Is Conflict Looming in the Straits of Hormuz? Oil Prices Soaring to $200 a Barrel?
[Editor’s note: Today, we feature a thought-provoking essay by John Daly discussing the escalating potential for conflict in the Persian Gulf and its implications for oil prices. Reprinted with permission from OILPRICE.com.]
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The World’s Most Crucial Oil Chokepoint
The elements that could lead to conflict in the Persian Gulf are aligning alarmingly.
Since December 24, the Iranian Navy has been conducting its ten-day Velayat 90 naval exercises, covering the Arabian Sea from the entrance of the Strait of Hormuz to the Gulf of Aden. At the start of these drills, Iranian Navy Commander Rear Admiral Habibollah Sayyari stated that the exercises aimed to demonstrate “Iran’s military prowess and defense capabilities in international waters, to communicate a message of peace and friendship to regional nations, and to test the latest military equipment.” This marks Iran’s first naval training operation since May 2010, when it ran the Velayat 89 exercises in the same area. Velayat 90 stands as the largest naval drill in Iran’s history.
The Iranian forces participating have been categorized into two groups: “blue” representing Iranian assets and “orange” denoting the enemy. Velayat 90 showcases a comprehensive array of Iranian naval forces, including destroyers, missile boats, logistical support vessels, hovercraft, aircraft, drones, advanced coastal missiles, and torpedoes. Tactics during these exercises include mine-laying and preparations for potential chemical attacks, with participation from Iranian naval commandos, marines, and divers.
These exercises have placed Iranian warships alarmingly close to the United States Fifth Fleet stationed in Bahrain, which patrols many of the shared waters, including the vital Strait of Hormuz. This narrow waterway, just 21 miles wide at its narrowest point, is pivotal for global commerce; approximately 40 percent of the world’s oil tanker shipments, totaling 15.5 million barrels daily from Saudi Arabia, Iraq, Iran, Kuwait, Bahrain, Qatar, and the UAE, navigate through here. The U.S. Energy Information Administration has dubbed it “the world’s most important oil chokepoint.”
Possible Closure of the Straits of Hormuz
In response to Iran’s recent capture of an advanced CIA RQ-170 Sentinel drone, Iranian Navy Rear Admiral Seyed Mahmoud Moussavi commented that the Velayat 90 forces also engaged in electronic warfare tests, utilizing locally made jamming devices to disrupt enemy radar and communication systems. Moussavi provocatively noted that Iranian Navy drones successfully undertook surveillance operations during the exercises.
Meanwhile, thousands of miles away, President Obama is poised to enact legislation that could impose severe penalties on all buyers of Iranian oil, targeting Iran’s ability to export it. This raises concerns regarding Iran’s seriousness about potential sanctions and any military responses related to its civilian nuclear initiatives. The International Institute for Strategic Studies reports Iran’s military inventory includes 23 submarines, over 100 patrol craft, five mine warfare vessels, 13 amphibious landing crafts, and 26 logistical support ships. Furthermore, Iran has signaled its development of unique “asymmetrical warfare” naval strategies, making their response to sanctions or military strikes unpredictable.
The proposed energy sanctions from the Obama administration heighten the likelihood of confrontation, threatening substantial economic repercussions through surging oil prices depending on Iran’s retaliatory measures. Addressing the potential effects of tightened sanctions, Iran’s first vice president, Mohammad-Reza Rahimi stated on December 27, “If they impose sanctions on Iran’s oil exports, then not a single drop of oil can pass through the Strait of Hormuz.”
Iran has warned that if the U.S. or Israel were to launch an attack, it would target 32 U.S. military bases in the Middle East and close the Strait of Hormuz. On December 28, Rear Admiral Sayyari reiterated, “For the Islamic Republic of Iran’s armed forces, closing the Strait of Hormuz is very easy. This capability has always been part of our naval forces.” However, he also noted, “Today we are not in the Hormuz Strait. We are operating in the Sea of Oman and do not need to close the Strait of Hormuz. We can control it from here, showcasing one of our primary strengths concerning vital waterways.”
Widening the Military Arc of Crisis
Despite the escalating tensions, there are glimmers of hope. The sanctions legislation allows for presidential waivers if they threaten national security or cause oil prices to skyrocket.
Moreover, Iran’s oil customers, particularly China, are unlikely to cooperate with increased sanctions, complicating the situation further.
It is essential for Washington to understand that, despite any disdain for Iran’s leadership, it is improbable that Iran would yield to economic or military threats endangering its existence. If cornered, it may utilize all available resources to defend itself. Given their cyber capabilities demonstrated through the RQ-170 drone incident and claims of a homegrown naval doctrine, expectations of a swift and easy military victory would be naive. Such a conflict would extend the military crisis from Iraq through Iran to Afghanistan, creating a chaotic military scenario beyond the control of Washington, NATO, or Tel Aviv.
It is worth remembering that chess was played in ancient Sassanid Iran over 1,400 years ago, where it was then known as “chatrang.” What is currently unfolding in the Persian Gulf resembles a complex game of chess, with significant global consequences.
Washington’s approach of targeting a nation’s government through its energy policies has a lengthy and troubling history.
For instance, when Japan invaded Vichy French-controlled southern Indo-China in July 1941, the U.S. demanded a withdrawal. Subsequently, on August 1, the U.S., Japan’s largest oil provider at the time, imposed an oil embargo. Less than four months later, the attack on Pearl Harbor occurred.
Sincerely,
John Daly
for Economic Prism