The Persian Gulf and Hurricane Felix

Once again I am going to start the blog about something that this blog was not created for, politics and war.

However, serious rumors of war with Iran have now hit my industry and that is not a good sign.

Yes I have a political point of view. And since this is not a political blog I will keep my political views to myself.

There are a plethora of blogs both right wing and left wing that can confuse a group of rocket scientists, so just do a web search and knock yourself out if your all ready blindly deposed one way or the other.

However as a professional marine salvor I wish to take a different approach in discussing the potential of going to war with Iran in the Persian Gulf .

The potential maritime and economic loss of war in the Persian Gulf to both sides as well as the rest of the world.

Most blogs and news reports focus on the ramification of going to war with Iran in terms of terrorism or in military terms. But there is another picture. The economic picture. While I have no great love for the current Iranian regime and since I am sure, that most of the Iranian people do not wish to go to war with the United States, as most citizens of countries normally feel about going to war, unless they are attacked without just cause or buy a political hook, line and sinker. Yes we are not the only ones, try the German people during WWII and they paid a very heavy price, much heavier than anything we have ever paid.

While we are have the freedom of speech and opinion. Most of the time, none of us actually know what is really going on, but we all have some real interesting opinions. So I say to my readers, do not let the media or government meld with your mind, do your own research. And seriously research all sides then come to a conclusion.

Yes the United States Military is very capable of successfully striking Iran. Though we need to remember the British Falklands Island campaign. Ship losses took a heavy toll and we can expect the same thing in the Persian Gulf on both the military and merchant sides.

Daily in the Gulf there are some 30 merchant ships entering and exiting the Gulf every 24 hours. During both the Gulf War and the Iraq/Iran War the US and its Allies escorted some 9000 merchant vessel, even re-flagging some to the US Flag for additional protection. The Persian Gulf is a key economic waterway to the world.

Currently we have three Carrier Battle Groups operating in the Gulf. Depending on the mission each battle group can have as many as 12 or more combat ships within each of its groups. This is not just a strike force but a fleet protection force as well. Protection for both fleets, military and merchant.

Yes we know how and where to strike Iran and the Iranians know, we know, and they know how to strike back. Yes we are prepared to ensure that the Gulf remains open to the merchant fleet. You can also bet that the Iranians are prepared to attempt to close it down as well. They have done it before and odds are they will attempt it again.

So I end here. Not much has changed since the Iraq/Iran war except that weapons systems have advanced 10 fold and yes we have a huge advantage on that frront. But the same navigational and economic concerns and problems in the Gulf still exist.

Listed are some choice studies for my readers to start with. So as the political and media campaign to war starts remember, "do not let the media or government meld with your mind, do your own research" !


1. Iran-Iraq War 1980-1988
The Tanker War, 1984 - 1987

Much of Iraq's export capability was lost during the Iran-Iraq War, either to war-related damage or due to political reasons. In 1982, for instance, Syria (allied with Iran at the time) closed the 500-mile, 650,000-bbl/d-capacity Banias pipeline, which had been a vital Iraqi access route to the Mediterranean Sea and European oil markets. By 1983, Iraq's export capabilities were only 700,000 bbl/d, or less than 30% of operable field production capacity at that time.

Iran's revenue share fell after the 1978-79 Iranian Revolution, followed soon thereafter by the Iran-Iraq War for much of the 1980s. All Iranian onshore crude oil production and output from the Forozan field (which is blended with crude streams from the Abuzar and Doroud fields) is exported from the Khark Island terminal located in the northern Gulf. The terminal's original capacity of 7 million bbl/d was nearly eliminated by more than 9,000 bombing raids during the Iran-Iraq War.

The tanker war seemed likely to precipitate a major international incident for two reasons. First, some 70 percent of Japanese, 50 percent of West European, and 7 percent of American oil imports came from the Persian Gulf in the early 1980s. Second, the assault on tankers involved neutral shipping as well as ships of the belligerent states.

The tanker war had two phases. The relatively obscure first phase began in 1981, and the well publicized second phase began in 1984.

