Why the U.S. Should Remain Protector of World Oil Flows

President Trump has suggested handing protection of tankers in the Strait of Hormuz to other countries, though that would carry its own costs

As tensions with Iran began escalating last month, President Trump made a startling statement: The U.S. shouldn’t be bearing the burden of protecting the flow of oil tankers past Iranian waters and through the Strait of Hormuz, one of the principal assignments the U.S. has accepted for the last four decades.

Instead, he said, China and Japan depend far more on Persian Gulf oil than does the U.S. these days, so they should protect their own ships. “We don’t even need to be there in that the U.S. has just become (by far) the largest producer of Energy anywhere in the world!” the president tweeted.

As tensions mount further, thanks to Iran’s announcement over the weekend that it is breaking the level of uranium enrichmentagreed to in the 2015 deal restraining its nuclear program, Mr. Trump’s pronouncement is more relevant than ever. Iran has made clear in recent weeks that it has two weapons with which to fight back against crippling American economic sanctions: One is to scare the world by reviving its nuclear program. The other is to shake the world economy by blocking the flow of oil tankers carrying oil out through the Strait of Hormuz, a threat illustrated with attacks on a handful of tankers.

In response, Mr. Trump was asking, essentially: Why should we care, if we don’t need your region’s oil as much as we used to? It is a question that seems at once both reckless and perfectly reasonable—one a lot of Americans probably are asking themselves.

Yet the question also serves as notice that political leaders regularly need to remind Americans, and perhaps themselves, why they benefit from assuming the kind of world leadership role that includes protecting the flow of oil out of the Persian Gulf.

The reasons the U.S. should still accept—indeed, should want—this role are both practical and geopolitical. The practical reasons start with the fact that the U.S. economy is still vulnerable to a disruption of oil supplies, from the Persian Gulf or anywhere else.

Oil is the ultimate fungible global product. If the price goes up for somebody because of a supply disruption, it goes up for everybody. The origin of the barrel of oil from which your gallon of gas is derived doesn’t really matter much in determining how much it costs. If there is a global shortfall, everybody pays the price, literally.

In that global marketplace, the Strait of Hormuz isn’t quite as important as it once was, but it is still very important. The U.S. Energy Information Administration reports that 21 million barrels of oil a day flowed through the Strait last year, or about 21% of the world’s total consumption.

Iran Demands Return of Tanker Held in Gibraltar

Tehran summoned the British ambassador over the impounding of an Iranian vessel suspected of ferrying oil to Syria

Iran demanded the immediate release of one of its tankers impounded with the help of British forces in Gibraltar this week, an incident that has angered Tehran and exacerbated tensions between Iran and Western countries.

The British ambassador to Iran was summoned to the country’s foreign ministry Thursday night shortly after British Royal Marines assisted Gibraltar in the detention of an oil tanker that was bound for Syria in suspected violation of European Union sanctions. Iran has supported Syrian President Bashar al-Assad through an eight-year war.

A senior Iranian Foreign Ministry official told British Ambassador Robert Macaire that the tanker seizure was “tantamount to maritime piracy,” according to the ministry’s website. The official “stressed that Britain has no right to impose its own unilateral sanctions or those of the European Union in an extraterritorial manner against the other countries.”

A day earlier, Iranian Foreign Ministry spokesman Abbas Mousavi said the impounded tanker, named Grace 1, was carrying fuel from Iran, according to the state-run IRNA news agency. He didn’t say where the fuel was headed.

The U.K. Foreign Office didn’t comment on the meeting but in a statement Friday said it welcomed “this firm action by the Gibraltarian authorities, acting to enforce the EU Syria Sanctions regime.”

Gibraltar’s Supreme Court ruled the tanker could be detained for 14 more days, the British territory’s government said Friday.

One British official said the ship was registered to a company in Lebanon. This is the first time the U.K. has seized a ship for violating sanctions against Syria. The Gibraltar police are now involved over deciding what to do with the crew and the ship.

Mohsen Rezaei, secretary of Iran’s Expediency Discernment Council, which advises the supreme leader, on Friday tweeted that Iran should seize a British tanker if the Iranian vessel isn’t released immediately.

“The Islamic Revolution has never initiated any battles in its 40-year history but has also never hesitated in responding to bullies,” Mr. Rezaei added on Twitter.

Recent attacks on oil tankers in the Gulf of Oman has raised the risk for oil tankers traveling through waters off Iran’s coast.

