Is Trump About To Fall Into Iran’s Trap?
“Iran’s been waiting for the U.S. to put boots on the ground because it knows that while it’s easy to get into a country militarily, it’s much more difficult to get out, and the longer the U.S. is on the ground, the more likely it is to be forced into making a better peace deal for Tehran,” a senior energy security source working closely with the European Union’s (E.U.) energy security complex exclusively told OilPrice.com over the weekend. “And two events this weekend [28-29 March] have dramatically increased the possibility that the U.S. is going to fall into the trap,” he said.
The first of these was the full entry into the U.S./Israel-Iran conflict of the Tehran-backed Houthis, which has fought a proxy war for Iran in Yemen against its arch-regional enemy, Saudi Arabia. On Saturday, 28 March, the group launched a barrage of missiles against Israel, the first since the start of the US/Israel war with Iran. It vowed to continue such attacks, saying that closing the vital global shipping chokepoint, the Bab el-Mandeb Strait, remained “a viable option.” These moves by the Houthis are specifically designed to “provide the catalyst for direct infantry action from the U.S, by challenging [President Donald] Trump’s vow to keep the [world’s] oil flowing, following the ongoing Iranian blockade of the Strait of Hormuz,” the E.U. source underlined. As highlighted recently by OilPrice.com, the situation in the Strait remains precarious, effectively blocking the free passage of up to a third of the globe’s oil supply and about a fifth of its liquefied natural gas. Iran’s often-stated aim is to force oil and gas prices sharply higher, causing economic damage to energy importers.
Related: Chinese Publication Claims U.S. Has Two Months of Rare Earths Left
The only ships currently able to move relatively freely through the Strait of Hormuz are those carrying Iranian oil to its biggest superpower backer, China, which has for decades bankrolled the Islamic regime through oil payments, despite international sanctions aimed at preventing this. In a bizarre turn of events, this previously illegal activity by Iran has now been made legal for the next 30 days by the U.S. to keep oil prices contained. Although it ‘only’ affects oil at sea, this covers around 170 million barrels of Iranian oil, and the waiver may yet be extended. Russia — the second of Tehran’s key superpower backers — will also reap a surprise multi-billion-dollar windfall from its own U.S.-granted 30-day waiver on oil-at-sea exports. Combined with higher oil prices, this means the Kremlin’s oil and gas revenues are projected to nearly double this month, rising from approximately US$12 billion to US$24 billion this month, according to industry figures.
For net energy importers — which includes many of the U.S.’s key allies — the view is less rosy. Houston-based Vikas Dwivedi, global energy strategist at Macquarie Group, said early in the conflict that the closure of the Strait of Hormuz alone could create a domino effect that could push crude to US$150 a barrel or higher. As he told OilPrice.com: “We think about the conflict and the closure around the Strait of Hormuz as an impulse function on pricing, meaning the reduced transit is creating the action and will require numerous policy, military, and logistical responses to mitigate the upward price move, which we believe could reach $150 per barrel along the path.” In the past few days, he and the Macquarie Group team have assessed the possible impact of the war continuing until the end of June. “The current hit to supply is already bigger than the peak in either of the 1970s oil shocks, or the first two Gulf Wars, although thankfully International Energy Agency members hold emergency stockpiles of over 1.2 billion barrels of oil, while China is also well stocked, which will help,” he said. “However, if the Strait [of Hormuz] were to stay closed for an extended period, prices would need to move high enough to destroy an historically large amount of global oil demand, with some countries, particularly in Asia, already facing physical shortages,” he underlined. “And with the global economy much less oil intensive than 50 years ago, we would not be surprised if that would require historically high real prices (over US$200) for a time, which would equate to a U.S. gasoline price of around US$7 per gallon,” he concluded.
Such a move could be hastened by the closure of the other major oil chokepoint in Iran’s strategic sights — the Bab el-Mandeb Strait. This 16-mile-wide waterway hosts 10-15% of the world’s seaborne oil shipments and begins on the south-west spur of Yemen where the Gulf of Aden runs westwards from the Arabian Sea, forming a channel between the west coast of Yemen on the one side, and the east coasts of Djibouti and then Eritrea on the other. From the north end of the Red Sea, the waterway flows into the Suez Canal before moving into the Mediterranean Sea and then westwards. In day-to-day terms, the Bab el-Mandeb Strait is controlled on the Yemen side by the Iran-backed Houthis, and on the other side by Djibouti and Eritrea (both of which owe huge sums of money to Beijing as part of ‘Belt and Road Initiative’-related loans). However, in broader terms, through its ‘Iran-China 25-Year Comprehensive Cooperation Agreement’, first revealed anywhere in the world in my 3 September 2019 article on the subject and as analysed in full in my latest book on the new global oil market order, Beijing exercises enormous influence over what happens in the Strait, as it does over the entire Persian Gulf and Strait of Hormuz chokepoints. As shown by the Houthis’ seizure of the Galaxy Leader cargo ship on 19 November 2023 – supposedly for being ‘Israeli-owned’ – the action was sanctioned by Iran to demonstrate that it still had control over the Bab-el-Mandeb Strait, and it was done with the full blessing of Beijing, according to the E.U. source at the time. “The same is true now,” the source underlined, “with nothing happening here [in the Bab el-Mandeb Strait and the Strait of Hormuz] without China’s tacit approval.” The closure of the Bab-el-Mandeb Strait by the Houthis — on top of the blockade of the Strait of Hormuz — would mean up to 45% of the world’s oil flows would be closed, prompting a move in the Brent benchmark oil price towards US$200 per barrel and beyond.
Related: Is This The No.1 Way To Play the Rare Earth Crisis?
Given the appalling economic — and political — consequences of such a move for the U.S. and Trump respectively, as also fully detailed in my latest book on the new global oil market order, this could be sufficient lure for the president to spring the trap set for him by Tehran, thinks the E.U. source. “Although the movement of [U.S.] troops over the past week or so was intended as a negotiating tool with Tehran, they may well find themselves in a real deployment,” he added. As with so many such deployments in various theatres by various countries in the past, this could start with a very limited presence, perhaps on Iran’s key crude and condensate export and storage terminal of Kharg Island, or on key nodes along the Strait of Hormuz, the source thinks. “But the problem here is that to protect the troops in such a deployment, the U.S. would need to establish an indirect fire buffer zone of at least a 20-kilometre radius, and much more than that to deal with the missile threat,” he added. “And ultimately, for a Kharg Island deployment, for instance, the Iranians could just sit there day after day for months, firing everything they have on the site, and on any American forces that came to rescue them,” he underlined.
Given these factors, pressure may well grow on Trump to declare a victory of sorts and withdraw from the conflict, as flagged by OilPrice.com. “He [Trump] laid out four clear objectives for the attacks on Iran at the beginning, and we still think there’s sufficient scope for him to say that he’s broadly achieved them,” said the E.U. security complex source. “Trump can say that the regime has been changed, in that the leader and many other leadership figures have been removed, and he can cite the nuclear programme as having been degraded such that Iran won’t be able to make a nuclear weapon for the foreseeable future,” he told OilPrice.com. “Third, he can say the [U.S. and Israeli] attacks have destroyed nearly all of Iran’s missile stocks and meaningfully set back its production capabilities, and he can announce that Iran’s regional proxies have been hollowed out to a point that makes them much less of a threat than before,” he underlined. “There is a wording that will work here, and we think he’ll use it once he sees the scale of what he’d be taking on with a full invasion, and then he’ll pull out,” the E.U. source concluded.
By Simon Watkins for Oilprice.com
First Appeared on
Source link
