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            Persian Gulf

            Straits of Hormuz and Gulf of Oman

             

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            Significance

            The Strait of Hormuz is a narrow 21 mile wide channel separating Iran from the Arabia Peninsula. It is used to transport a fifth of the world's petroleum liquids which is around 21 million barrels or $1.2 billion worth of oil every day. The majority of Saudi Arabia's crude exports pass through the Strait of Hormuz, meaning much of the oil-dependent economy's wealth is situated there, similarly, 10% of the US's total oil imports per month transit the straits. Further, a quarter of the world’s LNG is also transported through the channel. This makes the Strait of Hormuz not only the world’s busiest shipping lane but also the most strategically important choke-point for the world's oil supply because there are limited alternatives to bypass the strait. 

            Security Context 

            The principal security implications for the region are presented by Iran. Iran’s options to address the threats it is facing to regime stability are limited, and the potential success of any response is no longer clear. Whilst this analytical perspective may appear muddled, it lends credence to the complexity of the issues. When nation states find themselves with no clear route to achieving their interests it is usually when they are at their most dangerous, and it is increasingly clear that the international community needs to acknowledge that Iran is on the precipice of an existential crisis. Whilst it is unlikely that the current instability of the Iranian regime will dramatically alter the regional maritime security picture in the near term, there is the potential for escalation should the international community not manage the situation sensitively. 

            Regional security in the Persian Gulf 

            Understanding the current issues facing Iran is vital to understanding the regional security picture. In early 2020, Iran faced three simultaneous threats to its stability in the short-term. The first, COVID-19, impacted Iran more significantly than other nations in the Middle EastThe World Health Organisation’s statistics reported 321k confirmed cases and 17.5k deaths (as at 3rd August 2020) in stark contrast to much reduced figures reported by IranWhatever the true number, it is reasonable to say that Iranian society faces significant strain under the pressure of COVID-19. 

            The second crisis Iran faces is the ongoing punitive economic impact of US sanctions. The effect of sanctions imposed on Iran prompted 24 senior diplomats and defence officials to urge President Trump to relax sanctions. In particular, sanctions on medical and humanitarian sectors which are constraining Iran’s capacity to respond to COVID-19. The impact of sanctions is already forcing Iran to make compromises, and Iran has recently suggested some restricted economic activities may have to resume, despite the threat of COVID-19. 

            Lastly, the recent collapse in oil prices seriously impacted Iran and further constrained its economic options. Although Iranian export options are severely limited due to sanctions, Iran has thus far reduced the severity of the economic impact through its exports to China and Venezuela. However, with Brent crude oil prices remaining below USD $35 pb, the logic of retaining Iran as an illegitimate supplier is less clear. 

            Could Iran block the Strait of Hormuz? 

            Whenever global tensions rise in relation to Iran, media commentators drag out the scaremongering assertion that Iran could exact its revenge on the US and its allies is by shutting or harassing tankers in the Strait of Hormuz, which would disrupt oil supply and send prices shooting up.  

            Iranian leaders, who have also vowed retaliation for the death of Soleimani, have threatened to close down the strait multiple times in the past.  

            If Iran followed through with these threats, it would likely cause huge disruption to the global oil trade. As the strait is so narrow, any sort of interference in tanker traffic could decrease the world's oil supply, and send prices shooting up. 

            To close down the entire strait, Iran would have to place at least 1,000 mines with submarines and surface craft along the chokepoint, security researcher Caitlin Talmadge posited in a 2009 MIT study. Such an effort could take weeks, the study added.  

            Disrupting oil traffic on the strait would also result in oil importers around the world looking beyond the Middle East for their sources, and further reduce reliance on the region.  

            Iran's oil industry is already suffering after the US imposed sanctions designed to stop countries from importing Iranian oil earlier this year.  

            As Michael Knights, a Middle East expert at the Washington Institute think tank, told The Atlantic last May: "They'd be cutting their own throat if they close the strait." 

            This is true, Iran could seek to conduct maritime attacks as route to raising oil prices; however, Dryad continues to assess that Iran does not possess the capacity or resolve to close the Strait of Hormuz. The increased international naval presences in the region, has reduced the capacity for the IRGC(N) to conduct opportune attacks, approaches or detentions of vessels to the same degree as previous years. 

            What incidents have happened recently in the Strait of Hormuz? 

            Iran's Revolutionary Guards seized two British oil tankers sailing in the strait's international waters and attempted to harass another British tanker. 

            June 2019: Marshall Islands-flagged Front Altair and Panama-flagged Kokuka Courageous rocked by explosions after sailing through Strait of Hormuz. 

            June 2019: Iran shoots down a US drone flying near the strait.  

            July 2019: Iran seizes UK flagged vessel Stena Impero 

            July 2019: U.S. shoots down Iranian drone near the American warship USS Boxer. 

            April 2020: Hong Kong flagged, SC TAIPEI boarded by IRGC

            July 2020: Iran launches missiles at a mock-up of a US aircraft carrier in the Strait of Hormuz.  

            Feb 2021: Explosion - Gulf Of Oman Vehicle Carrier MV HELIOS RAY (IMO9690547) has suffered an explosion within the Gulf of Oman.

