The latest geopolitical risks in the Gulf and Middle East and increasing concerns about the safety and security of the economic infrastructure of Saudi Arabia has forced major ratings agency to bring down a notch the generally strong credit rating awarded by them to the oil producing kingdom.

According to an announcement by the New York-based agency Fitch on Monday, its credit rating for Saudi Arabia’s long-term foreign currency issuer default rating has been brought down from A+ to A. however the ratings agency has retained a stable outlook for the economy.

“The downgrade reflects rising geopolitical and military tensions in the Gulf region, Fitch’s revised assessment of the vulnerability of Saudi Arabia’s economic infrastructure and continued deterioration in Saudi Arabia’s fiscal and external balance sheets,” Fitch said in a release.

This downgrade was announced after about two weeks since an attack on the oil infrastructure of the country. A series of drone and missile attacks on Saudi oil facilities on September 14 had resulted in the largest every supply side reduction in the global oil market as well as heightening the tensions in the Persian Gulf. While the state owned Saudi Aramco, the owner of the oil facilities that were attached, had lost about half its production capacity or about 5.7 million barrels per day (mbpd), the attack had reduced global supply of oil by as much as 5 per cent,

And while the Yemen based Houthi rebels had claimed responsibility for the attacks, the US and Saudi Arabia had pointed the finger against Iran for the incident.

“Saudi Aramco President & CEO Amin Nasser said Tuesday that the Company’s production capacity, suspended earlier due to terror attacks on its plants at Abqaiq and Khurais, would be fully restored by the end of September,” the world’s largest oil producer said in the first detailed statement after the attack.

However despite the claims and assurances by Saudi Arabia since the attacks about stabilization of oil production soon, the price of global crude has been rising steadily – as much as by 19.5 per cent soon after the attacks to touch $71.95 per barrel.

“Although oil production was restored fully by end-September, we believe that there is a risk of further attacks on Saudi Arabia which could result in economic damage,” Fitch said. “We have revised our assessment of the vulnerability of Saudi Arabia’s economic infrastructure to regional military threats as a result of the most recent attack.”

Analysts have said that the impact of the attack by 10 drones and missiles at Abqaiq and Khurais oil facilities in the Kingdom can be gauged from the fact that the attack has been considered to be a greater shock for the global crude supplies than the one that was experienced after the invasion of Kuwait by Saddam Hussein in 1990 and the Islamic Revolution in Iran in 1979.

(Adapted from CNBC.com)

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