South Korea To Send Navy Unit To Guard Oil Shipping In Strait Of Hormuz

South Korea’s move is reminiscent of the alliance of the willing during the first Gulf war. If so, it will be an escalation of tension in an already tense region.

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