Iran wants to close a shipping lane protected by the US Navy through Oman’s waters, which allows oil and gas tankers from the Persian Gulf to leave the Strait of Hormuz without seeking permission from Tehran.
The Islamic Republic attempted this week to impose its control over Hormuz by attacking three tankers navigate the strait by the route protected by the United States. The attacks have pushed Washington and Tehran to the brink of a crisis. renewed war as they trade strikes across the Gulf.
This week’s fighting represents “the most significant escalation of the conflict since its opening phase” in late February and early March, analysts from the maritime intelligence company Windward said in a note.
Iran is losing control of the strait as the southern corridor along the coast of Oman expands with U.S. military support, said Michelle Wiese Bockmann, senior maritime intelligence analyst at Windward. U.S. allies in the Gulf export their oil and gas through this southern route, Bockmann said.
“Iran will no longer have the capacity to close the Strait of Hormuz in the future,” believes the United States. Energy Secretary Chris Wright said at a conference in New York on June 24. “That’s their main lever and we’re taking that lever away from them.”
Senior U.S. officials told reporters June 17 that military escorts had allowed between 5 million and 8 million barrels per day to leave Hormuz. Although exports through the strait have increased, they remain far below the 20 million barrels per day of oil and products that passed through Hormuz before the war.
Under the interim deal with the United States, Iran promised safe passage for commercial ships through Hormuz and agreed not to charge tolls for 60 days. In exchange, the United States lifted its naval blockade from Iran and temporarily sanctions removed on its oil sales.
But Tehran has insisted in the three weeks since the deal that ships would only be allowed safe passage if they took a northern route through Iranian territorial waters.
This week’s tanker attacks “are part of a sporadic targeted campaign by Iran to destabilize this southern corridor and send a message to Gulf state producers who do not send their oil through this northern corridor,” Bockmann said.
The Iranians point to the fifth paragraph of the agreement which states that Tehran will “make arrangements using its best efforts” to ensure safe passage. Specific routes have not been defined. The agreement also specifies that the future administration of the strait will be defined by Iran and Oman in consultation with the other Gulf States.
“The underlying problem here is that the memorandum of understanding did not result in an agreement on managing maritime traffic through the Strait. It essentially addressed that issue,” said David Goldwyn, who served as the State Department’s special envoy for international energy affairs under President Barack Obama.
Iran Revolutionary Guard warned on Thursday that “US military interference in determining maritime traffic routes will not only result in a decisive response from us, but will also seriously disrupt the process of gradual reopening and seriously endanger the interests of countries using the Strait of Hormuz.”
The United States has reestablished oil sanctions on Iran and the president Donald Trump threatened to reimpose the US naval blockade in response to the tanker attacks. Iran Ministry of Foreign Affairs said this week that the reimposition of oil sanctions constituted a “material violation” of the memorandum of understanding.
Tehran “holds the American government fully responsible for the consequences resulting from this failure to fulfill its commitments,” the ministry said in a statement. The US energy secretary insisted last month that Washington would keep the strait open with or without a deal.
“With the U.S. military and some of the things we have developed, we can ensure the flow of energy out of the Gulf with or without an Iran deal,” Wright said June 24.
Under international law, Iran is not allowed to control traffic passing through Hormuz, said James Kraska, an international maritime law expert at the U.S. Naval War College. The international community “has an absolute right” to transit the strait without any obstacles, Kraska said.
But attacks on Iranian tankers are having an impact on traffic through Hormuz. Ship operators are favoring the Iranian route rather than the corridor along the coast of Oman, thus reinforcing the impact of tanker attacks earlier this week, according to the business information company Kpler.
“We are back to where we were before the memorandum of understanding, which was that the Iranians are threatening all approved non-Iranian traffic and the United States is incapable of opening the strait to free navigation by military means,” Goldwyn said.
“Its only choices are therefore either to close the strait entirely with a blockade or to resort to limited military strikes against Iran for violating the agreement,” he said.
Oil price rose more than 4% this week in response to the latest hostilities. US crude oil was trading around $71 a barrel on Friday while Brent, the international benchmark, is just below $76. Prices are well below Brent’s wartime highs of around $122 a barrel.
If the United States reinstates the blockade, oil prices will likely rise further because it will take 1.5 million bpd of Iranian exports off the market, Goldwyn said.
But Iran’s efforts to control Hormuz are likely untenable in the long term, Kraska said. That would set a dangerous precedent that could be repeated in other trade chokepoints, he said.
China and Russia, for example, have an interest in ensuring that the precedent is not repeated in the Strait of Malacca or the Danish Strait that connects the Baltic Sea, the analyst said.
Iran also risks going overboard and incentivizing Gulf producers to redirect their flows to alternative routes, such as pipelines through Saudi Arabia and the United Arab Emirates, Kraska said.
“In the long term, Iran is shrinking its trade space,” he said.