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Strategic Outlook

Strait Talking: A Canadian Perspective on Hormuz

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By Michael Bonner

What’s it really worth?

Late last year, Iran began threatening to close the strait of Hormuz in the Persian Gulf. At their narrowest point between Iran and Oman, the Strait are only 21 miles wide, but they have a perceived significance out of all proportion to their size, as some 17 million barrels of oil pass through them every day.

This story was recently brought home in a long article in the Financial Times on 5 October by author, Javier Blas. His source was a report by the US Energy Information Administration published 22 August 2012 entitled World Oil Transit Chokepoints. 

Here is the gist of Blas’ argument. International sanctions have taken a grim toll on Iran. The Iranian economy is in horrendous shape, and the oil has lost 60% of its value since the beginning of the year. Merchants have gone on strike as a result. President Ahmadi-Nezhad is in his final term in office and he and his supporters have been increasingly sidelined by more conservative elements within the Iranian regime. Could it be, as Blas suggests, that Iran has less to lose now than ever before and that closing the strait — even if only a diversionary tactic by the president — is now more likely than ever?

It should be remembered that the 17 million barrels passing through the strait of Hormuz daily constitute only 35% of the world’s oil. Apart from Iran itself exporters of oil primarily threatened by closure of the strait would be the Gulf states of Kuwait, Bahrain, Qatar. All their oil goes through the strait. Iraq, the United Arab Emirates, and Saudi Arabia, would also be affected, but not all their oil moves through the strait (the respective figures being 87%, 55%, and 48% of exported oil). So these countries, in so far as they are exporters of oil, would suffer greatly if the strait were closed.

But Gulf states such as Abu Dhabi and Saudi Arabia have built pipelines which, when fully operational, will vastly reduce their reliance on the strait. It must be said, however, that the pipelines will only be ready in about 18 months, which may be too late. This strategy, though, is sound in principle, and other gulf states should find similar means to avoid relying on a single route of export.

What about the West? Though the effect of closing the strait would not be negligible, it would not be catastrophic either — at least as far as oil supply is concerned. Only 16% of America’s imported oil passes through the strait, followed by Germany’s total of 5% — numbers which are dwarfed by statistics for Japan, South Korea, India, and China whose respective figures are 82%, 74%, 63%, and 43%. So it would seem that western countries have much less to fear from a closure of the strait than does Asia, at least as far as oil supply is concerned.

None of this is to say that closure of the strait would not have a profoundly negative economic effect, which it certainly would. But the effect would not be permanent. And in every crisis lies opportunity. In the event that the strait were indeed closed, thereby denying enormous amounts of oil to Japan, South Korea, India and China, two countries may stand to gain from supplying them.

The first is Russia. Russia produces 10.41 million barrels of oil a day, just slightly higher than Saudi Arabia’s output. According to the CIA, Russian reserves must be about 60 billion barrels, and there is much more to be discovered, so we can expect output to go up. But this would surely be augmented by the supposed 100 or so billion barrels of oil in Central Asia, historically within the Russian sphere of influence, and which Russia would almost certainly monopolize. In theory Russia and Central Asia could well end America’s partial reliance on gulf oil and supply large amounts to Japan, South Korea, India, and China at the same time.

But the strategic concerns here would be enormous. Thanks to Presidents Putin and George W. Bush, Moscow now has renewed ties with Kabul, where it exercised influence throughout the 20th century. Could Russia pass up the opportunity to restart its drive towards the Indian Ocean in search of an ice-free port? Much of the necessary infrastructure is already in place, and if Russia developed oil reserves in the former Soviet Central Asian republics (as well as its own), transport to China and India via the Wakhan corridor in Afghanistan and rail links from Uzbekistan via Mazar-i Sharif through Afghanistan and Pakistan would be essential. Construction of such links has been in planning for some time. But a port on the Indian Ocean, perhaps with Pakistan’s coerced permission, would be ideal for transport of Russian oil to India and beyond. Thus American naval superiority in the Indian Ocean (based on the tiny British atoll of Diego Garcia) would be entirely outflanked, and the Fifth Fleet, stationed on Bahrain, could not offset this. The result might be naval race of terrifying scale.

If closing the strait of Hormuz could lead to Russian dominance of the Asian oil market, many will argue that it would be best to keep them open at almost any cost. Many may therefore be pleased to know that the second country standing to profit from closure of the strait is Canada. Alberta’s Oil Sands are expected to yield about 4 million barrels a day by 2015, a puny amount that is easily outstripped by Russia’s colossal daily output. But Canada’s reserves are greater than those of Russia and Central Asia combined. In 2008, the government of Alberta estimated that 1.75 trillion barrels of oil could be extracted from the Oil Sands. Admittedly, however, only about 10% of this can be extracted in an economically viable manner at present. But 1.75 billion barrels is still a formidable amount and might well match or surpass Russian and Central Asian reserves. Output could also be increased with more investment that would further benefit Canada by creating jobs.

