The Shelter of the Gulf: This is how Hormuz became the point that decided the war

Despite the announcements, as of the time of writing about 800 ships waiting in the Gulf are afraid to leave and are asking for clarification regarding the current arrangement. The lack of clarity stems from a significant gap between the official statements of Iran and the United States. While President Donald Trump wrote that a “complete, immediate and safe opening” had been achieved, according to the 10 points published by Iran’s official news agency, it is actually about “coordination with Iran’s armed forces” while taking into account the “technical limitations”, and in the long term the granting of “special status” to Iran in Hormuz.

These two statements have a very different tone, and they do not answer a simple factual question: which route will the ships be able to leave (and enter) through Hormuz, and will they have to pay a ransom to Iran or will they be able to leave for free?

Oil exports jumped and the profits of the Revolutionary Guards soared

Prof. Yehoshua Krasna, a former senior official in one of the intelligence organizations and today the director of the Forum for Regional Cooperation at the Dayan Center at Tel Aviv University, explains why the closure of the Strait of Hormuz, through which 20% of the world’s oil and gas traffic passes, was so dramatic: “It affected everyone in the world. In India, Pakistan and Bangladesh, people were told to turn off air conditioners and work more from home. Farmers around the world also feel it, including in the USA. There was panic from the spike in the price of oil and its products.” He adds that although American oil also became more expensive, which added significantly to US profits, “but this does not help consumers. In addition, the opponents of the war in the US now have a strong argument that speaks to the heart of the president. The Iranian suffering does not convince him, but the economic impact does.”

But while the exporting Gulf countries suffered from the blockade of the strait and attacks on their physical infrastructures for the production and export of oil and gas, Iran exported as usual. In fact, it exported much more than usual, since in order to combat the rising oil prices, explains Ella Rosenberg, a research fellow at the Jerusalem Center for Foreign and Security Affairs (JCFA) and a member of the Deborah Forum, “The American regulator approved the sale of Iranian oil at sea, as well as Russian oil. While Iran was bankrupt, the Revolutionary Guards made several times the profit from the oil.”

According to an analysis by the Economist, this resulted in a nearly two-fold jump in the IRGC’s oil profits. This is not only due to the jump in prices, but also due to an increase in the amount exported (after all, Iran blocked the competitors in the Gulf). Together, this led to the fact that even though the Revolutionary Guards were severely damaged in the war – they were able to receive significant compensation in the form of larger than usual oil profits.

How the strait was blocked and why the US was not prepared

Iran managed to block Hormuz relatively easily, and without firing much: it was enough to sink a few ships to cause all maritime traffic to stop completely. Insurance companies were unwilling to insure a ship passing through a missile-hit area, and even when the US initiated (belatedly) an insurance policy for them, not many companies and civilian sea crews agreed to risk their lives and goods just to transport oil out of the Gulf. With a few exceptions, such as the Greek company Dynacom that stole several ships out, the sporadic Iranian threat was enough to cause one of the world’s most important energy arteries to be blocked totally

The space of Hormuz is particularly narrow, which leads to great difficulty in the passage of ships when there is a threat on the coast. The Houthis, with much less resources, were also able to stop traffic for a long time in the Bab al-Mandab strait that connects the Red Sea to the Indian Ocean. Modern tools, including unmanned aerial vehicles (UAVs) and UAVs (unmanned aerial vehicles), as well as the age-old threat of surface-to-air missiles, made the transition challenging.

In mid-March, senior US Navy officials explained to the Wall Street Journal that this was turning Hormuz into a “kill box” that would make it very difficult for ships to pass through. Trump was indeed furious and said in an interview with Fox News that “these ships should sail through the Strait of Hormuz and show some courage. There is nothing to fear, they have no fleet, we have sunk all the ships.” But as mentioned, the Iranian navy is not the only threat, and Iran has shown that it is definitely possible to block Hormuz only from land.

A solution, if there is one, requires an extensive and permanent presence of warships and perhaps even ground forces. But while the US began promoting (at a relatively late stage in the war) amphibious assault ships with thousands of marines towards the Middle East, it was clear that this would require an international coalition of the type that operated against the Houthis at the end of the Biden days and the beginning of the Trump days. But Trump found it very difficult to mobilize such, especially in light of the shaky relations he created with Europe after the Greenland crisis a few months earlier.

