The strait of Hormuz

Written By: - Date published: 8:44 am, July 20th, 2019 - 49 comments
Categories: business, capitalism, Donald Trump, energy, Iran, transport, us politics - Tags:

With the seizing of an oil tanker by Iran in the Strait of Hormuz today as a presumably tit-for-tat escalation for British seizing an Iranian ship, and the U.S. Navy harassing their coastline, we are in for a senseless and dangerous political escalation.

The Strait of Hormuz is a very tight pinch point in which much of the oil and gas from Saudi Arabia, Gulf States, and Iran pass through to get to the world’s refineries.

I was 12 when the 1979 oil crisis hit the world after the Iranian revolution that same year. Despite the fact that global oil supply decreased by only 4% as a result of Iranian governmental action, there was simply widespread panic across the world which drove prices skyward.

What then started was real panic, and long queues of cars were on our television screens at petrol stations across the U.S., governments reacted across the world. The price of crude oil doubled to U.S. $39 per barrel inside a year.

The New Zealand government responded to its oil vulnerability with an all-in response not seen since World War 2. Other countries did even more.

Together with the policy author Bill Birch, Prime Minister Robert Muldoon doubled down on the Think Big projects to give some measure of fuel and energy autonomy for New Zealand. People were issued stickers to put onto their cars so that they could only drive on specific days as a fuel-saving measure. You can debate whether the Think Big expenditure was worth it, but it was a gargantuan policy response that we haven’t seen since.

Now, that scale of response is not yet expected if Iran did something particularly daft like try to block the Strait of Hormuz. There would be a price spike of course, and then the U.S. Navy would do what they’ve been gagging for and smash the Iranian navy into sticks. The U.S. provocations are frankly tiresome right now, and it’s easy to see why Iran’s government would be tempted to keep poking the bear.

The European Union have sought valiantly to find ways around the U.S. economic blockade of Iran. It has sought to set up alternative trade routes that seek to wangle their way around sanctions. The E.U. is seeking to retain some semblance of allegiance to the Iranian deal concerning nuclear energy production. But even the E.U., as the main remaining body with any economic or political clout prepared to hold on to that Iranian nuclear deal, well, even the E.U. is seeing most remaining avenues close.

The U.S. belligerence will push Iran more and more to exporting to China, building on a relationship that goes back a fair bit in history. It is the biggest gift imaginable to Xi Jinping’s Belt and Road programme.

And exports can also increase to Russia and its allies. The U.S. can’t effectively blockade, but in trying to do so it will tilt Iran, Russia and China even closer together than before.

Thankfully the world has many more alternative oil sources, and Middle eastern oil pipelines, than they did in 1979. Brent Crude is about US$66 a barrel. Sure it will do an M spike and settle higher, but it won’t be the same panic as 1979.

New Zealand will of course be asked by the U.S. to increase naval support for any big blowup in this strait.

Led by the worst President in living memory, the United States is provoking needless conflict with Iran that will only set the world back socially and economically.

49 comments on “The strait of Hormuz ”

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  1. Bruce 1
    20 July 2019 at 9:12 am

    We could just grow hemp, produce hemp oil and become self sufficient . Then we would not be dependent on selling milk powder to China to buy oil and the hemp would help to heal the damage that intensive milk production has caused.

    too simple?

    • James 1.1
      20 July 2019 at 9:29 am

      ”too simple?”

    • James 1.2
      20 July 2019 at 9:33 am

      Apologies for duplicate empty post above

      “too simple?

      Yes – by a long shot.

      [Deleted duplicate post]

    • Robert Guyton 1.3
      20 July 2019 at 9:50 am

      Selling milk powder to China: too simple?

      Yes – by a long shot.

      How foolish to put some many of your eggs in just one basket.

      Weaving a hemp basket to contain some of those eggs is a very wise idea, Bruce!

    • BG 1.4
      20 July 2019 at 10:28 pm

      Great, so we move highly productive arable land (that feeds literally millions) to land to run our generators that are required when the wind doesn't blow or there are too many native birds being smashed up in wind farms?

    • Gabby 1.5
      21 July 2019 at 11:21 pm

      What acreage of hemp would that be then brucy?

