West Asia Crisis: Global Energy Crisis Looms As Iran War Disrupts Supply Chains
· Free Press Journal
It is often said that the best-laid battle plan will not survive first contact with the enemy. This adage, attributed to the 19th-century Prussian Field Marshal Helmuth von Moltke, certainly seems to hold true in the case of the Iran war launched by President Trump. In the 5th century BC, Sun Tzu, the Chinese military strategist, in his Art of War said: “Strategy without tactics is the slowest road to victory; tactics without strategy is the noise before defeat.” This misadventure in Iran is a classic example of tactical brilliance and strategic failure.
As pointed out in this column on March 23, President Trump’s failure is not moral or legal; his failure as the leader of the world’s pre-eminent power is one of rank irresponsibility. Now, with attacks on civilian infrastructure and his threat to bring Iran “back to the Stone Age where they belong”, that failure is increasingly moral and legal as well. It is also a colossal strategic failure. What started as a war, in part, to liberate the long-suffering Iranian people from the clutches of a murderous theocratic regime has now morphed into a war against the Iranian people and the nation.
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Let us hope that even at this late hour, wiser counsel prevails and Iranian civil infrastructure and lives are not endangered. What is shocking is the American establishment’s apparent lack of concern about the enormous global consequences of their local action. For the first time in thousands of years of maritime transport history, the Strait of Hormuz is effectively blockaded by Iran, severely disrupting vital supply chains and holding the global economy hostage. True, Iran’s reckless retaliation against the GCC countries and attacks on cargo ships in the strait led to this global crisis.
But it was not an unanticipated response of a theocratic regime fighting for its own survival, disregarding the welfare of its own people. That the US had not anticipated it, and has no viable plan to keep the Strait of Hormuz open, is shocking. Now President Trump says it is not the US’s responsibility to keep the Strait open; America will withdraw irrespective of the global crisis its actions precipitated, and the rest of the world should bear the consequences. In the twentieth century, with the rise of oil and natural gas as critical fuels to run the global industrial economy, automobiles, and for heating and cooking, the Gulf countries emerged as vital sources of fossil fuels.
The Persian Gulf and the Red Sea became the world’s most critical shipping routes. With the Strait of Hormuz practically closed, about 15 million barrels of oil and 30 billion cubic feet of natural gas per day are no longer available to global markets. Oil and gas cannot be substituted by other fuels in the short and medium term. The demand for these fuels and raw materials is inelastic, and therefore market prices rise disproportionately to shortages. Already, Brent oil spot prices for actual cargo have soared to $141 per barrel on April 2, the highest since the 2008 Global Financial Crisis. If the Strait of Hormuz remains closed for some more weeks, prices could reach $200 or more.
The Houthis from Yemen, a proxy of Iran, have already signalled that they are joining the battle. If they disrupt supply from the Red Sea route by blocking the Strait of Bab al-Mandab, the supply shock will be even more severe, and oil prices will go through the roof. If Iranians carry out the threat of destroying energy infrastructure and oil and gas fields in the GCC countries, the supply chain could be disrupted for years, and the global economy may take a long time to adjust and recover. The world is truly on the precipice of an economic disaster if things do not de-escalate and a semblance of normalcy is not restored quickly. Despite creating the global problem by launching this war unilaterally, the US is insulated from the consequences of its own actions.
Except for gasoline prices rising by about 30%, there is little impact on the US economy. The US is fully self-sufficient in oil and gas and is, in fact, a net exporter. Prices increase at the gas station because oil and gas are non-perishable and tradable commodities, and prices tend to be globalised. If the US resorts to price-control laws, as most countries including India do in times of massive price escalation, US prices will be stable because supply exceeds demand. The US is also insulated by the Atlantic and Pacific Oceans on either side. It is therefore isolationist and insular in its approach, particularly under a President who is avowedly unconcerned about global public good.
If President Trump’s threat of bombing Iran back into the Stone Age materialises, there is a real danger of the nihilistic Iranian regime recklessly attacking all oil and gas fields in the Gulf countries, causing long-term or even permanent damage to vital energy sources. While there is still a slim possibility of peace and a ceasefire without further damage, the dangers of catastrophic long-term disruption of energy supplies are clear and present. Almost certainly, President Trump will declare victory and call off the attacks after “two or three weeks” because of domestic political compulsions.
But if, during these weeks, irreparable damage occurs to energy sources and supply chains, all of humanity will suffer a severe setback for a generation. Our country, hoping to sustain growth momentum for the next generation after decades of underperformance, will pay a heavy price. We cannot afford it. This is the time when all nations—regardless of ideology, faith, geography, and political differences—must come together and leverage their collective diplomatic and economic strength to end this ruinous war without further damage to the global economy and human welfare.
The author is the founder of Lok Satta Movement and Foundation for Democratic Reforms.