Posted by: Dr Churchill | May 11, 2019

Are we walking blindly towards another Oil Crisis and an endless war, by shutting down the Straits of Hormuz?

A couple of thousand years ago some early physicist amongst the Greek philosopher scientists, voiced the truth, when he said that “Change is the only constant in the Universe”

Heraclitus, went on to say that “Life is Flux” (Panta Rhei in Greek, meaning everything & all things change).

Yet change is really hard…

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Even with the potential to save one’s life, or the whole world itself — making the simplest of changes can be the hardest thing for any human being.

Just look at our pitiful & childish response to Climate Change … for further proof of this.

Naturally change, is especially hard for these intelligent constructs of human beings who seek to maintain long term safety & stability, and so change is a near impossibility for intelligent assemblies such as the Pentagon, the State Department, and the long held institutional memory coalescing as the foreign policy apparatus, of the United States.

As for other smaller nation states, that have simpler institutional structures — it is even more difficult to embrace change than it is for a Superpower to understand & handle the vagaries of uncertainty, time, and chance, that all together militate for a state of constant flux & change.

It appears to be especially hard for our institutions, when these necessary changes of policy are needed, not because of the changing times and circumstances of the geopolitical & economic dynamic equilibriums, but because they are rather needed in order to bring into focus the paradoxical conflict of the Superpower’s economic interests vs the diplomacy, world safety, and international order foreign policy.

We haven’t faced for a while, such lofty dilemmas as we are facing today when these United States, align for battle across the shifting sands of Iran and it’s wildly inventive and theocratic regime that seeks to spread evil hither and tither.

And yet, even now at the eleventh hour, we are unwilling to embrace either the conflict or the change, even though we know that as Heraclitus quipped: “The underlying form of life, the ‘wisdom,’ is that the human condition is chiefly characterized by strife, by the coming together and pulling away of opposing forces.” And while people lament this strife, equating it with suffering, Heraclitus observed that this same process informed the natural world as well by writing: “All things come into being through opposition and all are in flux like a river.” There is no reason, then, to fear or try to avoid strife because conflict is the essential underlying force in life. This contending of forces, which Heraclitus characterized as fire, is easily observable in nature and yet human beings resist the natural movement of life and try to cling to what is known and what is considered safe.”

Marry that riddle, with the conflicts of interest between our national economy, and our international “Pax Americana” sovereignty, along with the global NATO partnerships, and we are in for a refresher course in solving the famed game theory “Prisoner’s Dilemma” paradox, that others have never solved successfully at this highest levels of the global diplomatic stage, in order to avoid another needless war.

So…

It would seem that we are sleep-walking to our predetermined fate, and thus going blindly towards another Middle Eastern war and the resultant Oil Crisis be damned…

And this is going to be a real nasty bit of war, because it will start by shutting down the Straits of Hormuz, and then all kinds of economic hell will break loose, and the roof tiles of Wall Street and the Banking majors, will fall upon our heads all over again.

Yet, I truly think that our leadership does not really know what shutting down the straits of Hormuz entails, and perhaps they need to take a trip down the institutional memory-lane, or just visit the local library, and read up on the subject and then try their hardest to recall the havoc that was wrought to the world, the last time this happened.

And even for those of us who remember — it seems to me that our administration does not know the angles and the implications of it, and even more importantly, the unintended consequences of that oil gateway closure…

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YES, WE ARE SLEEP WALKING TOWARD WAR, AND AN OIL CRISIS TO BOOT IS IN THE OFFING … SIMPLY BECAUSE WE ARE UNWILLING TO SEE THE SHIFTING SANDS OF TIME FOE WHAT THEY ARE.

And sadly, we are all going down that dismal path, and we don’t even know it, as we are prevaricating with our national belly button observational fixation.

Yet, I must caution the war department President, and the Senate, (forget Congress), that we are mistakenly and blindly going down the war path, because the Trump administration’s oil embargo towards Iran, and the push to reduce Iran’s oil exports to near zero, has entered a new and untested, yet all too critical phase, without so much as a tensions release valve in place, in this pressure cooker explosion contest, I will christen as the “Brinkmanship with the Ayatollahs” global economic value blow-up game.

