Investigator notes on Hormuz, tankers, Irish petrol lines... and lessons from the 1980 Iraq-Iran war

There are times when world events simply overshadow the dark and seedy corners that I happen to focus on in the current version of this blog.

This is one of these times.

Which means the Hormuz debacle needs to be at least briefly addressed.

Primarily, because this has to potential to affect all of us. Even the villains that are the typical focus of this blog.

So let’s touch upon Hormuz briefly (in part because I do have a bit of inside info to add), and then, I promise, we will get back to grime and crime.

When the US and Israel first hit Iran, Yours Truly just happened to be working on a fuel-related project. And I just happened to be in touch with experts who immediately cited varying tidbits of doom and gloom that seemed to get overlooked from the get go. While the first interviews were hurried and essentially quite a rushed effort to get an overview and quick prediction... you stay in touch.

Over the next couple of weeks, this what they said:

• You will soon read that the US military has worried itself silly over the Strait of Hormuz for decades—hence Iran’s rather unchecked ability to back terrorism at will. The reasoning behind that? It’s a trap that the armed forces do not want to deal with. No sane Navy (even before the age of drones) wanted to sail into said trap, no sane army wanted to fight it out on the coast or really anywhere else in Iran. The repercussions would be extensive AND even politicians (with good advisors) understand that the voter and corporate fallout of a bottleneck at Hormuz would be nightmarish.

Check.

• Worse, at the time sources pointed out that tankers had already been hit and were burning even before this was officially reported. Ok. Not that big of a surprise. But the comments that followed were far more troubling, these being: this will impact oil shipments for far, far longer than discussed in the public forum. Why? Insurance. For no sane insurer is willing to insure a tanker for EUR 100 mln if there is the chance that said ship could simply go up in smoke. And as tankers were already burning… that damage was done. As one player in the industry stated (although forgive me because I am citing this from memory and thus paraphrasing): “Even if negotiations begin today and the strait is technically opened, I do not think Lloyd’s for example, is going to go for it. And if there are military escorts, so what? Maritime insurers watch everything that occurs in the news. They have analysts. They do not want to lose money. Do you think they did not notice Ukrainian drone strikes on the Russian Navy? They did for they followed everything that took place during the grain blockade. Do not expect insurers to back oil tankers just because [US President Donald] Trump declares victory.

And judging from the current lack of movement in Hormuz…

Check.

• US oil is an option BUT the question is: is it even available? The general answer was “not immediately” and “not the kind of oil that can be immediately used.” Other answers could be summarized as: 1) there will be tremendous competition for whatever oil or petroleum products that the US decides to export, and then you have tanker availability issues, or, in other words, 2) this could take months if it is viable at all.
• The immediate concern for the layman is the price of petrol for his car. The true concern should be… packaging. The food we eat is primarily packaged. The goods we buy, packaged. Water bottles, milk bottles, plastic wrap for meats—all petroleum products. In short, the impact will run far wider than most assume, and a government decision to regulate the price at the pump will be little more than a panacea.
• The public will sleep on this in Europe—for a couple of weeks. This is because tankers were already en-route to various destinations. So Asia will be hit first (check, as petrol rationing appeared in Asia almost immediately), but then the effects will become immediately noticeable in Europe… and then severe.

Check—at least in part. And if you have any doubts, check out the fuel lines in Ireland, and the possible need for the military to step in to attempt to put a lid on social unrest. https://www.independent.co.uk/bulletin/news/ireland-fuel-protest-shortage-queues-b2955126.html

In fact, note that there is a perceived risk to social services and even to animal welfare due to a coming lack of animal feed. Which does also mean to the food chain.

• Finally, there were comments that went back all the way to the war between Iran and Iraq. This being the war that began in 1980 when Iraq made the mistake of trying to invade its neighbour. That war lasted eight years… but not really. In fact, it lasted on a low level until the US invaded Iraq and put an end to the reign of Saddam Hussein in 2003. Why? Well, government leaders in Iran are hard to deal with… and traditionally do hold a grudge. And they are hard to deal with, and yes… again, they traditionally hold a grudge.
• Finally, two points were voiced that simply did not bode well. While the media immediately made much of the difficulties of “taking and controlling the Strait of Hormuz,” others quietly voiced concerns to Yours Truly that the war between Iran and Iraq provided valuable historical lessons that should not be forgotten. First, the leadership of Iran was likely to be willing to sacrifice civilians and suffer military casualties to a much higher degree than might be expected. After all, the war between Iran and Iraq may have cost Iran 500,000—but that number may well be conservative. And second, even when the country was frankly sick of war, and when it should have been assumed that the leadership at the time should have been taking such losses to heart, there was evidence that behind the scenes the military capability was actually improving (a fact overshadowed by Iraq’s emergence as a regional power). In short, Iran did play the long game, and even if on the surface the war between Iran and Iraq appeared to be a matter of bloody trench warfare (and there are some estimates out there that total casualties when both sides are included may have run as high as two million, although in the years that followed, this number was drastically revised down).
• Finally, there actually is a precedence that unfortunately served as a teaching moment for Iran. This was the “tanker war” that highlighted the conflict beginning in 1984. At that time, it was Iraq which hit the Strait of Hormuz, but despite the targeting of oil infrastructure… ironically, at Kharg Island in an effort to force Iran to shut down the strait (and then Iraq threatened all tankers going through the strait), Iran hit Iraqi shipping and military—even while Iraq hit Kharg Island again and again. Tankers from Kuwait and Saudi Arabia were also hit… by Iranians.

Which brings us in a roundabout way back to Lloyd’s of London, which estimated that 546 commercial vessels were damaged during that part of the war.

How many of these ships were insured by Lloyd’s? Frankly, I have no idea. But don’t think that the powers that be in the most famous maritime insurer the world over have forgotten the lessons of history (and cumulative hit to the pocketbook) that seem to have been glossed over by the US Trump administration.

Which also brings us to a worrying conclusion (when it is clearly far too early to conclude anything). Three days into the conflict I asked shipping brokers just how long the oil disruption could last. At that time, they scoffed at the four-five day prediction coming out of the US. But they were hopeful. Only 10 days later the reaction was far different.

“Three, four months,” said one.

“Six months,” said another.

But the true prophet of the group? He answered as follows:

“Before things return to normal? Maybe never. Probably never, in fact.”

And the prediction now?  Considering that the ceasefire is already falling apart? That the East-West pipeline (which surprisingly also happens to be key to getting oil to the Red Sea, which actually does eventually mean all the way… to Poland) has also been hit.

Yes, yes. The prediction now…

Before the consequences have even been properly felt.

To be honest, I’m a bit too afraid to call.

Preston Smith is a licensed investigator based in Gdansk, Poland. He can be reached at query@cddi.pl.

Photo credit: M142 High Mobility Artillery Rocket Systems (HIMARS) conduct live-fire missions during Operation Epic Fury in the U.S. Central Command area of responsibility. (U.S. Army Photo) Part of this photo was blurred for security purposes. [null Courtesy], Public domain, via Wikimedia Commons.