Iran threat to block Strait of Hormuz may upset goods trade worldwide
Iran's threatened blockade of the Strait of Hormuz may disrupt world trade in goods as companies divert ships from the Gulf to safer regions.
Iran has said it would block oil exports through the strait, a global chokepoint for crude shipments, if sanctions are imposed on its crude exports. Such a move could also force companies including Ford Motor, BASF and Caterpillar to seek safer routes for transporting items including car parts and chemicals, John Manners-Bell, chief executive of Transport Intelligence, an England-based logistics consultant, said on January 5. "If for any reason the strait were closed it would have a huge impact on the economy in the Middle East and would cause a systematic restructuring of flows of goods around the world," Manners-Bell, who used to manage European marketing at United Parcel Service, said by phone. "At the moment, investors are piling into Gulf countries because they're seen as a good business case for long-term development of the region as a global hub."
Biggest chokepoint Dubai's Jebel Ali, the biggest port between Singapore and Rotterdam, handles 11.6 million 20-foot boxloads of goods a year, Manners-Bell said. It sits inside the Gulf, meaning vessels must navigate Strait of Hormuz to reach it. Sharjah, also in the United Arab Emirates, handles three million units and Saudi Arabia's Dammam takes 1.3 million.
Half of the cargo proceeds to destinations in the Middle East, India and Africa while vessels also pass through on their way to Europe, he said. The strait, which connects the Gulf with the Gulf of Oman and the Arabian Sea, is the world's biggest chokepoint for seaborne oil trade, according to the United States Energy Department. Almost 17 million barrels a day, or about a fifth of oil traded globally, crossed the waterway last year, the Energy Department said in a report on December 30. Caterpillar spokesman Jim Dugan declined to comment by e-mail.
The Peoria, Illinois-based company is the largest maker of construction equipment. Ludwigshafen, Germany-based BASF, the world's biggest chemical company, would face 'little impact' from a possible closure of the strait, spokeswoman Jennifer Moore-Braun said by e-mail on January 6.
Marcey Evans, a spokeswoman for Dearborn, Michigan-based Ford, said in an e-mail the company was monitoring the situation in Hormuz. Brent oil for February settlement was at $113.86 a barrel, up 0.7 percent, on the London-based ICE Futures Europe exchange. Naval exercises Iran's Islamic Revolutionary Guard Corps is planning to hold naval exercises in the Strait of Hormuz and the Gulf, Brigadier General Ahmad Vahidi, the defence minister, was cited as saying by the Fars News Agency last week. The drills would be held in Iran's southern waters in the 'near future', he told the agency.
The 27 European Union countries moved closer to banning imports of Iranian oil last week after Greece lifted its objections to an embargo that may be adopted on January 30. The EU and the US are joined by the United Nations in levying sanctions on Iran over its atomic programme, work that the US and allies say may be intended for weapons development. The government in Tehran says its nuclear efforts are for civilian purposes and to generate electricity.