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Because we are already in a solid phase of belligerence, with the United States refusing to extend the waivers it granted six months ago to the eight oil importing nations, including China, India, Turkey, Japan, and South Korea, that were allowed to continue purchasing Iranian oil based on the prior Iran nuclear deal agreements.

Moreover, the United States has refused to allow for a “wind-down” period where impacted nations would be able to gradually wean themselves away from Iranian sources of energy.

This means that, effective May 1st, any nation purchasing oil from Iran will be subject to punitive US sanctions.

The effort on the part of the Trump administration to shut down Iran’s ability to export oil is predicated on the false notion that the rest of the world will fall in lockstep with U.S. policy. But has President Donald Trump really thought through what would happen to the economic health of the world if Iran retaliates, shutting the Strait of Hormuz, through which much of the world’s oil flows daily?

Because as of now, some 18 million barrels of oil transit through every day.

Therefore, the economic impact of shutting this trade down, by closing and clogging there straits, would surely be catastrophic.

But catastrophic exactly for whom?

Iran has responded to the American decision not to extend oil waivers in typical fashion, with Rear Admiral Alireza Tangsiri, the commander of the Iranian Revolutionary Guard Command (IRGC) naval forces, warning on April 23 that “if Iran’s benefits in the Strait of Hormuz, which according to international rules is an international waterway, are denied, we will close it”.

This threat was clarified the next day, April 24, by Iran’s Foreign Minister, Javad Zarif, who declared “ships can go through the Strait of Hormuz,” noting that “if the U.S. wanted to continue to observe the rules of engagement, the rules of the game, the channels of communication, the prevailing protocols, then in spite of the fact that we consider U.S. presence in the Persian Gulf as inherently destabilizing, we’re not going to take any action.”

For now…

The Strait of Hormuz is one of the most critical sea lanes in the world today, transiting some 18.5 million barrels of crude and refined products per day, representing roughly 20 percent of all oil produced globally. There is universal consensus among energy analysts that any closure of the Strait of Hormuz would result in “catastrophic” consequences for the global economy.

Less certain is whether Iran is serious about carrying out its threats. In July 2018, following the Trump administration’s decision to withdraw from the Iran nuclear deal (the Joint Comprehensive Program of Action, or JCPOA), Iranian President Hassan Rouhani threatened to close the Straits in retaliation for renewed U.S. economic sanctions. Calmer heads prevailed, and Iran ended up taking the diplomatic route, working with the other signatories of the JCPOA to find ways to bypass U.S. sanctions.

In the intervening time, Iran’s efforts at crafting a diplomatic solution have fizzled, with Europe unable (or unwilling) to implement a meaningful alternative to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) system, a financial network based in Belgium that provides cross-border transfers for over 11,000 financial institutions in more than 200 countries and territories around the world. Because the SWIFT board includes executives from U.S. banks, federal law allows the U.S. government to sanction banks and regulators who operate in violation of U.S. law. As such, any financial transaction involving Iran or any other entity under U.S. sanction would provide a trigger for secondary sanctions to be applied to facilitating institutions and/or persons.

Iran has a history of bypassing U.S. sanctions, and while the Trump administration’s targeting of Iran’s oil exports has caused significant economic harm to the Islamic Republic, Iran remains confident that it would be able to continue to sell oil in enough quantity to keep its economy afloat. In a recent appearance, the Supreme Leader of the Islamic Revolution, Ayatollah Ali Khamenei, declared that the American effort to block Iran’s oil sales will fail. “The Islamic Republic of Iran will be exporting any amount of oil it would require, at will,” Khamenei said.

There is a major difference between 2018 and today, however. The recent decisionby the Trump administration to declare the Iranian Revolutionary Guard Command (IRGC) a terrorist organization has complicated the issue of Iran’s oil sales, and America’s reaction in response.

The IRGC has long been subject to U.S. sanctions. In 2012, the U.S. Department of Treasury, Office of Foreign Assets Control (OFAC), determined that National Iranian Oil Company (NIOC) was an “agent or affiliate” of the IRGC and therefore is subject to sanctions under the Iran Threat Reduction and Syria Human Rights Act of 2012 (ITRSHRA). Other Iranian oil companies have likewise been linked to the IRGC, including Kermanshah Petrochemical Industries Co., Pardis Petrochemical Co., Parsian Oil & Gas Development Co., and Shiraz Petrochemical Co.

