Aramco's IPO may look like a glittering success - but it's painted a target on Saudi Arabia's back that Iran will be happy to exploit

• Saudi Aramco's $1.88 trillion IPO could end up weakening Saudi Arabia, rather than strengthen or invigorating it.
• Attacks on Saudi oil facilities this year showed its vulnerability to military strike. It will be even more sensitive now that Aramco has a public share price.
• Iran now has a new way to carry out its longstanding conflict with Saudi Arabia, intelligence sources told Insider.
• "To be blunt, investors in Aramco are not just gambling on the future price and production of oil, but they are betting on the future of security in the region," one said.
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Saudi Aramco's $1.88 trillion IPO set new records for a public offering - but has also brought into the world a significant new security risk by painting a high-priced target on Saudi Arabia's back.

Now that the IPO has taken place, he kingdom's oil and gas infrastructure is effectively a gilded hostage to Iran, intelligence service and private security sources told Insider.

According to these sources, the impending IPO prompted Saudi retreats in its regional conflicts in order to safeguard its oil industry and buttress its economy.

Saudi is facing budget deficits of at least $50 billion on the year, and other attempts to raise funds - like the development of a $400 billion economic zone that has drawn only limited interest from international investors - have fallen flat.

According to three intelligence and security sources based in the region, these factors have limited the scope of Saudi ambition in the Middle East, and make the IPO effectively a move born of weakness rather than strength.

A clear sign were the attacks on Saudi oil fields this September, widely blamed on Iran and its proxies. The attacks saw 19 critical oil infrastructure targets simultaneously hit.

The immediate consequence was knocking offline 5% of the world's oil supply. It also highlighted Saudi's vulnerability to military attack on its oil fields, pipeline operations and oil refineries - despite the hundreds of billions of dollars spend on their security.

"The strikes [on Abqaiq-Khurais] were, in many ways, a direct warning to the Saudis that they can't have an ongoing military confrontation with Iran in the region without paying an enormous price," said one Western intelligence official in the region. He requested anonymity as he does not have permission to speak with the media.

"Now there's a hard dollar value on the price they will pay for antagonizing Iran beyond just the repairable damage to oil facilities: The Aramco IPO will now add a perception of the future security of these facilities and that will be reflected in the share price.

"To be blunt, investors in Aramco are not just gambling on the future price and production of oil, but they are betting on the future of security in the region."

The CEO of a private security firm based in the Gulf agreed with this assessment, pointing out that the September attacks, combined with years of setbacks in the Saudi-UAE involvement in the Yemen civil war, highlighted the limits of either the Saudi - and indeed US - ability to protect energy infrastructure in the region.

"The Khashoggi murder was a problem because it highlighted, in the eyes of Western investors, the irresponsible and mercurial nature of the Crown Prince," said the CEO, who declined to be identified for fear of arrest or harassment for speaking ill of the Saudi royal family.

"But as we have seen, that murder will likely be washed away by the churn of money in the region, what investors will not easily forget however is the military adventurism in Yemen and other conflicts with Iran, who has proven to be a superior opponent in almost all ways.

"And, not only could the US military, with its massive presence in the area, fail to stop the Abqaiq attack but didn't even see it as it was happening.

"This sent a powerful message to everyone involved: Iran can shut down the world's oil markets and there's little anyone can do to stop them short of a full-scale regional war."

"And of course a full-scale regional war would also knock oil production offline for the duration, which would send oil prices to never before imagined highs," the CEO said.

Saudi has also been put on notice by the UAE, its tiny but most important ally, that the economic costs of further antagonizing Iran could prove devastating.

Speaking from the UAE, a security expert with a firm contracted by the UAE government to collect intelligence on the region said pressure from Iran was succeeding in cowing the UAE's military action in Yemen.

"[Iran] doesn't need to strike [Dubai or Abu Dhabi to get the UAE's attention - it's just a matter of implied power: Iran has more military power and can easily offset the UAE and Saudi economic power.

"This is why we saw UAE openly withdraw from its military coalition in Yemen: It decided the risks of confronting Iran in Yemen are not close to worth any benefit."

Now, with Aramco floating on a public market, these sorts of cost-benefit calculations by Iran on how to pressure its regional foes become even easier, according to the UAE based security expert.

"By putting a market valuation on the Saudi energy sector, Iran now has metrics it can employ in a future conflict. Going forward... the effect of any action will be reflected in the share price.

"This gives Iran a powerful tool it can use in a future crisis, deciding how may cruise missiles should go where at what the cost will be to Saudi in terms of share price."

"Saudi might have done this IPO to provide additional certainty to its energy sector and in this it has probably succeeded," he said.

"But in doing so they've handed Iran just as much certainty and a clean way to judge the success of future attacks: it will be reflected in the share price."