Over the Persian Gulf, Dark Clouds have Gathered Once Again

06.07.2018 Author: Petr Lvov

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Last week, the US State Department said that Washington will attempt to persuade its allies to stop purchasing oil from Iran completely by early November. Reportedly, negotiations are already underway with representatives from India and China. Afterwards, Iranian President H. Rouhani said that he considers the US’ wish to stop Iranian oil exports not feasible; stressing that Iranian authorities would take certain steps that will allow the Iranian government to sell oil at the same volume. Additionally, Rouhani called Washington’s actions incompatible with international law. “Donald Trump is putting pressure on international companies so that they won’t buy Iranian oil, leading to an increase in prices,” said the Iranian representative to OPEC, Hussein Kazempur Erdebili, on July 4. According to him, oil should not be used as a weapon or an instrument for achieving political goals. “Trump’s requirement that Iranian oil not be purchased and his pressure on European firms when Nigeria and Libya are in crisis, oil exports from Venezuela have fallen as a result of US sanctions, and Saudi Arabia’s domestic consumption has increased this summer, is to do nothing but harm one’s self,” he said. It will lead to growth in global oil markets,” Erdabili added. “In the end, the American consumer will be the one paying the price for Trump’s policy.”

The command of the Islamic Revolutionary Guard Corps went even further. A representative of the Islamic Revolutionary Guard Corps in Tehran threatened to block the transit of oil from the Persian Gulf and to close the Strait of Hormuz to some countries if the US manages to ban the sale of Iranian oil. Deputy Head of the IRGC “Sarala” Ismail Kusari clarified that the closure of the strait would be in response to the halting of Iranian oil exports. He noted that 20% of the world’s oil exports pass through the strait. General Qasem Soleimani, commander of the IRGC Al-Quds special unit, made an even sharper statement that if Iranian oil exports are blocked by sanctions, then Tehran will make it so that other countries in the region also could not sell oil. According to him, a part of the Islamic Revolutionary Guard Corps is ready to implement a forceful scenario, and they have enough forces and means to do it.

Tehran’s reaction to Washington’s blackmail is understandable – Iran has reason to consider itself the aggrieved party after the history of the nuclear deal, after the US withdrew from it unilaterally and categorically demanded a new one. Statements from the US State Department amidst the July 6 meeting in Vienna between the six world powers and Iran to review the implementation of the nuclear deal give the strong impression of blackmail. However, communicating with Iran from a position of strength is a ghastly idea. As a result, the price of oil will skyrocket, and buyers should expect a shortage.

This is beneficial for sellers, but there will be negative consequences, especially if armed conflict arises in the region. Those provoking conflict face significant risks, given the vulnerability of US military bases in GCC countries, particularly of the base of the Sixth Fleet in Bahrain and the US Air Force base in Qatar. It is no coincidence that Iranian President H. Rouhani, in a meeting with the Chancellor of Austria S. Kurz in Vienna on July 4 said that the US is not thinking about its last attempts to shut down Iranian oil exports. “The Americans’ statements that they will drive Iranian oil exports to null, are absolutely crazy, and show that they have not been thinking about the consequences,” is written on the Iranian leader’s official website.

So far, really, Trump’s threats appear hypothetical. In general, it would not make sense to discuss this altercation, were it not for one nuance – the US itself is almost entirely independent from the Persian Gulf region’s oil supplies: from Saudi Arabia, Kuwait, Iraq – and these are exactly those who will suffer first in the event of a closure of the Strait of Hormuz. Indeed, Qatar is also the main supplier of LNG to Asia and partly to the EU. Importers of oil and LNG from the EU and South, Southeast, and East-Asian countries will suffer – first, of course, will be China.

The sharp rise in oil prices would be a dubious plus for the Russian Federation and a number of OPEC countries that are outside of the Persian Gulf zone. Still, 17-18 million barrels of oil are transported through the Strait of Hormuz every day – almost one fifth of the world’s consumption. Additionally, there is the fact that Egypt could well survive the collapse, although it considerably depends on the uninterrupted and highly profitable work of the Suez Canal, through which pass many tankers from the Persian Gulf and further through the Arabian and Red Seas to Europe. The most curious thing is that this event could be a breath of fresh air for the Russian economy, although not for long. Russia will inevitably win out in increasing its oil and gas deliveries to Europe, but in the end would lose out from a new war in the Persian Gulf.

It is still unclear whether Trump will attempt the oil embargo against Iran. So far, this seems like yet another episode of blackmail and bluff on the eve of the Russian-American summit in Helsinki and talk of an upcoming “deal” regarding Syria to the disadvantage of the Iranians. But bearing in mind Trump’s volatile temperament, unpredictability, love for shock value, and total misunderstanding of the Middle Eastern region, it is possible that he will decide to do it all the same. In any case, the return of the harsh anti-Iranian sanctions of the Obama era seems extremely likely. Another question is whether Iran would risk cutting off the Strait of Hormuz, understanding that it would be hard to imagine a more valid reason for a direct-armed conflict launched by the US and its Arabic neighbors in the Persian Gulf. This is especially true in a situation where America, Saudi Arabia, and Israel are already prepared for such a conflict – and not just hypothetically. In a sense, the closure of shipping through the Persian Gulf could become a prologue to a new Persian Gulf War. The damage from such a development would be comparable to the damage of Iraq’s 1991 annexation of Kuwait under Saddam Hussein, but larger in scale.

Washington, of course, couldn’t care less that in the event of a real war in the Persian Gulf, all of its allies would be the first to suffer, following the destruction of oil and gas fields, hundreds of thousands, if not millions of dead and displaced, not to mention the collapse of the world energy market. It is unlikely that the conservative regimes of the Arabian monarchies would be able to survive all of this.

All that remains is to await Trump’s decision on the embargo and Iran’s answer to it—if, of course, it takes place versus another instance of Trump leveraging bluster and the threat of arms, before allowing tensions to diminish once again, just as he did during the conflict with North Korea. Trump’s ambitions are off the scale, and he is clearly ready for some adventures. Only the US political system itself with its checks and balances can prevent the realization of the insane ideas of the latest messiah to become the leader of America.

Pyotr Lvov, Ph.D in political science, exclusively for the online magazine “New Eastern Outlook.