Saudi Arabian Prince Mohammed bin Salman reshuffles cabinet to shore up power

It was only last week that an Iranian deputy military commander warned off the US and its allies over an attacks on its kingdom saying it was prepared to close the Strait of Hormuz, a crucial gateway for oil produced in the Middle East to leave the region and delivered to the rest of the world, if it found their actions threatening in any way. These comments clearly sent a message of defiance to the West who've recently unshackled Tehran from years of sanctions.

I wrote an article last week Thursday expressing my opinion that Iran was harming the image of its nation in the international community by playing the contemptuous card in the actions and comments it made so early into its readmission. When the mention of "US and its allies" reached the ears of Riyadh, many knew that would be some sort of retaliation from the Arab Kingdom.

When asked last month what Saudi Arabia would do if Iran was unprepared to agree to freeze oil production along with other OPEC members, Deputy Crown Prince Mohammed bin Salman stated that Saudi was ready and able to increase their production at any moment. He also went on to say that Riyadh had the capability of increasing its oil producing capacity to 20 million barrels a day if the kingdom decided on investing further in its oil sector.

These comments came as a threat to Tehran who subsequently didn't arrive at the oil summit in Doha, making up a well of excuses for its non-attendances but as it boils down we see this was a tactic by them to test Saudi's willingness to go forward with their own threats. The remarks made by an Iranian deputy military commander were simply a means to stir the provocation even more to measure the level of tolerance.

It didn't take long for Saudi Arabia to respond with the latest shake up causing analysts to stop and reassess the influence of the Deputy Crown Prince Mohammed bin Salman's power in matters relating to the economy of the kingdom.

Salman has fired prolific oil minister Ali al-Naimi who had served in his position for 21 years and replacing him with Aramco chairman Khalid al-Falih, showing his desire to take more control over the situation which is developing between themselves and Iran. The influential discretion afforded to al-Naimi in terms of his powers to formulate oil policy in Saudi Arabia and OPEC helped shore away the kingdoms conflict with other members in the Middle Eastern region namely Iraq and Iran.

Power and a 'brutal' battle against Iran: What the Saudi reshuffle REALLY means https://t.co/isPK0GFYcW

— CNBC (@CNBC) May 9, 2016

However Salman's sweeping changes has shifted the perspective view on Saudi Arabia with many believing the 30 year old's aggressive approach could indicate a heightened and tense geopolitical situation building up that could possibly interrupt the supply of oil.

The Saudi prince has been tasked with transitioning his family's kingdom from an oil dependent nation into a more diverse economy reaping its benefits towards a greater number of sector, an immediate acknowledgement that the risk presented in the current oil market doesn't mitigate itself over the long term and the onset of alternative sources of energy provides a real threat to the industry.

Although Salman might be ambitious in his desires, the success of his plan will be the function of how well he is able to diverse the kingdom's reliance on oil into other sectors but at the same time retain control over OPEC so as to have a larger weighting on the direction of oil prices and thus more certainty during its transitive period.

Iran stands in the way of this presenting the prince with a problematic situation to deal with; if he allows Tehran to continue producing, the benefits that could be rendered from a unified cooperation would take longer because the deficits would consistently be cancelled out by the added production from Iran. One needs reminding that nothing stops Iran from going over and above its targeted production in its own ambitions to wrestle control away from Saudi Arabia, an outcome that could be disastrous for Riyadh as they'd no longer have discretion over direction.

Salman's thinking would be on par with a tit-for-tat playground attitude in the sense that if the Saudi kingdom can't get what it wants then no one will get anything, even if it means taking on financial strain in the process.

The prince knows that Iran is desperate to get back on track which is indicative from the enormous capital spend it's laid out in the area of air and rail transportation. This certainly doesn't stop here but the expansion of this program would require a healthy and stable climate in the oil market to emerge which is seeming unlikely given these turns of events.

This would be an incredible risk to take on after the kingdom admittedly suffered defeat at the hands of US shale gas producers by initiating the proposal to freeze production. There intention the last time round was to secure market share by squeezing out these new competitive players which hasn't worked.

I look at things this way, either Saudi Arabia is going to stamp its authority on the dominance oil or its going to end very badly for the Arab Kingdom. With the type of economic developments evolving in the world, I wouldn't think it would be appropriate to be taking on such a risk but only time will tell.