2. If Iran Provokes an Energy Crisis: Modeling the Problem in a War Game by James Jay Carafano, Ph.D. and William W. Beach

From December 2006 to March 2007, Heritage Foundation scholars conducted a computer simula­tion and gaming exercise that examined the likely economic and policy consequences of a major oil disruption in the Persian Gulf. The exercise utilized a realistic scenario, state-of-the-art macroeconomic modeling, and a knowledgeable team of subject-matter experts from government, business, aca­demia, and research institutes from around Wash­ington, D.C.

This project was a proof-of-principle investiga­tion that combined computer modeling and gaming to capture how U.S. decisions during a crisis might affect how global energy markets and the U.S. econ­omy adjust to sudden and significant disruptions of oil supplies. In this scenario, the United States responded to a crisis precipitated by an attempted Iranian blockade of the Strait of Hormuz.

3. The Future of Oil: Four Scenarios Standard & Poor's RatingsDirect

If anything underscores how geopolitical forces have played havoc with oil prices, it's the latest armed conflict in the Middle East, pitting the Israeli military against Hezbollah guerrillas in open warfare in Lebanon. Already heightened by the U.S.-led confrontation with Iran over its nuclear ambitions, fears about the stability of oil supplies have only increased since the Gaza bombings earlier in July and have intensified sharply since Israel began targeting Lebanon. The outcome is now even more uncertain than it appeared just a few weeks ago.

How long the conflict continues—and whether it spreads to surrounding countries—will determine the future of energy prices, at least in the short run. With Iranian President Mahmoud Ahmadinejad saying on July 25 that the fighting could trigger "a hurricane" of broader war in the Middle East, the prospects look dire to many observers—especially oil traders—around the world.

Having survived higher energy prices relatively unscathed so far, the U.S. economy is more sensitive to costlier oil now than it was a year ago. Inflation, even excluding energy, has accelerated, leading the Federal Reserve to raise interest rates 425 basis points in response. Consumers are already spending more than they earn. And Standard &Poor's expects the economy to slow down to 2.5% growth in gross domestic product in 2007 from an estimated 3.5% in 2006.

UNCERTAINTY PREVAILS. The falloff in U.S. growth means it takes a smaller shock to cause a recession than it did a year ago. Continued strong world oil demand, with usage in both China and Europe accelerating, will continue to put rising pressure on oil supplies despite a U.S. slowdown, thus raising the odds of an oil price surge causing a U.S. recession.

Whether the current Mideast conflict causes a recession depends mostly on how big the impact on oil supplies and prices becomes. This is still highly uncertain. At Standard & Poor's, we continue to believe that the most likely outcome is that cooler heads will eventually prevail and that oil prices will drop back from current peaks. (Of course, there are other, non-military factors—like hurricanes or production disruptions on the order of BP's [BP ] Aug. 6 closure of its Prudhoe Bay field in Alaska—that could have an effect as well [see BusinessWeek.com, 8/7/06, BP's Pipeline Trouble].)

4. TANKERS AT WAR - JAMES H. RAND 1984-1987

Published:	12 January 2001 00:00
Updated:	05 July 2006 17:09

In his first ‘Chairman’s Report’, in the 1984 Annual Report, Jim Rand noted that “promotion of free enterprise and safety at sea are key issues for INTERTANKO”.

Further, he added that “free competition has also for centuries been a cornerstone of American society”. Perhaps someone should have told the United States Congress. Although, for a change, no flag preference proposals gained any speed in Congress, American proposals for taxation of foreign shipping were tabled in 1986. These proposals required tax returns from foreign owners and planned to levy taxes according to American theories of the owner’s domicile rather than the ship’s flag - a burdensome intrusion.

American tax was not the main feature of this time. This was provided by the more spectacular events in the Middle East Gulf, where the Iran-Iraq War now made the waters of the Gulf one of its main theatres. Both sides routinely attacked non-military shipping regardless of its association in any way with either of the combatants.

In 1984, eleven Very Large Crude Carriers (VLCCs) were damaged beyond repair by military strikes. More seriously, 25 sailors were killed and 25 more injured in the attacks. Some tanker owners refused to sail their ships to load at the Iranian export terminal at Kharg Island, despite high freight rates obtainable.

Back to the Weather!

Latest on Hurricane Felix:

Felix becomes a Category Five!!

Felix's projected path is just north of Honduras, then Belize one more time!



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