US Sanctions, Hormuz Strait and Security in the Gulf

The seizure of Stena Impero by Iranian Revolutionary Guard Corps (IRGC) on 19th July in the Hormuz Strait follows arrest of Grace 1 off Gibraltar by Royal Marines earlier. This represents an escalation. Incidents of attacks on tankers on 12th May and 13th June were not claimed by any side. This time the governments have taken responsibility. This brings the confrontation closer.

British justification for seizure of Grace 1 was that the vessel was carrying Iranian oil for Syria in violation of European Union (EU) sanctions. This is strange logic, as EU does not apply its sanctions to third countries. The IRGC’s action is clearly a retaliation, though an attempt is made to project it in legal terms. The IRGC statement said that the British flagged ship had violated international maritime law. The Guardian Council spokesman described the action as retaliation, but added that this was justified in international law. The ship’s crew include 18 Indians. India has asked for their release and repatriation.

While there has been dangerous escalation, both sides have exercised restraint. President Trump has stated that he does not want regime change. He has also mentioned he does not want war. He stepped back from ordering retaliation against downing of US drone in June. He stated that such a step costing 150 Iranian lives would have been a disproportionate response. He has also called for negotiations.

Iran waited for a year after US withdrawal from JCPOA before announcing resumption of Uranium enrichment on 8th May 2019. Even this step was described a ‘reversible’ by President Rouhani. He also gave further two month time to E-3 (UK, France and Germany) to come out with specific measures to ensure Iran receives the economic gains it was promised under the nuclear accord. Supreme Leader has said that there will be neither war, nor negotiations. The statement was intended to calm tensions. President Rouhani recently stated that Iran was prepared to negotiate once the sanctions are lifted.

British Foreign Secretary Jeremy Hunt, while warning Iran of a robust response, added “Our priority continues to be to find a way to de-escalate the situation”. The Iranian Foreign Minister Zarif said that ‘unlike the piracy in the Strait of Gibraltar, our action in the Persian Gulf is to uphold [international] maritime rules’. The issue is complicated. A Gibraltar court has extended the ship’s detention to August 15. The UK has suggested to Iran to find a destination other than Syria, and ensure that the crude is not sold to a sanctioned entity¹. Iran denies that the crude was being shipped to Syria.

Rising tensions in the Gulf has pushed up insurance costs by 400 % in 1 ½ months. This is accompanied by increase in crude oil prices. OPEC basket of crude oil price after touching $83.64 per barrel in October last had come down to $ 52.17 per barrel by January 2, 2019. It has since gone up and stands currently at $ 63.10 per barrel. The Indian basket of crude oil price has increased from $ 52.43 per barrel to $ 62.03 per barrel during this period. An increase of $ 10 per barrel in the price of crude adds more than 100,000 crore rupees to India’s annual import bill at current levels. In the event of closure of the Gulf, the crude price is bound to rise even more steeply.

Reacting to arrest of Stena Impero, President Trump said that he will be ‘working with the UK’, citing the incident in support of his position. Germany and France have given statements calling for quick release of the British flagged ship. The EU expressed ‘deep concern’ and urged ‘restraint to avoid further tensions'. NATO spokesman ‘condemned the seizure of two commercial ships in the Strait of Hormuz’. He described it as a ‘clear challenge to international freedom of navigation’. However, the statement left door open for negotiations. It stated that NATO ‘supports all diplomatic efforts to resolve this situation’². The UK has also written to the Security Council stating that the ship was ‘exercising the law of transit passage in an international strait as provided for under international law’. The letter added that ‘our priority is to de-escalate. We do not seek confrontation with Iran.’ ³

The seizure of Stena Impero took place less than 24 hours after an US navy ship USS Boxer shot down an Iranian drone in the Hormuz strait. Iran denied that it has lost any of its drones. The increasing incidents in the Gulf have led to a call for establishment of a multinational task force to guarantee freedom of navigation in the Strait of Hormuz without addressing the issue of lifting of US sanctions on Iranian oil export would not be acceptable to Iran.

While western position is unified on the release of Stena Impero, there is rift on the issue of nuclear accord. The E-3 (UK, France and Germany) continue to support Joint Comprehensive Plan of Action (JCPOA). This is also an issue of far greater import. Break-down of the nuclear accord with nothing in its place will start a chain reaction. Nuclear proliferation in the region will have implications for international security. It should be possible to explore options on the basis of public positions of the two sides. Both have affirmed that they do not want war. The Supreme Leader has stated that nuclear weapons are forbidden in Islam. Instead of giving up JCPOA, it should be possible to find ways of addressing concerns of both the parties. Foreign Minister Zarif said that ‘If Trump wants more for more, we can ratify the Additional Protocol and he can lift the sanctions he set’.⁴ He has also mentioned a ‘non-aggression pact’ with the neighbours.

Release of tankers by UK and Iran could be a welcome step to start the process of de-escalation followed by negotiations. India has the credibility with both sides to facilitate dialogue.

(D.P. Srivastava is a former Ambassador to Iran and presently a Distinguished Fellow at the VIF)

References:

1. Wall Street Journal, 20.7.2019.
2. NATO.
3. Reuters.
4. Tehran Times, July 20.7.2019.