Ongoing conflict between Israel and Iran has sent oil prices soaring and upheaval in stock market, because of rising fears that this could disrupt Global Flow of Crude Oil. Iran,a major producer of oil sits on the narrow Strait of Hormuz,a major gateway of transit.Iranian Parliament has okayed closure of this Strait on 22 June,25 which would be effective on, soon expected approval of Supreme Council of Iran. As per Email Kosari, Commander of Revolutionary Guards,“It will be done whenever necessary”.Hossein Shariatmadari,Representative of Iranian Supreme Leader Ali Khamenei reportedly called for immediate retaliation, including closing the Strait of Hormuz to American, British, German, and French Ships.
Bulk of all oil exported by Regional Petro Giants; Iran, Iraq, Kuwait, Qatar, Saudi Arabia and UAE travel through this narrow waterway.Iran exports up to 2 million barrels of oil and refined petroleum products per day. Normally, a sudden loss of Iranian exports would trigger panic. But; Organisation of Petroleum Exporting Countries has acquired a spare capacity of Four Million Barrels per day which would cushion potential Iranian Supply Loss.Approximately 20 Million Barrels of oil pass daily through Strait of Hormuz. It could be diverted through Alternative Supply Routes through Saudi East West Pipeline leading to Red Sea and UAE Pipeline leading to Port of Fujairah, in the Gulf of Oman. Increased Risk and Higher Shipping Costs along with Cost of Ship Insurance would increase price of Crude Oil substantially without disruption in supply. That, combined with the broader economic fallout, could have Global Repercussions.
Strait of Hormuz connects Gulf of Oman with Persian Gulf.It is bordered by Iran to North and Oman/United Arab Emirates to South. It is just 30 kilometres wide at its narrowest point. It’s inward slanting slope, leave bare three kilometer wide Clear Channel/ Shipping Lane for a ship to pass through. Thus; it is most vulnerable to attacks and threats of closure. Shallow channel of the Strait can be blocked by underwater mining whereas its Narrowness is vulnerable to attack from shore based Missiles,Interception by Patrol Boats or gunfire from Helicopters.
My take is; Iran may/would not block the Strait but adopt a Multi layered Asymmetric Strategy of a) Mine shipping lanes for Immediate Disruption; b) Engage passing ships by her Ghader/Nasir Mobile Coastal Batteries up to a distance of approximately 300 kilometer, c) This would put more than One Billion Dollars of oil shipment amounting to 20% of World Daily Oil Supply per day at risk and send oil prices soaring. As such, there was a increase of about two and half dollars per barrel on very next day of 23 June,25.
In UNSC meeting on 23 June,25, Iranian Representative said that; “a) America dropped six “Bunker Buster Bombs” on her Fordow Nuclear Enrichment Plant and around 30 Tomhock Missiles on two other key sites; b) Prior to this, Israel initiated extensive attacks on her Nuclear/ Military Infrastructure; c) As a result,mountain protecting these facilities were completely obliterated; d) UN/UNSC must be alarmed over this extremely dangerous, lawless and criminal behavior by America and Israel; e) American Strikes will have “Everlasting Consequences”. But as per America/Israel,Iran has no Legal Authority to Block Sea Traffic through Hormuz. Therefore, any attempt by her Navy to “Bar entry to the Strait” would be met by a Strong Response. Iran strike authorised by the President of America shows that “American Deterrence is back. Henceforth,when the American President speaks,world should listen”. Our Fifth Fleet, along with other Western Navies, are patrolling the area at all times” was their cautionary advice to Iran.
Both China and Russia have used “Veto Power” at the UNSC to block Sanctions/Resolutions against Iran. Incidentally, closure of Strait of Hormuz would also affect the Economy of Iran. She depends on Strait of Hormuz for her own Vital Imports. She exports around Two Million Barrels of oil daily, mostly to China at discounted rates.So; any closure attempt would prove to be Self Destructive for her.On the other hand; closure of this Strait would Trigger an Overwhelming Response by America, Israel and other affected countries.Iran cannot/dare not alienate China, her Primary Oil Customer, by closing the Strait as it would amount to Economic Suicide. My take is; Iran understands this calculus, which is why,Threat of Closure of Hormuz remains more valuable as leverage than as an actual course of action.