While in 2012 the United States determined that there was insufficient information to link the National Iranian Tanker Company (NITC) as an affiliate of the IRGC, under the current sanctions regime imposed in 2018 the Islamic Republic of Iran Shipping Lines (IRISL) and the NITC have been blacklisted in their entirety.

By linking the bulk of Iran’s oil exporting capacity to the IRGC, the United States has opened the door to means other than economic sanctions when it comes to enforcing its “zero” ban on Iranian oil sales. Any Iranian oil in transit would be classified as the property of a terrorist organization, as would any Iranian vessel carrying oil.

Likewise, any vessel from any nation that carried Iranian oil would be classified as providing material support to a terrorist organization, and thereby subject to interdiction, confiscation, and/or destruction. This is the distinction the world is missing when assessing Iran’s current threats to close the Strait of Hormuz. It’s one thing to sanction Iranian entities, including the IRGC—Iran has historically found enough work-arounds to defeat such efforts. It is an altogether different situation if the Unite States opts to physically impede Iran’s ability to ship oil. This would be a red line for Iran, and a trigger for it to shut down all shipping through the Strait of Hormuz.

So far the United States has not shown any inclination to physically confront Iranian shipping. Indeed, as Iran’s top military commander Major General Mohammad Baqeri recently told reporters, U.S. naval and commercial vessels transiting the Strait of Hormuz continue to respond to the queries transmitted by the IRGC naval forces responsible for securing Iran’s portion of the strategic waterway—an awkward reality given that the IRGC has been designated a terrorist organization, which means the U.S. Navy freely communicates and coordinates with terrorists.

“As oil and commodities of other countries are passing through the Strait of Hormuz, ours are also moving through it,” Bageri observed, declaring that “if our crude is not to pass through the Strait of Hormuz, others’ [crude] will not pass either.” Bageri went on to explain that “this does not mean [that we are going to] close the Strait of Hormuz. We do not intend to shut it unless the enemies’ hostile acts will leave us with no other option. We will be fully capable of closing it on that day.”

The challenge will come when the U.S. effort to bring Iran’s oil exports to zero fails—and most observers believe this will be the case. Iran’s Foreign Minister Javid Zarif has bragged that “Iran has a PhD in sanctions busting,” and historical precedence is on his side. If the Trump administration proves unable to shut down Iran’s ability to sell oil through sanctions, and therefore fails to blunt what it describes as Iran’s “malign activities” in the Middle East, there will be increased pressure to be seen as doing something—anything—to effectuate policy objectives, especially during the lead up to the 2020 presidential election, where the Trump administration would be loath to provide any fodder to its political opponents.

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And if we seek to remember the lessons learned from dealing with Iran fifty years ago — then we are in for a surprise, because the Iranian Ayatollahs of your father’s time, are not the same ones ruling the roost in Teheran today.

Things have changed and we are not even aware of the changes, subtle and big, that have transpired in that country…

For it’s all a new game today.

After all as the old man Heraclitus would have said: “You can never step into the same river twice.”

Yours,
Dr Churchill

PS:

However the economic impacts of an Oil embargo emanating from the oil consumer nations, is another reality all together.

And if anyone out there recalls the effects of the OPEC’s oil embargo back in the early 1970’s, and the economic devastation that it caused the free world — might want to shout out at Mr Pompeo and Mr Trump to have a rethink of this new and precipitous invitation to trouble.

And simply because any effort to restrict or deny oil transits through the Strait of Hormuz would be rightfully seen as a provocative act worthy of military intervention, it is highly unlikely that either the United States or Iran would take any precipitous action in that regard unilaterally…

However, Iran would most likely seek a gradual escalation of restrictions grounded in its legal interpretation of the 1982 United Nations’ Convention on the Law of the Sea, which grants Iran control over “territorial waters” extending to a maximum of 12 nautical miles beyond its coastline.

Any ships using the northern and eastern routes through the Strait of Hormuz to gain access to the Persian Gulf would have to transit through Iranian waters.

