Monday, April 29, 2019

Oil Wars: The Contest Over Strait Of Hormuz

The contest over the Strait of Hormuz’s closure has begun at… Libya’s Ras Lanuf

Five of Iran’s top leaders have threatened to close the Strait of Hormuz to oil traffic. Why is President Donald Trump unfazed in his resolve to tighten sanctions on the Islamic Republic?

On Sunday, April 28, Iran’s armed forces chief of staff Gen. Mohammed Bagheri said: “We are not after closing the Strait of Hormuz. If our oil does not go through the strait, other countries’ oil will certainly not cross the strait too.” Bagheri was echoing supreme leader Ayatollah Ali Khamenei, President Hassan Rouhani, foreign minister Mohammed Javad Zarif and Guards Navy chief Rear Adm. Alireza Tangsiri.

Unfazed by this collective threat, the Trump administration has not backed off from its decision to cancel the oil embargo exemptions granted to eight of Iran’s biggest oil importers, including China, India and South Korea. In fact, a new set of penalties are in store.

DEBKAfile’s sources report that the cancellation of the waivers will slash Iran’s oil sales down from 1.1m barrels per day to half a million. But that’s just for starters. The next round of penalties aims to lower the figure to zero.

No one in Washington or the Middle East expects the Iranians to take the loss of their primary source of income lying down. And so the US is making plans accordingly.

  1. On Saturday, April 27, US Central Command chief Gen. Kenneth McKenzie  stated: “The United States would deploy the necessary resources to counter any dangerous actions by Iran.”
  2. The US administration is in full-flight of an effort to replace Iranian oil with alternative energy supplies to the world markets while holding oil prices down from flying out of control. Even the partial closure of the two energy choke points for exported Gulf oil – at the Strait of Hormuz or the Bb al-Mandeb entrance to the Red Sea – is liable to send oil prices shooting up. For instance, each added dollar on the world energy market adds $4bn of extra revenue to the coffers of the Russian government, which is itself under US sanction.
Saudi Arabia and the other oil-rich Gulf nations are currently in no position to raise output to cover the loss from Iran – mainly because of their commitments to OPEC and Moscow. The Trump administration therefore cast about for a regular, preferably stable, source for at least half a million barrels of all a day to cover the shortfall. The solution was found in Washington’s first intervention in the Libyan crisis since Trump’s predecessor Barack Obama contrived the downfall of Muammar Qaddafi. 

On April 4, President Trump put in a phone call to Gen. Khalifa Haftar, head of the Libyan National Army (LNA) militia fighting to conquer the Libyan capital, Tripoli. At this peak moment of the turbulent Libyan civil war, Haftar, backed by Russia, Egypt, the UAE and France, is fighting to unseat the national government sponsored by the UN and Italy. Trump and his advisers reckon that Haftar’s LNA, which already controls Libya’s eastern and southern oil fields, is capable of also seizing its main oil terminals at Ras Lanuf and Es Sidr on the Mediterranean (see map).

On Sunday, April 24, as the battles for these key targets between the LNA and government forces intensified, US Republican Senator Lindsey Graham said in an interview to Face the Nation that this was having an “unnerving effect in the region.” 

To secure the port facilities of Ras Lanuf, in Libya’s key Oil Crescent region and one of the world’s crucial maritime oil export points, Haftar on Sunday sent an Alkarama patrol vessel to the port. The oil trade in the country divided by the civil war is operated by the National Oil Corporation (NOC), which tries to position itself as a neutral side in a conflict between the LNA and the Government of National Accord (GNA), operating across the entire country, sending the profits to the Tripoli-based central bank, but also a portion to public servants in the LNA-controlled lands

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