Tension has been simmering in the Gulf for quite some time, specifically due to the strained US-Iran relationship, caused by Iran’s contentious nuclear programme, its support to Hezbollah, a Shia Islamist political party and militant group based in Lebanon, which threatens Israel, and its support to President Bashar al-Assad of Syria and his Arab Socialist Ba'ath Party. Sanctions imposed on Iran were withdrawn after the landmark nuclear agreement between Iran and six countries—the US, UK, France, Germany, Russia and China in 2015 called the Joint Comprehensive Plan of Action (JCPA), which in turn received support across the globe. But with President Trump unilaterally withdrawing from the Agreement in 2018 and imposing fresh sanctions on Iran, matters between the two countries have once again come to the boil.
It was President Trump’s contention that the JCPA did nothing to curb Iran’s intervention in Syria, Yemen, and elsewhere. While that may be correct, the deal had a limited focus of curbing Iran’s nuclear ambitions and was not intended to limit its broader geopolitical goals. There has been a sense of dismay at the American action, with the former British ambassador to the U.S., terming President Donald Trump's withdrawal from the Iranian nuclear deal as an act of “diplomatic vandalism” against his predecessor Barack Obama, according to leaked diplomatic cables. Be that as it may, the tense relations have set off a chain of actions which can potentially have grave consequences for the world’s energy supplies.
On 12 May 2019, two oil tankers were attacked off the coast of the United Arab Emirates, leaving one ablaze and both adrift. These tankers were flying the flag of Saudi Arabia, one of which was en-route to the Saudi kingdom to be loaded with crude oil to be sent to the US. Saudi Arabia’s Energy Minister Khalid al-Falih denounced the attack as a deliberate act of sabotage, stating that while no lives were lost and no oil was spilled, the incident caused “significant damage” to the two ships. Earlier, UAE officials had alleged that four boats including a UAE flagged vessel had been targeted and Thome Ship Management had stated that one of its Norwegian-registered tankers was “struck by an unknown object”. The US pointed the needle of suspicion on Iran or its proxies and dispatched an aircraft carrier strike group to the Middle East to send a "clear and unmistakable" message to Iran. The US also ramped up sanctions against Iran and designated the Iranian Islamic Revolutionary Guard Corps (IRGC) as a terrorist group. Iran responded by stating that it would roll back some of its commitments to the 2015 nuclear deal.
A month later, on 13 June, two oil tankers, one Japanese owned and the other Norwegian, were again attacked in the Gulf of Oman, leaving one ablaze and both adrift. The US Navy’s Fifth Fleet responded to the distress calls and assisted the tankers, whose crew was evacuated. As the attack occurred along one of the world’s busiest oil routes, it led to a surge in oil prices. The U.S. blamed Iran for the incident, with the U.S. Central Command, which is based in the Gulf, releasing a video footage that purportedly showed men on an Iranian boat removing a mine from one of the tankers. Iran promptly refuted the allegation, but regardless of who is behind these attacks, it is becoming increasingly clear that the Strait of Hormuz and the Gulf of Oman are getting weaponised.
A week into the above incident, the IRGC shot down a US surveillance drone (RQ-4A Global Hawk BAMS-D) with a surface to air missile over the Strait of Hormuz, claiming it to have violated Iranian air space. The US on the other hand claimed that the drone was in international airspace. On 18 July, USS Boxer, downed an Iranian drone off the Start of Hormuz, which it claimed came dangerously close to the warship and did not heed to warnings to move out of the area. As per US officials, electronic jamming measures were used to take out the drone. The news site military.com has stated that the Marine Corps was responsible for bringing down the drone, using a new anti-drone system. A statement made by CENTCOM Commander Gen. Kenneth McKenzie, indicates that the US may have shot down a second Iranian drone on 23 July, indicating a ratcheting up of operations in the Gulf.
Adding to the existing tensions in the Gulf, the UK on 4 July, seized an Iranian tanker off the coast of Gibraltar, carrying two million barrels of crude oil, on the grounds that it was carrying the oil to Syria in breach of EU sanctions. The Gibraltar police arrested the captain and chief officer of the Iranian oil tanker Grace 1. This prompted a sharp response from Iranian President Hassan Rouhani who termed the act as piracy and warned that the UK would face “repercussions” for the seizure. Those repercussions came on 19 July, with Iran seizing a British oil tanker the Stena Impero, in the Strait of Hormuz, and briefly detaining a second British ship. The IRGC reportedly carried out the seizure on the grounds that the tanker had “violated three international naval regulations,” including turning off a GPS locator, breaking the traffic pattern in the Strait of Hormuz and polluting the water by dumping crude oil residue. The message being sent by Iran to the world is clear: Iran has the ability to threaten the flow of shipping out of the Persian Gulf through the narrow Strait of Hormuz.
