than-expected recovery in Saudi output, slowing Chinese economic growth, a Wall Street Journal report saying that Saudi Arabia had agreed a partial ceasefire in Yemen. Brent crude was trading below $62 a barrel. [O/R]

Rouhani did not meet U.S. President Donald Trump in New York and European and Gulf officials expect Washington to keep tightening the vice on Iran’s economy.

The United States and Iran are at odds over a host of issues, including the U.S. withdrawal from the 2015 Iran nuclear deal, U.S. accusations – denied by Tehran – that Iran attacked two Saudi oil facilities on Sept. 14, and Iran’s detention of U.S. citizens on what the United States regards as spurious grounds.

(Reporting by Babak Dehghanpisheh; Editing by Angus MacSwan)

Israeli minister urges unity government to stave off ‘blow-up’ in Iran tensions

FILE PHOTO: Israeli Energy Minister Yuval Steinitz speaks during an interview with Reuters in Cairo, Egypt January 14, 2019. REUTERS/Mohamed Abd El Ghany/File Photo

JERUSALEM (Reuters) – Israel’s energy minister on Friday warned tensions between Iran and the United States were reaching a breaking point and an Israeli unity government deal was needed to stave off the threat of conflict following an inconclusive election last week.

Washington has blamed Iran for a Sept. 14 attack on Saudi Arabia’s oil facilities, and on Thursday announced it would send radar systems and Patriot missiles to the kingdom to bolster its defenses. Iran denies carrying out the attack.

Yuval Steinitz, who is also a member of Prime Minister Benjamin Netanyahu’s security cabinet, warned “we are on the verge of the Iran situation blowing up”.

“(The) chances of an American-Iranian or Saudi-Iranian blow-up, or a blow-up in the Gulf which, if it happens, is liable to reach us too, is something that is very, very tangible and realistic,” Steinitz told Tel Aviv radio station 102 FM on Friday.

Steinitz, a member of Netanyahu’s right-wing Likud party, said the potential for a wider conflict “is another reason for the need to hasten and form a broad unity government now, and not to be dragged into months of boycotts and discussions.”

On Wednesday, Netanyahu was tapped to try to form the next coalition government after garnering marginally more support from lawmakers than his centrist rival, Benny Gantz, in a Sept. 17 election.

Neither leader was able on his own to put together a coalition with a ruling majority or reach a power-sharing deal for a unity government between their two parties.

However, with little appetite among Israeli voters for a third trip to the polls in less than a year if no government emerges, public pressure could grow for Netanyahu and Gantz to compromise and join forces.

(Reporting by Rami Ayyub and Dan Williams, Editing by William Maclean)

Explainer: How the Saudi attack affects global oil supply

A worker fills up a car at a gas station in Riyadh, Saudi Arabia September 16, 2019. REUTERS/Stringer

LONDON (Reuters) – The strike on the heartland of Saudi Arabia’s oil industry, including damage to the world’s biggest petroleum-processing facility, has driven oil prices to their highest level in nearly four months.

Here are some facts about the impact on oil supply and spare capacity:

WHY IS IT SO DISRUPTIVE FOR GLOBAL OIL SUPPLIES?

The attack on Saudi oil facilities on Saturday not only knocked out over half of the country’s production, it also removed almost all the spare capacity available to compensate for any major disruption in oil supplies worldwide.

The attack cut 5.7 million barrels per day (bpd) of Saudi crude output, over 5 percent of the world’s supply. But the attack also constrained Saudi Arabia’s ability to use the more than 2 million bpd of spare oil production capacity it held for emergencies.

The kingdom has for years been the only major oil-producing country that has kept significant spare capacity that it could start up quickly to compensate for any deficiency in supply caused by war or natural disaster.

Most other countries cannot afford to drill expensive wells and install infrastructure, then maintain it idle.

Before the attack, the Organization of the Petroleum Exporting Countries (OPEC) global supply cushion was just over 3.21 million barrels per day (bpd), according to the International Energy Agency (IEA).

Saudi Arabia – the de facto leader of OPEC – had 2.27 million bpd of that capacity. That leaves around 940,000 bpd of spare capacity, mostly held by Kuwait and the United Arab Emirates. Iraq and Angola also have some spare capacity. They may now bring that production online to help plug some of the gap left by Saudi Arabia – but it won’t be enough.

HAVEN’T OPEC AND ITS ALLIES BEEN CUTTING OUTPUT? CAN’T THEY JUST REVERSE THOSE CUTS?

Yes, OPEC and its allies such as Russia have cut output to prevent prices from weakening because the market has been oversupplied.

Those cuts aimed to reduce supply by 1.2 million bpd. But much of that was from Saudi Arabia so it now cannot be reversed quickly.

Non-OPEC members such as Russia are pumping near capacity, with perhaps only 100,000-150,000 bpd of available additional production.

WHAT ABOUT IRAN?

Iran holds spare capacity but it cannot get the oil to market because of sanctions imposed by the government of U.S. President Donald Trump.

