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One of Asia’s key oil importers, South Korea, is preparing to send a naval unit, including a destroyer, to the Strait of Hormuz to help protect free tanker movement through the crucial oil transit point in the Middle East, South Korea’s Maekyung business newspaper reported on Monday.
South Korea has decided to deploy its anti-piracy unit Cheonghae, currently in the Gulf of Aden off Somalia, to the Strait of Hormuz, where the naval unit could be joined by helicopters, according to a senior South Korean government official who spoke to the Maekyung newspaper.
The Strait of Hormuz is the most important oil chokepoint in the world with daily oil flows averaging 21 million bpd, or the equivalent of 21 percent of global petroleum liquids consumption. According to EIA estimates, 76 percent of the crude oil and condensate that moved through the Strait of Hormuz last year went to Asian markets, with China, India, Japan, South Korea, and Singapore the top destinations.
Several high-profile incidents in recent weeks and months have raised the tensions between Iran and the West in the Middle East, the latest being Iran’s seizure of a British-flagged oil tanker earlier this month, in what appears to be in retaliation for the seizure of an Iranian oil tanker by Gibraltar, with the help of the UK Royal Marines, in the beginning of July.
South Korea is exploring various way to protect its ships in the Strait of Hormuz, Reuters quoted deputy ministry spokesman Ro Jae-cheon as saying at a press conference on Monday.
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Khalid al-Falih, the energy minister of the world’s largest crude oil exporter and OPEC’s biggest producer, Saudi Arabia, urged last week countries buying crude oil to secure the free navigation of tankers in the Strait of Hormuz.
Also last week, U.S. Secretary of State Mike Pompeo said in an interview with FOX News, referring to international efforts to secure free tanker navigation in the Strait of Hormuz:
“We’ve asked the Brits, the French, the Germans, the Norwegians, the Japanese, the South Koreans, the Australians – I’m sure I missed a few. Every country that has an interest in ensuring that those waterways are open and crude oil and other products can flow through the Straits of Hormuz needs to participate to protect not only their own interests, but the fundamental understanding of free and open waterways.”
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
Iran made it clear that there will be no risk to shipping in the Strait of Hormuz unless it is attacked or its crude oil exports were prevented from passing through the Strait. In such an eventuality, it will block or mine the Strait of Hormuz so as to disrupt other Gulf countries’ oil exports. Moreover, it could launch a kind of hybrid war – both directly and through its proxies – carrying out sporadic and widely dispersed attacks on shipping and other targets pushing oil prices, shipping costs and insurance premiums steeply up.
But despite scheming by John Bolton, President Trump’s national security adviser, war is neither an option for Iran nor for the United States.
Still, a war could happen by accident rather than by design. Iran, for example, may see the US naval build-up in the region partly as bluster and partly as an effort at intimidation in what it sees as its own backyard - intimidation that it is not disposed to accept.
Almost seventeen years ago, a group of neoconservative hawks among them John Bolton, persuaded President George W. Bush to mount a quick invasion of Iraq because, they alleged, it had “weapons of mass destruction.” That decision, based on dubious intelligence and taken against the advice of many of America’s closest allies, triggered a huge refugee crisis, destabilized the entire Middle East and cost the global economy an estimated $12.584 trillion of which the US economy’s share was $6.52 trillion according to a research paper titled: ”The Oil ’Price Rise’ Factor in the Iraq War: A Macroeconomic Assessment” I wrote and was published by the United States Association for Energy Economics (USAEE) on the 4th of June 2008. Moreover, nearly 5,000 Americans lost their lives in Iraq with hundreds of thousands more injured and receiving lifetime disability compensation.
Despite the staggering costs, some hawks, John Bolton among them, are again urging the United States to go to war with Iran thus plunging the Gulf region in a destructive war which could cost the global economy far more than the invasion of Iraq and leave the Gulf countries’ economies in tatters. Furthermore, such a war would destroy forever US national interests in the Gulf region and would strengthen the most virulently anti-American elements of Iranian society and suppress those who favour détente.
My estimates are that a war with Iran could cost the global economy $13.137 trillion compared with $12.584 being the cost of the invasion of Iraq.
The reason is the fact that Iran’s land area is almost four times that of Iraq and its population is more than double Iraq’s, also the many countries that could be sucked into the war, the damage to oil installations in Saudi Arabia, UAE and Iran, the cost to the global economy of disrupting 19 mbd from passing through the Strait of Hormuz even for one month, the loss of oil and LNG revenues and the collateral damage to the Gulf countries’ economies.
Yet, a blood-thirsty hawk like John Bolton wouldn’t mind or care if the global economy lost an estimated $13 trillion as long as he gets his war. Wouldn’t be far less costly to remove him from his position of authority?
Wouldn’t also be more logical for President Trump who is reported by the former British Ambassador to the United States to have walked away from the Iran nuclear deal just to spite his predecessor former President Barak Obama, to re-join the nuclear deal, lift sanctions on Iran and negotiate with it on whatever grievances he may have on the deal. In so doing, he would save the world and the global economy huge economic and human tragedies. He will also be the toast of the world and a possible Nobel peace prize winner.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London