Importance of the Strait of Hormuz
Conflict in the Gulf serves little purpose as it would only serve to cripple the world’s economies which are dependent on energy flows from the region. The situation is thus worrisome for the world and especially for India. The channel accounts for a fifth of the world’s oil supply, a quarter of the liquefied natural gas, and USD 500 billion in trade every year. The countries which lie along the Persian Gulf and share the Gulf coastline are Iran, Iraq, Kuwait, Bahrain, Qatar, United Arab Emirates (UAE), and Oman, all of whom are energy rich and export oil and petroleum products. Consequently, the Gulf has emerged as a major trade route through which most of the oil exported from these countries flows out. The Strait of Hormuz is a choke-point between the Gulf and the open ocean, being bounded by Iran to its North and the UAE and an Omanian enclave to its South. At its narrowest point, the Strait has a width of just 34 km. It opens to the Gulf of Oman and from there to the Arabian Sea. A third of crude oil exports transported via ships pass through the Strait, which makes it the world’s most important oil artery.
On an average, 20.7 million barrels per day (bpd) pass through the narrow Strait of Hormuz, of which 17.3 million bpd is crude and condensate products and 3.3 million bpd is petroleum products. (https://www.eia.gov/todayinenergy/detail.php?id=39932). This accounts for 21 percent of the world’s exports. Alternate data provided by Vortexa, an energy analytics firm states that 22.5 million bpd passes through the Strait of Hormuz on average, which is 24 percent of daily global oil production and nearly 30 percent of oil moving across the world’s oceans. Any disruption to this supply will have serious consequences on the worlds economy and while some countries will be affected more than others, the mere fact that we are living in a globalised world, every country will be deeply impacted. India’s total imports (till June 2019) was 83,908,500 barrels of crude oil products of which 2/3 of crude oil and 1/2 of liquified natural gas (LNG) passed through the Strait of Hormuz. That defines the criticality of conflict in the Gulf for India. China too, stands critically affected. In June 2019 it imported 9.63 million bpd, 44 percent of which passed through the Gulf.
With the Gulf getting increasingly weaponised and rapprochement between Iran and U.S. not visible on the horizon, it could take but a spark to trigger of a limited war on the high seas, impacting upon trade routes and halting the flow of energy resources. Such a scenario has played out earlier in the 1980s, during the Iran-Iraq war. Iraq first targeted Iranian fuel carrying ships in 1981, using jet aircraft. Iran responded in 1984, using a combination of means to include speedboats, sea mines, anti-ship cruise missiles and naval gunfire, to target Iraqi vessels carrying fuel. The Gulf waters were thus turned into a war zone, with a total of 340 ships being attacked and over 30 million tonnes of shipping damaged during the period 1981-1987. U.S. intervention in 1987 led to the conflict subsiding but only after Iran developed and demonstrated capability to attack any vessel that passed through the Strait of Hormuz.
Any military action taken by the US and its allies against Iran could well push Teheran to widening the conflict and choking the trade routes across the Strait. It could even spill over to a wider war where Iran targets Saudi assets, thereby crippling oil supplies across the world. That is a scenario best avoided and one which India, along with like minded countries, must work towards circumventing. India has tremendous goodwill with both Iran and the US and could use its influence to prevent matters from slipping out of control. Here, the interest of all Asian economies too coincide. By 2020, Asia will account for half of the worlds GDP. A crippling of the Asian economies caused by oil shortages would have serious impact across the globe. Even a limited conflict will push up global oil prices, adversely impacting on growth.
As a long term measure, India needs to reduce its oil consumption through alternate technologies. India’s dependency on oil imports is about 85 percent of its overall requirement, and much of this is sourced from the Gulf. This makes India’s growth vulnerable to any disruptions in the passage of crude through the sea lanes passing through the Gulf. Besides alternate technologies, there is a need to focus on increasing indigenous output of crude. Research on renewable sources of energy also needs a much greater push and a greater inflow of funding. Nuclear energy and hydro power also needs much greater exploitation. A whole of government approach would be required to enhancing the nation’s energy security to reduce the impact which oil shortages or oil shocks may cause in future.
Note: For DSA - Sep 2019 edition.
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