Iran does not allow certain ships to travel through the Strait of Hormuz, a major shipping chokepoint, in what one expert calls geopolitical “extortion.”
The Strait of Hormuz normally passes through about 20 percent of the world’s crude oil supply, along with other important resources. Since the war began, the price of oil per barrel has risen worldwide, and economists expect inflation to rise soon, including in Canada.
“If you allow someone to block an international waterway and choose who gets in based on favorable policies or outright emancipation, you’re always going to pay the ransom,” says Aurel Braun. Professor of International Relations and Political Science at the University of Toronto.
On Monday, US Treasury Secretary Scott Besant said he was aware of some ships passing through in recent days.
“We’re seeing more and more fuel ships going through. Iranian ships are already coming out, and we’ve allowed supplies to the rest of the world. We’ve seen Indian ships going out now … we believe some Chinese ships have gone out,” he said in an interview with CNBC.
“It has to start ramping up before there are any flotillas or defense fleets in the Gulf. So we think there will be a natural opening for the Iranians to push out. And for now, we’re fine with that. We want the world to be well supplied,” Besant said.
But who benefits and who doesn’t when only certain ships are allowed to pass?
Why is the Strait of Hormuz blocked?
Blocking the Strait of Hormuz could be one of Iran’s most powerful leverage tools in a war because it would allow it to inflict economic damage on the US and other nations, including Israel, by raising oil prices and making virtually all other goods and services more expensive.
Oil is not only used to make fuel for vehicles, machinery and other equipment: it is also a critical ingredient in making dozens of other industrial products, from rubber to plastics, industrial solvents and waxes, and textiles such as fabric for clothing.
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Transporting anything requires fuel in some capacity. Higher oil prices lead to more expensive fuel, and when those higher fuel costs make it more expensive for consumers and businesses to ship products, sticker prices typically increase.
Deliberately inflicting economic damage is part of Iran’s larger pattern of so-called asymmetric warfare.
“They don’t have the conventional military power to confront the United States and Israel. So what they’ve done is they’ve engaged asymmetrically, they’ve used their missiles and their drones, their proxy militias in Iraq and Lebanon,” said Joseph Warner, a senior fellow at the Macdonald-Lowry Institute.
“And, they’ve threatened to mine and close the Strait of Hormuz, which is their only real leverage at this point.”
Blocking the strait has clearly sent ripples through global economies, but Iran is not immune to those negative effects. This means that countries that can offer Iran something in return will be able to negotiate safe passage for their ships.
“Some countries will do anything to try to make it easier,” says Warner. “But Iran doesn’t have the leverage that I think they will.”
This is why Iran is making agreements or arrangements with other countries, especially in the Middle East, and particularly those that are heavily dependent on oil from Iran.
“China is actually very dependent on Iranian oil, so it has a very big interest in seeing the strait open. Just like India and Pakistan and the other countries mentioned there. So there’s a strong interest,” says Kevin Budning, director of scientific research at the Defense Associations Institute’s conference.
Iran’s goal with China is “to keep trade open and to get some kind of military assistance from China, whether it’s intelligence or anything else,” Werner said.
Iran has asked India to release three tankers it seized in February, trying to get Indian-flagged or India-bound ships safely out of the Gulf through the Strait of Hormuz, three sources with knowledge of the matter told Reuters.
“On top of Pakistan, Pakistan has threatened Iran that if it continues to strike Pakistan’s ally Saudi Arabia, it will involve Pakistan in the conflict,” says Warner.
Pakistan was able to get at least one oil tanker through the strait over the weekend, data tracking shows.
Kpler data provider, MarineTraffic, said in a post on X that Karachi was “the first non-Iranian cargo to carry a chokepoint while transmitting its AIS signal, while select shipments can receive negotiated safe passage.”
If anyone comes out a winner in all this, Budning says, it might be other oil-producing countries like Canada.
“There are always winners. So if you’re producing oil, for example, if you’re in the Canadian oilfields, and you’re a big exporter of oil, and the global price of oil is up, and you’re not particularly directly affected by the conflict in the Middle East, then maybe there’s some serious money to be made from all of this.”
While blocking the Strait of Hormuz could help Canada and other oil producers offset lost oil supplies, nations choosing to negotiate with Iran to continue getting oil and other resources from the Gulf region are still taking a major risk.
“A number of countries are saying they are negotiating with the Iranians to try and get safe passage for their ships in and out of the Persian Gulf,” says Warner.
“Making a deal with the devil is never a good idea. And I don’t think it works or helps anyone.”
– with files from Reuters
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(tags to translate)Iran(T)Strait of Hormuz(T)Economy(T)World