      • Bruce 1.5.1
        22 July 2019 at 8:54 am

        Good start, It would be something like the amount of fuel required divided by the amount of oil produced per acre maybe over two if its possible to grow two crops per year, Gabbster.

  2. SPC 2
    20 July 2019 at 9:24 am

    No, not sure about escalation. This is merely the Iranians trying to get leverage for release of a ship the UK took recently – and it is long past time the sanctions against Syria came to an end.

    The EU and UK should end sanctions against Syria.

    • Dukeofurl 2.1
      20 July 2019 at 11:44 am

      The tanker the British took at Gibraltar was an illegal act.

      EU sanctions only apply to supplies from EU members , Iran isnt one.

      EU restrictive measures apply in situations where links exist with the European Union (“EU”). The application of the Regulation is defined in Article 35 of the Regulation. It applies:

      1. (a) within the territory of the Union, including its airspace;
      2. (b) on board any aircraft or any vessel under the jurisdiction of a Member State;
      3. (c) to any person inside or outside the territory of the Union who is a national of a Member State;
      4. (d) to any legal person, entity or body which is incorporated or constituted under the law of a Member State;
      5. (e) to any legal person, entity or body in respect of any business done in whole or in part within the Union.

      https://ec.europa.eu/fpi/what-we-do/sanctions/eu-restrictive-measures-syria-%E2%80%93-faqs_en#collapse01

      • The Chairman 2.1.1
        21 July 2019 at 5:49 pm

        Whereas, the tanker Iran took veered off course and started heading towards Iran, suggesting (in the current heated environment) they may have been up to unscrupulous behaviour.

      • Gabby 2.1.2
        21 July 2019 at 11:22 pm

        The poms got played.

      • SPC 2.1.3
        22 July 2019 at 3:01 am

        Grace 1 – was carrying Iranian crude oil to the Baniyas Refinery in Syria. The refinery is subject to European Union sanctions against Syria

        https://www.bbc.com/news/uk-48865030

        • Dukeofurl 2.1.3.1
          22 July 2019 at 11:11 am

          The EU sanctions only apply to EU countries and businesses.

          They can only use UN sanctions for a vessel at sea, which dont exist as far as Im aware for this refinery in Syria- and thats mostly for weapons for Syria

      • SPC 2.1.4
        22 July 2019 at 3:23 am

        This explains the various permations, including EU Regulation 36/2012. The ship made the serious mistake of intruding into Gibraltar's territorial waters.

        Chapter V—“Freezing of Funds and Economic Resources”—and its article 14 state that “no funds and economic resources” shall be made available to persons and entities listed in an Annex II. Annex II lists several oil companies and refineries, including the Baniyas Refinery Company, which the government of Gibraltar has presented as the alleged destination of the Grace I’s cargo. This could be the legal ground for the detention of the ship, if indeed the sale of oil to a refinery is a way “to make available an economic resource” to it.

        https://lobelog.com/the-strange-case-of-the-grace-is-detention/

    • Lettuce 2.2
      21 July 2019 at 10:49 pm

      Neither the EU or the UK will be allowed to end sanctions against Syria until they get permission from Israel to do so.

  3. johnm 3
    20 July 2019 at 9:49 am

    The Iranians have been totally provoked and have replied to the British seizure of Iranian owned oil tanker Grace1 off Gibraltar, an act of piracy.

    Relations were excellent with the E.U. and US until the latter tore up the Iran nuclear deal on false pretenses. Iran is is on the US and Israel hate list because of its successful support of the Assad government, along with the Russians that has won the war against US and Israeli backed terrorist invaders including ISIS.

    Also because Iran has supported Hezbollah in southern Lebanon which successfully rebuffed Israel's attempt to annex water resources in the south. Hezbollah also helped Assad in Syria, the hit list failed here.

    Iran is on the Washington Zionist Neocon hit list along with Libya successfully destroyed. Iraq successfully destroyed. Afghanistan still going. The goal is total US Israeli domination of the Middle East. Much of the refugee crisis in the US puppet states of Europe is due to US Neocon Zionist wars of aggression.

    All part of the project for the new American Century.

    General Wesley Clark Wars Were Planned Seven Countries In Five Years

  4. Morrissey 4
    20 July 2019 at 10:16 am

    Britain and the United States conspired to smash Iran's democratic government in 1953. They imposed on the Iranian people a brutal dictator who was ousted in 1979. Whatever has ensued in Iran and the region since then is in large part the fault of the people who smashed democracy there.

