Iran Has Little to Gain From Oman Tanker Attacks

Julian Lee
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Iran Has Little to Gain From Oman Tanker Attacks

(Bloomberg Opinion) -- 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.

There is another group that will benefit from the incident – the people who want to see the U.S. step up its campaign against Iran and move from an economic war to a military one. There are plenty of those, both in the U.S. and among its allies in the Persian Gulf and wider Middle East regions.

The timing of the attacks also raises questions.

They come as Japanese Prime Minister Shinzo Abe is visiting Tehran, with the blessing of President Trump. On Wednesday Abe urged Tehran to avoid conflict at all costs and pledged to do his utmost to ease tensions. The tankers damaged on Thursday were carrying cargoes related to Japan,  Hiroshige Seko, minister of Economy, Trade and Industry, said on the ministry's Twitter feed.

A day earlier, Iran freed a U.S. resident imprisoned on espionage charges.

This would seem very clumsy timing from a country seeing the first tangible signs of any easing of the crippling sanctions imposed by the Americans. But it is absolutely understandable if you’re someone whose ultimate goal is to derail any easing of tensions between the two nations, and to effect regime change in Tehran. Whoever is behind the attacks is no friend of Iran. 

--With assistance from Elaine He.

To contact the author of this story: Julian Lee at jlee1627@bloomberg.net

To contact the editor responsible for this story: Jennifer Ryan at jryan13@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Julian Lee is an oil strategist for Bloomberg. Previously he worked as a senior analyst at the Centre for Global Energy Studies.

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