Canadians might look forward to a day when domestic oil reserves foster a massive national industry with international reach, both to America to the south and across the Pacific — and this without the alarming geostrategic concerns attending the rise of Russia. It is also worth noting that exporting oil from Canada across the Pacific would obviate another oil transit chokepoint: the strait of Malacca connecting the Indian and Pacific oceans. Canada’s dominance as an ‘energy superpower’, as some have said, would require an enormous amount of investment in infrastructure and political will to see it through, but it might well be worth it.

The high potential of the Oil Sands is not in doubt, but transport of oil through pipelines (notably the proposed expansion of the Keystone XL and the Gulf Coast Project) remains highly controversial both in Canada and the United States. And the environmental questions hanging over the Oil Sands themselves cannot be ignored either. So it may be some time before Canada can compete seriously with other oil-exporting countries — if ever. In the meantime, it will be best for everyone that the strait of Hormuz remain open. But Canadians may well wish to consider that Canada’s role as an ‘energy superpower’ may be infinitely preferable than other alternatives.

Michael Bonner studied Iranian history at Brasenose College in the University of Oxford. He is widely published on pre-Islamic Iran in both English and French, and his master’s thesis was published a year ago by Studia Iranica in Paris. Michael is a member of the Balkh Art and Cultural Heritage project, an archeological team based in Oxford devoted to the study of the ancient city of Balkh near modern-day Mazar-i Sharif in northern Afghanistan. Any views or opinions expressed in this article are solely those of the authors and the news agencies and do not necessarily represent those of the Atlantic Council of Canada. This article is published for information purposes only.

Strategic Outlook

Maritime Blindness

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U.S. and Canada: Arctic Icebreak Tango

The U.S. runs a succesful series of Fleet Weeks across the country, bringing exposure to the sea services even in those corners of the country far from a sea. These events aim in part to educate Americans on the importance of their sea services for ensuring freedom of navigation for the 99% of overseas trade by volume that is transported by ship and the ability to project power abroad(CDR Doyle Hodges had a good article last week on the importance of international maritime security). From a self-interest standpoint, this outreach is also important when these citizens’ elected representatives look to make cuts to spending and military programs. After a decade of land wars, the sea services have some ground to make up. Last year, Gallup polled Americans on the relative importance of the different branches of the Armed Forces using the following question:

Just off the top of your head, which of the five branches of the Armed Forces in this country would you say is the most important to our national defense today?” 

Respondents gave the Air Force 17%, Army 25%, Marines 24%, Navy 11%, Coast Guard 3% and equal importance 16%. In May 2001 the numbers were Air Force 42%, Army 18%, Marines 14%, Navy 15%, Coast Guard 0%, and equality at 9%. Operations in Iraq, Afghanistan, and Libya appear mostly to have bolstered perceptions of the Army, Marines, and equality at the expense of the Air Force; but this still leaves large room for improvement in the understanding and appreciation of the functions of the sea services.

Canada has a similar problem, and CIMSECian James Bridger calls it “Maritime Blindness.” Writing for the Atlantic Council of Canada, he states:

Maritime Blindness: Three Oceans is No Cure.

As a nation surrounded by three oceans and the great lakes, Canada’s maritime security has been of preeminent importance throughout the country’s history. A secure marine environment is also essential to Canada’s prosperity. Despite this marked significance, there has been recent concern that Canada has slipped into a state of “maritime blindness,” characterized by a general lack of awareness concerning issues of national and global oceanic security.  This problem is particularly pronounced in central Canada, along the Toronto-Ottawa-Montreal corridor.

 

Seeking to address this weakness, The Atlantic Council of Canada (ACC) has taken a greater role in investigating and highlighting the strengths and weaknesses of Canadian maritime security and matters concerning our surrounding waters. Our goal is to raise public awareness and encourage debate about Canada’s most important frontier.

Doing good work in the land of Moose and Ice Hockey, James developed this idea into a primer on the Canada’s maritime background, and with another CIMSECian, Andrew Walker, in May kicked off the publication Maritime Nation to help Canada counter the effects of maritime blindness. In addition to helping illustrate the challenges and opportunities of the sea for the Canadian public, the products provide some good nuggets on Canadians approaches to maritime problems and concepts, such as a focus on maritime domain awareness:

Reflecting a “whole of government” approach to the problem, the Department of Defence, in cooperation with the Canada Border Services Agency, Department of Fisheries, Canadian Coast Guard, RCMP and Transport Canada, have recently established three Marine Security Operations Centres (MSOC)—located in Esquimalt, Halifax, and on the St. Lawrence Seaway.

