Sea Transportation: Iran And The Hormuz Booby Trap

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May 15, 2010:  Within the past few weeks, Iran has conducted wargames simulating a blockade on the Strait of Hormuz. During these exercises Iran showcased both its maneuvers and green water fleet. Iran is clearly trying to send a message showing the consequences of a military strike on its facilities. However, even if Iran does possess the ability to block the Strait of Hormuz, it would be useless. With Hormuz closed, Iran would choke itself.

When one looks at a map of Iran, they notice that Iran borders seven countries: Pakistan, Afghanistan, Turkmenistan, Azerbaijan, Armenia, Turkey, and Iraq. Iran’s estimated combined trade with these countries is approximately $22.5 billion (Iran’s total exports total $70.16 billion and bilateral trade reaches $127.32 billion), approximately 32 percent of its exports. The rest of Iran’s trade, around $48 billion, occurs through shipping routes either through the Caspian Sea or the Persian Gulf. 

If Iran attempted to blockade the Strait of Hormuz, the US and NATO would likely respond with their own blockade. The U.S. possesses a superior fleet, so it would be highly unlikely for Iran to eliminate the U.S. fleet and its blockade. Immediately, all trade both ways through the Strait of Hormuz would be stopped.

Iran could never afford such an action. Iran’s largest ports, Kharg Island and Lavan Island (which both store and export oil) and Bandar Abbas (which imports and exports commercial and industrial goods), are all in the Persian Gulf. The only exit out of the Persian Gulf is through the Strait of Hormuz. This is where most of Iran’s trade flows; Iran has yet to establish significant trade routes in the Caspian Sea. 

Crude oil makes up 80 percent of Iran’s exports, approximately $56.13 billion. Since both of Iran’s largest oil export ports (Kharg Island and Lavan Island) are in the Strait of Hormuz, Iran’s exports would shrink drastically. Iran would be unable to ship oil. On top of that, Iran’s fleet of 29 supertankers would be confined to the inner Persian Gulf. These large ships, which contribute a significant amount to the Iranian economy, could not break the U.S. blockade.    

Even worse, the U.S. would likely pressure its allies in the Middle East to stop trading with Iran. Two countries that would likely cooperate (based on the U.S. troop presence in the country) would be Afghanistan and Iraq, which Iran exports a combined $4.5 billion worth of goods to. If the US offered incentives and gained the support of the UN, other nations (specifically the United Arab Emirates and Turkey) bordering Iran also might halt their trade. 

Iran has made several dangerous mistakes. Not only has it relied on one main resource for the majority of its exports, but it also has relied on only a few trade routes; Iran relies too much on the Strait of Hormuz. As a result, a blockade against the Strait of Hormuz, combined with cutting off some of the trade between Iran and its neighbors, would strike a devastating blow to Iran’s economy. The economic downturn in Iran would likely cause both internal strife and a decrease in military spending that would weaken Iran’s blockade. Blocking the Strait of Hormuz, which 40 percent of the world’s oil flows through, may seem like a solid strategy, but in fact it has several flaws. Hopefully Iran considers the economic consequences of closing the Strait of Hormuz. --By Bret Perry

 

 

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