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Cyril Widdershoven

Cyril Widdershoven

Dr. Cyril Widdershoven is a long-time observer of the global energy market. Presently, he holds several advisory positions with international think tanks in the Middle…

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The Decisive Battle For Yemen’s Oil Port

An Arab coalition, led by Saudi Arabia and the UAE, have started their expected military assault on the Yemeni port of Hodeidah. This military operation will most probably decide the outcome of the ongoing civil war between the internationally recognized Yemeni government and the Houthi rebels, which are supported by Iran and Hezbollah. While international pressure has been mounting on the Arab coalition not to attack Hodeidah, with aid agencies worried about the consequences for civilians, Saudi Arabia and its allies consider military action the only solution to quell the Houthi threat. While the outcome of this attack will have a significant impact on the conflict, it is unlikely to end the civil war as large parts of Yemen are still under the control of the Houthis and other regions are controlled by Al Qaeda.

The first media reports detailed the Arab coalition battling Houthi rebels in the port city of Hodeidah. The first assault is reported to have come from Iran-backed Houthi positions in the suburbs of Seham and Qazabah. As well as engagements on land, Saudi and UAE ships have positioned themeselves just south of the city. Some reports have even stated that an Arab coalition navy vessel has been destroyed. Related: OPEC’s Second Biggest Producer Faces Instability

Aid agencies are worried that these military clashes will block the supply of food to millions of Yemenis, as Hodeidah has been the main lifeline for international aid. Saudi Arabia, however, claims that the port has been a lifeline for the Houthi rebel forces, with ships from Iran and elsewhere sending military supplies to the Houthis. Last week, the UN warned that urban fighting could endanger the lives of up to 250,000 people. A statement from Yemen’s exiled government, which is supported by Saudi and UAE forces, said that “all peaceful and political means” to remove the Houthis had failed. Since 2015, Hodeidah has been held by the Houthis. The current military operation is meant to end this situation by force. European governments have been very critical of the Arab coalition’s operations in Yemen, despite the threat posed by Houthi militia to international shipping lines, via the Red Sea and the Gulf of Aden. The country has also become a breeding ground for Al Qaeda forces – something that the international community is eager to deal with.

In the last few days the U.S. has become increasingly involved in the Yemen conflict. After threats made by Washington to block any support to the Arab coalition if conflict was escalated, a new dialogue emerged. Riyadh and Abu Dhabi have stated openly that they will not attack Hodeidah without U.S. support. That statement, and the actions that followed, suggests that Washington may well have given the green light to end the Houthi role in Yemen. Equally, it is possible that the Saudi Crown Prince Mohammed bin Salman and his counterpart, Abu Dhabi’s crown prince Mohammed bin Zayed, have decided that it is worth the risk. Related: The Oil Giant That Saw Its Cash Reserves Plunge 90%

For Washington and the West, the Yemen crisis has been quite far down the pecking order of geopolitical threats. For the oil industry however, the threat of heaving an Iranian backed Houthi regime wielding power on Yemen’s main strategic geographic choke-points could be considered a nightmare scenario. The conflict in the area presents a threat to international shipping lanes in the region that should not be taken lightly. The Houthis have attacked maritime traffic in the Red Sea and Aden area several times, using Iranian supplied missiles the majority of the time. The strategic position of Yemen should not be underestimated. Looking at the militarization of the Horn of Africa, where all parties, including UAE, Turkey, Qatar, China and even Iran, are setting up military bases, a military doomsday scenario could be looming. With Iran-Qatar and Chinese forces in Djibouti and other countries setting up military basis, or even building new navy ports, a combined Yemen-Horn of Africa Iranian power projection could be threatening the world’s most important sea lane. Looking at oil and gas volumes, slated to be more than 3.4 million bpd of oil and more than 12% of global LNG, its closure would be disastrous to European and U.S. markets. Its closure would force oil and LNG tankers to sail around the southern tip of Africa, tying up tankers for weeks and driving up costs. Removing this threat is seem by some as not only a necessity for Yemen and the Arab coalition members, but also for the global economy.

If the current military operation is however not successful, a counter-reaction from the Houthis and possibly supporting countries is to be expected. This could lead to a renewed threat for oil and gas shipping lanes, making markets tighter still.

By Cyril Widdershoven for Oilprice.com

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  • Lee James on June 14 2018 said:
    Thank you for this important update on the conflict in Yemen. Americans mostly pay attention to Yemen because we know the world is still dependent on oil. Oil producing countries dot the area, and shipping lanes are at Yemen's doorstep.

    It will go better when the world is less dependent on oil.

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