Yanbu Under Fire: Why French Air Defence Won't Revive Saudi Arabia's Red Sea Oil Route
Macron's troops and radars protect a terminal from missiles. They do nothing about Bab el-Mandeb, where insuring a Saudi-linked tanker now costs 10 to 15 times what a neutral ship pays. Riyadh's Red Sea bypass has become a Europe-only outlet, and its Asian barrels depend on the US lane through Hormuz.
Saudi Arabia spent decades and billions of dollars building a way around the Strait of Hormuz. Seven months into the Iran war, that route has become a second chokepoint. On Thursday Emmanuel Macron said France would send "soldiers, radar systems and defence systems" to protect Yanbu, the Red Sea terminal at the end of the kingdom's East-West pipeline. Britain has already sent an RAF Voyager tanker to refuel Saudi Typhoons, in addition to a Sky Sabre air-defence battery. Both deployments defend Saudi territory. Neither reopens the sea lane that made Yanbu valuable, and the market has already drawn its conclusion: Saudi crude is going back through Hormuz, where American forces keep a corridor open. Riyadh's export security now depends on the US lane and the US-Iran talks far more than on any European battery on the Red Sea coast.
The pipeline was Saudi Arabia's plan. After Iran restricted Gulf exports from March, Saudi Arabia diverted about 4 million barrels a day, roughly 4% of world supply, through the East-West line, which can carry up to 7 million. Reuters reports that the kingdom shut the line on September 11 after drone attacks it said were launched from Iraq. It restarted at reduced rates on September 22, and a full recovery will take several weeks; loadings at Yanbu had not resumed as of Thursday. The Houthis added to the pressure. After their 2022 truce with Riyadh collapsed in July, they declared a naval blockade of the kingdom, took Yemen's entire Red Sea coast and Perim Island in the Bab el-Mandeb strait, and began firing at Saudi cities. On Thursday the Saudi-led coalition intercepted six ballistic missiles aimed at Taif and the Yanbu area, and the Houthis said they had hit Aramco facilities there.
Macron's deployment addresses that second threat, the one to the terminal itself. It is a reasonable thing to defend. Yanbu holds storage and refining as well as loading berths, and a successful hit there would do more damage than a missed tanker. The 2019 Abqaiq attack showed how quickly Saudi Arabia can repair processing plants once the attacks stop. Aramco's chief executive, Amin Nasser, said on Thursday that interruptions last "days, not weeks or months." The terminal is not what has broken down, though. The sea lane has.
Insurance premiums show where the risk sits. War-risk premiums quoted for Saudi-linked tankers calling at Yanbu have risen to about 3% of hull value, from under 1% in early July. For ports further south, such as Jizan near the Yemeni border, quotes run as high as 7%. Hormuz transits cost 6% to 9%. A tanker with no Saudi connection sailing the same Red Sea waters pays 0.2% to 0.3%. The Houthis have said they are targeting Saudi-linked ships only, and on Friday they wrote to the European Union promising not to attack European vessels, the FT reported. Underwriters are pricing that selectively. Heidmar's chief executive said the Red Sea is now harder than Hormuz for anyone with a Saudi connection, because "in the Strait of Hormuz, the US is providing some cover. In the Red Sea, there's nothing." The European Union's naval mission in the area says it needs more ships.
Riyadh has responded by increasing exports. Kpler data put Saudi crude exports at about 6 million barrels a day in September, the highest since the war began and up nearly 80% from August. Shipments through Hormuz are on track for 3.6 million barrels a day, four times August's level, according to Reuters. Aramco has sold more than 60 million barrels for ship-to-ship transfer off Sohar in Oman, and Bahri supertankers are crossing the strait with their transponders switched off. The logistics are strained. Transfer points in the Gulf of Oman are full, a transfer now takes close to ten days, and the daily hire rate for a supertanker on the Gulf to China route hit a record $1.27 million this week. Traders say 20 supertankers are waiting in the Mediterranean for Yanbu to reopen.
Those 20 ships in the Mediterranean show what Yanbu is becoming. Cargoes that sail north through Suez to European refiners can avoid Bab el-Mandeb. Asian buyers take most Saudi crude, and their cargoes cannot, unless they go round Africa or accept Houthi exposure at the strait's mouth. Traders are already arranging transfers at Port Said so that non-Saudi hulls can carry oil south. That is a workaround, and it costs money. When Yanbu reopens, it will mostly serve Europe. The bulk of Saudi exports will keep going through Hormuz, whose security is a US matter first.
Yanbu could recover quickly if the pipeline keeps ramping up, French air defence reduces the risk of a strike on the terminal, and Aramco's repair record holds. Loadings could resume in October and insurers could cut premiums once attacks stop succeeding. That overstates what the defence can do. Air defence stops missiles aimed at storage tanks. It does not change the underwriter's calculation for a tanker that must pass within range of Houthi batteries on Perim Island. The Houthis have also found an effective target. Hitting a tanker is harder than stopping its insurance, and they do not need to hit many Saudi-linked ships to keep premiums at 3% or more. Ground fighting also points the wrong way for Riyadh. At least 150 combatants died in 24 hours this week in battles for the hills above Bab el-Mandeb, and the Houthis are consolidating the coast they took.
The allied response also shows how far Riyadh's partners are willing to go. Pakistan and Turkey are sending military chiefs to Riyadh under the Mecca joint defence agreement, which treats an attack on one member as an attack on all, but the pact has not been formally triggered and Islamabad is wary of being pulled in. Britain has said its tanker mission will last "weeks." France has limited its role to protecting "this site," and Macron said his troops would not join the fighting. The US has not renewed military involvement in the Red Sea. The coalition is built to defend Saudi land, and nobody in it has offered to escort Saudi ships.
Our expectation is that Yanbu resumes crude loadings in October well below the roughly 4 million barrels a day the pipeline carried before September, with the cargoes it does load going mostly north to Europe. Saudi shipments through Hormuz should stay above 3 million barrels a day through the end of the year. Quoted war-risk premiums for Saudi-linked Red Sea calls should stay at 3% or higher until someone is willing to put warships in Bab el-Mandeb. For oil buyers, the useful signal is the war-risk quote at Yanbu, which reflects what underwriters think of the route.