If you have a few minutes, both the primer and the publication are easy to read and definitely worth a look, offering insights on cooperation with the U.S., and options arising from the unfreezing Arctic.

Strategic Outlook

More on International Maritime Security

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Flower Power: HMS Lotus

“What is International Maritime Security?” is an excellent post, framing the question against the common interests, threats, and resources of nations in the effort to keep maritime commons secure.  Why are these dynamics and underlying processes so complex, and what we can do with that knowledge?  Professor Mearsheimer’s work The Tragedy of Great Power Politics, notes Kurt Albaugh, helps provide some answers.  It discusses great powers’ search for ultimate security, possible only through hegemony.  But it leaves untold the story of great powers’ neighbors. These states have a need for national security disproportionate to the real threat, which Prof. Mearsheimer explains in following way:

When a state surveys its environment to determine which states pose a threat to its survival, it focuses mainly on the offensive capabilities of potential rivals, not their intentions.

Moreover, in such a case the “stopping power of water” likely doesn’t apply, not only because neighbors could share a land border but also because defensive power is not strong enough to check a great power’s short-distance naval assault.  The Impact on the navy is important.  In the event of a neighbor’s build-up, the smaller neighbor’s scarce financial resources would be devoted to building as much war-fighting capabilities as possible, depleting a budget very quickly.  The maritime security mission becomes a “nice to have” item, especially protecting the maritime commons, which is possibly perceived more as a foreign affairs than defense issue.  The corresponding fleet composition is summarized well with another observation made by D.K. Brown in Future British Surface Fleet: Options for Medium-Sized Powers, discussing individual ship design:

This is discussed by Khudyakov, who points out that one can optimise for maximum effectiveness at constant cost or for minimum cost at constant effectiveness.  Carried to extremes, he sees the one leading to what he aptly calls the Super Battleship Paradox, the other, emphasising numbers at the expense of capability, to the Chinese Junk Paradox.  One may, however, wonder if the Royal Navy’s Flower-class of World War II was so limited in capability that it fell into the latter category.

The end result is a navy consisting of a very few “Super Battleships” to defend against the great powers, and under-appreciated fleet workhorses like the Flower-class to carry out International Maritime Security missions.  The Naval Diplomat might offer a solution to that problem.  The concept of a “Fortress-fleet” operating under the umbrella of land-based aircraft and missiles would allow a smaller nation to forgo the “Super Battleships” and develop a fleet much more oriented toward International Maritime Security.  Such “fortress” should satisfy demand for national security, cover the gap between a real threat and its perception, and allow the nation to build much lighter naval forces, which theoretically could be more focused on diplomatic and constabulary missions.  Governments would be also more inclined to invest in dual-use, army and navy weapons like aircraft, instead of very expensive systems with only a naval application.  Rooted in the views of A.T. Mahan, this distant descendant of his original concept answers partially its critics.  Fleets thus freed to get involved in international cooperation in distant waters are no longer inactive and without initiative.

Przemek Krajewski alias Viribus Unitis is a blogger In Poland. His area of interest is broad context of purpose and structure of Navy and promoting discussions on these subjects In his country

Asia-Pacific, Current Operations, Strategic Outlook

(Updated 9/18) Keeping up with the Senkakus: China Establishing a New Reality on the Ground…er, Sea

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UPDATE: 9/18:

Japan’s Coast Guard has its hands full: Latest reports indicate up to 11 Chinese maritime surveillance ships have entered the Senkakus/Diaoyus’ Continguous Zone while a pair of fishermen swam ashore one of the islands before departing.

UPDATE: 9/17:

In addition to the anti-Japanese protests and violence which has flared throughout China this weekend, Chinese state media has indicated the possibility of further reaction to the nationalization of the Senkakus/Diaoyus to come later this week.  Chinese state radio said Monday that “1,000” fishing vessels are headed to the waters near the islands, as a fishing ban comes to an end.  Of note, the report quoted a Chinese source who said the vessels’ activities would be monitored by a “marine observation satellite.”  It is unclear whether this is an attempt to say the six vessels still believed in the vicinity of the islands will attempt to avoid a confrontation with the Japanese Coast Guard on station, or whether it just indicates China will be watching the situation very closely.  Meanwhile, Hong Kong reports that the ship Kai Fung 2, which earlier helped keep the islands in the spotlight, will attempt a return voyage this week as well.

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Hi, Hai Jian!

In the past week, while American attention has largely been diverted, China appears to have taken a number of steps to change the reality of the situation in the Senkakus/Diaoyus (hereafter referred to as Senkakus for brevity’s sake) in a coordinated diplomatic, media, legal, and physical push.

