July 26, 2012

Shipping's last-straw threat


Forget China. The unchecked, repetitious reckless and malicious behaviour of Western countries remain the bigger threat to peace and economic growth - and trade-in South Asia and the Middle East. 

The Iran oil embargo is going the Iraq way. The aim of the game, as in Iraq, is to give the dog a bad name and starve him. Therefore sanctions, same as in Iraq. If, as a result of the isolation, half a million children under five die because of malnutrition or lack of medicines (567,000 died as a direct result of sanctions against Iraq, according to UN figures; a price US Secretary of State Madeline Albright said on TV was 'worth it') then it is just tough bananas again. 

Because of US led sanctions, Iranian crude output has fallen to a 22 year low; it was pumping 4.1 million barrels a day in January 2008, it now pumps only 3.2 million. Iran is losing $3 billion in lost revenue every month; 60% of its shipping company NITC's tankers are being used for storage of oil that has nowhere to go. 

And who in the world is covering this shortfall? US ally Saudi Arabia, Russia and- guess what- Iraq, with plundering Western companies and US lackeys in the government laughing all the way to the bank. Incidentally, the US announced recently that all American assets belonging to NITC would be frozen. Iraq redux.

True, about 20 countries have been 'granted' waivers by the self-appointed policemen of the world; they can import Iranian oil 'at lower levels'. Indian and Japanese governments will underwrite their vessels because the western dominated insurance market is closed to them, thanks to the sanctions, effectively stopping their ships unless alternate insurance is arranged (see ''Marine Insurance or economic warfare?' published May 3 here). Nonetheless, the impact on energy starved India of a continuing choke of Iranian oil will be extremely severe. 

Oil industry experts are now saying that Iranian crude output is headed even lower to roughly half its 2011 numbers, and will plunge to a record 1.3 million barrels a day this month. The tanker trade is not doing much better internationally, as we know, with owners struggling to break even. Should there be a further decline in demand- or a further decline in oil prices that have started rising again- the tanker segment of the industry might find that it is well and truly on the mat. Parts of it geared to carry Iranian oil already are.

Overall, shipping is not complaining so far; the oil embargo has forced most countries to seek new markets, caused a major shift in demand and disrupted fuel supplies in some countries. Additionally, it is not a bad thing for shipping that NITC's tankers are effectively grounded, Iranian front companies notwithstanding, as the sanctions have taken out the Iranian fleet from a market that simply has too many ships floating around for its own good.

The threats to shipping from planned western hegemony over the region-that nobody seems willing or able to check-cannot be overstated. US and European sabre rattling has usually led to a major military conflict here, as it did in Iraq. Shipping today can ill afford the dying of trade, escalated war risk premiums, threats to its assets and other upheaval that another war in the region is guaranteed to unleash.

Even a low intensity conflict is enough to choke an industry already gasping for breath. Iranian response to the sanctions so far has mainly been twofold: One, it is talking in Istanbul on nuclear issues with the 'P5+1' - Britain, China, France, Russia, the United States and Germany- with much grandstanding shown at the pulpit there by all concerned. Iran has, elsewhere but simultaneously, repeatedly threatened to close down the Straits of Hormuz, arguably the most critical chokepoint for shipping in the world, given that forty percent of the world's seaborne oil passes through it- and a fifth of all oil- 17 million barrels everyday in 2011.  

The US and Iran have clashed before- in 2008- in and around Hormuz. They are on track to do so again. If that happens and escalates, the resultant chaos that will hit shipping will make the present economic upheaval look like a Sunday school picnic. Chances of an all out Iran-US war may be low now, but chances of a skirmish are not. Keep an eye out.

As the camel said before the concluding piece of straw was strapped onto his back, things are bad enough as it is. 

(You may also be interested in Marine insurance or economic warfare?)

1 comment:

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