January 13, 2012

Deja Vu in the Gulf, threats in the Strait of Hormuz

Shipping has never organised itself enough to influence political decision making that impacts geopolitical events, even if those events end up in a war that threatens it directly. However, shipping usually ends up paying the price- and first, whether the price is financial loss or sailors' lives- whenever armed conflicts occur. Governments across the world will react, often robustly, when their economic interests are threatened by other nations, but orphaned shipping is not seen as a vital industry and so it has no voice; it is a dog in the street that is at the mercy of every passing car.

So is the case of the present brinksmanship between the West and Iran that is concentrated on the strategic Strait of Hormuz. Everybody has their pants in a twist because the flow of oil through the Strait is threatened today, and, while the world talks of international laws on shipping lanes and their vital interests in the region, they are talking about the risks to the flow of oil, not about the risks to shipping or its sailors. But then, they never do.

It is important for the industry to understand the situation and which way it might go, for that is vital to its interests. My take is that declining Western nations with tottering economies, led by the US in a Presidential election year, see an economic advantage in a possible conflict- the consumption and sale of armaments. Politically too, the abnormal influence of Israel on their policies and their worries at the increasing Iranian influence in enclaves of Iraq seem to have made them tone up the rhetoric against Iran in recent months. The demonising of a nuclear bad-guy Iran and its leadership has been going on for years, though, although it was interrupted by the wars in Afghanistan and Iraq. After all, Iran and the US have been antagonists ever since the Shah was forced out and especially since the Tehran US embassy hostage crisis that scarred Jimmy Carter's presidency.  Finally, Western friends in the oil rich states around Iran are desperately against Iranian nuclear and regional-satrap ambitions- and some of them host Western navies at their bases spread across the region. 

On the other hand, it is difficult to see how a conflict will benefit anybody in Iran, except some of its hardliner leaders. Unfortunately, those are the very leaders whose voices are getting more shrill with every passing day; Iran's threat to close the chokepoint of the Straits of Hormuz ("Easier than drinking water from a glass," said Iranian Naval Commander Habibollah Sayyari) as a reaction to increased western economic sanctions has already seen oil markets jittery. Imagine the impact, economists are saying, of Iranian Vice-President Mohammad Reza Rahimi's threat- that should further sanctions proposed by the USA be imposed on Iran, “not even a drop of oil will be allowed through the Strait of Hormuz.” Keep in mind that about 16.5 million barrels, more than a third of global oil supply, pass through Hormuz. Every day.

But, surprise, surprise! Folks, Iran has already closed the Strait once on Dec 31- by manipulation, not by force. What reportedly happened was this: Iran announced- the previous evening- that it would test-fire missiles as part of its 'naval exercises' around the Strait of Hormuz. For five hours or so, not a single warship or merchant vessel transitted the Strait. Then, tongue in cheek, Iran announced that no missiles had been fired at all. "The exercise of launching missiles will be carried out in the coming days," Iranian navy commander Mahmoud Moussavi said.  Easier than drinking water, after all.

The scenario today has some remarkable similarities with the 'Tanker War' during the Iran-Iraq conflict in the eighties, in which around five hundred and fifty ships were hit by missiles or mines or whatever- and, if my failing memory serves me correctly, around 450 seamen died. Then too- as now- shipping was in recession and political rhetoric was high. Then too, as now- the West sold billions in arms to Saudi Arabia and other States in the Gulf. (Billion dollar arms deals have been announced in the last fortnight, by the way- Saudi Arabia and some Gulf States included). Then, too, the war of attrition at sea targeted shipping. Sailors were the forgotten victims then, as they will be now, if war erupts. In fact, given the firepower Iran has developed over the years, and the fact that it has more than twelve hundred miles of coastline littoral to the Straits, and given that the generals of NATO countries will be chomping at the bit to teach those pesky Iranians a lesson (Iran Iraq same- same, just one letter difference, after all), casualties at sea will be far higher.  I don't know about you, but I get a keen sense of Deja Vu- or, given the rhetoric, should it be Deja Boo instead?

If the situation escalates dramatically, Israel will be in the war, aerial bombing Iran. In addition, Iran has the ability to strike at US and British bases in Oman, Kuwait, Bahrain and Oman- an eventuality that will bring war to the waters of the Arabian Sea and the Gulf both, with greatly escalated dangers and costs to shipping- and over a much wider area too. 

I think that the rhetoric from both sides will remain ratcheted up throughout 2012- perhaps more so as the elections in the US draw near. In addition, unless both sides cool off, chances are decent that there may be a small skirmish between the West and Iran sometime. If this happens, one can only hope both sides will back down after a round-one pissing contest and better sense will prevail, for a change.

Sadly, inevitably, shipping cannot do much to counter this massive threat to its businesses or its assets, except use every means possible to pressurise governments to internationalise the issue. Although I have little faith in the United Nations (who would, especially after the illegal Iraq war sanctioned by it?) that is the only way, right now, that outside influence can be brought to bear on countries that are snarling at each other like a bunch of Rottweilers in the park. Much of the oil that passes through Hormuz is bound for Japan, China and India; these countries stand to lose heavily if the Strait is even temporarily shut down. Besides, the world cannot afford- for economic reasons, if nothing else- a war in the Gulf of Oman, with its devastating affect oil prices in particular and on trade in general. 

Notice that  I do not speak of the collateral murder of ship crews as an argument against war here, because I know that line of persuasion will have few takers, either from outside the industry or from within it. Oh, me of little faith!

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