Under the convention, Iran is permitted to deny free transit passage to nations, like the United States, which have not ratified the agreement. If the United States interdicts Iranian shipping involved in the transit of oil, then it is most likely Iran will close the Strait of Hormuz to U.S. shipping, citing the 1982 convention as its justification.

The United States would either be compelled to back down (unlikely), or resort to military force, certifying it as the aggressor in the eyes of international law, and bringing along the wrath of all the Arab oil producing nations, leading to an escalating oil embargo that would most likely include also the “neutral” producers of the OPEC and perhaps all others…

The military debate over Iran’s or the US’s ability to close the Strait of Hormuz unilaterally, and the ability of the “other” power to respond to such a threat is moot, mainly because No Real Insurance company will ever cover any oil tanker seeking to transit contested waterways under the strain of missile fire and long distance naval guns.

The threat of cannon fire across the bow of a ship is enough for all sane oil tanker captains, to turn their vessels around swiftly.

Thus the economic impact of any straits of Hormuz unilateral closure — will be immediate, catastrophic and sustained.

And regardless of outcomes — the bigger economy will suffer the most damage.

Further, our national economy will be going swiftly into the toilet with energy prices rising beyond the pale, even though as of now, the US is a net energy exporter, and conceivably self sufficient.

The riddle of this dilemma stands at the first mover advantage, and it resembles the economic paradox aspects of the game theory “Prisoner’s Dilemma” because even if the United States mover first, or simply responded to an Iranian closure of the straits, and even if we prevailed in a military conflict over the Strait of Hormuz, which is not at all a certainty … it would still mean that to do so, we will be shooting ourselves and the global economy straight in the head.

Seeing as two completely rational nation-states will engage all their mighty foreign affairs and diplomatic corps detailed negotiations, might not find a MIDDLE WAY to cooperate even if it appears that it is in their best interests to do so — it is simply like waiting for the “Sarajevo moment” to unleash the Gods of War.

And since it is inevitable that we will not find a cooperative agreement with Iran, although we are both presumably rational in our pursuit of our self interests — diplomacy by military means will be the only other option.

But war as diplomacy is always flawed and the unintended consequences are massive and unseen ahead of the commencement of hostilities, always leading the belligerents at overestimating their particular strengths, while underestimating those of their opponent — leading both nations to the wrong assumptions about the length and the nature of the battles ahead and of the overall war…

And although for strategic purposes we are sure to score and declare a quick victory, we know that we will be left holding an empty cup, having drunk from the poisoned chalice of the Gods of War — and we will be stranded in the deserts of Iran for a long time to come much like those downed helicopters of the rangers during President Carter’s failed effort at freeing the hostages in the early days of this Persian theocratic tyrannical regime of the Mullahs, the Bazaaris, and the Ayatollahs.

Still hemlock is our own choice of drink when we belly up to that bar of Ares, and we forget to study our game theory primer…

Because we instinctively and unstintingly know hereafter, after the length and expenditure of the Iraq and Afghanistan wars, that any military victory against Iran would be pyrrhic in nature.

And if our plan is for regime change in Iran, then we should really be concerned, because if a foreign nation deposed the existing theocratic regime in Iran by force — the ensuing civil war, regional destabilization, and refugee crisis, would make Iraq, Libya, and Syria, all look like a walk in the park…

As for the Pyrrhic victories — they have the effect of bleeding the winner dry of any power, and destabilizing their regime, regardless of the outcome of the war. And the fact that this looming battle seems to be resulting in a Pyrrhic victory before it even started is because it appears that the United States is willing to sacrifice its national economic health, and that of the rest of the world on the altar of hubris and anti free trade gunboat diplomacy.

And that posturing position clearly fails to advance the national interest in any meaningful fashion, and that’s why this provocation to war, is indeed a poisoned chalice that will sacrifice our best and brightest strategic minds along with scores of soldiers and marines.

A major sacrifice indeed.

“Corbunet Beram”

And the Persians will surely take advantage of the situation then…

من برای شما قربانی می کنم

And they will surely once again celebrate the SuperPower’s awful folly

Besalamati…


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