Danish A.P. Moller-Maersk , the world’s largest container shipper, on Thursday said it would raise prices for sending containers into the Persian Gulf, following similar moves from other major shipping companies.

In a statement, Maersk said it would charge an extra $42 per 20-foot container for shipments to some ports in Saudi Arabia, Bahrain, Qatar, United Arab Emirates, Kuwait, Iraq and Oman.

The threat to U.K. ships has historical precedents. In 2007, Iran detained 15 U.K. Royal Navy personnel off the Iran-Iraq coast, alleging they had entered Iranian waters. The sailors were released 12 days later. Iran also in 2004 captured eight British sailors who were training Iraqi forces, releasing them after three days.

The unusual seizure of the Iranian vessel piles pressure on Tehran, which has tried to find ways to evade U.S. sanctions imposed with the aim of slashing the country’s oil exports to zero.

The incident in Gibraltar, a British overseas territory, adds to growing acrimony between Iran and the EU, which doesn’t have broad sanctions in place against Iran. Tehran is moving toward a second violation of the 2015 nuclear accord on Sunday when it has said it would surpass limits imposed by that agreement on its uranium enrichment. The U.S. pulled out of the deal last year and then imposed sanctions on the country.

The U.K., which alongside Germany, France, China and Russia, remains a party to the 2015 nuclear deal with Iran, has worked to keep the pact alive. However the U.K. is caught in a delicate balancing act, defending the nuclear accord while sharing the White House’s concerns about Iran’s growing belligerence in the Middle East.

Tensions between the U.K. and Iran are already high. Britain has joined the U.S. in blaming Iran for attacks on oil tankers in May in the Gulf of Oman and is also campaigning for the release of several Iranian British dual nationals who have been detained in Iran. These include Nazanin Zaghari-Ratcliffe who was jailed in 2016 for spying, an activity she denies.

For its part, Iran has grown increasingly frustrated with European countries, demanding that they stand up to U.S. pressure and provide some relief from American sanctions. The Iranian Foreign Ministry said that based on its available information the tanker had been seized at the request of the U.S.

Gibraltar’s government denied that, saying its decision to board the tanker was “not at all based on extraneous political considerations” and not “taken at the political behest or instruction of any other state or of any third party.”

U.S. national security adviser John Bolton called the tanker seizure “excellent news,” tweeting on Thursday that “America & our allies will continue to prevent regimes in Tehran & Damascus from profiting off this illicit trade.”

A British shipping executive with direct knowledge of the matter said the ship was tracked by American authorities, who informed the British.

The decline in oil sales has strained Iran’s economy. Its budget is based on the assumption that Iran would be able to export 1.5 million barrels a day, already a stark drop from the 2.5 million barrels it exported a day this time last year.

As U.S. sanctions have bitten harder than the Iranian leadership expected, Tehran has taken a more confrontational approach, and in June shot down a U.S. surveillance drone. Washington also accuses Iran of attacking six oil tankers in the Gulf of Oman, a charge Iran denies.

In the wake of harsh sanctions by the Trump administration, Iran’s oil exports have fallen to around 230,000 barrels a day, mostly to China, according to a former Iran oil official.

A top adviser to the Supreme Leader Ali Khamenei on Friday praised China for continuing to purchase Iranian oil.

“China has continued to buy our oil and will do this in the future,” Ali Akbar Velayati, the adviser, said in an interview with Mr. Khamenei’s website.

Bethany McLean | Saudi America

Bethany McLean discusses her new book which you can purchase here: https://www.strandbooks.com/product/s… The technology of fracking in shale rock — particularly in the Permian Basin in Texas — has transformed America into the world’s top producer of both oil and natural gas. The U.S. is expected to be “energy independent” and a “net exporter” in less than a decade, a move that will upend global politics, destabilize Saudi Arabia, crush Russia’s chokehold over Europe, and finally bolster American power again. Or Will it?

Investigative journalist and bestselling author Bethany McLean digs deep into the cycles of boom and bust that has plagued the American oil industry for the past decade, from the financial wizardry and mysterious death of fracking pioneer Aubrey McClendon, to the speculators who are betting on America’s ascendance and the collapse of OPEC in the great game of geopolitics. McLean finds that fracking is a business built on attracting ever-more gigantic amounts of capital investment, while promises of huge returns have often not borne out. Overeagerness in partaking in a boom can lead to all types of problems and just as she did with the Enron story, in Saudi America McLean points out the reality and the risks of the inflated promises of the fracking boom.