Two oil tankers have been damaged in a suspected attack in the waters between the United Arab Emirates and Iran as they were leaving the Persian Gulf. This is the second incident in four weeks, and raises the question of who gains what from them.
Fingers will certainly be pointed at Iran as the mastermind behind these events. But the potential benefits to the Persian Gulf nation are outweighed by the risks. And even if Tehran isn’t responsible, it will still suffer the consequences.
The first tanker to report a problem was the Front Altair. It was reported to be carrying 75,000 tons of naphtha, loaded in Abu Dhabi, to Japan, although it was signaling a destination of Kaosiung in Taiwan when it was damaged. The second vessel was the Japanese-owned Kokuka Courageous, which was sailing from Saudi Arabia to Singapore with a cargo of methanol.
A person who’s heard local radio transmissions between ships in the region told Bloomberg that a torpedo attack is suspected to have caused an explosion and fire on the Front Altair. The managers of the Kokuka Courageous said in a statement that “the 21 crew of the vessel abandoned ship after the incident on board which resulted in damage to the ship’s hull starboard side.”
Who gains from these attacks?
The obvious answer is Iran. If Tehran is attacking tankers leaving the Persian Gulf – either directly, or through proxies – it sends a message that transit through the world’s most important choke point for global oil flows is not safe without its consent. If Iran is pushed to the brink economically by sanctions, it will not go quietly. Other nations in the region will bear the cost of disruptions to their own oil exports, while America and its allies will have to cope with higher crude prices and disruptions to supplies.
Not since 2005 have the world’s insurers considered shipping in the Persian Gulf so dangerous for oil tankers. Nevertheless, we are still far from the level of tension that existed during the so-called Tanker War of the 1980s, when 451 vessels (259 of them oil or refined petroleum product tankers) suffered some sort of attack in the region, according to a report from the U.S. Naval Institute. The incidents took place during the Iran-Iraq war, and the culprits were forces from both countries.
Then, the U.S. navy resorted to escorting vessels through the Persian Gulf. That would be an expensive operation to repeat and would tie up a large part of the U.S. and allied fleets in the region. It would also raise the cost of the U.S. drive against Iran, which began with President Donald Trump’s decision to pull out of the Iran nuclear deal in May 2018.
Brent crude was up by as much as 4.45% on Thursday, shortly after news of the attacks broke, although it has since lost some of those gains. The nation’s oil exports have been seriously curtailed by U.S. sanctions, and higher prices are its only route to increasing revenues. But the benefits are likely to be relatively small, given the dwindling volumes and steep discounts that the country probably has to offer to shift its oil.