    The Trump regime recently failed to smash another democratic government in what U.S. politicians contemptuously refer to as the “back yard.”
    https://thegrayzone.com/category/venezuela/

    • BG 4.1
      20 July 2019 at 10:36 pm

      So the Ayatollah Khomeini is a benign open hearted leader? Yes the Shah was a US puppet, but what replaced him was hardly the epitome to tolerance was it?

      • In Vino 4.1.1
        21 July 2019 at 5:48 pm

        It was a logical reaction of Iranians in general, and a damned good lesson for the USA, etc, who totally failed to learn from it… as usual.

  5. Anne 5
    20 July 2019 at 11:30 am

    New Zealand will of course be asked by the U.S. to increase naval support for any big blowup in this strait.

    If the government agreed to send a frigate (they've only got one in use haven't they?), I imagine there would be a riot in Queen St. Best course of action would be for the frigate's engine to develop a major fault that will take months to fix.

    The RNZAF can give them advice on how to go about organising such a scenario. 😉

    • Dukeofurl 5.1
      20 July 2019 at 11:52 am

      We havent had any NZ navy vessels 'inside the Gulf' since the Iraq war , its always been outside in the Gulf of Aden-Arabian Sea- Indian Oceanand any sanctions enforced have been UN ones, not US or EU.

      I cant see that changing.

    • Exkiwiforces 5.2
      20 July 2019 at 4:01 pm

      I would've be too worried about an ANZAC Frigate deploying to the Gulf, as both are in refit (well one going in and one coming out of the refit) in Canada atm. Ah the joy's the of having a two Frigate Navy lol? The Matelots and the Jackie's will disagree at having a two Frigate Navy as those crews a flog like a dead horse because of the pollies in Wellington.

      I think there could be more of a chance of a P3 deploying to the Gulf but that would be depending on the availability of both P3's and C-130's plus aircrew and support crews. Especially as the remaining airframe hrs of both aircraft now have to be carefully managed, with criterial spare parts are becoming hard to nowadays and with the new platforms are slowly coming on line means aircrew along with the techies being sent overseas for training. Which means there is very little fudge factor at either end for short notice deployments as with the current shenanigans in the Gulf with Iran and Co.

      • Sam 5.2.1
        20 July 2019 at 4:58 pm

        Could be Iran, Israel, or America who fires first.wouldnt mater who fires first really Iran, Libya, Lebanon and Syria will be all in and Russia and China won't be far behind. Tensions are high and there's nothing to say anyone in each camp has the deplomatic skills and talent to walk tensions back.

        brent Crude is up a percent and OPEC crude is retracing. At $2 at the pump this is going to have a disproportionate effect on our economy. Any restriction in western oil supply and the price will just want to go up. Whether we get into it or not the mere fact that weakness in all western economies will be exposed by rising oil prices and low interest rates would require a rethink to raising defence spending to at least 2% of the GDP.

        • Exkiwiforces 5.2.1.1
          21 July 2019 at 5:00 pm

          Funny you say that, as there was a short notice arrival and departure with a Yank Charter Flight out of RAAF Darwin on Friday. From my observations it appeared to be elements of the Marine Rotation Force Darwin that were not deployed to Ex TS19 and from Flight Radar the Charter Flight was heading to the MER. Its going to be interesting to see who blinks first which appears highly unlikely atm and as you say who's going to fire first.

          I don't think the price of oil is going to rise that much as the Yanks are a nett exporter atm as they fracking the shit out the USA and along with the Tar Sands in Canada which has kept a lid on OPEC cuts to production atm. But in saying that a rise in the price oil may actually lead to a rise inflation across the worlds economy with the flow on effect of possible interest rate rises and there by forcing wages up along with both core and nett inflation?

          But with most of the worlds economies so weak atm, it could go either way?

          Anyway this is interesting read from the Save the Royal Navy blogsite.
          https://www.savetheroyalnavy.org/chokepoint-charlie-what-its-like-to-operate-a-warship-in-the-strait-of-hormuz/

          • Sam 5.2.1.1.1
            21 July 2019 at 5:45 pm

            Yeah I still reckon there's a bit of huff & puff left in Middle East oil interests. Oil is an unloved industry at the moment as it goes through its finale stages. Oil oligarchs could squeeze out a few hundred years of oil production by shifting there products into fertilisers, medicines and plastics, Y'know after oil based transportation runs out of puff.

