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Hormuz Strait: The most vulnerable point of gas and oil politics

Introduction

Since the surprise attack against Ukraine from Russia, the nations of the EU were caught up in a sudden inadequate situation of energy supply in 2022. Brussels’ heavy reliance on energy imports from Russia and the impact of the ongoing armed conflict in Ukraine, left the EU more prone to its energy vulnerability. As a result, The European Union had to implement drastic measures such as lowering energy consumption, filling the gas tanks earlier, and importing more gas from gas-rich countries such as Norway since the early summer of 2022.  Despite its initial success of relying less on Russia’s natural gas, the need for a stable supply of energy is a still riddle for EU policymakers. This riddle turned the attention of Brussels towards the Gulf states primarily Qatar. Qatar is one of the biggest players in the energy field. It contains vast amounts of natural gas reserves which amount to 871 thousand million cubic meters and ranks 3rd in the world. Several high-ranking officials of influential member countries of the EU such as German Chancellor Olaf Scholz, and French President Emmanuel Macron visited Doha for different reasons. However, under the guise of these reasons, it might be generally motivated to ensure a smooth gas deal with Doha. Even though Doha is seizing this opportunity to replace Russian gas, there are several obstacles that may hinder their progress.

The Strait of Hormuz: Why It Matters a Lot

As the Ukrainian war intensified, The EU’s reliance on gas from third sources increased dramatically. According to the Oxford Institute for Energy Studies, the monthly gas supply to the EU and the UK in 2022 was 25 million cubic meters predominantly coming from LNG (liquefied natural gas—which implies that most of the natural gas is imported from third sources via sea transport) and Russian gas, which was barely 4 million cubic meters. In late August 2022, the price of imported natural gas reached 70$ per MMBtu. The increase in the natural gas price presented a perfect opportunity for natural gas-rich countries such as Qatar and UAE.  In November 2022, several German firms stroke a deal with Qatari officials to import natural gas for 15 years. To export the gas smoothly, Qatar transports its LNG through the Strait of Hormuz to the EU. The Strait of Hormuz is one of the strategically important waterways for ensuring gas and oil transport to the global economy without any hindrances. Physically speaking, the size of the strait is around 95 km and separates Iran from the Arabian Peninsula.  Then, why this strait should matter a lot? Experts believe that 18 million barrels and 3.5 billion cubic feet of natural gas per day pass through this strait. Various countries such as the USA, Japan, South Korea, China, and lately the EU import gas and oil through the Strait of Hormuz. Therefore, the answer would be Iran’s capability to block the strait. According to the Congressional Research Report, Iran is capable of blocking the strait to a certain period through conventional military means such as mines, fast-boats, submarines, and missiles. Not only does Iran possess the capability to block the strait, but Iran also possesses several strategic key islands such as Qeshem, Kish, Sirri, Abu Musa, and Hormuz which are geographically close to the strait and can be accessible for mounting military operations against transport ships. The consequences of blocking the strait can be disastrous for the countries that rely on gas and oil from the Arabian Peninsula, especially the EU.

Iran-Russia comes closer: A warning sign.          

Russia is searching for reliable allies that could willingly defy the global order imposed by Western powers. The results of the voting from the UN General Assembly calling for the Russian military to leave Ukraine clearly indicates that Russia is deeply isolated from the international community: 141 in favor, 32 abstentions, and 7 opposed. One of the few countries that voted against the resolution was Iran. Marginalized from the international community and with a common interest to tackle the West’s influence, Russian-Iranian bilateral relations are getting closer let alone reaching a strategic level. On 15th March 2023, Iranian Foreign Minister Amir Abdollahian paid an official visit to Moscow and stated that “final revision of the agreement will be carried out within a month by the foreign ministry” according to Tehran Times. Iran also provided three different types of drones to the Russian military: Shahed-131, Shahed-136, and Mohajer-6. Even though they claim that these drones weren’t utilized for military operations in Ukraine, there is a deep suspicion among drone experts that drones were likely to be utilized for military purposes. Iran could be the backbone of providing military equipment to Russia’s military as it faces severe logistical issues in Ukraine. Despite its neutral stance, it can be seen that Iran is supporting the Russian cause in an indirect way.

