Saudis Set To Bankrupt Iran With Flood Of Oil

Today the Wall Street Journal has a fascinating piece describing a speech given this month by Saudi Prince Turki Al-Faisal. The prince, speaking to a group of U.S. and British servicemen at an airbase near London, explained that Saudi Arabia was so concerned about Iran's continued march toward attaining nuclear weapons that it was considering opening its oil spigots and swamping the world with oil in the interest of gutting Tehran's government revenue. The prince insisted that the Saudis still have sufficient spare production capacity that, if need be, "we could almost instantly replace all of Iran's oil production" of roughly 4 million bpd. Assume for the sake of argument that he's right and that the Saudis could manage upwards of 14 million bpd. It means that in a worst case scenario Iran's nuclear ambitions could be potentially reined in by a naval blockade of its oil tankers without invoking massive oil shortages (and economy crushing oil prices) worldwide. Bankrupting the mullahs wouldn't be a surefire solution--Iran would of course view any such blockade as an act of war. Better then for the Saudis to cut Tehran's revenue gradually, by keeping the markets flush with crude. For more on the likelihood of the Saudis showing its power over OPEC by enacting a "QE3" in the form of oil, see my dispatch from last week.