Dire straits as crude politics heats up

Published December 27, 2020
Things are heating up in the strategically important Strait of Hormuz — the only sea passage to crude from the Persian Gulf to the open ocean. — AFP/File
Things are heating up in the strategically important Strait of Hormuz — the only sea passage to crude from the Persian Gulf to the open ocean. — AFP/File

THINGS are heating up in the strategically important Strait of Hormuz — the only sea passage to crude from the Persian Gulf to the open ocean. In 2018, some 21 million barrels per day (bpd), or almost 20 per cent of the total global crude consumption passed through the Strait of Hormuz.

Sandwiched between Oman and Iran, the Strait is also one of the world’s most strategic chokepoints. Just 34 kilometers (21 miles) wide at its narrowest point, the shipping lane is only 3km wide in either direction. And, with incoming vessels forced to use the North and East routes to gain access to the Persian Gulf, they need to pass through Iranian waters. This provides Iran with a capacity to disrupt traffic using the Straits of Hormuz.

With the Trump administration about to leave Washington, tensions between the US and Iran appear escalating. In the wake of Sunday’s rocket attack on the American embassy in Baghdad, the US 5th Fleet announced that the USS Georgia passed through the Strait of Hormuz to demonstrate their “ability to sail and operate wherever international law allows”.

Earlier, Washington blamed Iran for a barrage of rockets fired at the US embassy in Baghdad’s Green Zone.

Along with the Ohio-class submarine, the 5th Fleet sailed with two guided-missile cruisers, the USS Port Royal and USS Philippine Sea out of their Bahrain base and out of Bahrain into the narrow Strait of Hormuz. A day later, USS John McCain “asserted navigational rights and freedoms in the Spratly Islands, consistent with international law,” US 7th Fleet public affairs announced Dec 22.

With the US showing off its prowess, in and around the Strait of Hormuz, Iran has also been expanding its military footprint and building key infrastructure in the area. It has been endeavouring to strengthen its leverage around the narrow Strait. In a report, Nicholas Carl said that Iran’s regular military called the “Artesh” and the Islamic Revolutionary Guards Corps (IRGC) have been adapting their force posture, structure, and capabilities, for a larger, potential escalation in the region.

Last June, President Hassan Rouhani of Iran announced plans to construct a 1,000 km oil pipeline from Bushehr province to Bandar-e Jask by March 2021 to allow Tehran to export oil even if the Strait “was closed.” Iran currently exports around 90pc of its oil from Bushehr province via the strait.

Other oil-exporting countries of the region are also looking at similar possibilities.

The UAE and Saudi Arabia have long sought to find alternative routes to bypass the Strait, including through pipelines. The Abu Dhabi Crude Oil Pipeline has a capacity of 1.5 million bpd and carries the bulk of its production to the UAE port of Fujairah on the Indian Ocean.

Following the establishment of ties with Israel, the UAE is also reportedly looking to collaborate on the transportation of crude and products between the Persian Gulf and Western markets, using the Israeli infrastructure. The Eilat-Ashkelon pipeline, built by Israel and Iran in the 1960s, has a capacity of 600,000 bpd and runs from the Red Sea to the Mediterranean.

In the wake of rising tension, Saudi Arabia’s Red Sea crude terminals have taken on critical importance. Saudi Arabia already exports some of its oil, using a 745-mile-long pipeline that runs from its key production facilities in the east to the Red Sea port city of Yanbu in the west. A major expansion of its capacity is also underway. Unconfirmed media reports also indicate that Saudi Aramco has also been using a separate, reserve network of other pipelines that run parallel to its East-West pipeline.

The outgoing US Energy Secretary Dan Brouillette who was in the region to meet ministers from the UAE, Bahrain and Israel also hinted at the possibility of using alternative methods to transport Middle East oil and gas to the world. “Part of the conversation we’re having with the Abraham Accords is to look for alternatives to shipping, so that’s why these pipelines are so important,” Brouillette told CNBC’s Hadley Gamble on Wednesday.

Yet, to be fair, pipelines are no passport to provide a safe route to crude from the region to the world. Recent attacks from Yemen on Saudi crude infrastructure and the Iranian threat to the UAE in retaliation to any possible attack from Israel underlines the reality that the only guarantee to the safe passage of crude from the energy rich region is the resolution of disputes through negotiations. Strong arms tactics may not work and all the stakeholders — including the incoming administration in Washington — also needs to understand that fully and comprehensively.

Published in Dawn, December 27th, 2020

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