This leads to the obvious question: Why did the US not prepare for the closure of Hormuz, which turned out to be particularly effective? The transfer of the relevant American forces to the Gulf began only after the war began, and the assembly of an international coalition to open the Strait also began only in retrospect, while threatening the integrity of NATO. According to Rosenberg, “in the US, and here too, they didn’t understand the magnitude of the issue of Hormuz.” We are more missile and nuclear oriented. And naturally, Iran chose to hit where it hurts the most.”

Prof. Krasna expresses himself more sharply: “They simply did not listen. The current American administration does not believe its experts. There are experts in the US, and they are certainly aware of this risk, but those who make these decisions are mainly Yes Men. There was a leak that said the words were presented to the president, but not presented ‘strongly’ enough. The CIA and the Pentagon introduced it, and have been talking about it for decades. But it may be that those who did did not press enough on the subject. No one wants to be the one Trump yells at.

Krasna also adds that the Gulf countries also probably warned about this, “but when they formulated it as an argument in favor of avoiding an attack – he ignored them.” In his eyes, the damage is first of all the closure of Hormuz, and also the physical damage to the oil and gas facilities in the Gulf, which will mean that it will be years before oil prices return to reasonable levels. “There is a situation where Iran manages to withstand the American attacks, and determines the oil prices.”

Iran realized how powerful the tool is in its possession

An equally big concern, in the eyes of Prof. Krasna, is what will happen now. Trump did not rule out the idea that Iran would charge “transit fees” on Hormuz as it did during the war, which would break the international agreements surrounding the passage through the Strait. “The Iranians threatened to close Hormuz, but they never did it. Now it really happened, and now they have learned that it is as powerful a tool as they thought. If you don’t use it, you don’t know how long it will last. They attacked boats, but not a lot, and look what happened.”

In his eyes, this is a dangerous precedent: “As soon as you opened this Pandora’s box, then Indonesia will say ‘we want to take money on the Strait of Malacca’ (between the Indian Ocean and East Asia, a.a.), Morocco and Spain will say the same about Gibraltar, the Houthis about Bab al-Mandab. Turkey is asking for money already today, but that’s because the passage is narrow, and every ship that passes through needs a ‘pilot’ to steer it, and they charge money for this service. Russia is also asking for money for icebreakers in its northern passage. But there is a difference between someone asking for money for a service and collecting transit fees.”

If Iran comes out of the war with the right to collect transit fees, he says, it will be a significant achievement that they did not have before the war.

Rosenberg complains about the difficulty of preventing Iran from profiting from the sale of oil, despite the sanctions. According to her, “The Americans are excellent at issuing sanctions, and very bad at enforcing them. There is no strong and orderly regulator for maritime trade in the Middle East.” In her eyes, Arab countries should take on this role, and establish such a body together with Israel instead of relying on the Americans. After all, once Iran forced them to come down from the fence, they have a clear interest in preventing Iran from profiting and restoring its capabilities. Will we see such a surprising collaboration in the future? It’s still too early to tell.

Meanwhile, the focus is starting to shift to alternatives to Hormuz. The East-West oil pipeline of Saudi Arabia is indeed able to transfer only 5-7 million barrels a day to the Red Sea out of about 10 that the Saudis can export through Hormuz on normal days, and it was still much more than any other Gulf country.

In an interview with Globes this week, the CEO of New Med Energy, Yossi Abu, even proposed an overland pipeline that would reach Eilat, and from there flow the oil from the west of Saudi Arabia and the Emirates to the oil terminal in Ashkelon and from there to the wider world. But the biggest problem is probably the production of the gas, when Qatar is the second largest exporter of monzel natural gas in the world, and its full export capacity has been blocked by Iran. And unlike oil, which can be stored for a relatively long term, storage Gas is more expensive and more complex, while the war would have continued – this could have been a significant problem. The solution to this, in his eyes, is a gas pipeline through Iraq to Turkey and Azerbaijan, and from there through the existing pipeline to Europe.

And so are completely different energy alternatives: Adi Levithan, CEO of Enlight, the largest renewable energy company on the Israeli stock exchange, told Globes that “the current security situation only strengthens the need for renewable and distributed energy. 20% of the world’s oil passes through the Strait of Hormuz, and the world still depends on oil used for transportation, shipping and aviation. And this is not the first supply chain shake-up in recent times: there was the corona virus and the Russia-Ukraine war. Any country that wants energy security needs to harvest renewable energy.”