 

With the maelstrom of news emanating from the Muslim world, U.S. media coverage of other, possibly more consequential events inevitably slackened.  Fortunately our international and domestic partners have carried the ball a bit with regards to the disputed islands claimed by Japan, China, and Taiwan.  While we noted the reports on Tuesday of two Chinese ships – the Hai Jian 46 and Hai Jian 49 – dispatched to and arriving outside the islands’ Territorial Waters (TW), the number that arrived eventually totaled six, twice as many ever previously sent by China at one time.  A good account of the stand-off, on pause for now, can be found at The Asahi Shimbun.  Although the Chinese vessels have all left the islands’ TW, they remain in the direct vicinity.

 

The Senkakus are the same five islands, under administrative control of Japan (and populated only by goats), at the center of Japanese Coast Guard clashes with Chinese fishermen and most recently protestors from all claimants.  The Atlantic Council of Canada has a good article on the history of the conflict, but the immediate cause of the Chinese flotilla was the purchase of three of the islands by Japan’s national government (another was already government-owned, and the last owned by another private owner).  The decision to go forward with the purchase was forced by Tokyo’s nationalist metropolitan government, which also attempted to buy the islands but would have furthered their use as a provocative cause célèbre – whereas the central government has mostly sought to play down tensions between the two economic partners.

 

However, with the lead-time given by advance warnings of the sale date on Sept. 11th, China had time to prepare a coordinated response.  As our counterparts @Galrahn and @cdrsalamander noted, this response not only involved the vessels themselves (which, significantly or not are from State Oceanic Administration while previous vessels were from the Ministry of Agriculture) but also articles backing the move ready to run in China’s state media.  Further, these actions appear timed to coincide with the PRC’s announcement of baselines demarcating their claims and the start of weather forecasts for the area.

 

Peaceful…but effective?

Although unprecedented for this particular conflict, China appears to be following a course it charted earlier this summer in the South China Sea, where it has so far successfully established a new reality on the ground with the Philippines-claimed and previously administered Scarborough/Pantang Shoal.  The Philippines Coast Guard pulled back its vessels on June 16th due to bad weather and has yet to return, effectively ceding control to the Chinese civilian maritime agencies, who have maintained a presence in the area and attempted to physically impede any non-Chinese vessels.

 

Back in the East China Sea, as the Christian Science Monitor noted, China likely had to take some action to appease nationalist sentiment at home in reaction to Japan’s moves.  But the paper also said that the movement of the vessels back out of the islands’ TW can be taken as a sign of China’s unwillingness to take things too far.  Here’s hoping they’re right – and that fears of further turmoil before the country’s leadership transition will serve as a break.  But with precedence already established in the South China Sea, and the vessels still loitering in the area, many signs point to the potential for future confrontation – and it may begin as early as next week. 

 

On Friday Xinhua said the vessels will start “patrol and law enforcement around the Diaoyu Islands” while the catalyst for conflict could begin Sunday, when China’s self-imposed three-and-a-half-month fishing ban in waters near the Senkakus ends (although a typhoon to the east of the islands may further complicate the situation (h/t Galrahn)).  A Bureau of Fisheries official stated: “A large number of fishing boats will leave their ports…We will resolutely protect China’s sovereignty and the safety of fishers and step up controls in marine areas that include the Diaoyu Islands.”  Adding to the fun, Taiwan has also sent two Coast Guard vessels to protect any of its own fishermen brave enough to wade into the waters.

 

Not a pretty kitty. MEOW: Mutual Economic Obliteration Worldwide

From the perspective of the U.S., hoping to de-escalate any conflict between two of its most important trading partners and avoid being dragged in to an armed conflict, it’s clear we need better mechanisms with the PRC in case of emergency.  The threat of MEOW (mutual economic obliteration worldwide) is not enough.  It’s vital to separate the sides in the early stages to prevent a confrontation going past a point of no return – so we need to know who to call, and that they’ll have actual authority to call vessels back.  That is of course easier said than done with a country whose future president can drop of the face of the Earth for over a week at a time.  What the U.S. can work on, however, is building “habits of trust and cooperation,” through increasing partnership opportunities with China – a topic I will return to shortly.

 

If the long-term solution has to be through international diplomacy, China, by demarcating its claims to the specific rocks and islands around the Senkakus – a step experts have called the Chinese to take in the South China Sea – might this week actually have made progress of a sort.  But next week might not be as useful.

 

LT Scott Cheney-Peters is a surface warfare officer in the U.S. Navy Reserve and the former editor of Surface Warfare magazine. He is the founding director of the Center for International Maritime Security and holds a master’s degree in National Security and Strategic Studies from the U.S. Naval War College.

 

The opinions and views expressed in this post are his alone and are presented in his personal capacity. They do not necessarily represent the views of U.S. Department of Defense or the U.S. Navy.