            The thing I was trying to get at with raising defence spending is because NZDF is constructed around diesel. The markets have already priced in higher oil prices and NZDF will have to do the same. They'll just have to do it. Until oil producers and retailers are fully electrified NZDF will just have to cope higher oil prices and experiment with really expensive prototype energy solutions for the military.

  6. Higherstandard 6
    20 July 2019 at 11:45 am

    "Britain and the United States conspired to smash Iran's democratic government in 1953. They imposed on the Iranian people a brutal dictator who was ousted in 1979. Whatever has ensued in Iran and the region since then is in large part the fault of the people who smashed democracy there."

    Yes no doubt about that, although the Shah became progressively more authoritarian and brutal during his time in control it's perverse that there were a number of quite positive aspects of his time in power especially during the earlier years with many freedoms coming the way of the iranian population (especially women), a bit like many of the other middle east countries sad how so many tend to go potty with power or religion although that's not the unique preserve of the middle east.

    • Morrissey 6.1
      20 July 2019 at 5:34 pm

      Women were relatively well off in Saddam Hussein's Iraq as well. They're relatively well off in Israel as well. And in the United Kingdom, and the United States.

  8. A 8
    20 July 2019 at 5:38 pm

    There goes the oil price…this could be the black swan that triggers the next global financial crisis.

    • Andre 9.1
      21 July 2019 at 4:18 pm

      Just for whoever needs to know, the link from the sidebar 404'd, but the link in Pablo's comment works for me.

    • Psycho Milt 9.2
      21 July 2019 at 5:25 pm

      Thanks Pablo, the way our media's been presenting all this as the result of malicious action by Iran has been annoying the hell out of me too. I haven't seen a single NZ mainstream media story asking the fairly obvious question of what legal authority the UK has to make non-EU members comply with an EU embargo on oil exports to Syria, for a start.

      • SPC 9.2.1
        22 July 2019 at 3:27 am

        Apparently the ship made the mistake of entering Gibraltar territorial waters … EU turf as it were.

        https://lobelog.com/the-strange-case-of-the-grace-is-detention/

        • Dukeofurl 9.2.1.1
          22 July 2019 at 10:59 am

          Mistake ?

          Its a narrow international strait , you cant go through without going into some ones waters. They are entitled to unimpeded passage

          Gibraltars waters are tiny ( only 3 naut miles offshore)compared to those of Spain ( 12 miles), so I cant see the tanker on a long voyage coming that close to Gibraltar

          http://www.gibnet.com/fish/waters.htm

          Ship tracking data shows current position at anchor inside Gibraltar waters, but that doesnt been its previous course was there
          https://www.vesselfinder.com/?imo=9116412

          • Andre 9.2.1.1.1
            22 July 2019 at 12:18 pm

            Thanks for that map. I hadn't previously appreciated that one of the consequences of Spain hanging onto Ceuta is that any ships passing through the Straits of Gibraltar must go through Spanish territorial waters at some point. If Spain handed Ceuta back to Morocco, then shipping could choose Spanish or Moroccan waters.

          • SPC 9.2.1.1.2
            23 July 2019 at 1:06 am

            'The Grace 1 was detained last week in Gibraltar when it freely navigated into British Gibraltar Territorial Waters to a point two miles off the Eastside of Gibraltar, having previously exited the international waters of the Straits of Gibraltar, on a pre-arranged call for provisions and spare parts."

            https://www.gibraltar.gov.gi/uploads/522.1-2019.jpg

  10. aj 10
    21 July 2019 at 7:05 pm

    Syriana. Watched it this afternoon. Some things don't change.

  12. mosa 12
    22 July 2019 at 8:24 pm

    Any conflict with Iran will make Iraq and Afghanistan seem like a Sunday school picnic.

    http://www.kiwipolitico.com/2019/07/the-real-roots-of-iranian-brinkmanship/

  13. johnm 13
    24 July 2019 at 10:31 am

    CrossTalk Bullhorns: To The Brink

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