(Bloomberg) - President Donald Trump’s plan to blockade the Strait of Hormuz would halt the nearly 2 million barrels a day of Iranian oil that’s been passing through the waterway, further squeezing global supply and cutting off a vital lifeline for the Islamic Republic.
On Sunday, ship transits remained at greatly reduced levels in the face of Tehran’s stranglehold on the world’s most important energy chokepoint, with most vessel owners reluctant to operate in an area that until recently was a war zone.
There had been some signs of improving traffic in recent days, not least when three non-Iranian supertankers transited Hormuz. While it was only a single day, that flow equates to six million barrels a day, a volume that would have significantly narrowed the amount of lost supply from the waterway had it been sustained.
If a blockade of exports were to be successful, it would sever one of Iran’s main economic lifelines — a remarkable turnaround from last month when the US issued sanctions waivers to allow some buyers to purchase barrels from Tehran.
“President Trump is trying to force Iran’s hand by reducing their leverage over the strait,” said Jorge Leon, head of geopolitical analysis at Rystad Energy. “The problem is that the risk for escalation is very high now.”
After the conflict started at the end of February, the number of ships crossing Hormuz in either direction has been in single digits on most days. In normal times, daily transits totaled about 135. Below is a summary of the ways in which ships have managed to cross Hormuz since the war began.
1) Sanctioned Ships and Cargoes
Unlike it’s neighbors, Iran has largely continued to transport barrels through Hormuz since the start of the war. Tehran exported about 1.7 million barrels a day of crude and condensate last month, according to preliminary tanker-tracking estimates compiled by Bloomberg, with China being the biggest buyer. In contrast, shipments of other Middle Eastern producers collapsed. At times over the past week, every ship that transited Hormuz had some sort of link to Iran, while other sanctioned ships have also crossed.
2) Dealmakers
A handful of countries have said they sought permission from Iran to transit. Pakistan got permission for 20 vessels to cross — more than the number it actually had inside the Persian Gulf. India has managed to get eight liquefied petroleum gas tankers through Hormuz. Some oil tankers bound for Thailand were allowed to exit and the country sought to get more out.
3) Friendly nations
Iraq, which Iran described as a “brotherly” nation, received an exception earlier this month. Since then, some refiners have been seeking ships to pick up oil from ports in the country, according to shipbroker reports, although few deals have been concluded. There’s yet to be a major pickup in Iraqi ships crossing, though a smattering of vessels carrying the country’s oil have transited.
4) Signals Off
A handful of Greek ships have also continued to cross the strait, but with their satellite transponders switched off. Dynacom Tankers Management Ltd. has managed to clear Hormuz with at least five vessels since the waterway was closed using this technique. A combination of ships switching off their transponders and signal jamming makes it hard to confirm exactly how many vessels have used the same method.
By Alex Longley, Prejula Prem and Charles Gorrivan
With assistance from Julian Lee
