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1. The attack on the Saudi oil facility is different in some obvious ways from the economic coercion strategies that @ANewman_forward and I describe in our work on #WeaponizedInterdependence - mitpressjournals.org/doi/full/10.11… . However, there is a distinct family resemblance.
2. What the attackers (whether Houthi or Iran) have done is to discover a crucial chokepoint in the Saudi oil production system (and to some extent in the global oil system). This has allowed them to achieve substantial effects - a 20% spike in oil prices - for a tiny outlay.
3. The implications are clear. Most people who looked at globalization, assumed that it was going to result in more liquid markets, that were far more difficult to manipulate. Oil markets were supposed to be a paradigmatic example. This is turning out to be wrong.
4. [Not wrong all the time; but wrong often enough to be gravely misleading as a general assumption]. The creation of world markets involves the creation of world networks of production and dissemination. These networks very often have topologies that create chokepoints.
5. Information and financial networks tend to get centralized. Production networks often rely on a small number of suppliers (perhaps one) for highly sophisticated components. Here, the entire Saudi oil industry relies on a single facility for processing.
6. These chokepoints create vulnerabilities. Policy debates have long been aware of some of them (the Strait of Hormuz is a natural chokepoint for oil and LNG transport - washingtonpost.com/politics/2019/… ) but there are many, many others.
7. Some of the shock markets are seeing today may be a reaction to short term fluctuations in volume of supply. Some may be the realization that this facility is a key chokepoint - and is vulnerable. Some may be the belated realization that there are plausibly other chokepoints.
8. The other important takeaway is that these vulnerabilities plausibly make it easier for smaller powers to project and retaliate. The US has gotten very used to exploiting its control over network chokepoints against adversaries.
9. Including, most obviously its use of the dollar clearing system to effectively isolate Iran from global financial structures. If this indeed turns out to be retaliation by Iran, then it suggests that the US may want to think carefully about its application of financial muscle.
10. As we argue here - lawfareblog.com/introducing-ne… - the risk of escalation may be higher than anticipated (of course: we still don't know - this attack may not have been mounted by Iran, or may have been mounted for reasons entirely independent of US pressure).
11. The broader takeaway is: globalization has not produced a seamless global market, but lumpy global networks, with plenty of chokepoints. These create vulnerabilities. And vulnerabilities create strategic opportunities that states and non-state actors are taking up. Finis.