             

            UN sanctions on Iran, the Straits of Hormuz and oil 

            The UN sanctions against Iran do not include oil exports from Iran. As of 2019, an estimated one third of all oil traded at sea passes through the Strait of Hormuz. In August 2018, EU High Representative Mogherini, speaking at a briefing with New Zealand's Foreign Minister Winston Peters, challenged U.S. sanctions on Iran, stating that the EU are encouraging small and medium size enterprises in particular to increase business with and in Iran as part of something that is for the EU a "Security Priority". In September 2019, the US government announced, unilaterally, that it would begin to sanction certain Chinese entities that imported oil from Iran. The U.N. arms embargo on Iran is set to expire on 18 October 2020. 

            Why isn’t China playing a role to secure shipping routes in the Gulf? 

            In 2019 China turned down an opportunity to join the United States and other partners in naval patrols to protect its oil tankers in the Persian Gulf and Strait of Hormuz. In 2019 and 2020 Iran launched a string of attacks in the Gulf and its nearby waters primarily targeted against American, British, and Saudi assets. 

            Are China’s long-term commitments to Iran, including an ostensible $400 billion investment pledge to Iran’s oil and gas sector, its defence against foul play affecting its oil shipments?  

            Out of the 13.6 million barrels of oil per day shipped out of the Persian Gulf and through the Strait of Hormuz 3.5 million barrels, or nearly 26 percent, go to China

            For China, those 3.5 million barrels a day represent more than 38% of its total daily imports of oil. China is now the largest oil importer in the world, relying on supplies abroad for approximately 75 percent of its crude. This makes the Strait of Hormuz an extremely important geographical region for China. 

            So why doesn’t China have a vested interest in making sure that not only its own oil supplies, but also those of other countries, are protected from the escalated threats to tanker shipping in the Gulf, Hormuz, and the Gulf of Oman. Even if Chinese ships are not targeted by Iran on the strength of the two nations’ cozy relationship, a conflict among third-party actors could severely impact shipping for all. 

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            What international coalitions patrol the Strait of Hormuz and Persian Gulf? 

            1. France is leading an eight-member coalition of EU countries, which became fully operational in February 2020. Supporting France are Belgium, Denmark, Germany, Greece, Italy, the Netherlands, and Portugal. Titled the European Maritime Awareness in the Strait of Hormuz (EMASoH), the coalition’s stated aim is “ensuring the freedom of navigation in the Gulf.” 

            The military component of the EU initiative, Operation Agenor, is based in the United Arab Emirates (UAE), where France has a base in Abu Dhabi. France says the mission of EMASoH is de-escalation of tensions and “is not aimed at any particular state,” a disingenuous denial of the coalition’s goal to counter Iran’s attacks on oil tankers. 

            1. The second coalition, led by the United States, includes Australia, Bahrain, Israel, Saudi Arabia, the United Arab Emirates, and the United Kingdom. The grouping’s mission, dubbed Operation Sentinel, is “to promote maritime stability, ensure safe passage, and de-escalate tensions in international waters throughout the Arabian Gulf, Strait of Hormuz, the Bab el-Mandeb Strait (BAM) and the Gulf of Oman.” 

            Most member states of the EU’s Operation Agenor had been wary of joining a U.S.-led security framework, fearful of undermining their efforts to save the landmark Joint Comprehensive Plan of Action nuclear deal with Iran that was signed in 2015.  

            1. Japan and South Korea, both heavily dependent on Persian Gulf oil are conduct independent patrols to ensure freedom of navigation in the Gulf. 

            In 2019 China briefly contemplated joining the American-led coalition. Ni Jian, the Chinese ambassador to the UAE, said on August 6, 2019 that “If there happens to be a very unsafe situation, we will consider having our navy escort our commercial vessels”. The Chinese Embassy in Abu Dhabi went on to comment, “We are studying the U.S. proposal on Gulf escort arrangements.” 

            For the time being it seems that China has nothing to fear from Iran’s meddling in Middle Eastern waters. But other factors may change China’s position.  

            How strong is the relationship between China and Iran? 

            Despite the 25-year comprehensive strategic partnership agreement signed in 2016, to which $400 billion was pledged to the oil and gas sector pledge, figures show that the Chinese-Iranian trade relationship has actually deteriorated since 2016. Exports to Iran have now stabilized at just under $1 billion each month. The strategic partnership “included agreements intended to boost bilateral trade to $600 billion within a decade but with only six years left in that decade, the ability to achieve $600 billion in trade per year, with volumes at less than $1 billion a month now, seems impossible. 

            Further, the $400 billion oil pledge from China may not be true. Various Iranian officials and business leaders have denied any knowledge of the pledge.  

            These two reasons combined could imply future strain between China and Iran.  

            China has naval capability in the region with a base in Djibouti within range of the Bab al-Mandab Strait at the mouth of the Red Sea, which controls access to the Suez Canal, and the Strait of Hormuz. The base’s stated purpose is to provide logistical support for China’s ongoing participation in international anti-piracy missions in the Gulf of Aden. China therefore could support a go-alone mission or a coalition of international partners.  

            With China refraining from joining or launching its own patrols in the Middle East it is signalling its intent to maintain a status quo. Sitting on the fence, means avoiding confrontation with all parties but it also means failing to support efforts to reduce risk in the Gulf. 

             

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