Strait of Hormuz: Will Tehran shut the vital oil artery of the world?

Mint

13 hours ago

As tensions escalate following Israeli strikes on Iran, fears rise that Tehran could choke the Strait of Hormuz. However, patterns in history indicate that while there might be temporary disruption in maritime traffic, Iran might refrain from choking the Strait of Hormuz, as it will pinch its friends more than its enemies.
Mint explains why the Strait of Hormuz is significant geopolitically, and economically and what it means for India and Iran-US talks.
Why is the Strait of Hormuz significant geopolitically and economically?
The Strait of Hormuz is significant for its strategic location. It lies between Oman and Iran, linking the sea passage from the countries on the Gulf (Iraq, Kuwait, Saudi Arabia, Bahrain, Qatar and the United Arab Emirates) with the Arabian Sea and beyond.
The strait is only 33 km wide at its narrowest point. According to available statistics, it sees roughly 20 million barrels per day of oil, and oil products shipments, and accounts for nearly one-fifth of global oil shipments. Further, one-third of the world's liquified natural gas LNG passes through the route.
The maritime sea lanes, as the critical outlet for Gulf countries, are watched by the US Navy's Fifth Fleet based in Manama, Bahrain. The Strait of Hormuz is the vital oil artery for the world, and any disruptions, or even temporary closure, will send global oil shocks across the world.
Also Read: India concerned about crude oil supply disruptions in Strait of Hormuz
Will Tehran, or can Tehran, actually shut the Strait of Hormuz?
With the Israeli air strikes on its military and nuclear establishments, Tehran has threatened to shut the Strait of Hormuz. But will it do so? Or is Iran using Hormuz as bargaining chip that leverages the fears of global oil shock and oil vulnerability of its friends, and enemies alike? While there could be some disruption- Iran might actually refrain from a full-scale blockade.
There are three significant reasons why Iran might not actually do so, even while signalling that it might do so rhetorically. First, it will hurt Iran's friend, China, the world second-largest economy, and Iran's largest trading partner. China, is number one importer of oil, accounting for nearly three quarter of its oil export.
So China, will not like to see any disruption in its maritime oil shipments, and might actually use its economic leverage with Iran to prevent Iran from closure of the narrow lane.
Second, it will rupture Iran's relationship with Oman (which owns the southern half of the strait) and the Gulf Cooperation Council (GCC States). With Oman, careful crafting of a relationship has resulted in greater dependency for Iran on wide-ranging issues.
Further, Oman has been a strong advocate of freedom of navigation in the sea passage. On the other hand, while there has been a history of difficult relationships between GCC states, in the recent past there has been a détente of sorts, and Iran risks a fallout if it was to close the Strait of Hormuz.
Third, domestically this might not work for the interest of the regime, as any economic hits or closure of its oil exporting terminal, will see a surge in prices, and fuel popular discontent, which might impact both regime stability, and reformist tendencies for President Masoud Pezeshkian.
Also Read: Javier Blas: An Israel-Iran war may not rattle the oil market
Where does this leave US-Iran talk?
The US is giving clear indications that it will attend Sunday's talks with Iran in Oman with a focus on limiting Iran's ability to build a nuclear bomb- a move that Iran has vehemently resisted.
While the US claims it has no role or remains unaware of Israel's strikes on Tehran, the timing of the strikes raises a pertinent question. This comes just before the crucial 15 June talks between the US and Iran in Oman.
While the US and Trump deny any role, it remains doubtful that Netanyahu and Israel would act without a green signal from the US. So, it seems the attacks serve a dual purpose, for the US, it pushes Tehran to re-engage in talks with the US that it has put on the slow burner in the past few weeks.
For Israel, a tacit US support in any case works, given it sees Iran, and its nuclear programme as an existential threat. Further, Netanyahu, would anyway want to see the collapse of the deal between US and Iran, and has for the longest time opposed it.
However, despite strategic denials by the US, the killing of Iranian nuclear scientists, and the reported wounding of one of its negotiators many actually convince a anyways belligerent to Iran, to walk down the path towards a nuclear weapon to build its own nuclear deterrence.
Will China rein in Iran?
In the recent past, China has strategically drawn in Iran into the Belt and Road Initiative, which Tehran joined in 2019. China has been working to build new connectivity opportunities, for instance, railway projects for Iran that serve two significant aims: first, it provides opportunities for bringing in Central Asian countries and Iran into the connectivity matrix. And second, it helps counter US hegemony, and can offset the US sanctions that are imposed time and again.
In the moment of the current crisis, if Hormuz is choked, China will be hit, given it's the largest exporter of Iranian Oil. So China, might actually reign in Iran, given its impending economic interest, and disruption in global oil supply chain, will impede its own economic interest first and foremost.
Also Read | Israel's war on Iran to hit Indian workforce
What will this mean for India?
For India, over two-thirds of its oil imports and nearly half of its liquefied natural gas (LNG) imports transit through the Strait of Hormuz. This surely puts India in a tight spot, given that any disruption in the global supply chain will hit India, particularly in the LNG sector—given that it imports a major chunk of its LNG from Qatar and UAE.
According to available reports, January-November 2024, India imported 9.82 million tonnes of LNG from Qatar, which accounted for 38.8 per cent of India's overall LNG imports.
So a closure of Strait of Hormuz through which a chunk of LNG exported by Qatar and UAE passes, will hit countries like India. Further, in the recent past, India has strengthened strategic ties with Israel, particularly in the sectors of defence, intelligence, and technology. So for India, it is tightrope walk, given the need to do balancing act between Israel, and Iran.
Further in terms of India's connectivity interest. both Chabahar port and IMEC corridor anyways stand in a freeze mode, given the ever growing tensions between Israel, and Iran.
Shweta Singh is associate professor, Department of International Relations, Faculty of International Studies, South Asian University