The Trump administration’s plan to rally global naval powers to protect shipping lanes in the Persian Gulf is not progressing very well.
After President Trump pulled back from a military strike on Iran last month, Plan B for the U.S. was to convince interested parties to band together and escort oil tankers through the Strait of Hormuz. Nobody wanted anything to do with a new war in the Middle East, but with roughly 20 million barrels per day (mb/d) passing through the Strait every day – or a fifth of global supply – building a coalition of naval ships from multiple countries would seemingly be a much easier lift.
Newly confirmed U.S. Secretary of Defense Mark Esper said his top priority would be “Operation Sentinel,” as it is called, which would include getting other navies to help the U.S. provide security in the Persian Gulf for oil tankers. The objective is to “de-escalate by deterring escalation – any unnecessary provocation that leads to an unnecessary conflict,” he said. “[We're] trying to de-escalate and at the same time message [Iran] very clearly, that without precondition, any time, any place, we're willing to meet with them to talk about how we get back on into a negotiation.”
The rhetoric from the Trump administration has already appreciably softened from the recent past. For instance, National Security Adviser John Bolton issued a statement earlier this year directly to Ayatollah Ali Khamenei on the anniversary of the 1979 Islamic Revolution in Iran, where Bolton concluded by saying, “I don’t think you’ll have many more anniversaries to enjoy,” a not very subtle threat of regime change.
But Bolton has been relatively quiet as of late, with other Trump officials seemingly taking the lead. Sec. Esper’s statement about de-escalation is different in both tone and strategy.
To be sure, however, the Trump administration is still pursuing its “maximum pressure” campaign. Brutal oil sanctions have drastically cut Iranian exports, which were down to as low as 400,000 bpd in June.
Operation Sentinel is aimed at ensuring the oil continues to flow through the Persian Gulf, which would remove one of Iran’s main points of leverage, while allowing sanctions to continue to tighten the noose. Related: Can Renewable Natural Gas Actually Compete With Diesel?
But to what end? Many still think that the Trump administration’s strategy is regime change, even if it is using economic warfare rather than actual warfare.
As a result, Operation Sentinel, which surely stops well short of what some hardliners in Washington want, has run aground. Once-close allies are trying to distance themselves from the U.S. effort.
Europe outlined its own maritime security strategy in recent days, which echoes the American effort but is conspicuously separate from it. “The move to establish a European initiative is a clear signal that Europe is bending over backwards to dissociate itself from U.S. policy toward Iran,” Jonathan Alterman, director of the Middle East Program at the Center for Strategic and International Studies, told Bloomberg. “Europe wants some real daylight.”
French foreign minister Jean-Yves Le Drian put it bluntly, stating that Europe wants “to create the conditions for inclusive regional talks on maritime security,” Le Drian said. But that “this is the opposite of the U.S. policy of maximum pressure.”
The pushback from Europe, including from the UK, is all the more notable given that it was a British tanker that was recently targeted. However, with the change of government underway in London, which included a comprehensive reshuffling of cabinet members, British attention is elsewhere.
In any event, the overlapping and disjointed maritime security efforts clearly highlight the discord between the U.S. and Europe as it relates to the Persian Gulf and Iran. “U.S. allies are increasingly concerned about participating in joint operations under American command,” Adam Mount, director of the Defense Posture Project at the Federation of American Scientists, told Bloomberg. Related: Major Setback For EVs Could Delay Peak Oil Demand
It’s clear that Europe does not trust the motives of the Trump administration. As a result, the U.S. is somewhat alone as it tries to bolster military assets in the Persian Gulf. What all of that means for the oil market is a bit unclear, but at a minimum, the momentum behind military action against Iran has diminished significantly. If the U.S. can’t even get Europe to sign on to military escorts for oil tankers, even after a British tanker was seized, support for something more aggressive is essentially nil.
The flip side is that Iran has also signaled its willingness to negotiate with the Trump administration, expressing an openness to the nuclear portfolio, a once off-limits topic. But, Tehran has demanded an end to sanctions first, something that Trump is probably unwilling to do.
The struggles of the U.S.-led maritime effort doesn’t mean that Iran will necessarily manage to prevent its oil exports from falling further. Sanctions are not going away. Moreover, Iran’s main source of leverage at this point is to harass tankers in its vicinity. And with the West showing little appetite for war, tanker problems could continue.
At the end of the day, however, the oil market may not care. With supply expected to outstrip demand this year and next, traders are little concerned about an outage.
By Nick Cunningham of Oilprice.com
More Top Reads From Oilprice.com:
- Why Goldman Sachs Thinks Oil Should Be Trading Higher
- Oil Glut Could Worsen As Libya’s Civil War Ends
- The Robot Revolution In Oil & Gas Starts Here