While the United States and Iran continue to flex their muscles and thumb their noses at each other, it’s the United Kingdom that is getting pulled directly into the crisis. On July 4, ironically US independence day, the British Royal Marines detained VLCC Grace 1 in Gibraltar on suspicion it was carrying Iranian oil to Syria’s Baniyas refinery in violation of EU sanctions. In a tit-for-tat display of power, Iranian navy boats seized an empty British-flagged vessel on July 19, which is now parked off Bandar Abbas. Regional powers are scrambling to contain the tensions, just as Great Britain readies for Boris Johnson as its next prime minister. Against this backdrop is anticipation of strategic miscalculation in the Strait of Hormuz.
The din in the strait is like heavy metal music and ships are sailing to the heavy beat.
It is not just the regional exporters that need security in the Strait of Hormuz to support their oil-dependent economies, but also import-dependent countries such as India and China. In June, China imported close to 1.85 million barrels per day of Saudi crude, the highest on our records going back to 2013. Meanwhile, over half of India’s crude imports last month originated from the Persian Gulf.
China has recently increased its refinery capacity by starting up two new 400,000 bpd refineries operated by Hengli Petrochemical and Zhejiang Petrochemical. In November, Hengli signed a deal to buy 130,000 bpd of crude from Saudi Aramco.
China is among Iran’s top oil customers, and though Beijing continues to defy US sanctions, its imports of Iranian oil have declined by a third this year. On Monday, Washington sanctioned Zhuhai Zhenrong Co Ltd, a Chinese energy firm accused of violating US sanctions on Iranian oil. The same company was targeted by the US government for maintaining business with Iran three years before the signing of the landmark nuclear deal, which is now in serious jeopardy.
India also relies heavily on oil from the gulf, mostly in the form of Iraqi crude. In May, it imported 1.15mn bpd of Iraqi crude, the highest we have seen since January 2018. After China, India was Iran’s second-largest oil client before US sanctions kicked in again last May.
If nobody wants conflict then what do the latest security incidents in the Strait of Hormuz mean, and why are they becoming more frequent?
Tehran will likely pursue an eye-for-an-eye policy with the US as long as there are no serious efforts by either side to ease tensions. Since May, when Washington revoked sanctions waivers, Tehran has been hitting back at the US and some of its western allies, the United Kingdom in particular. Tehran said previously that if it is prevented from exporting oil from the Persian Gulf, “then no oil will be exported.” Iran does not need to close the strait to make a point. The act of seizing one tanker is enough.
Iran’s Islamic Revolution Guards Corps (IRGC) said Thursday that it seized a small vessel for “smuggling” fuel near the Strait of Hormuz, sending a message to Washington that it has its own military influence in regional waters. The following day, it seized UK-flagged Stena Impero in what was seen as a direct response to the British capture of Grace I. The IRGC detention of Stena Impero came hours after news that Grace I would face extended detention
Washington is proposing a broad-based military coalition to safeguard maritime traffic in Iranian and Yemeni waters, though it already commands the Combined Marine Forces (CMF) in the region. The CMF is comprised of 33 nations, and part of its mission is to promote “a safe maritime environment.” Russia, Iran, and China are not part of this force.
This week, the British government under Theresa May called for a task force in the Persian Gulf. The United Kingdom is already a member of the CMF, which is tasked with security operations in the Arabian Gulf through Combined Task Force 151. If there’s already a multilateral naval presence responsible for securing maritime traffic, why are there competing proposals now? Sending more troops to the region does less to reduce tensions than it does raise the risks of miscalculation.
Volatility has been increasing in the gulf region since the US withdrew from the nuclear agreement and reinstated sanctions on Iran. Tehran at first showed patience in the face of Washington’s “maximum pressure”, but it is now retaliating. The target of its frustration, the United Kingdom, is among the European powers working to save the nuclear deal.
The feats of strength between Washington and Tehran leave the Persian Gulf region on edge. Talks, direct or indirect, will be one of the first steps towards de-escalation. Even if a brief military confrontation erupts, it will inevitably bring both sides back to the negotiation table.