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Iran’s Upper Hand in Hormuz Is Pressuring Oil Buyers and Trump.

general :: 10hrs ago :: source - bloomberg

By Weilun Soon and Alastair Gale

(Bloomberg) -- Iran is making the most of its geographic advantage in the Strait of Hormuz, forcing energy buyers to negotiate for safe transit and pushing the US to demand help from other nations to secure a reopening that — even in the best case — could take weeks.

The narrow channel has become a focal point for all sides as the war advances into a third week. Iran is using attacks in the waterway to create unprecedented chaos in the energy trade in response to US and Israeli strikes — while US President Donald Trump is eyeing the stretch of water as a fix for a near-45% surge in oil prices.

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Shipowners’ fears have intensified after three vessels were struck in the Persian Gulf on one day last week — including a Thai-flagged bulk carrier that was attacked in the Strait.

Hormuz is “squarely at the center of global geopolitics,” said Rahul Kapoor, global head of shipping & metals at S&P Global Energy. “Shipping and the energy markets are signaling that the risk of a prolonged disruption is undoubtedly significantly higher than at any point in decades.”

That prospect is pushing large consumers in Asia to seek workarounds to ease shortages and surging costs. India secured a green light from Tehran that allowed two liquefied petroleum gas tankers to clear the strait over the weekend — a small but significant step toward alleviating acute shortages of the fuel, used as cooking gas. Both used their signaling systems to signpost the vessels as Indian government cargoes.

Turkey received an approval last week, a state-run news outlet reported. A Pakistani vessel has also cleared the strait.

Iran’s Foreign Minister Abbas Araghchi said over the weekend that a number of countries have approached Tehran for safe passage, adding the strait was only shut to ships from “enemies.” He did not name any. In his first statement last week, new Iranian leader Mojtaba Khamenei said the “lever of closing the Strait of Hormuz” would continue to be used.

Over the past two weeks, only a handful of vessels have transited the waterway — almost all Iranian or Chinese. Even India’s deal is one-way, meaning vessels will not go back for loading, according to one person familiar with the country’s arrangements, who asked not to be named given the sensitivity of matter.

Trump, who has floated the idea of maritime escorts, sought to crank up pressure on other nations over the weekend, saying he hoped China, France, Japan, South Korea and the UK would send warships to help open the waterway. He has since threatened to delay his summit with Chinese leader Xi Jinping if Beijing does not help.

None of the countries named has so far made any commitments to send support.

“The question becomes how much risk you can accept. If Trump directed the US Navy to do it tomorrow, they would do it, but they would do so at a high level of risk,” said Jennifer Parker, adjunct professor at the University of Western Australia Defence and Security Institute.

“The priority is reducing Iran’s ability to target ships, by taking out Iran’s capabilities in command and control, as opposed to escorting ships,” added Parker, a former naval warfare officer.

The strait is barely 30 miles wide at its narrowest point. When taking navigable shipping lanes into account, this means significantly reduced maneuvering space and ability to respond to threats. These include potential attacks from Iranian missiles, unmanned surface vessels and unmanned aerial vehicles at the same time — tools that Iran has deployed in recent days to target vessels. The UK said last week Iran has likely begun laying mines in Hormuz.

The prospect of a broad coalition to guard ships — as happened in the Red Sea to protect from Houthi attacks — looks distant as a result. Some countries are trying to seek clarity about what any protection operation might even look like.


China does have capability and experience, having escorted vessels in anti-piracy missions, but has yet to respond publicly to Trump’s call for help. It has sufficient oil supplies, opposes US attacks on Iran and has a policy of non-intervention, so has little incentive. Zhou Bo, a senior fellow at Tsinghua University’s Center for International Security and Strategy said the chance of Beijing taking part in a joint naval mission with the US was “zero.”

Chinese Foreign Ministry spokesman Lin Jian at a regular briefing on Monday sidestepped the question of whether Beijing would send ships to help secure the strait. Instead, he reiterated calls for “all sides to immediately stop military operations” and “avoid the further escalation of tension.”

Japan and South Korea are facing more pressure to support the US because of their military alliances with Washington and dependence on oil from the Middle East. On Monday, Prime Minister Sanae Takaichi said Japan was considering how to protect Japanese ships, although Defense Minister Shinjiro Koizumi said Tokyo wasn’t considering dispatching its navy. Tokyo has restrictions on deploying its military to a conflict zone because of its pacifist constitution.

South Korea is reviewing the request from Trump and will closely coordinate with the US over the matter, according to the Defense Ministry. Both South Korea and Japan said there had been no formal request from the US to dispatch ships to the Middle East.

Even if a diplomatic or military solution is found, restoring traffic in the strait will take weeks, S&P’s Kapoor said. “You’ll have to see almost 20, 30 crossings a day for us to get a signal that things are opening up,” he added. “There’s a traffic jam on both sides that will take weeks and weeks to clear.”

India has 22 Indian-flagged vessels to the west of the Strait of Hormuz with 611 seafarers onboard and the government is closely monitoring their situation, Rajesh Kumar Sinha, special secretary with the shipping ministry, said during a media briefing on Saturday.

These include LPG, crude and liquefied natural gas tankers as well as container ships, among others, he added.

“It’s imperative for India to negotiate with Tehran for the safe passage of these vessels — there is no other way,” said Vandana Hari, founder of Vanda Insights. “This is not about politics or taking sides in a war. It’s simply about preserving the lives of your people and your nation’s energy security.”

The two Indian LPG vessels that exited Hormuz on Saturday carried over 92,000 tons of LPG — barely enough to meet one day of the country’s demand.

--With assistance from Josh Xiao, Rong Wei Neo, Rakesh Sharma and Colum Murphy.

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