The Cost of an Iranian-Saudi War

On New Year’s Eve the Address Hotel at the United Arab Emirates was set on fire. The United Arab Emirates is a close ally of Saudi Arabia. On January 2nd 2016 the Saudis beheaded 47 people, among them a Shiite cleric and many members of Al Qaeda. Then the Iranians set on fire the Saudi embassy in Tehran, in order to revenge the death of the Shiite cleric.

Some people are talking about “the drums of war”. But the question is how are these two countries going to fight a direct war, when almost all of their oil and gas reserves are in the middle of these two countries, very close to the Persian Gulf, as you can see on the map? (the oil fields are colored black and the natural gas field red).

Oil and Gas Reserves

It is much simpler for them to fight proxy wars in Syria, Egypt and Yemen, where they do not have to worry about the safety of their oil and gas reserves, than to actually fight a direct war.

Moreover what would be the effect on oil prices if a war between Saudi Arabia and Iran was to break out? Tankers would not be able to even reach Iraq, in order to get oil at least from Iraq. Therefore you have Saudi Arabia and Iran worrying too much about the safety of their reserves, and you have the United States, Europe and China worrying too much about oil prices, since their economies are addicted to oil, and would be harmed a great deal if oil prices were to increase dramatically. Only Russia would gain from the dramatic increase in oil prices, because she would see her oil revenues exploding.

But if Iran and Saudi Arabia, and almost all great powers, have so much to lose from a Saudi-Iranian war, it means that it will be harder for such a war to break out. I am not saying that it is impossible, but the higher the cost of war the more the parties involved will think about it before they pull the trigger.


“Blaze hits Dubai skyscraper, New Year’s fireworks proceed nearby”, December 31 2015

“Saudi Arabia executes 47 people in one day – including prominent Shia cleric Sheikh Nimr al-Nimr”, January 2 2016

“Protesters Angry Over Nimr Execution Set Fire To Saudi Embassy In Tehran”, January 2 2016

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