Closing the strait: Last ditch attempt?

As the conflict in Ukraine drags on and more military aid from the EU and the US arrives, Russia might reconsider its strategy to protect its geopolitical interests.

If the military conflict in Ukraine would not favor Russia well, it might implement dangerously risky actions that may harm the global economy. One of the strategies could be persuading Iran to block the strait to inflate the gas prices during the preparation period of winter in Europe.  If Iran attempts to block off the strait, it might not only harm the global economy, but it might seal the final prospect of future energy security for the EU.

As a result, the EU has no choice but to rely on more expensive natural gas from geographically far countries such as the US which will be a critical blow for the region. Plus, it will force Brussels to persuade Kyiv to sue peace treaty with Moscow to tackle its energy crisis which may permanently and symbolically damage the reputation of the EU as it can be seen as incompetent to resolve the conflict in the eyes of other countries. It will be a similar event to the Munich Agreement of 1938.

The Problems of Closing the Strait

Firstly, Iran would not attempt to carry out such a risky action due to its heavy reliance on oil exports. Also, is Iran capable of maintaining the costs of blocking the strait? According to the World Bank, the GDP growth of Iran could plummet by up to 2.2%. As it fails to tackle the economical issue, it could backfire disastrously for Iran’s officials as violent protests like the 2017 protest instigated by the increase in prices. The protest against the regime sparked by the death of Mahsa Amini highlighted that Tehran was not domestically and ideologically united. Aside from domestic issues, Tehran is attempting to warm its ties with the Gulf states by re-establishing diplomatic ties with Riyadh after a couple of years with the help of China. Plus, Russia would not dare to win this conflict at the expense of its relations with the Gulf states.  Secondly, Iran will be less likely to Qatar’s economic interests as these countries have cordial relations. Asides from violating Qatar’s interests, Iran could also violate China’s economic interests as Qatar Energy and Sinopec signed an agreement that it would provide 4 million tons of LNG to China for 27 years. Thirdly, Russia would have to re-evaluate its strategic interests in the Middle East to persuade Iran. The different approaches towards regional issues such as the Israel-Palestinian conflict from Russia and Iran could be clashing. (1) If Iran shows gestures of willingness to close off the strait in the favor of supporting the Russian cause, Can Russia willingly dedicate its support to Iranian interests in the Middle East such as siding with Iran to militarily support Israel?  Russia Fourth, rather than closing off the strait, cooperating with OPEC would be more effective, less costly, and less risky to influence the global energy market for Russia. As the EU attempts to curtail Russia’s oil exports, in October 2022, OPEC reached an agreement cut its oil barrels by 2 million. A mere statement from oil-producing countries could fluctuate the oil prices.

Conclusion

There was wider speculation that Europe would face dire consequences, especially during last winter. Luckily, the EU did manage to contain the risks well. On the other hand, is Europe ready for another severe scenario of shortage of natural gas? The answer remains unclear. As the price cap imposed by Western countries directed at Russia might force OPEC countries to take drastic measures to protect their interests. As for the Strait of Hormuz, currently, it might not be closed off due to the ongoing improvement of relations between Iran and Saudi Arabia and the military conflict in Ukraine. It would be illogical for Iran to close off the strait. As the West attempts to meddle with the price of oil, Saudi Arabia’s mistrust will deepen. For Iran, fundamentally against the West, this presents a perfect opportunity for re-warming relations. Not only warming the relations, Iran, encouraged by Russia, might consider forming a pact to counter the West’s influence. However, if regional rivalry resurfaces again and economic interests go unfavorably, Iran might reconsider this strategy.    

1-Hamidreza Azizi, Close but complicated: Iran-Russia relations amid the War in Ukraine, Friedrich Ebert Stiftung, February, 2023, https://library.fes.de/pdf-files/international/20084.pdf