The Saudis understood, too, that the best time to crash the markets would be when prices were already soft and consumer demand low. In early December, just a few months after Saudi Arabia unleashed its latest oil flood, Obaid wrote in a Reuters article that his government’s decision to depress prices is “going to have a huge effect on the political situation in the Middle East. Iran will come under unprecedented economic and financial pressure as it tries to sustain an economy already battered by international sanctions.” Around the same time, the Saudis were no doubt pleased to see bread prices shoot up by 30 percent in Tehran. (Bread is a staple of the Iranian diet, and its prices are a bellwether for the economy.)
On Dec. 10, the Saudi oil minister said his country would keep pumping 9.7 million barrels per day into the global markets, regardless of demand. For their part, the Iranians have shown alarm, if not yet panic. Without naming names — he didn’t have to — President Hassan Rouhani decried the “treacherous” actions of a major oil producer whose “politically motivated” behavior was evidence of “a conspiracy against the interests of the region…. Iran and the people of the region will not forget such conspiracies.” The previous day, Vice President Eshag Jahangiri had described the rapid plunge in oil prices as a “political plot … not a result of supply and demand.”
Riyadh’s real hope, if history is any indicator, is that escalated production will force Rouhani’s government to implement an austerity budget that will ultimately stoke underlying social unrest and once again push people into the streets.
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