Iran’s exports have fallen over 2 million bpd since April.

Washington has said Iran was behind Saturday’s attack, so is unlikely to ease sanctions to allow Iran to plug a gap it believes was created by Tehran.

Iran, for its part, said after the attack that it would pump at full volume if sanctions were eased.

AND VENEZUELA?

U.S. sanctions have also impacted the Venezuelan oil industry. But Venezuelan output has been in free fall for years and state oil company PDVSA is unlikely to be able to boost production much even if sanctions were eased.

WHAT ABOUT U.S. SHALE? CAN SHALE PRODUCERS PUMP MORE?

The United States has become the world’s top crude producer after years of rapid growth in supply from the shale sector, much of it pumped from fields in Texas. The U.S. has also grown as an exporter and shipped more crude to international markets in June than Saudi Arabia.

Shale producers can move quickly to pump more when prices rise and can bring production online in a matter of months. That is a much faster timeline than most traditional oil production.

If the Saudi outage looks like it will be prolonged and oil prices rally significantly, then shale producers will raise output.

But even if shale producers pump more, there are constraints on how much the United States can export because oil ports are already near capacity.

(Graphic: U.S. Oil Production png, https://fingfx.thomsonreuters.com/gfx/editorcharts/OIL-PRODUCTION-US/0H001PBVH68N/eikon.png)

SO WHAT HAPPENS NOW? WHAT ABOUT OIL IN STORAGE?

It all depends on how long the outage lasts.

Saudi Arabia, the United States and China all have hundreds of millions of barrels of oil in strategic storage. That is the storage that governments keep for exactly this scenario – to compensate for unexpected outages in supply.

They can release oil from strategic storage to meet demand and temper the impact on prices. U.S. President Donald Trump said on Sunday he had authorized a release from the U.S. Strategic Petroleum Reserve.

The IEA, which coordinates energy policies of industrialized nations, advises all its members to keep the equivalent of 90 days of net oil imports in storage.

Oil from storage should keep the market supplied for some time, but oil markets will likely become increasingly volatile as storage is run down and the possibility of a supply crunch rises.

The IEA said on Saturday the markets were still well supplied despite the Saudi disruptions.

“We are massively oversupplied,” said Christyan Malek, head of oil and gas research for Europe, Middle East and Africa at J.P. Morgan, adding it would take five months of a 5 million-bpd outage to take global crude supply levels back to a 40-year normal average.

“Having said that, this attack introduces a new, irreversible risk premium into the market,” he added.

WHAT HAPPENS IF THERE IS ANOTHER SUPPLY DISRUPTION?

With no spare capacity, future disruptions would cause oil prices to rise. A higher price over time will encourage producers to invest and pump more, while at the same time reducing consumption.

OPEC member Libya is in the middle of a civil war, which threatens its ability to continue pumping oil. Another big Libyan disruption would add to the shocks and highlight the lack of spare capacity.

Nigerian exports have also suffered from disruptions.

Even before the Saudi attack, spare capacity was falling. Consultancy Energy Aspects has said it expects OPEC spare capacity to fall to below 1 million bpd in the fourth quarter from two million bpd in the second quarter of 2019.

(Reporting by Dmitry Zhdannikov, Ron Bousso and Alex Lawler; Writing by Dmitry Zhdannikov and Simon Webb; Editing by Daniel Wallis)

U.S. blames Iran for Saudi oil attack, Trump says ‘locked and loaded’

A satellite image shows an apparent drone strike on an Aramco oil facility in Abqaiq, Saudi Arabia September 14, 2019. Planet Labs Inc/Handout via REUTERS

By Roberta Rampton and Arshad Mohammed

WASHINGTON (Reuters) – U.S. President Donald Trump said on Sunday the United States was “locked and loaded” for a potential response to the attack on Saudi Arabia’s oil facilities, after a senior U.S. administration official said Iran was to blame.

Trump also authorized the use of the U.S. emergency oil stockpile to ensure stable supplies after the attack, which shut 5% of world production and sent crude prices soaring more than 19% in early trade on Monday, before moderating to show a 10% gain.

“There is reason to believe that we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the Kingdom as to who they believe was the cause of this attack, and under what terms we would proceed!” Trump said on Twitter.

Earlier in the day, a senior U.S. official told reporters that evidence from the attack, which hit the world’s biggest oil-processing facility, indicated Iran was behind it, instead of the Yemeni Houthi group that had claimed responsibility.

U.S. Secretary of State Mike Pompeo also said there was no evidence the attack came from Yemen, where a Saudi-led coalition has been battling the Houthis for over four years in a conflict widely seen as a proxy war between Saudi Arabia and Shi’ite Muslim rival Iran.

“Amid all the calls for de-escalation, Iran has now launched an unprecedented attack on the world’s energy supply,” Pompeo said.

Iranian Foreign Ministry spokesman Abbas Mousavi dismissed the U.S. allegations that it was responsible was “pointless”. A senior Revolutionary Guards commander warned the Islamic Republic was ready for “full-fledged” war.