Instances of Iran blocking maritime traffic at/near Strait of Hormuz does exist. In May 2022, two Greek Tankers were seized/held by Iran for six months.This was in retaliation to confiscation of Iranian Oil Tankers by Greece and America.In April 2023, she had seized an America bound Tanker for frivolous claim of striking another vessel.She again seized an Israel linked Container Ship near Strait, accusing MSC Aries of “Violating Maritime Regulations” in April 24. For past few years Iran is collaborating with Houthi Militia in Yemen to concurrently disrupt traffic through the Bab el Mandeb Strait, leading into the Red Sea on the other side of the Arabian Peninsula.Both of them use Missile/Drone Fire to cut Ship Traffic in respective areas. By this step, Vessel Operators would be forced to abandon/reroute oil traffic.
Iranian Navy would employ the same or Tactics along with Cyber Attacks and other Sabotage Operations.It would also execute its proven “Swarm’ Tactics” using hundreds of small, fast boats armed with Missiles and Explosives to overwhelm Defenses. It would also use Suicide Drones and Explosive laden Unmanned Boats akin to operations of Houthi in Red Sea.Iran would further resort to; a) Cyber Attacks on Port Infrastructure and Shipping Navigation Systems; b)Activate her Regional Proxies in Lebanon,Iraq,Palestine, Syria,Yemen, Malaytia,Philippinesb and India to create Multiple Crisis Points to over stretch American/Allied Forces; c) Carry out Sabotage Operations against Saudi Arab and UAE Oil Facilities and d) Target Desalination Plants in/of Gulf Countries to pressurise them to oppose American Operations.
Iran had issued threats to retaliate against America after her bombers dropped 30,000-pound Bunker Busters on Iranian Underground Nuclear Sites on Saturday,21 June,25 joining Israeli Air War against Iran.Shortly before Iran launched missiles at the base, Qatar announced it had closed its airspace.Iran had coordinated her Strikes prompting closure of Qatari Airspace.Al Udeid Airbase in Qatar is the largest American Military Installation in Middle East. Iran’s Supreme National Security Council confirmed that,number of Missiles used were equal to the number of Bombs/Missiles used in assault on Three Iranian Nuclear Facilities.Iran launched missiles toward American Military Base in Iraq also. Both bases were targeted with a Powerful Missile Attack in “Operation Beshararat Fatah”. As per Iran, these strikes she has made it clear that “Iran will not leave her Territorial Integrity, Sovereignty and National Security unanswered under any circumstances”. America has confirmed that her two bases in Middle East have come under Iranian Attack but there is no Economic ,Military or Troop/Material Loss. Qatar and Iraq have said that they reserve “The \Rright to Respond”. Both have confirmed that their Air Defences intercepted Iranian Missiles and though the attack as a clear breach of their Sovereignty, Airspace, and International Law. Iran said that “The operation posed No Threat Whatsoever to our Friendly and Brotherly countries or its People”.
Hopefully, Iran will now drop the idea of Closing Strait of Hormuz after Cease Fire becomes effective by Morning of 25 June,25.Closure of Strait would have severely affected China, India, Japan and South Korea who get most of their oil imports through it and would bear “The Brunt Most” from any closure of the Strait.China is biggest buyer of Iranian Oil and Russia is her Major/Principal Monetary and Weapon Supplier. Iran exports up to Two Million Barrels of oil and refined petroleum products per day. Due to long-standing sanctions, most of this oil is sold to China at discounted prices.
As on date; India is well placed in respect of Strategic Petroleum Reserve Petroleum Reserve managed by Indian Strategic Petroleum Reserves Limited under Ministry of Petroleum & Natural Gas, meant to cushion her against supply disruptions.India has 5.33 Million Metric Tonnes of Crude Oil stored in underground facilities at Visakhapatnam (Andhra Pradesh) as well in Mangaluru and Padur (Karnataka). As per 2023 Consumption Pattern Estimates, this would last for 9 to 10 days. It is to be expanded by an additional 6.5 MMT lasting for 22 days.In addition,Oil Marketing Companies maintain their own Commercial Stockpiles increasing the Buffer Stock to 70-75 days.This is enough for Short Term Resilience. But a prolonged disruption would certainly impact Indian Oil Reserves.So she would also welcome this latest development.
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