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On-Going Middle East Tensions Affecting Asian – European Trade

On May 8, 2018, President Donald Trump signed a Presidential Memorandum ordering the reinstatement of harsher sanctions against Iran.
On May 8, 2018, President Donald Trump signed a Presidential Memorandum ordering the reinstatement of harsher sanctions against Iran.

By Harry Valentine 2019-05-14 02:28:35

The alleged damage sustained by Saudi Arabian oil tankers in the Persian Gulf is escalating political tension between Saudi Arabia and Iran, also between the U.S. and Iran. These tensions have the potential to adversely affect regional trade as well as future maritime transportation.

Introduction

For the past several years, political – religious tension has prevailed between Saudi Arabia and Iran. Saudi Arabia and Iran are also competing oil producing nations. Political tension between Israel and Iran is the result of Iranian support of the Hezbollah community that lives in Southern Lebanon, near the border with Israel. The trio of the U.S., Israel and Saudi Arabia are also concerned about Iran’s alleged intention to develop nuclear weapons and also support more severe economic sanctions and military action against Iran.

American-initiated economic isolation of Iran has the potential to impact trade between China and Europe, also between India and Europe. Some of the railway trains that carry high priority containers between China and Europe travel on the railway line through Iran. To move high priority containers to and from Europe, India proposed to build a railway line between southeastern Iran and Tehran, to connect with the railway line to Turkey and Europe. There is potential for India and China to cooperate to build a new section of railway line in Turkey, around Lake Vaan.

The Great Silk Road

China’s new initiative involving a modern Great Silk Road includes maritime transportation, roads, railway lines and pipelines that carry oil and natural gas. China’s economy depends heavily on imported oil and natural gas, with overland pipelines assuring reliable movement of both. While the U.S. Navy can intercept oil tankers carrying Iranian oil into the Gulf of Oman and Arabian Sea, overland pipelines represent a very different challenge, hence the U.S. threats to nations seeking to trade or sustain trade with Iran. The presence of U.S. navy ships in the South China Sea merely serves to escalate American – Chinese tensions.

Part of the Great Silk Road could include improved ship navigation between the Caspian Sea and the Black Sea (Sea of Azov), to transit large cargo ships that would call at ports of nations that border around the Caspian Sea. U.S. economic sanctions against Iran along with U.S. political tensions with Turkey and with Russia, serves to delay perhaps indefinitely plans to develop a navigation canal between the Sea of Azov and the Caspian Sea that has undergone a decline in water levels in recent years. A navigation canal between the two seas could allow additional water to Caspian Sea.

Importance of Caspian Sea

Local trade amongst nations around the Caspian Sea depends of sufficient water depth for vessels to sail. The overland distances between several Caspian Sea ports is many times that of the maritime distance and will involve massive increases in freight transportation costs by many orders of magnitude. Initiatives that restrain the economies of Russia and Iran have the potential to affect the economies of many other nations across the region. Military action against Iran to suspend operation of oil and natural gas pipelines as well as to divert container trains away from Iran has widespread economic and political ramifications.

Middle Eastern Oil

Access to oil sustains national economies around the world. According to a revisionist history treatise entitled Day of Deception, during the late 1930’s the Roosevelt administration hatched a plan to curtail Japan’s access to oil from other Asian nations. According to the treatise, such action precipitated Japan’s attack on Pearl Harbor. North-eastern Iraq is believed to hold a massive volume of oil. An oil pipeline between China and Iran could be extended into Iraq to transport additional oil to China, with a possible alternative pipeline going north via Turkey to bypass Iran and under the Caspian Sea.

There is also believed to be oil deposits under the lands located to the east of the Caspian Sea, which an oil pipeline from Iran could also carry to China. If Russia was willing, a navigation canal between the Caspian Sea and the Sea of Azov could transit ships carrying oil from future Caspian Sea oil terminals into the Black Sea and to barge trains that sail along the Danube River into Europe. It is possible that U.S. interests might be seeking to control the export and sale of oil from some Middle Eastern nations to international markets. 

Provocative Maritime Incidents

The alleged attacks on Saudi Arabian oil tankers between the Strait of Hormuz and the Gulf will likely escalate tensions Iranian - Saudi Arabian tensions. During an earlier era and prior to the outbreak of hostilities between the U.S. and North Vietnam, a Vietcong combat vessel was alleged to have fired on a U.S. warship on patrol in the Gulf of Tonkin. Revisionist historians have questioned as to why an American was in that location in the first place and have suggested that a fishing boat launched a flare skyward to alert other fishing boats of its location. 

The combination of escalated U.S. – Iranian tensions along with escalated Saudi Arabian – Iranian tensions increased the likelihood of a maritime incident occurring between the Gulf of Oman through the Strait of Hormuz and the Gulf. Given the increased presence of U.S. warships in the Gulf, there is increased likelihood of an American-flagged vessel being the alleged target of such an incident. On August 12, 2000, the USS Cole was the target of a terrorist attack while moored at Port of Aden. It will remain to be seen as to who gets blamed in the event of a repeat attack.

Raising Government Revenue

The combination of U.S. economic sanctions against Iran, American trade tariffs on Chinese trade destined for U.S. markets and the threat of U.S. sanctions on countries that trade with Iran may be a strategy to “Make America Great Again.” It is unlikely that disrupting Sino-European and Indo-European trade that involves railway container transportation across Iran would create new American manufacturing and employment opportunities. U.S. economists have warned that America’s trade tariffs on Chinese goods will adversely affect U.S. citizens but also raise much needed revenue for the U.S. treasury. 

Conclusions

While Saudi Arabia and Israel would likely support and applaud U.S. military action against Iran, such action would likely cause major economic and political disruption in many other countries that include China and India. 

Without a U.S. military strike against Iran and oil pipelines that carry oil from Iran into Asia, international cooperation among Iran’s trading partners could otherwise defy U.S. sanctions and make such policy appear irrelevant. To move high priority trade between China and Europe, traders could either turn to air freight or seek to develop less energy intensive large-scale ground-effect technology that could travel via the Arctic carrying shipping containers between a Chinese port and the mouth of the Elbe River west of Hamburg. Some U.S. officials seem supportive of the military strike option.
 

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.