Data shows the Middle East tanker trade will continue, and a Royal Navy Admiral sees convoys and coalition navies on the horizon, writes Windward analyst Dror Salzman
In the early hours of 13 June, the tankers Front Altair and Kokuka Courageous were damaged while exiting the Gulf via the Strait of Hormuz. The United States said it was sabotage, the result of a deliberately planned attack by Iran, because of US sanctions. Washington also blamed Tehran for the previous month’s attack on four tankers off the coast of Fujairah, in the UAE.
The most immediate impact has been on oil prices and the cost of insurance, both of which have jumped (as the region was already Listed by the Joint War Committee when the latest incident occurred, underwriters have been able to respond to the increasing risk much faster this time around). But rising tensions may also have far-reaching implications on maritime safety and security.
"Prices will go up on all fronts," said Admiral Sir James Burnell-Nugent, former risk advisor to Shell Shipping, and a former Commander-in-Chief of the Royal Navy.
"While the Americans might advise against transits – as they have done before – that cannot last for more than 24 hours as it is very difficult to ‘turn the taps off’." Admiral Burnell-Nugent thinks most operators will continue trading, as there is "safety in numbers", and that coalition navies will likely be drawn in.
Crude tankers visited the Middle East Gulf more than 5,000 times in the past year; almost two-thirds of them have operated in the Gulf at least once. (Source for images: Windward)
The data explains why. More than 1,400 crude tankers – almost two-thirds of active crude oil tankers worldwide – have operated in the Middle East Gulf at least once in the past year; one-quarter of them visited four or more times. All in, they sailed to the area more than 5,300 times in the past 12 months. On any given day, there around 115 crude oil tankers operating in the Middle East Gulf.
In other words, there is an almost limitless supply of opportunities for would-be saboteurs, though their methods may evolve. "With sanctions in full force," said Admiral Burnell-Nugent, "the Iranians favour political and operational asymmetry as they seek to avoid direct conflict. Information operations are well underway – images, fake news, etc – and cyber is almost certainly involved, and if not, it soon will be. Moreover, we should expect attacks of various types away from the Straits – so as to disperse politics and countermeasures."
Windward data collected before and after the attacks show a mixed trend on behalf of shipowners. The number of vessels operating at any given moment offshore Fujairah – the biggest transhipment and replenishment hub in the region – remains steady at around 150. What has changed is the amount of time vessels spend there. Our research shows that during the first five months of 2019, ships anchoring off Fujairah did so for an average of 32 hours. Since the attacks last week, this figure has dropped by one-third, to below 22 hours. In other words, shipowners and captains are actively reducing their exposure to the region, while maintaining the same scope of trade.
The best part of a day is, of course, still plenty of time for a vessel to be exposed. But here are some actions that can be taken to mitigate the risk, courtesy of Admiral Burnell-Nugent:
Dror Salzman is a senior analyst at Windward where he focuses on DPRK Sanctions and IUU Fishing. Mr Salzman's article first appeared on the Windward website.