“All American bases and their aircraft carriers in a distance of up to 2,000 kilometers around Iran are within the range of our missiles,” the semi-official Tasnim news agency quoted Commander Amirali Hajizadeh as saying.

Tensions between Washington and Tehran were already running high because of a long-running dispute between the two nations over Iran’s nuclear program that led the United States to impose sweeping sanctions.

Oil prices surged as much as 19% in early Asian trade on Monday on worries over global supply and soaring tensions in the Middle East.

Brent crude posted its biggest intra-day percentage gain since the start of the Gulf War in 1991.

State oil giant Saudi Aramco said the attack on Saturday had cut output by 5.7 million barrels per day.

The U.S. official, who asked not to be named, said on Sunday there were 19 points of impact in the attack on Saudi facilities and evidence showed the launch area was west-northwest of the targets – not south from Yemen.

The official added that Saudi officials indicated they had seen signs that cruise missiles were used in the attack, which is inconsistent with the Iran-aligned Houthi group’s claim that it conducted the attack with 10 drones.

“There’s no doubt that Iran is responsible for this. No matter how you slice it, there’s no escaping it. There’s no other candidate,” the official told reporters.

Riyadh has accused Iran of being behind previous attacks on oil-pumping stations and the Shaybah oil field, charges that Tehran denies, but has not blamed anyone for Saturday’s strike. Riyadh also says Tehran arms the Houthis, a charge both deny.

Richard Nephew, a program director at Columbia University’s Center on Global Energy Policy, said if Iran was responsible for the attack, it may be as retribution for U.S. sanctions.

“They are making decisions about whether and how to respond to what they see as a massive attack on their interests from the U.S. via sanctions by attacking U.S. interests in turn, and those of U.S. partners they believe are responsible for U.S. policy,” he said.

Aramco gave no timeline for output resumption. A source close to the matter told Reuters the return to full oil capacity could take “weeks, not days”.

Riyadh said it would compensate for the damage at its facilities by drawing on its stocks, which stood at 188 million barrels in June, according to official data.

Trump said he had “authorized the release of oil from the Strategic Petroleum Reserve, if needed, in a to-be-determined amount sufficient to keep the markets well-supplied.”

CALLS FOR RESTRAINT

Consultancy Rapidan Energy Group said images of the Abqaiq facility after the attack showed about five of its stabilization towers appeared to have been destroyed, and would take months to rebuild – something that could curtail output for a prolonged period.

“However Saudi Aramco keeps some redundancy in the system to maintain production during maintenance,” Rapidan added, meaning operations could return to pre-attack levels sooner.

The Saudi bourse closed down 1.1% on Sunday, with banking and petrochemical shares taking the biggest hit. Saudi petrochemical firms announced a significant reduction in feedstock supplies.

“Abqaiq is the nerve center of the Saudi energy system. Even if exports resume in the next 24 to 48 hours, the image of invulnerability has been altered,” Helima Croft, global head of commodity strategy at RBC Capital Markets, told Reuters.

Some Iraqi media outlets said the attack came from there. Baghdad denied that on Sunday and vowed to punish anyone using Iraq, where Iran-backed paramilitary groups wield increasing power, as a launchpad for attacks.

Kuwait, which borders Iraq, said it was investigating the sighting of a drone over its territory and coordinating with Saudi Arabia and other countries.

U.N. Secretary-General Antonio Guterres condemned Saturday’s attacks and called on all parties to exercise restraint and prevent any escalation. The European Union warned the strikes posed a real threat to regional security, and several nations urged restraint.

The attack came after Trump said a meeting with Iranian President Hassan Rouhani was possible at the U.N. General Assembly in New York this month. Tehran ruled out talks until sanctions are lifted.

But Trump appeared on Sunday to play down the chances he might be willing to meet with Iranian officials, saying reports he would do so without conditions were not accurate.

As recently as last Tuesday, Pompeo said Trump “is prepared to meet with no preconditions”.

Saudi de facto ruler Crown Prince Mohammed bin Salman told Trump that Riyadh was ready to deal with “terrorist aggression”. A Saudi-led coalition has responded to past Houthi attacks with airstrikes on the group’s military sites in Yemen.

The conflict has been in military stalemate for years. The Saudi alliance has air supremacy but has come under scrutiny over civilian deaths and a humanitarian crisis that has left millions facing starvation.

(Reporting by Roberta Rampton and Arshad Mohammed; Additional reporting by Rania El Gamal and Parisa Hafezi, Saeed Azhar and Hadeel Al Sayegh in Dubai, David Shepardson and Timothy Gardner in Washington, William James in London, John Irish in Paris, Alex Lawler, Julia Payne and Ron Bousso in London, Robin Emmott in Brussels and Devika Krishna Kumar and Michelle Nichols in New York; Writing by Ghaida Ghantous and Richard Valdmanis; Editing by William Maclean, Peter Cooney & Simon Cameron-Moore)