Yemen is a bottleneck for Saudi Arabia’s oil transportation
Yemen has been destabilized by Houthis fighters. Iran supports the fighters on religious and political grounds. Yemen is a small oil-producing country. However, it can bottleneck Saudi Arabia’s oil transportation. According to the statistics, 3.8 MMbbls (million barrels) of oil pass through the Mandeb Strait. If Russia intervenes, Houthi fighters will gain control over the strait. Saudi Arabia leads the Arab allies fighting the Houthis in that region.
Why could Russia interfere in Yemen?
Russian (RSX) energy exports are hurt by falling crude oil prices. Saudi Arabia’s engagement in a price war with the US shale oil producers leads OPEC (Organization of the Petroleum Exporting Countries). In order to retain its market share, the cartel is pumping oil into the international market. Since the US is a large net importer of crude oil, the US shale producers likely won’t hit the international market.
North America accounts for a small portion of Russia’s energy exports. According to Russia’s state statistics, mining energy-producing minerals attracted 14.7% of the total fixed capital investment in the country in 2014. According to the EIA (U.S. Energy Information Administration), crude oil accounted for 68% of the total exports and 16.4% of the GDP (gross domestic product) in 2013. Russia’s main trading partners are Germany (EWG) and China (FXI).
The price war made life difficult for Russian energy companies and Russia’s economy at large. Asia and Europe are two important markets for Russia. Asia and Europe accounted for 98% of Russia’s energy exports in 2013. Although Russian companies aren’t directly concerned with the US shale oil producers, they’re impacted due to lower crude oil prices in the international market.
In the next part, we’ll discuss how Iran is planning to emerge as the most powerful nation in the Middle East.