Chokehold: Iran’s threat to global trade

Iran’s seizure of the MV Maersk Tigris container ship was a small example that shed light on a significant security vulnerability. 18 percent of the world’s oil flows through the Strait of Hormuz, making it what the U.S. Energy Information Administration has called “the world’s most important chokepoint.” The IRGC (Iranian Republican Guard Corps) Navy is well aware of the importance of this narrow and crucial shipping lane. Further escalation in the area could have a profound effect on oil markets and seaborne trade, making it a matter of national security for not just the U.S., but also the dozens of nations that engage in trade in the region.

There are both immediate and long-term reasons the attack on the Maersk is an important flash point. In the immediate, the IRGCN’s actions are a direct affront to U.S. sovereignty. The Tigris was sailing under the flag of the Marshall Islands, a sovereign nation that, according to the Compact of Free Association, is under the sole military protection of the U.S. The IRGCN knew by attacking the Tigris they were provoking the U.S. military into action, as was evidenced by the dispatching of the USS Farragut missile cruiser, which unfortunately did not arrive in time to save the Tigris from being boarded. The target and the timing were undoubtedly intentional.

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The Tigris attack is evidence of a grander Iranian strategy: exposing the vulnerabilities of key shipping routes. Aside from the Strait of Hormuz, Iran will soon have the ability to apply pressure to the Bab el Mandeb, another crucial choke point off the southwest coast of Yemen from which 4 percent of the world’s oil supply flows. Iran is closely supporting and training the Houthi rebels, who have at least partial control of the crucial port city of Aden. This means that in conjunction with their presence in the Strait of Hormuz, Iran could eventually threaten 22 percent of the global oil supply.
Even the smallest disruption of commercial shipping lanes can have profound effects on markets. Maersk, the Copenhagen based company that owns the Tigris, saw a 5 percent (approx.) drop in stock the day after the attack. As of the writing of this article, elements from the US Navy’s Theodore Roosevelt carrier strike group are accompanying U.S. flagged cargo ships through the Strait, which could cost taxpayers millions. This attack could also prove consequential for oil markets, shipping costs, and insurance costs in the near future.

The ripple effect these kinds of attacks can have on markets is profound, and Iran is certainly aware of it. In the late 1980s, Iran began harassing Kuwaiti oil tankers throughout the Persian Gulf, destabilizing the oil market and presenting a threat to US interests. The U.S. responded by allowing Kuwait to re-register vessels under the U.S. flag, thus allowing them to be escorted by U.S. naval forces. Iran responded by mining areas in the Gulf that led to the damage of the USS Samuel B. Roberts, injuring 10 sailors. In retaliation, the U.S. launched Operation Praying Mantis in 1988, a naval operation that led to the destruction of 5 Iranian Naval ships and damage of 2 oil platforms. Following the operation, Iranian harassment of neutral ships would decrease.

Iran has few options it can leverage to harm the U.S., but exposing vulnerabilities in shipping lanes is one of them. The spectrum of attacks Iran could engage in varies, as does the severity. As we saw in the 1980s, Iran could harass neutral shipping to apply pressure as needed. Should they choose to engage in more severe operations, Iran could also attempt to blockade or mine the Strait of Hormuz and Bab al Mandeb, throwing markets into free fall. Granted the latter option would essentially draw a massive U.S. response that would be detrimental to Iran, it still presents them with a worst- case scenario option, one that must be strategically accounted for.

Iran would probably choose to avoid a direct confrontation with the U.S., but their ability to pose a threat in the Strait of Hormuz and Bab al Mandeb gains them leverage. Regionally, it gives Iran further means to apply pressure to their neighbors. The ability to disrupt trade in the region presents an existential threat to Saudi Arabia, Kuwait, and other Gulf nations that survive on energy exports.

The threat may not be as immediately existential on a global stage, but it certainly could be problematic to the U.S., EU, and essentially any other nation that is buying or selling goods being shipped through the two choke points. The threat of Iranian harassment of these strategically important areas is by itself a point in Iran’s favor, and therefore one that the U.S. will have to account for when dealing with Iran in the future. It is Iran’s strategy to collect enough of these small power projection capabilities in order to eventually become a dominant world power. It is essentially a marathon strategy of small steps towards an eventual goal, one that will have repercussions for much of the global community should it go unchecked.

Read is the deputy director of Legislative Affairs at EMET, a Washington-based foreign policy think tank.

Originally published at: https://thehill.com/blogs/congress-blog/foreign-policy/242010-chokehold-irans-threat-to-global-trade